Richard Salsman - Are Price Controls Coming?

Speaker 0 00:00:01 All right. Uh, well, I'm expecting people will filter in as we get started. Um, and so for those who are in the room, if you'd also like to, uh, tag your contacts, invite others to the room, um, because Richard is usually our biggest draw. So I want to make sure people know that this is happening, but we are recording it and it will be on our podcast. So, um, Richard, would you like to get started? Speaker 1 00:00:31 Sure. Thank you, Jennifer. The reason I wanted to talk about, uh, price controls for a bit. And then before I take comments and questions, the concept of inflation, the spread of empirically of inflation in the last year or so at levels not seen for 40 years, I was ignored really brings up the question of price controls because the last time we had broad-based price controls in the United States was 40 years ago, basically the late 1970s. So I think it's a, uh, an important related discussion. And, uh, the other thing is I'm beginning to see, uh, calls for price controls. Now, I wouldn't say they're ubiquitous. I wouldn't say they're necessarily even being touted by prominent economist. I have looked at the Biden, uh, council of economic advisors and what they've said about inflation. They haven't come out for price controls, but their theory of inflation, uh, implies that they could. Speaker 1 00:01:30 And frankly, on public policy over the last couple of years, I don't put it past anybody to come up with a harebrained approach to inflation. But just as it, just as a recent example, I'm just going to cite some headlines, uh, back in November at the Roosevelt Institute. Now granted a left-leaning group, uh, Todd Tucker price controls how the U has used them and how they can help shape industries on who. So there's a positive presentation, perhaps the one that got the most attention in the guardian in the UK, Isabella Weber note, Isabella Weber is an economist at UMass Amherst. If you know, UMass Amherst, it's notable for its left leaning economist, but still that this generated wide debate title of her essay was could strategic price controls help fight inflation. And our answer was yes, yes. Uh, Hardy. Yes. Uh, Eric Lovett's in the New York magazine. Speaker 1 00:02:31 Now we're getting a little more closer to us on Weber's essay wrote one called who's afraid of price controls. And it was January of this year, January 2nd. So that his view was no one should be afraid of price controls, but we need to be careful about how we implement them January 14th, NPR as prices rise, some debate, whether price controls should be reinstated. Um, and on the bright side, Alison Schrager over at city journal. And then that's out of the Manhattan Institute has a critique, a quote, no Encore, please price controls were a bad idea in the 20th century and even more so today, unquote, now, before I move on to, I should cite, uh, Paul Krugman, obviously a famous economist writes for the New York times a Nobel prize winner in oh eight. He also wrote in regard to Weber's call for strategic price control quote. Speaker 1 00:03:27 Now this is to his credit quote, price controls would just screw up the adjustment needed in supply chains. And then this very clever line, not all bad ideas come from the right unequal. So good for Paul Krugman to at least initially dismiss it as bad stuff. Now I want to make three. How would you describe what price controls are? But I want to make three, uh, fundamental cases, not normally heard from an, uh, uh, an economist. The first one is, um, moral. Uh, if you're selling something, you have a moral right to set the terms on which you're selling something, it's your stuff. It's your property whatever's causing prices to rise or fall, whether it's microeconomic factors unique to your sector or a broader issue involving the currency, uh, almost never stressed in all these discussions pro or con is the idea that nobody should be telling sellers what their price setting should be. Speaker 1 00:04:28 That's 0.1. And frankly, anyone buying from the seller of course, should not also be impeded from offering a price voluntarily. So I just wanted to get that out on the table. It should be the first thing, any social scientists discusses, which is get your dirty grubby hands off of my products and how I priced them. Now, how about the political case before I get to the obvious economic ones? I mean, politically, it is just the use of force of the initiation of force by a government, which is vicious and evil. The government should be protecting property rights, not invading them. And that's the price setting of your goods is a big part of that. So as simply an improper function of government, it's an improper use of government power, by the way, it isn't coincidentally, when the wind price controls are broadly applied, they usually lead to quite tyrannical government, bureaucratic, uh, actions. Speaker 1 00:05:21 Now the normal econ case, which I'll, I'll just lay out quickly because it's, it's, it's probably more known, but if you're trying to stop inflation by price controls, what this usually means is you're setting a ceiling on how high prices can go as opposed to a floor. And now let's so quickly, you have to say, well, what is inflation? Inflation is now, this is really important too. To note a decline in the purchasing power of money caused by the government to let me just repeat inflation is a decline in the purchasing power of money caused by the government. I say caused by the government because for years it's been the monopoly issuer of, of money. So this is true in every major country. They long ago jettison the gold standard. They long ago, monopolize the money and now issue it in a Fiat manner. So there's nobody really else responsible for whether the value of money goes up or down except the money issuer, any other monopolous would be seen as the sole controller of the thing. Speaker 1 00:06:24 It's never the case almost will economists attribute this to central banks, but that's the first thing to notice. Now, if the value of money declines, it means that each unit of money, you need more of them to buy stuff. If the value of the dollar declines. And by that, I mean, what it can actually buy in terms of real, tangible goods and services. It just, the math of it is simply that you must give more units to get the thing and that, and the more units really is the money price of things going up. So, um, the only way to prevent inflation is to not do that, not to issue too much money relative to how much money people want to hold price controls in effect, look at the effects, not the cause at the symptoms, not the disease. And of course, that's just not only wrong, logically, it's not going to work practically either. Speaker 1 00:07:18 Now, if prices are rising broadly and you impose price controls economics, 1 0 1 teaches that the first result will be widespread shortages. Now, this is more understood when you think of particular cases. So let me give you a particular case, is this isn't really inflation so much as it is or price controls broadly, but price controls on particular things. What are the most famous cases, rent controls? So someone says the rent's too damn high. The rent is, you know, say a thousand dollars a month on the market. And someone says, that's too high. We're going to put a ceiling. It can be no higher than $500 a month. Supply demand curves. You just look at it and say, well, when the price is set below the market level, there'll be less supply of those things. And there'll be more people demanding those rental units because they seem so cheap. Speaker 1 00:08:09 That is what leads to long lines that with that's what leads to shortages. There are no longer any rent, uh, rental units to find the, the, uh, the occupancy rates are 100%. Now there's another price control, kind of a famous one going in the other direction. Instead of capping the price you can charge, there's a floor under which you can't go. That's the minimum wage law. So suppose your worth to an employer. I don't know, $8 an hour, but the government says that's too low. A fair wage will be $15 an hour. That's not remunerative to the higher. Um, and they're not going to hire you. So that leads also not to a shortage. In this case, it leads to a surplus, a surplus of what a surplus of labor. What does that mean? Unemployed, labor, too many laborers hanging around, not working because these prices, uh, this price has been set in this case, uh, uh, above the market level. Speaker 1 00:09:10 Now, I don't know. So we do in a way you could say, we do have price controls, um, already what we, what we have them. We have them on however particular products in particular sectors and they have the standard expected result. So the idea that this can be universalized and somehow be a better thing is just not true. Um, more recently, by the way, just so you know, this is a bipartisan thing. Um, while it's certainly bipartisan on rent controls and minimum wage, you get both parties, basically endorsing those kinds of things, but more recently pharma, uh, more recently pharma drugs. So, uh, the contention is that pharmaceutical drugs are rising too fast or they're rising faster than other broader prices. And there should be price controls. Now, both Trump and Biden have advocated, uh, pharmaceutical price controls. Now, in this case, by putting a cap on it, you would deter enormously the incentive for pharmaceutical companies to invest in R and D and create and create these products. Speaker 1 00:10:13 When price controls were applied through the socialized medicine systems of Britain, Switzerland, Australia, and Canada, they basically eliminated their pharma companies. The pharma companies are mostly now in America only because there have not been price controls. Um, so that's just as, uh, an overview. Um, I just wanted to say that when one of the difficulties associated with assessing inflation and therefore determining whether people are likely to impose price controls or not is how do you measure the purchasing power of money? And as you know, they create these indices. One of them is the consumer price index. How do they do that? They run around every month and, and look at the prices of what they call a representative basket of things. People buy well that's of course not specifically the things you might buy or your family might buy, but they're trying to come up with this quote unquote representative basket. Speaker 1 00:11:13 Now, when you think about it, that is accumulating a bunch of prices, which are the effects. They are the con, they are the effects, not the causes. So the very, the very, uh, construction of a price indices make people not focus on the actual cause of inflation. Now, the government does issue money, supply numbers, but almost nobody looks at them and know almost nobody considers their role. But if you said something like how much is consumer prices gone up in the past year? I mean, most people read the headlines and they know the answer is something like six or 7%. That's true. But if you asked how much did money supply go up in the last year? Almost nobody knows the answer by the way is an excess of a hundred percent. Speaker 1 00:12:01 Um, so that is one difficulty. Now another approach would be to say, why not use the gold price? Why is that relevant? Because for years, the U S and other currencies were convertible into gold. And then prior to that gold itself and silver were real monies. I mean, real market created market produced monies of enormous stability relative to subsequent currencies. So that even today, even though it's been 50 years since the world was on the gold standard, it is still possible to look at the dollar gold price. This is somewhat technical now, but this is just where the economists out there and gauge the value of the dollar by comparing it to gold. How many ounces of gold represented in a dollar? Now, those of you old enough to remember when we were last on the gold standard, this would be 1971. What was the gold price? Speaker 1 00:12:54 $35 an ounce. Meaning what invert that. And you're saying a dollar is worth 135th, an ounce of gold. And of course it was that way every day, every week, every month for three or four decades after the war, what is it now the gold price today? I think the last time I checked is $1,800. Meaning what again, take the inverse a dollar today is worth one 18 hundreds announced of gold. Now that's an enormous depreciation. If you think about it, the value of the dollar in the last 50 years has gone from being worth one 35th, announce of gold to one 18 hundreds, ounce of gold. So an enormous depreciation against quote unquote, real money, a measure of inflation. And of course you can measure that every year, if the gold price, if the dollar gold price goes up. It's another way of saying that the dollar has lost some of its gold content. Speaker 1 00:13:51 Now, quick history in terms of broad price controls. I don't mean just on things like rents, minimum wage pharma, things like that. The U S has had about five in the last century, about five major episodes of imposing broad-based price controls, uh, basically trying to freeze prices and making it illegal for people to raise them. So the first word, world war one and world war two, very common during wars, by the way, it also happened during the Korean war. Let me throw that in there in 1950, the early 1950s, why is it common for them to impose price controls during war? Because during war they're printing money, usually recklessly, they're usually borrowing in a prompt manner. And I have already said that is really the root cause of the debasement of money showing up in higher prices. So they're more inclined in war time to do that, to look and say, oh my gosh, prices are going up 15, 16, 20, 30%. Speaker 1 00:14:50 We're going to slap price controls. Part of it is they'll say we have to buy warm material. We have to buy munitions, and we can't bust the budget by, uh, you know, having to pay too much for that. So in those cases, world war II, world war II, Korean war, there were as might be expected, widespread shortages of things, some things you just couldn't even get. And, um, and once the controls were lifted, prices skyrocketed Nixon in 1971 took the us off the gold standard. It was really a diluted form of the gold standard, the gold exchange standard, but in the same speech and in the same moment, also imposed price controls. Now that's very revealing because by going off the gold standard, he and his advisors well knew that this would mean prices would go up. If the dollar is no longer anchored and convertible into real money, it's going to lose value. Speaker 1 00:15:47 So the dollar had its value all those years because it was convertible into gold, not the other way around. So price controls were imposed for about three or four years under next and completely disastrous the, again, the idea of shortages, the spreading every passing day, when the set prices would depart from real underlying prices, things just got worse and worse. It makes exchange and planning chaotic. Uh, it, it leads to corruption where people are operating in black markets. It leads to a huge bureaucracy trying to figure out how to ration by not using prices, ration by boards, um, shortages of things, or in some cases, if there are surpluses, rationing nose out, uh, who will get the surpluses, who will not. But the last real, uh, imposition of widespread price controls was under Jimmy Carter. So this is what we mean about going back 40 years in the late seventies, 78, 79, they weren't as stringent as the Nixon price controls, but Carter imposed wage and price controls in the late seventies, same kind of disaster. Speaker 1 00:16:56 Those enough, those abused and remember gas lines. Those of you remember other things like that that's on the Carter years. Um, let me just, uh, indicate, uh, cause this is kind of a crazy list, but just to be aware of it, if you don't know what inflation is or what the cause of it is, you're not going to be very good at diagnosing the cure, but in, in, just in my recent review, but just from my own history of knowing what people think of inflation, this is, this is a short list of the kind of things economists sadly will say is causing inflation. Now, some of it is the, just say particular goods. They'll look in that basket that I told you about this constructed in that they'll look for the things that went up the most. I mean, that is literally how maniacal they are about it. Speaker 1 00:17:46 How my OPIC they'll look and they'll say, wow, well, the food prices went up a lot. So I guess food prices are causing inflation to go up. Um, another one, very common oil, oil, energy prices. Oil goes up and down a lot. Sometimes old pack will impose an embargo, but again, this is a specific product whose price might go up. I mean, wheat prices might go up because there's a crop failure that is not inflation. That's just the price of something going up for various supply demand factors. Inflation is a broad based expansion in prices caused by a debasement of money. So you have to, you have to kind of tease out what I would call the micro versus the macro effects of inflation. Uh, here's another one labor unions, um, greedy wage demands. Um, th that's the idea, well, they're imposing costs on business and then business have to recoup those costs. Speaker 1 00:18:39 So they turn around and raise prices. Uh, sometimes they're attributable to profits. Someone will say, uh, these greedy profiteers are raising prices to get their profit margins up. And sometimes they'll just correlate the two and blame it on profits. Now, if you go through long stretches of low inflation, you have to ask these people what happened to the profit motive, go away in that decade. It's just a, it's just a goofy theory. Here's another one in emergencies, price gouging, they're actually price controls preventing during emergencies. Like, um, I dunno, hurricanes, you know, where you get a week long shortage of plywood or gas or something like that. Again, then nothing to do with inflation. These are just micro phenomenon, but they'll also, they'll often locally states will impose price caps on how I prices can go in emergencies, which actually make the emergencies worse because they put off the process of adjusting and bringing in the necessary supplies. Speaker 1 00:19:36 Here's another one inflation they say is caused by a lack of competition, just a monopoly power. And when you think about it, you get two or three companies competing, you know, all else equal. Maybe you'd get a lower price than if they were just one. So, but how do you explain an entire inflation across the economy inflation that way you can't you'd have to trace the rise and fall of a monopoly power. And that's just not how it works. Sometimes in the Keynesian universe, you'll hear it said inflation is caused by the economy growing too fast. Do you ever hear this one? The economy is overheating like a car, like an engine. And now think of this. The economy is the production of goods. How can the production of goods lead to a debasement of money? The debasement of money comes from producing too much money, not by producing too many goods, but that's a very common view. Speaker 1 00:20:28 Another common view is the unemployment rate is so low. That's causing inflation. What's the logic there. The unemployment rate is really low. Uh, it's easy to get a job, um, or hard to get a job. And then, and then companies will have to bid up labor costs. You're back to the old cost push inflation idea to go you're back to the idea that there's something about the business profit and loss statement that's causing inflation. Now a more plausible one, but one that's not true is government spending or government deficit spending. And in other words, spending and borrowing to spend, it's a very common view, but it's not quite true because you can have government spending go up without an increase in the money supply without an undue increase in the money supply. The reason it's plausible is typically government spending goes up and DeVos's spending go up in tandem with big increases in the money supply. Speaker 1 00:21:22 Now more recently, um, what you'll hear is, well, inflation has gone up because there's some kind of supply chain disruption. Now there are supply chain disruptions, and therefore the price of certain goods might go up. But again, that is not what inflation is. Inflation is this broad-based debasement in money. Now, let me fin, I'm going to finish off in four or five minutes here, apropos the topic. Um, when you look at these essays, I cited earlier, uh, on price controls. Are there going to be priced control? Should we have price controls? I think my judgment would be, these are still periphery. These are still marginal characters. It isn't a, it doesn't strike me as a high probability. And I think especially if now this would be real finger crossing, if cross your fingers and say, if it's true that in 2022, the rates of inflation start topping out and coming down, they'll be less talk about price controls. Speaker 1 00:22:30 But what I'm worried about is if inflation remains high and then goes higher and then persists, these people are going to have to back off from their view that these are temporary, like COVID related phenomenon or supply chain phenomenon. They're going to go start getting very nervous about the spreading and the rising of inflation. And they're going to start, that would make them, I believe, start to resort to these goofy, uh, price control, uh, ideas now G to get right to the administration. I did find from last July, not a council of economic advisors report on price controls, but a report on its view of inflation. And it's just horrendous. So if you want to look this up for you, policy nerds out there, July 6th, 2021 historical parallels to today's inflationary episode. And in there they go through six prior episodes since world war two of high inflation in the United States. Speaker 1 00:23:32 And in each case they failed to name well, it actually caused the inflation. So it's very disturbing. So these are the Biden people. I mean, these are the current economic advisors to Biden. So in 19 46, 48, I think they say that CPI went up 20% quote caused by an elimination of price controls caused by supply shortages caused by pent up demand. Unquote. Now notice no mention of the creation of money, the excess creation of money during the war. And interestingly caused by the elimination of price controls. Implication would be reimpose. The price controls, what a weird theory of inflation during Korea quote, they say households rushed to buy goods in anticipation of shortages. Unquote, that's not what causes inflation, but that's their view. The 19 69 71 episode quote, this inflate. This is from the white house report. This inflationary episode with caused by a booming economy, unquote see all the various versions. Speaker 1 00:24:38 They have 1973 to 82 quote because of two surges and oil prices caused by OPEC, uh, 19 89 91 higher inflation quote because the rack invaded Kuwait and the oil price went up due to a heightened uncertainty, unquote 2008 episode, 2008. Uh, inflation did go up a lot, but briefly quote, due to skyrocketing gas prices. Unquote, that's just a flavor of what's coming out of the white house. That's their view of what causes inflation and that's, that's the kind of eclectic, uh, non principled, uh, fallacious view of inflation that could lead policy makers to adopt a price controls because price controls are irrational, but it ultimately, I think comes from an irrational theory of where inflation itself, um, is coming, is coming from. So I I'll I'll stop there. There's more to say, but I, I thought I would rather stop there that my, again, my, my judgment is there's a messed up really widespread, messed up theory of where inflation comes from to me, that jeopardizes the case for keeping prices, CRE it heightens the danger that these people will resort to price controls, which would be chaotic and tyrannical, but I'm still putting the estimate, at least in the coming couple of years, as less than 10% likelihood that maybe that's good news. Speaker 1 00:26:07 I'll stop. Speaker 0 00:26:08 Yeah. All right. Thanks, Richard. Um, I see a couple of hands raised and I don't know if it's my phone here, but it's a little sluggish. I'm going to try to bring you up. Roger Lawrence, David. Meanwhile, did you have a question or a perspective on this? One of the things I was thinking about when Richard was talking about Nixon's price controls was wasn't Alan Greenspan in there and didn't you have anything to say or do about that? Speaker 1 00:26:39 Um, Richard correct me if I'm wrong, but I think Nixon joined Speaker 2 00:26:43 The council of economic advisors. So he was not at the fed until later Reagan, is that correct? Speaker 1 00:26:51 Yeah. So the Greenspan involvement is on Nixon was during the campaign. I understand. So that would be 68. He was not named an official advisor when Nixon took office. So then he went back to private practice as an economist. He didn't become council ahead of council of economic advisors until Ford. So for the cause came after Nixon. I mean, I think, I think, uh, Greenspan to his credit was on record saying the Nixon price controls are a bad idea. And by the way, iron ran right around the time of the Nixon price controls wrote one of the best things she ever wrote on inflation and price controls called, um, egalitarianism and inflation. It's just a really brilliant piece. I believe it ended up as one of the chapters in philosophy who needs it. One funny story about it. Uh, Greenspan though, on inflation when Jerry Ford was president, he didn't impose price controls, uh, to his credit, but he had a really goofy, uh, program called whip inflation. Now you remember that David? I do. Speaker 2 00:27:59 Yeah. So the little buttons were supposed to wear it right. Speaker 1 00:28:03 Buttons as he had a, uh, he had the, uh, the acronym was wind and there were wind buttons when the Reagan people got into the white house, someone claimed that they found a bunch of boxes in the basement full of wind buttons. So, so Jerry Ford, Jerry Ford said, you know, wear this pin and walk around and remind people, you know, not to raise crisis. It was just so goofy. So on that one, Jennifer, I can think we can say to get, could Alan Greenspan not, you know, dissuade him from that goofy thing. He didn't, I don't know why, so at least there weren't price controls, but the wind buttons went out under Greenspan. So, and he didn't become, he, yeah, he didn't become third head until 1987 Greenspan named chairman Greenspan, chairman of the fed in 87. Yeah. Right. Speaker 2 00:28:56 Um, Richard, just a question, going back to what you said about the price of gold. Um, if it's gone up from $35 to $1,800 and, you know, do the multiple or the inverse, uh, fractions, um, that the client in the value of the dollar is orders of magnitude higher than the increase of inflation high as it's been. Right. And because, I mean, that's several orders of magnitude, um, decline. It's inflation, hasn't gone up a lot, but not that much, is it? And if so, correct me if I'm wrong on the inflation point, but, um, uh, is, is there a reason for that difference in, um, you know, a, the, a, the decline of money and B the Verizon in pricing? Speaker 1 00:29:51 Well, two things, David, if, if you wanted to do an equivalent calculation on not gold, you know, what is the gold content of the dollar, as we're talking about it, you can take the inverse of the CPI. It's another way of saying, well, what does a dollar buy in terms of the basket, you know, in the basket would be shrinking over time because the price of the last time I calculated it, uh, you know, from 1971 onward, that's when we went off the gold standard. Um, if they're not that far apart in terms of, well, the dollar has lost say 90% of its value in terms of gold, it's lost something like 83% of its value in terms of consumer goods. So they're not off as much as you might guess they're off. That would be, yeah, that would be one. That would be one way of looking at it. Speaker 1 00:30:39 But another way it'd be looking at it as some people believe that the government constructed consumer price index, which is not a marketplace like gold is manipulated in some way. I'm not really sure that's true, but I can, I can imagine why they would want to make it look like CPI, inflation isn't as bad as it really is. That would be another explanation. If the market price gold is a cleaner, more honest measure and the government measure isn't tracking it, you know, you might argue that, well, the government measure is manipulated, whereas you can't really manipulate the gold price. It's a huge market. Um, okay, good question. Yeah, you're welcome. Speaker 3 00:31:25 Yeah. Hey, uh, excellent, excellent topic. And, uh, Richard, uh, you're dropping all kinds of knowledge on me. Um, uh, real quick. I make my living through retail arbitrage, which simply means I buy things below market price and, uh, and then sell it for as much as I can, um, with the, with the changes that I've seen in prices, I've seen the less things on clearance racks to purchase, but it hasn't interrupted my ability to make money because, because what's happening is with the shelves, uh, being, um, a little more bare these days, I can buy things at retail and sell it above retail for people that can't find it. And I haven't been impacted despite the fact that prices have gone up, um, because the demand is still there. Uh, you know, for, for the items that I choose to resell. My question would be around the topic of black markets. Speaker 3 00:32:22 If we were to Institute price controls on certain industries, uh, the two parter, what industries do you think price controls uh, would be most likely to hit? Um, you know, I guess rent controls is, is one that could look at, but I would wonder, like in terms of retail goods, if you have any thoughts around that. And then the other question, and I don't know if you would have any insight on this, but it would stand for reason to me that if there's a price control set at the retail store, that they would probably want to extend that to a third party, uh, retail, uh, platform, such as E-bay and wonder, I'm wondering if that would then make it, you know, would it create a situation where it would be illegal? What I, as a retail, uh, reseller, uh, have to abide by that same price control and would that now eliminate my ability to even exist as a business of taking products and services. I buy at one price resell at a higher price, and what happens to sites like eBay, if that happens. Speaker 1 00:33:32 Good question. And thank you for the original, the initial accompliment. Roger. Thank you very much. Um, the first thing to note is as if you put in a price freeze or cap, and it's usually, you know, across the board, it, you asked the question of, well, which things would you kind of ask to go in? Which things would disappear fastest or be outlined they had, they're going to have to be the ones that, where the prices were rising the most. If you ha, if you have something else where the prices are not rising, that much, it's not going to affect it. And so, as long as you know what those are, but you can, you can, uh, go through the consumer price index. And, and by the way, the other thing is, you know, this well, probably Roger, the difference between wholesale prices and retail prices. Speaker 1 00:34:11 So people don't know this, but wholesale prices are going up faster than retail prices. So, um, and they're usually a leading indicator of retail prices. So, uh, that would be one answer. I think you're right. That just as with taxation, just as with sales taxes, there became a big issue about whether only brick and mortar companies should pay that. And then what about Amazon and the ones that are, you know, online retail, which is huge. Now, I think, I do think the same issue would come up with price controls. People would complain. They would say if the price controls are only on Walmart, tangible things on the shelves at Walmart, but not at Amazon. So if they did this, my guess would be, it would be on everything and someone like you, yes, you would operate in a black market. People would basically being, trying to sell, buy and sell, move things around and you, and you would have to try to escape, uh, being penalized or, uh, or jailed for it. I mean, usually it's penalties, not jail when you break price control things, but, um, uh, th that's how I'd answer it. It's, it's hard to get too much into the granular, the weeds of particular products and, and guests on what would happen, but I'd be very surprised that they only had price controls on brick and mortar. Speaker 3 00:35:28 Thank Speaker 1 00:35:28 You, Richard. Thank you, Roger. Speaker 3 00:35:33 Awesome. Uh, Scott, Speaker 4 00:35:37 Thank you a great topic. Uh, I was actually just going to ask a little bit about, uh, Greenspan, you know, I used to be in financial services and, uh, you talked about overheating. I remember in, I think 96, he talked about irrational exuberance, and I wonder if he was kind of a seeding to that a little bit. And, uh, also more broadly just touching on something you talked about yesterday, if you, um, you know, if you think Greenspan being in there, uh, when he was helping keep inflation in check, either because of negotiating with leaders in terms of their spending policy or what have you. Speaker 1 00:36:14 Yes. Um, the, uh, the first part of your question, Scott, uh, remind me, oh, right in 19, I think that was 1995. He did say the stock market is, uh, the prices are too high and due to irrational exuberance. Okay. So regardless of his theory, I just wanted to point out that some people will say, even if you do not see consumer prices going up as measured in the consumer price index, it's very common for them to say, well, it must have spilled over into other things that are not in the consumer price index, like houses or stock prices, stocks, or real estate generally, you know, and, and that seems plausible. Uh, but, um, those are not part of the, uh, inflation measures. Now inflation usually is bad for financial markets. So I, I'm just skeptical of the whole idea that the stock market is going up because money is quote unquote flooding into the market for every buyer. Speaker 1 00:37:17 There's a seller in the stock market. So, uh, that, that's just, hasn't been what I've studied. That is not the cause of stock prices. Stock prices go up when inflation is lower and interest rates are lower. Um, Greenspan's performance. He was at the fed 18 months. Um, I just study when he left and not 18 months, 18 years, I did a study when he left of the 18 years under the gold standard. And then the 18 years between going off the gold standard and him showing up at the fed and on a whole bunch of measures, uh, inflation and interest rates and employment the economy. And it's interesting because the best performer was the gold standard. The second best performer was Greenspan. And the third really the worst performer was 1971 until Greenspan 1971 to 1987, the terrible, uh, Jimmy Carter years and Nixon years. Speaker 1 00:38:15 So, so he wasn't bad, uh, in terms of his performance, inflation was generally low during his tenure, but what he was prone to do sadly, was to, well, exactly what you said. He, he used to look at the stock market and say, it's out of whack. I'm going to raise interest rates and squash the stock market. He was very much a believer in bubbles. The idea that there was artificial inflation of stock prices, which was really unfortunate, cause it, it caused a couple of recessions. And, um, and also that's just one main thing, but, but this might interest you in the re early Reagan years before he was a fed chairman. Um, there was a gold commission where they studied, whether they should return to the gold standard. So this is like 1981 or so this is a 10 years after going off the gold standard. Speaker 1 00:39:04 And they gathered all this testimony. And one of the contributors was Alan Greenspan and his testimony was summarized in a wall street journal article, can the us, or was it should the U S Candi U us returned to a gold standard? Now, this is interesting because all Objectivists know that Alan Greenspan was for the gold standard. And here he is, during the Reagan years, you'd think he'd be on that commission touting the gold standard. His essay actually said, don't go back on the gold standard. It was amazing MSI. He, at the time he said inflation is so high, which it was 1982 and the uncertainty is so great that it's too dangerous to return to the gold standard and pick a new convert ability rate 0.1. Then he said, really, what we should do is try to get the federal reserve to behave and bring inflation down, down, down, down to a level where it mimics the gold standard. Speaker 1 00:40:02 And then he said, but if that's true, then the fed has proved it doesn't need to be on the gold standard. It's just one of the craziest arguments ever. But when you look at his subsequent performance at the fed, he might well argue. Well, that's exactly what I did. I proved to you doubters out there that a head of a Fiat monopoly money issuer, the fed, who I in the past criticized, uh, can behave if I'm in charge, but he never all in all his tenure at the fed ever, you know, told the research departments or, or tasked anybody with researching the gold standard, considering going back on the gold standard by then, he was just not interested in being anything other than conventional, uh, Washington. Um, I hope that helps. So you're welcome. Speaker 0 00:40:58 Yes. Unfortunate, but that does clear it up. Um, Roger, Speaker 5 00:41:04 Hey, thanks, Jennifer. Um, uh, as much as I want to talk about inflation, I'm going to ask the question about price controls. You mentioned at the beginning, there's this, you know, you have a moral objection to price controls and the political one. Um, but, uh, um, you know, uh, price control is an intervention to prevent some other harm. And so I, I'm curious if you could spell out a scenario where you think a price control would be justified or, or would you, would you, would you, uh, would you tell the murderer at the door where your friend is, Speaker 1 00:41:48 But no, I would never, uh, I can't think of a reason to endorse or condone a price control. Um, uh, by the way, the, the, uh, objection I made, the, one of the reasons I started with moral and political objection, Roger, if you think about it, if, if inflation is not, but if inflation is abroad rise in prices, uh, price controls, fix that. I mean, when you look at the price series, when they impose price controls sure enough, there, their prices don't rise anymore. So why do economists, what do economists focus mostly on the underlying destruction of the trading system and the shortages and the chaos and the corruption that goes on, and it just ruins the economy cause the price mechanisms being overrun or ignored. Right. So, um, so it's interesting because, uh, the advocates of this will say, uh, it works price controls work, but their, their standard is not, does the economy continue to work? Their standard is have we prevented prices from going up? Yeah. Lo and behold we have. Um, but, um, no, for the same three reasons I named, I can't think of a case where I would endorse, uh, price controls. Uh, can you let me put it to you? Roger Cook, can you, am I missing something that you've thought of? Speaker 5 00:43:17 Um, I, I, I think we have a very fragile economic system and we, we should be, um, uh, we shouldn't be afraid to, uh, to, to take some action. Um, and actually I'll just say the point on inflation I wanted to make, and I'm actually wondering what you think about this. Um, uh, so I think when we say the term inflation, we're oftentimes conflating, oh, you know, the dollar is losing a little bit of power, uh, and you know, uh, Russia right after the wall went down or, or, uh, you know, Nigeria or, or Argentina or Venezuela. And I think those are very different kinds of inflation. But when we say inflation in the context of the us economy right now, I worry that that raises a different narrative. I'm wondering, what do you think about that are the different types of inflation caused for diff by different reasons or, um, or are they, Speaker 1 00:44:17 That's a good question. That's a good question. I'm really reluctant to go there because it sounds to me like, uh, the idea of I'm going to look at symptoms, which prices are rising, which are falling. And in that case, every single broad inflation has a different particularities to it. But, um, I'm a reluctant to do that because it, to me, anti conception, that's not a word, really. It ant up, well, I'll say it anyway. And the anti conceptualizes, the whole thing, it makes it, it makes every inflation seem like a, not part of any pattern, not part of any principle, but if the principle is inflation is a decline in the purchasing power of money caused by government. I mean, might the Hungarian government do it differently than the American government do it differently than the German hyperinflation? Yes, but it's the same principle. It's some government doing something to its money and that's a lot narrower. Speaker 1 00:45:12 And I think actually a lot more accurate than the idea of well there's price went up and that price went up and it went by up a lot. But, but only in Algeria and not in South Africa, at that point, you don't have a theory anymore. You just have a concatenation of particulars with no pattern and no connection, I think. And that's exactly what the kind of a disintegrated, uh, conception to nicer word for it, of inflation that we have today. It might, uh, by the way, for the, uh, you're reminding me that this might be helpful to people, there is, uh, the Milton Friedman view that inflation is everywhere and always a monetary phenomenon. And if you, if you've heard that before, that is much closer to my view, because what he's basically saying is it's not a quote, real phenomenon is not a result of, you know, we pray weed and oil and stuff like that. Speaker 1 00:46:07 Yes, their price goes up or down, but he wanted to highlight the fact that inflation is what's done to the money, but what's different about Friedman and say the Austrian view or my view is he had the quantity theory of money. So he literally said the value of money is going to go down if too much quantity of it is produced. Now that's close to the truth, but on the gold standard view, it's the quality theory of money, not the quantity theory of money. And then as long as semantics here, what would quality and the quality would mean? Is that the kind of money that was converged upon voluntarily by rationally self-interested market makers? Yes. That's the history of the gold standard. It wasn't imposed by government, but adopted quote unquote bottom up by rational traders 0.1, but 0.2, they converged on gold for a very particular reason. Speaker 1 00:47:00 It has particular properties that make it good money, but here's the really fun thing about it. It's a numerator. The gold standard, the key to the gold standard was not so much gold, but the standard and the idea that a currency was defined as a certain weight in gold or precious metals, that was the key that's by the way, why they called it the British pound, the French, Frank, the names themselves represent weights and measures. And it's, it's a fascinating phenomenon because it's something like, um, it's akin to a yardstick. If I said, why is a yardstick valuable? Why might it be important for architects? You know, in building things because it's equal to three feet and it's always equal to three feet, it doesn't fluctuate on Tuesdays and Wednesdays and become one feet, one foot. And that is what a proper money is. It's a numeraire is kind of like a yard stick. And the quality of that yard stick is going to be high. If it's, uh, measurements are fixed. Now notice you can still produce a bunch of yard sticks. You can still create a supply of yard sticks because there's many architects out there as many buildings being built, but the increase in the number of yard sticks does not debase the yard standard. That is exactly what the gold standard is, the kind of technical, but I thought I'd throw that out there, Speaker 5 00:48:21 Jen, next week. Can we do Siri of value of known and done? Speaker 0 00:48:26 Well, we are going to do a couple of things next week. Um, we're going to return to philosophy on Tuesday. Uh, Richard is going to be speaking about enlightened self-interest and then on Thursday, uh, our founder, David Kelly, is going to be talking about fact versus opinion. So we'll get value in there somehow. Um, but we've got another eight minutes today and I'd love to, to, uh, do a round Robin with, uh, JP Lawrence and Alan. So JP, you wanna start off, Speaker 6 00:48:59 Thank you, Jennifer. So about Bitcoin again, one would be very hard pressed not to, to turn a blind eye to the, uh, the sudden emergence of an alternative to gold as a standard of a store of value in the last decade. And one with a potential of not only, um, supplanting gold, but, uh, as a store of value, but also as currency given the endless possibilities, the fungibility of it. Um, I, once I, I consider myself a Bitcoin to CS still. Um, and one day I had this showered thought that, uh, I put on my social media platforms thinking of, of playing rents, um, novel. And I said, owning Bitcoin is like owning, going from Galt's Gulch safely deposited on Mulligan one against bank. Um, so that was my, my, my, my shower thought. And I, I so far I'm sticking to it. And I would love to have your, your views on this, this phenomenon that has, um, taken every, every, uh, school of, uh, um, economy and economics, uh, by, uh, Speaker 1 00:50:36 Well, JPI first, the first thing I want to recommend to you is we have an entire session on crypto, January 27th. I hope you can attend that if not see the recording, but I have a, uh, a webinar called morals and markets and it's once a month. And for the next one, we picked that topic. So we'll discuss it at great length. And by the way, I'm going to have a guest join me a fascinating guest. He's my duke student and this guy, Jack Kriesel knows more about Bitcoin. I I've talked to him for hours about it, and, and he's a fan of Bitcoin, but he really understands the, the science and the economics of it. And he and I, I'm helping him teach a course at duke about this, that some of the students sometimes will teach what they call house courses. So I asked them to come on morals and markets, January 20, 27th with me, and he will, I think you'll love it. Speaker 1 00:51:27 So my short answer here today, JP would be, I, I have come to, uh, be, uh, friendly toward crypto and Bitcoin. I initially was suspicious of them. I wasn't sure they were real. The more I've studied them. The more I do believe they can be an alternative monies, the actual structure, as you may know, a Bitcoin is very interesting because it puts a limit on the supply of Bitcoin that can be mined and created. And so in that regard, it has a kind of built in mechanism for not being over issued. And so you would think that over time it will stabilize in value, which it hasn't yet. So one feature of money. Of course it has to be somewhat stable in value in Bitcoin isn't yet, but I suspect that in the coming decade, it will become more and more. Asymptomatically more stable. Now, if you, as you know, if there's a viable, alternative to government money, government will try to get rid of it. Speaker 1 00:52:24 It'll try to like gold. So it'll either sabotage the gold standard, get rid of it, blame the gold standard for all sorts of things and replace it with its own bogus money. And so I do worry, this is no slight against cryptos that to the extent that cryptocurrencies become viable alternative monies, there'll be subject to the same kind of, um, sabotage by government. So, but that's a separate issue. And I think I have learned from Jack and others, that some of the features of crypto actually sidestep that prevent that in ways that physicalist gold systems cannot, you know, the whole idea of the crypto is, uh, maybe they can outguess and defeat government's attempt to shut them down. Um, so that's a short answer to a very technical question, but yeah. Good for you to, to be positive about Bitcoin or at least be studying it. I do think it's an interesting modern monetary phenomenon. Speaker 0 00:53:23 All right. Speaking of short answers, we've got, uh, just about three more minutes. So, um, Lawrence, uh, why don't you quickly answer, ask your question and then Allen, uh, just right afterwards. Um, well just go ahead, Lawrence and, uh, Clark. I see you. I'm not going to bring you up. I'm not ignoring you, but I don't want to tease you and give you false hope because we do sessions on for an hour or so. Um, hope you'll join us next time. Speaker 7 00:53:54 Great. Thank you. Let me be quick. Uh, so I wasn't around in the 1970s, so we don't want to always compare it to then, but you made, when you talked with us briefly yesterday, what are the similarities between what happened 1970s and what's happening today? So I'd be curious. Um, Richard, aside from price controls, what are some other things we might want to keep an eye on that government might try to do? If things continue to go haywire? Speaker 1 00:54:20 Um, boy, that's a hard one to answer just quickly learns. I would say, um, price controls generally, as we had in the seventies are a very authoritarian thing and I believe we're going to, I believe maybe even unlike the seventies for more recent years are very authoritarian. Now they're very authoritarian largely in public health, but that's making me think they could equally be authoritarian in, uh, money. Now this, this could be things like confiscating everyone's 401k plan assets. That sounds crazy, but, or, or, or a complete elimination of currency and going totally electric electronic. So the more modern monetary theory, so the government can directly access your bank account either subsidizing you or taxing you immediately without all the paperwork and IRS filing in between. So those are just a couple of suggestions of kind of, kind of off the wall, but possible things that would be very authoritarian. Speaker 8 00:55:29 Yeah. Hi, thanks. I have two questions. You can answer either one or both depending on your preference, but one is what is the rationale behind, um, the Biden administration, as you said, increasing the money supply 100%. And the other question is when it comes to pharmaceuticals, the, the narrative is that they are making way too much money to begin with, but then, which is a matter of opinion, but the other one would be that well, if car prices go up, then, oh, well, you're going to have to stay with your old car. But when prices go up for pharmaceuticals, for example, the whole issue with the EpiPens, that there can be very serious consequences to consumers not being able to, to afford those products. So, um, I was curious about your thoughts on that. Speaker 1 00:56:28 Thanks you'll make, thank you, Alan. My quick thought on the second one is in cases where people can not afford a pharmaceuticals. The answer to me is not price controls or authoritarian interventions, but voluntary private charity. They just need to rely on voluntary, private charity, asking others to help them afford the afford the thing. And the other thing is not in the self-interest of pharma companies to set prices that nobody can pay. That would be zero revenues. So that doesn't make sense either, but quickly on Biden. I, I wouldn't put it only to Biden. It's really Jay Powell and the fed, but this started with Trump. The fed has been increasing the money supply enormously in the last three or four years. So it really began under Trump and it's continued under Biden, but it's Trump Biden because it's the fed. And you asked why, why? Because they sent everybody home and told them to stay in their basement and not go to work. And then they said, oh my God, they can't pay their bills. Let's print money and give them money. I mean, it is that crude. That's really what it was and the chickens are coming home to roost now. Thanks Speaker 0 00:57:32 Alan Scott masterclass on cryptocurrency on the 27th, again, everybody next week back to philosophy Tuesday, Thursday, I don't know if you guys saw the thread by massage, he's the founder of, and a relatively recent immigrant to the United States. He had a 10 reasons why an American, which went kind of viral, got picked up on one cable network and of course in the wall street journal. So we're going to have a chance to talk to him next week. So thanks everybody. And I'll see you next week. Thanks Speaker 1 00:58:40 Jennifer. Thanks everyone.