1 00:00:00,000 --> 00:00:02,520 - The following content is provided under a Creative 2 00:00:02,520 --> 00:00:03,970 Commons license. 3 00:00:03,970 --> 00:00:06,360 Your support will help MIT OpenCourseWare 4 00:00:06,360 --> 00:00:10,660 continue to offer high-quality educational resources for free. 5 00:00:10,660 --> 00:00:13,320 To make a donation or view additional materials 6 00:00:13,320 --> 00:00:17,190 from hundreds of MIT courses, visit MIT OpenCourseWare 7 00:00:17,190 --> 00:00:18,370 at ocw.mit.edu. 8 00:00:26,210 --> 00:00:29,660 RICHARD SCHMALENSEE: Let's do a little general discussion 9 00:00:29,660 --> 00:00:33,200 of some of the political issues that we will encounter. 10 00:00:33,200 --> 00:00:42,020 This is a-- if you read why there are governments, 11 00:00:42,020 --> 00:00:47,790 if you read what governments say about why they are established, 12 00:00:47,790 --> 00:00:50,810 you get very high-flown language. 13 00:00:50,810 --> 00:00:54,810 This is The Declaration of Independence, life, liberty, 14 00:00:54,810 --> 00:00:56,750 and the pursuit of happiness. 15 00:00:56,750 --> 00:01:01,130 Governments are to assure those rights. 16 00:01:01,130 --> 00:01:06,040 This is The Constitution, a little less high-flying-- 17 00:01:06,040 --> 00:01:08,950 establish justice, ensure domestic tranquility, 18 00:01:08,950 --> 00:01:12,550 provide for the common defense, promote the general welfare, 19 00:01:12,550 --> 00:01:14,050 and secure the blessings of liberty. 20 00:01:14,050 --> 00:01:17,050 You will notice that we have domestic tranquility, 21 00:01:17,050 --> 00:01:21,010 common defense, things that are a little less 22 00:01:21,010 --> 00:01:25,353 high-flowing than life, liberty, and the pursuit of happiness. 23 00:01:25,353 --> 00:01:27,020 Does anybody know where this comes from? 24 00:01:30,930 --> 00:01:34,200 This is the law that it's actually 25 00:01:34,200 --> 00:01:36,960 an act the English government that sets up 26 00:01:36,960 --> 00:01:40,470 Canada as a separate state. 27 00:01:40,470 --> 00:01:43,530 Peace, order, and good government-- somewhat different 28 00:01:43,530 --> 00:01:47,880 emphasis than life, liberty, and the pursuit of happiness. 29 00:01:47,880 --> 00:01:50,010 If you look at-- 30 00:01:50,010 --> 00:01:52,950 lots of other governments don't write down-- 31 00:01:52,950 --> 00:01:57,540 or lots of other countries, lots of regimes, postrevolutionary, 32 00:01:57,540 --> 00:02:01,560 Henry VIII, Ivan the Terrible, Khmer Rouge, Joseph Stalin, 33 00:02:01,560 --> 00:02:06,240 Adolf Hitler would not write statements like that. 34 00:02:06,240 --> 00:02:07,500 But they had goals. 35 00:02:07,500 --> 00:02:10,340 They have goals. 36 00:02:10,340 --> 00:02:15,180 A key element of a functioning government 37 00:02:15,180 --> 00:02:19,570 is a near monopoly on the use of force. 38 00:02:19,570 --> 00:02:23,740 If you think about it, when you think about Somalia 39 00:02:23,740 --> 00:02:29,210 is a failed state, or Libya is a failing state 40 00:02:29,210 --> 00:02:30,680 not that long ago. 41 00:02:30,680 --> 00:02:35,000 What broke was the monopoly on the use of deadly force-- 42 00:02:35,000 --> 00:02:37,670 near monopoly-- near monopoly. 43 00:02:37,670 --> 00:02:40,250 Is Syria a failed state yet? 44 00:02:40,250 --> 00:02:42,360 Probably not. 45 00:02:42,360 --> 00:02:43,650 Is it en route? 46 00:02:43,650 --> 00:02:45,330 Maybe. 47 00:02:45,330 --> 00:02:50,630 But that's-- every government that's really a government-- 48 00:02:50,630 --> 00:02:54,990 really a government-- has a monopoly on the use of force. 49 00:02:54,990 --> 00:03:00,890 It also has-- governments tend to have legitimacy. 50 00:03:00,890 --> 00:03:04,100 That is to say, even in North Korea, 51 00:03:04,100 --> 00:03:08,150 people aren't followed around by a man with a gun. 52 00:03:08,150 --> 00:03:15,590 People follow orders without the use of force, generally-- 53 00:03:15,590 --> 00:03:17,650 generally. 54 00:03:17,650 --> 00:03:22,450 Legitimacy can come from a number of sources. 55 00:03:22,450 --> 00:03:27,620 Again, if you think about it in the abstract, 56 00:03:27,620 --> 00:03:32,680 the US government probably gets its legitimacy from the fact 57 00:03:32,680 --> 00:03:35,560 that most people think the processes followed 58 00:03:35,560 --> 00:03:37,750 are reasonably fair. 59 00:03:37,750 --> 00:03:39,820 You might not have liked the decision 60 00:03:39,820 --> 00:03:43,450 in Bush versus Gore that gave the election to Bush, 61 00:03:43,450 --> 00:03:45,580 but it followed a certain process 62 00:03:45,580 --> 00:03:49,900 and, yeah, you didn't like it, but fundamentally, the process 63 00:03:49,900 --> 00:03:50,412 was OK. 64 00:03:50,412 --> 00:03:52,870 You don't like the Bills that come out of Congress, but you 65 00:03:52,870 --> 00:03:54,640 know how people are elected-- 66 00:03:54,640 --> 00:03:57,370 blah, blah, blah. 67 00:03:57,370 --> 00:04:00,040 In the days of the divine right of kings, 68 00:04:00,040 --> 00:04:01,870 legitimacy came from someplace else. 69 00:04:01,870 --> 00:04:05,980 Legitimacy came from the fact that that king was the king. 70 00:04:05,980 --> 00:04:09,050 And God said, he's the king. 71 00:04:09,050 --> 00:04:10,710 Do what he says. 72 00:04:10,710 --> 00:04:12,460 That's a pretty good source of legitimacy. 73 00:04:12,460 --> 00:04:15,670 Or you could have a government that's 74 00:04:15,670 --> 00:04:21,519 arbitrary, doesn't have divine rights, 75 00:04:21,519 --> 00:04:25,610 but is doing things that people like. 76 00:04:25,610 --> 00:04:30,140 You might ask, why was the Hitler government-- 77 00:04:30,140 --> 00:04:33,180 why did it have legitimacy in Germany? 78 00:04:33,180 --> 00:04:35,190 Because the variety of the goals it 79 00:04:35,190 --> 00:04:37,910 was pursuing were popular goals. 80 00:04:37,910 --> 00:04:40,550 Was the process that put it in office fair? 81 00:04:40,550 --> 00:04:42,520 Not really. 82 00:04:42,520 --> 00:04:46,450 Was Adolf Hitler divinely endorsed? 83 00:04:46,450 --> 00:04:48,400 Not really. 84 00:04:48,400 --> 00:04:50,830 But restoring German self-respect, 85 00:04:50,830 --> 00:04:53,060 expanding the territory of the country, 86 00:04:53,060 --> 00:04:56,313 making it a power again, et cetera, et cetera, 87 00:04:56,313 --> 00:04:57,355 those were popular goals. 88 00:05:00,540 --> 00:05:03,270 And sometimes-- North Korea-- 89 00:05:03,270 --> 00:05:07,090 you have legitimacy because the consequences 90 00:05:07,090 --> 00:05:11,110 of not following orders are pretty terrible. 91 00:05:11,110 --> 00:05:13,800 So you follow orders. 92 00:05:13,800 --> 00:05:17,370 Governments also have policies and a process 93 00:05:17,370 --> 00:05:19,530 for changing them. 94 00:05:19,530 --> 00:05:22,750 I want to spend just a couple of minutes 95 00:05:22,750 --> 00:05:25,420 about how the market system-- 96 00:05:25,420 --> 00:05:29,110 the market, which you all studied in economics, 97 00:05:29,110 --> 00:05:32,620 differs from the political world, which we will 98 00:05:32,620 --> 00:05:34,255 be spending some time on here. 99 00:05:37,120 --> 00:05:43,830 In the market, we think of individuals or firms 100 00:05:43,830 --> 00:05:46,490 pursuing self-interest. 101 00:05:46,490 --> 00:05:49,440 That happens in the political world. 102 00:05:49,440 --> 00:05:52,650 But what also happens in the political world is, A, 103 00:05:52,650 --> 00:05:56,360 groups are involved, not just individuals-- 104 00:05:56,360 --> 00:05:59,750 parties, interest groups, trade associations, 105 00:05:59,750 --> 00:06:01,430 industries acting together. 106 00:06:04,360 --> 00:06:07,560 And you see the pursuit both of self-interest 107 00:06:07,560 --> 00:06:12,100 and have different views of the public interest. 108 00:06:12,100 --> 00:06:17,020 Because in the market-- 109 00:06:17,020 --> 00:06:18,800 right-- you make decisions for yourself, 110 00:06:18,800 --> 00:06:20,380 firm makes decisions for itself. 111 00:06:20,380 --> 00:06:24,140 In the political world most decisions 112 00:06:24,140 --> 00:06:26,570 are for the community. 113 00:06:26,570 --> 00:06:30,190 So the question is not only what's good for me-- 114 00:06:30,190 --> 00:06:32,683 that matters, obviously-- 115 00:06:32,683 --> 00:06:34,100 but what's good for the community. 116 00:06:34,100 --> 00:06:37,170 How do I think a government should work? 117 00:06:37,170 --> 00:06:39,470 How do I think a community, a state, 118 00:06:39,470 --> 00:06:41,750 a country should be organized? 119 00:06:41,750 --> 00:06:45,470 What goals should it pursue? 120 00:06:45,470 --> 00:06:51,770 That gets us to the question of ideology. 121 00:06:55,110 --> 00:06:58,380 In the market, individual decisions 122 00:06:58,380 --> 00:07:01,800 are driven by individual preferences. 123 00:07:01,800 --> 00:07:05,760 In the political world, ideology matters. 124 00:07:05,760 --> 00:07:11,580 Different views of how the state should operate, 125 00:07:11,580 --> 00:07:13,490 how society should work, and what 126 00:07:13,490 --> 00:07:16,760 arrangements should be adopted. 127 00:07:16,760 --> 00:07:18,410 So you and I might, for instance, 128 00:07:18,410 --> 00:07:25,110 agree that society should take care of poor people-- 129 00:07:25,110 --> 00:07:27,980 or that poor people should be taken care of. 130 00:07:27,980 --> 00:07:30,200 People on the market side might say, yeah, 131 00:07:30,200 --> 00:07:32,600 that's what families are for. 132 00:07:32,600 --> 00:07:36,140 That's how the state should be organized to achieve that goal, 133 00:07:36,140 --> 00:07:39,080 is families should understand that that's their duty to take 134 00:07:39,080 --> 00:07:42,120 care of poor relatives and poor friends. 135 00:07:42,120 --> 00:07:44,620 People on the state side might, say, well, 136 00:07:44,620 --> 00:07:48,730 that's all well and good, but that won't work. 137 00:07:48,730 --> 00:07:50,290 That won't work. 138 00:07:50,290 --> 00:07:54,990 You might have different goals, of course. 139 00:07:54,990 --> 00:07:58,020 People on the market side might say, 140 00:07:58,020 --> 00:08:02,880 the notion that the poor should be taken care of is a bad idea. 141 00:08:02,880 --> 00:08:04,747 It'll rob them of incentives. 142 00:08:04,747 --> 00:08:06,330 And if the poor don't have incentives, 143 00:08:06,330 --> 00:08:08,610 they'll be a burden on the rest of us, 144 00:08:08,610 --> 00:08:11,250 and we just shouldn't have that. 145 00:08:11,250 --> 00:08:13,843 People on the state side might say, no, no, no. 146 00:08:13,843 --> 00:08:16,260 You've got to take care of the poor, it's simple humanity. 147 00:08:16,260 --> 00:08:18,150 Forget all the incentives. 148 00:08:18,150 --> 00:08:20,400 Those are ideological statements. 149 00:08:20,400 --> 00:08:23,460 Those are statements about how the government, how 150 00:08:23,460 --> 00:08:27,690 the society, how the community, what should it work to do? 151 00:08:27,690 --> 00:08:30,820 And how best to get there? 152 00:08:30,820 --> 00:08:33,100 They don't arise-- those kinds of issues 153 00:08:33,100 --> 00:08:36,179 don't arise in the market, right? 154 00:08:36,179 --> 00:08:38,340 Market economy, you're buying, you're selling, 155 00:08:38,340 --> 00:08:40,710 you're pursuing your interest, you're maximizing profit. 156 00:08:40,710 --> 00:08:42,020 None of this stuff comes-- 157 00:08:42,020 --> 00:08:45,200 it may come up, but it's not central. 158 00:08:45,200 --> 00:08:46,670 It's not central. 159 00:08:46,670 --> 00:08:49,820 In the political system, it's central. 160 00:08:49,820 --> 00:08:52,230 So if I can do this-- 161 00:08:52,230 --> 00:08:54,680 let me just for fun-- 162 00:08:54,680 --> 00:08:58,340 if I've still got it. 163 00:08:58,340 --> 00:09:00,500 No, I don't still have it-- 164 00:09:00,500 --> 00:09:01,010 wait a sec. 165 00:09:01,010 --> 00:09:02,900 Yeah, I do. 166 00:09:02,900 --> 00:09:04,055 Just for humor. 167 00:09:07,850 --> 00:09:11,355 Let's do Howard Roark. 168 00:09:17,610 --> 00:09:20,153 This is a statement of ideology. 169 00:09:20,153 --> 00:09:20,820 [VIDEO PLAYBACK] 170 00:09:20,820 --> 00:09:22,070 - I shall call no witnesses. 171 00:09:22,070 --> 00:09:24,506 This will be my testimony and my summation. 172 00:09:24,506 --> 00:09:26,157 - Take the oath. 173 00:09:26,157 --> 00:09:28,240 - Do you swear to tell the truth, the whole truth, 174 00:09:28,240 --> 00:09:29,700 and nothing but the truth, so help you God? 175 00:09:29,700 --> 00:09:30,200 - I do. 176 00:09:34,405 --> 00:09:36,030 - Thousands of years ago, the first man 177 00:09:36,030 --> 00:09:38,240 discovered how to make fire. 178 00:09:38,240 --> 00:09:39,920 He was probably burned at the stake 179 00:09:39,920 --> 00:09:42,210 he taught his brothers to light, but he left them 180 00:09:42,210 --> 00:09:44,190 a gift they had not conceived. 181 00:09:44,190 --> 00:09:46,710 And he lit the darkness off the Earth. 182 00:09:46,710 --> 00:09:48,420 Throughout the centuries, there were 183 00:09:48,420 --> 00:09:52,170 men who took first steps down new roads armed with nothing 184 00:09:52,170 --> 00:09:54,060 but their own vision. 185 00:09:54,060 --> 00:09:55,590 The great creators. 186 00:09:55,590 --> 00:09:57,980 The thinkers, the artists, the scientists, the inventors 187 00:09:57,980 --> 00:10:00,090 stood alone against the men of their time. 188 00:10:00,090 --> 00:10:02,850 Every new thought was opposed. 189 00:10:02,850 --> 00:10:05,810 Every new invention was denounced. 190 00:10:05,810 --> 00:10:09,150 But the men of unborrowed vision went ahead. 191 00:10:09,150 --> 00:10:13,440 They fought, they suffered, and they paid, but they won. 192 00:10:13,440 --> 00:10:18,600 No creator was prompted by a desire to please his brothers. 193 00:10:18,600 --> 00:10:21,090 His brothers hated the gift he offered. 194 00:10:21,090 --> 00:10:23,910 His truth was his only motive. 195 00:10:23,910 --> 00:10:26,620 His work was his only goal. 196 00:10:26,620 --> 00:10:29,070 RICHARD SCHMALENSEE: This is a model of progress. 197 00:10:29,070 --> 00:10:30,240 Where does it come from? 198 00:10:30,240 --> 00:10:33,360 - --his creation, not the benefits others derived from 199 00:10:33,360 --> 00:10:33,990 it. 200 00:10:33,990 --> 00:10:36,990 The creation which gave form to his truth. 201 00:10:36,990 --> 00:10:42,330 He held his truth above all things and against all men. 202 00:10:42,330 --> 00:10:45,840 He went ahead whether others agreed with him or not, 203 00:10:45,840 --> 00:10:49,320 with his integrity as his only banner. 204 00:10:49,320 --> 00:10:52,380 He served nothing and no one. 205 00:10:52,380 --> 00:10:55,380 He lived for himself. 206 00:10:55,380 --> 00:10:57,180 And only by living for himself was 207 00:10:57,180 --> 00:11:01,320 he able to achieve the things which are the glory of mankind. 208 00:11:01,320 --> 00:11:04,650 Such is the nature of achievement. 209 00:11:04,650 --> 00:11:08,040 Man cannot survive except through his mind. 210 00:11:08,040 --> 00:11:10,520 He comes on Earth unarmed. 211 00:11:10,520 --> 00:11:12,600 His brain is his only weapon. 212 00:11:12,600 --> 00:11:14,980 But the mind is an attribute of the individual. 213 00:11:14,980 --> 00:11:18,870 There is no such thing as a collective brain. 214 00:11:18,870 --> 00:11:22,800 The man who thinks must think and act on his own. 215 00:11:22,800 --> 00:11:27,450 The reasoning mind cannot work under any form of compulsion. 216 00:11:27,450 --> 00:11:31,410 It cannot be subordinated to the needs, opinions, 217 00:11:31,410 --> 00:11:33,370 or wishes of others. 218 00:11:33,370 --> 00:11:36,660 It is not an object of sacrifice. 219 00:11:36,660 --> 00:11:40,380 The creator stands on his own judgment. 220 00:11:40,380 --> 00:11:44,640 The parasite follows the opinions of others. 221 00:11:44,640 --> 00:11:46,380 The creator thinks. 222 00:11:46,380 --> 00:11:48,570 The parasite copies. 223 00:11:48,570 --> 00:11:52,110 The creator produces, the parasite loots. 224 00:11:52,110 --> 00:11:55,710 The creator is concern is the conquest of nature. 225 00:11:55,710 --> 00:11:58,860 The parasite's concerned is the conquest of man. 226 00:11:58,860 --> 00:12:00,850 The creator requires independence-- 227 00:12:00,850 --> 00:12:03,120 he neither serves nor rules. 228 00:12:03,120 --> 00:12:07,040 He deals with men by free exchange and voluntary choice. 229 00:12:07,040 --> 00:12:09,140 The parasite seeks power. 230 00:12:09,140 --> 00:12:10,680 He wants to bind all men together 231 00:12:10,680 --> 00:12:12,983 in common action and common slavery. 232 00:12:12,983 --> 00:12:13,483 He claims-- 233 00:12:13,483 --> 00:12:15,733 RICHARD SCHMALENSEE: That's what we call a government. 234 00:12:15,733 --> 00:12:17,280 - --a tool for the use of others. 235 00:12:17,280 --> 00:12:20,040 That he must think as they think, act that they act, 236 00:12:20,040 --> 00:12:23,120 and live in selfless, joyless servitude 237 00:12:23,120 --> 00:12:25,440 to any need but his own. 238 00:12:25,440 --> 00:12:26,670 Look at history. 239 00:12:26,670 --> 00:12:29,670 Everything we have, every great achievement 240 00:12:29,670 --> 00:12:34,200 has come from the independent work of some independent mind. 241 00:12:34,200 --> 00:12:38,190 Every horror and destruction came from attempts 242 00:12:38,190 --> 00:12:42,210 to force men into a herd of brainless, soulless robots 243 00:12:42,210 --> 00:12:46,200 without personal rights, without personal ambition, 244 00:12:46,200 --> 00:12:49,350 without will, hope, or dignity. 245 00:12:49,350 --> 00:12:51,120 It is an ancient conflict. 246 00:12:51,120 --> 00:12:53,210 It has another name. 247 00:12:53,210 --> 00:12:57,810 The individual against the collective. 248 00:12:57,810 --> 00:13:00,750 Our country, the noblest country in the history of men, 249 00:13:00,750 --> 00:13:03,330 was based on the principle of individualism. 250 00:13:03,330 --> 00:13:07,380 The principle of man's inalienable rights. 251 00:13:07,380 --> 00:13:10,500 It was a country where a man was free to seek his own happiness, 252 00:13:10,500 --> 00:13:14,310 to gain and produce, not to give up and renounce; 253 00:13:14,310 --> 00:13:21,330 to prosper, not to starve; to achieve, not to plunder; 254 00:13:21,330 --> 00:13:25,320 to hold as his highest position a sense of his personal value, 255 00:13:25,320 --> 00:13:29,760 and as his highest virtue his self-respect. 256 00:13:29,760 --> 00:13:31,770 Look at the results. 257 00:13:31,770 --> 00:13:35,400 That is what the collectivists are now asking you to destroy, 258 00:13:35,400 --> 00:13:39,300 as much of the Earth has been destroyed. 259 00:13:39,300 --> 00:13:40,950 I am an architect. 260 00:13:40,950 --> 00:13:44,880 I know what is to come by the principle on which it is built. 261 00:13:44,880 --> 00:13:48,060 We are approaching a world in which I cannot permit myself 262 00:13:48,060 --> 00:13:49,530 to live. 263 00:13:49,530 --> 00:13:51,910 My ideas are my property. 264 00:13:51,910 --> 00:13:56,190 They were taken from me by force by breach of contract. 265 00:13:56,190 --> 00:13:58,890 No appeal was left to me. 266 00:13:58,890 --> 00:14:01,320 It was believed that my work belonged to others 267 00:14:01,320 --> 00:14:02,730 to do with as they pleased. 268 00:14:02,730 --> 00:14:05,610 That they had a claim upon me without my consent, 269 00:14:05,610 --> 00:14:09,570 that it was my duty to serve them without choice or reward. 270 00:14:09,570 --> 00:14:11,820 Now you know why I dynamited Courtland. 271 00:14:11,820 --> 00:14:13,500 I designed Courtland. 272 00:14:13,500 --> 00:14:15,330 I made it possible. 273 00:14:15,330 --> 00:14:17,040 I destroyed it. 274 00:14:17,040 --> 00:14:18,960 I agreed to design it for the purpose 275 00:14:18,960 --> 00:14:21,300 of seeing it built as I wished. 276 00:14:21,300 --> 00:14:24,150 That was the price that I set for my work. 277 00:14:24,150 --> 00:14:25,860 I was not paid. 278 00:14:25,860 --> 00:14:27,690 My building was disfigured at the whim 279 00:14:27,690 --> 00:14:29,880 of others who took all the benefits of my work 280 00:14:29,880 --> 00:14:32,740 and gave me nothing in return. 281 00:14:32,740 --> 00:14:36,210 I came here to say that I do not recognize anyone's right to one 282 00:14:36,210 --> 00:14:39,630 minute of my life, nor to any part of my energy, 283 00:14:39,630 --> 00:14:43,740 nor to any achievement of mine, no matter who makes the claim. 284 00:14:43,740 --> 00:14:45,540 It had to be said. 285 00:14:45,540 --> 00:14:48,870 The world is perishing from an orgy of self-sacrificing. 286 00:14:48,870 --> 00:14:51,630 I came here to be heard in the name 287 00:14:51,630 --> 00:14:54,510 of every man of independence still left in the world. 288 00:14:54,510 --> 00:14:56,310 I wanted to state my terms. 289 00:14:56,310 --> 00:14:59,550 I do not care to work or live on any others'. 290 00:14:59,550 --> 00:15:04,230 My terms are a man's right to exist for his own sake. 291 00:15:11,535 --> 00:15:12,520 [END PLAYBACK] 292 00:15:12,520 --> 00:15:15,260 RICHARD SCHMALENSEE: So I'm not-- 293 00:15:15,260 --> 00:15:18,010 I'm not going to ask for a vote. 294 00:15:18,010 --> 00:15:20,920 But you see that is an ideological statement. 295 00:15:20,920 --> 00:15:24,970 It is about how the world must be organized-- 296 00:15:24,970 --> 00:15:26,620 should be organized-- 297 00:15:26,620 --> 00:15:28,960 to permit progress. 298 00:15:28,960 --> 00:15:31,060 The inventors have to be free to invent, 299 00:15:31,060 --> 00:15:33,100 the parasites have to be suppressed. 300 00:15:33,100 --> 00:15:34,630 It's an ideological statement. 301 00:15:34,630 --> 00:15:37,420 It's not just how he wants to live, 302 00:15:37,420 --> 00:15:40,030 but how others should live. 303 00:15:40,030 --> 00:15:44,050 How the government, how the society should be organized. 304 00:15:44,050 --> 00:15:47,440 There's another example on the list, which 305 00:15:47,440 --> 00:15:49,420 was long, and tedious, and optional, 306 00:15:49,420 --> 00:15:52,490 so I assume nobody read it. 307 00:15:52,490 --> 00:15:56,980 But I will give you the story. 308 00:15:56,980 --> 00:15:59,930 It's kind of an amazing story. 309 00:15:59,930 --> 00:16:03,500 It's a description of the London electrical system-- 310 00:16:03,500 --> 00:16:06,410 the Hughes reading-- before the First World War. 311 00:16:06,410 --> 00:16:12,670 Now by, say, 1914, there was lots of electricity in Chicago. 312 00:16:12,670 --> 00:16:14,050 Chicago was electrified. 313 00:16:14,050 --> 00:16:15,440 There were trolleys. 314 00:16:15,440 --> 00:16:17,710 There was a company that spanned the city. 315 00:16:17,710 --> 00:16:19,270 There was a lot of-- 316 00:16:19,270 --> 00:16:22,660 electricity had penetrated a good deal in Berlin. 317 00:16:22,660 --> 00:16:26,950 Again, a single system, modern by the standards of the day. 318 00:16:26,950 --> 00:16:29,950 In London, there were-- 319 00:16:29,950 --> 00:16:30,580 what's it say? 320 00:16:30,580 --> 00:16:37,070 65 utilities operating on 10 different frequencies 321 00:16:37,070 --> 00:16:43,320 with 24 different voltages delivered to customers. 322 00:16:43,320 --> 00:16:47,570 And it's not like London was populated by idiots 323 00:16:47,570 --> 00:16:49,348 or there weren't engineers. 324 00:16:49,348 --> 00:16:50,640 There were plenty of engineers. 325 00:16:50,640 --> 00:16:52,740 They had societies of electrical engineers, 326 00:16:52,740 --> 00:16:55,530 just like the Germans did and the Americans did. 327 00:16:55,530 --> 00:17:00,500 And commissions regularly said, this is insane. 328 00:17:00,500 --> 00:17:01,890 This is crazy. 329 00:17:01,890 --> 00:17:05,609 Appliance makers said, this is nuts. 330 00:17:05,609 --> 00:17:07,319 We can't sell the same appliances 331 00:17:07,319 --> 00:17:10,680 in this part of London that we sell in that part of London. 332 00:17:10,680 --> 00:17:14,220 The US has a standard, Germany has the standard, 333 00:17:14,220 --> 00:17:21,730 London has 10 frequencies and 24 voltages and 65 companies. 334 00:17:21,730 --> 00:17:24,380 So why? 335 00:17:24,380 --> 00:17:28,700 Well, since nobody read it but me, I'll tell you why. 336 00:17:28,700 --> 00:17:33,410 Because London was divided into a set of local governments 337 00:17:33,410 --> 00:17:39,830 that had, since the Middle Ages, authority over their domains. 338 00:17:39,830 --> 00:17:42,200 And the ideology was this is local. 339 00:17:42,200 --> 00:17:43,460 It goes to residences. 340 00:17:43,460 --> 00:17:45,620 It goes to factories. 341 00:17:45,620 --> 00:17:48,900 It's the domain of local government. 342 00:17:48,900 --> 00:17:50,100 That was the ideology. 343 00:17:50,100 --> 00:17:53,850 That's the statement about how that society should 344 00:17:53,850 --> 00:17:55,140 be organized. 345 00:17:55,140 --> 00:18:00,070 Local government should-- no maximization here-- 346 00:18:00,070 --> 00:18:05,810 local government should have control over local utilities. 347 00:18:05,810 --> 00:18:10,190 It took them a long time to get past that. 348 00:18:10,190 --> 00:18:12,170 And you say, wait, couldn't you just say 349 00:18:12,170 --> 00:18:14,750 that that's all fine, that's a nice ideology. 350 00:18:14,750 --> 00:18:19,320 But why don't we just get the electrical system right? 351 00:18:19,320 --> 00:18:23,190 It was the biggest, richest city in the world 352 00:18:23,190 --> 00:18:25,860 and it had a terrible electrical system 353 00:18:25,860 --> 00:18:27,630 because of this ideology. 354 00:18:27,630 --> 00:18:32,400 How could they possibly have gone with it? 355 00:18:32,400 --> 00:18:38,730 Well, you will see in the course of human event, 356 00:18:38,730 --> 00:18:40,500 as you read the paper and as you read 357 00:18:40,500 --> 00:18:45,200 other things, this kind of thing happens all the time. 358 00:18:45,200 --> 00:18:49,310 Beliefs about how things should be organized, beliefs 359 00:18:49,310 --> 00:18:53,570 about the right way for a community to organize 360 00:18:53,570 --> 00:18:54,960 are very strong. 361 00:18:54,960 --> 00:18:57,450 They don't change rapidly. 362 00:18:57,450 --> 00:19:00,470 We have a federal system. 363 00:19:00,470 --> 00:19:03,890 I will discuss later on how we regulate the electric power 364 00:19:03,890 --> 00:19:06,030 system in this country. 365 00:19:06,030 --> 00:19:08,130 And we do a lot of pretending that electrons 366 00:19:08,130 --> 00:19:10,520 don't cross state lines. 367 00:19:10,520 --> 00:19:12,450 But of course they do. 368 00:19:12,450 --> 00:19:16,880 But the ideology is that's a state function. 369 00:19:16,880 --> 00:19:20,287 And if you stand up and say, why in heaven's name-- 370 00:19:20,287 --> 00:19:21,870 I mean, we do have national standards. 371 00:19:21,870 --> 00:19:23,660 It's not like London. 372 00:19:23,660 --> 00:19:25,040 But if you stand up and say, this 373 00:19:25,040 --> 00:19:28,980 ought to be a federal function, you'd get shot. 374 00:19:28,980 --> 00:19:33,630 I mean, it's just not on the table. 375 00:19:33,630 --> 00:19:36,060 You can't have a technical debate 376 00:19:36,060 --> 00:19:38,690 about would it be good or bad because of the strength 377 00:19:38,690 --> 00:19:40,290 of the ideologies. 378 00:19:40,290 --> 00:19:46,310 Now I don't say that as an indictment of human society. 379 00:19:46,310 --> 00:19:47,810 You have to have beliefs about how 380 00:19:47,810 --> 00:19:49,430 the world should be organized. 381 00:19:49,430 --> 00:19:51,050 How do you function without them? 382 00:19:51,050 --> 00:19:53,390 Just like you have to have preferences about do you 383 00:19:53,390 --> 00:19:54,560 like tacos or burritos? 384 00:19:54,560 --> 00:19:56,390 I mean, you have to get through life. 385 00:19:56,390 --> 00:20:00,710 You have to have views of how the world should be organized 386 00:20:00,710 --> 00:20:02,210 and how people-- 387 00:20:02,210 --> 00:20:05,390 how the government should pursue certain goals. 388 00:20:05,390 --> 00:20:07,700 Those beliefs might want to occasionally brush up 389 00:20:07,700 --> 00:20:11,920 against facts, just like your preferences for ice cream 390 00:20:11,920 --> 00:20:14,260 might occasionally want to brush up against facts 391 00:20:14,260 --> 00:20:15,820 about cholesterol. 392 00:20:15,820 --> 00:20:20,260 But fundamentally, just like you need preferences and habits 393 00:20:20,260 --> 00:20:22,270 to get through the day, individuals 394 00:20:22,270 --> 00:20:25,600 in the political world need ideologies. 395 00:20:25,600 --> 00:20:28,690 So that's not a pejorative statement. 396 00:20:28,690 --> 00:20:30,820 The other point I want to make-- 397 00:20:30,820 --> 00:20:37,120 a difference between the market and the polis, 398 00:20:37,120 --> 00:20:42,010 the political world, is we generally assume 399 00:20:42,010 --> 00:20:45,320 in economics that individuals-- 400 00:20:45,320 --> 00:20:47,060 at some point in time, at least-- 401 00:20:47,060 --> 00:20:50,150 have relatively well-defined preferences. 402 00:20:50,150 --> 00:20:51,890 Well-defined preferences basically just 403 00:20:51,890 --> 00:20:53,000 means you're consistent. 404 00:20:57,520 --> 00:21:01,180 You don't behave in a way that that's obviously 405 00:21:01,180 --> 00:21:05,140 evidence of an unsound mind. 406 00:21:05,140 --> 00:21:10,750 Political judgment can be inconsistent in that sense. 407 00:21:10,750 --> 00:21:12,940 Let me just give you the simplest case 408 00:21:12,940 --> 00:21:17,380 of the Condorcet paradox, which a very bright Frenchman 409 00:21:17,380 --> 00:21:20,500 discovered in 1785. 410 00:21:20,500 --> 00:21:26,890 And it's a special case of a general rule that says-- 411 00:21:26,890 --> 00:21:29,365 for which Ken Arrow got a Nobel Prize-- 412 00:21:29,365 --> 00:21:35,350 and it says, basically, any regime without a dictator 413 00:21:35,350 --> 00:21:40,510 will behave inconsistently in roughly the following sense. 414 00:21:40,510 --> 00:21:43,630 Let me say I've got three individuals, three voters. 415 00:21:46,580 --> 00:21:48,110 This is what the slide says, but I'm 416 00:21:48,110 --> 00:21:52,670 going to unpack it a little bit, 1, 2, and 3. 417 00:21:52,670 --> 00:21:56,780 And there are three alternatives A, B, and C. So individual 1 418 00:21:56,780 --> 00:22:05,870 prefers A to B and prefers B to C. Individual 2 prefers C-- 419 00:22:05,870 --> 00:22:07,850 that's her first choice-- 420 00:22:07,850 --> 00:22:24,050 C to A, and A to B. Individual 3 prefers B to C to A. 421 00:22:24,050 --> 00:22:24,800 OK. 422 00:22:24,800 --> 00:22:30,770 So suppose I have a vote between A and B. 423 00:22:30,770 --> 00:22:34,400 If I have a vote between A and B, 1 prefers A to B, 424 00:22:34,400 --> 00:22:46,430 2 prefers A to B. So if I vote, A is preferred to B. 425 00:22:46,430 --> 00:22:53,030 Now let me do B versus C. 1 prefers B to C, 426 00:22:53,030 --> 00:22:57,230 3 prefers B to C. So the vote tells me 427 00:22:57,230 --> 00:23:03,310 that B is preferred to C. 428 00:23:03,310 --> 00:23:11,320 Now let me do A and C. 2 prefers C to A, 3 prefers C to A. C 429 00:23:11,320 --> 00:23:20,560 is preferred to A. That is inconsistent behavior. 430 00:23:23,120 --> 00:23:26,090 If an individual behaved in that fashion, and said, 431 00:23:26,090 --> 00:23:28,770 I prefer chocolate to strawberry, 432 00:23:28,770 --> 00:23:30,477 I prefer strawberry to vanilla, but I 433 00:23:30,477 --> 00:23:32,560 prefer vanilla to chocolate, you'd say, I'm sorry, 434 00:23:32,560 --> 00:23:33,143 wait a minute. 435 00:23:33,143 --> 00:23:34,410 What? 436 00:23:34,410 --> 00:23:39,150 But in voting, that can happen all the time. 437 00:23:39,150 --> 00:23:43,320 And it also says, for instance, if you'd like to-- 438 00:23:43,320 --> 00:23:46,680 you'd really like to be the chairman of this committee 439 00:23:46,680 --> 00:23:49,830 because if you're the chairman of this committee, whoever 440 00:23:49,830 --> 00:23:53,700 you are, you can set the agenda to get the outcome you want. 441 00:23:56,610 --> 00:23:58,770 Suppose you're number 1. 442 00:23:58,770 --> 00:24:02,020 You want A. So what do you do? 443 00:24:02,020 --> 00:24:07,650 You first have a vote between B and C. B wins. 444 00:24:07,650 --> 00:24:10,020 Then you say, OK, let's try A and B-- 445 00:24:10,020 --> 00:24:11,740 A wins. 446 00:24:11,740 --> 00:24:17,190 Of course, if you're number 2, then what you'd like to do 447 00:24:17,190 --> 00:24:19,320 is start with the A/B vote-- 448 00:24:19,320 --> 00:24:20,520 A wins. 449 00:24:20,520 --> 00:24:22,200 And then do the A/C vote-- 450 00:24:22,200 --> 00:24:22,920 C wins. 451 00:24:26,310 --> 00:24:31,140 The kind of consistency that we expect 452 00:24:31,140 --> 00:24:34,320 when we talk about individual behavior 453 00:24:34,320 --> 00:24:38,610 is not a necessary feature of political behavior, 454 00:24:38,610 --> 00:24:40,850 of collective behavior. 455 00:24:40,850 --> 00:24:43,890 With a dictator, OK, sure. 456 00:24:43,890 --> 00:24:46,080 With a voting system-- 457 00:24:46,080 --> 00:24:50,350 you name your system, it is capable of that kind 458 00:24:50,350 --> 00:24:52,510 of inconsistency, even if it's not-- 459 00:24:52,510 --> 00:24:54,610 even if it's not voting. 460 00:24:54,610 --> 00:24:56,020 So let me do just-- 461 00:24:56,020 --> 00:25:02,060 have a couple more remarks before we get to the case. 462 00:25:02,060 --> 00:25:08,970 In the market system, the main process is competition. 463 00:25:08,970 --> 00:25:12,180 There may be other things going on, depending on the system. 464 00:25:12,180 --> 00:25:14,520 Is competition perfect, is it not perfect? 465 00:25:14,520 --> 00:25:15,840 Is there monopoly? 466 00:25:15,840 --> 00:25:19,020 But the central feature of a market system is competition. 467 00:25:19,020 --> 00:25:27,920 Competition happens in politics, but it's not the only process. 468 00:25:27,920 --> 00:25:29,790 Think about what we're going through now 469 00:25:29,790 --> 00:25:33,570 in the Republican primary process. 470 00:25:33,570 --> 00:25:38,600 There's a ton spent trying to influence. 471 00:25:38,600 --> 00:25:40,160 That happens in politics. 472 00:25:40,160 --> 00:25:42,200 It happens through TV ads. 473 00:25:42,200 --> 00:25:45,590 It also happens in parliaments and legislatures 474 00:25:45,590 --> 00:25:48,920 when people try to persuade other people. 475 00:25:48,920 --> 00:25:53,740 You try to persuade them to act in ways that benefit you, 476 00:25:53,740 --> 00:25:55,780 and you try to persuade them that, in fact, it 477 00:25:55,780 --> 00:25:57,910 benefits them to do so-- 478 00:25:57,910 --> 00:25:59,500 influence. 479 00:25:59,500 --> 00:26:06,020 Cooperation-- again, what are political parties all about? 480 00:26:06,020 --> 00:26:07,770 They're a group of people working together 481 00:26:07,770 --> 00:26:10,650 for a common end, typically, or a team, 482 00:26:10,650 --> 00:26:13,740 or a set of folks in a legislature trying 483 00:26:13,740 --> 00:26:15,270 to get something done. 484 00:26:15,270 --> 00:26:20,000 Groups act politically. 485 00:26:20,000 --> 00:26:23,120 You listen to-- you read descriptions 486 00:26:23,120 --> 00:26:26,240 of Japanese politics, and it's all about this faction 487 00:26:26,240 --> 00:26:27,650 and that faction. 488 00:26:27,650 --> 00:26:32,060 It's all about cooperating groups in the same party 489 00:26:32,060 --> 00:26:35,030 but pursuing different ends. 490 00:26:35,030 --> 00:26:42,440 And loyalty-- changing your position a lot in politics 491 00:26:42,440 --> 00:26:45,320 costs your friends, costs you influence. 492 00:26:45,320 --> 00:26:50,422 So a lot of what happens is Democrats hold their noses 493 00:26:50,422 --> 00:26:52,130 and vote for a Democrat they don't really 494 00:26:52,130 --> 00:26:54,020 like because she's a Democrat. 495 00:26:54,020 --> 00:26:56,400 Republicans do the same thing. 496 00:26:56,400 --> 00:26:58,070 We'll see that in the fall. 497 00:26:58,070 --> 00:27:00,410 I'm loyal, this is what I believe. 498 00:27:00,410 --> 00:27:02,360 It's not perfect, I'm going there. 499 00:27:02,360 --> 00:27:06,043 There's nothing like that in the marketplace. 500 00:27:06,043 --> 00:27:07,460 You may be loyal to Chevrolet even 501 00:27:07,460 --> 00:27:11,870 though it produces a lousy car, but this is not a common event. 502 00:27:11,870 --> 00:27:13,850 Loyalty in politics is more important, 503 00:27:13,850 --> 00:27:17,180 cooperation's more important, and influence Yeah, there's 504 00:27:17,180 --> 00:27:18,920 influence in the market-- 505 00:27:18,920 --> 00:27:20,930 of course, people advertise. 506 00:27:20,930 --> 00:27:26,210 But influence is sort of central to politics. 507 00:27:26,210 --> 00:27:28,860 There's not much influence in the wheat market. 508 00:27:28,860 --> 00:27:30,360 But there's a lot of influence in 509 00:27:30,360 --> 00:27:32,870 the Republican primary market. 510 00:27:32,870 --> 00:27:33,370 All right. 511 00:27:33,370 --> 00:27:34,600 So when you think about-- 512 00:27:34,600 --> 00:27:36,280 there's competition-- people try to win, 513 00:27:36,280 --> 00:27:39,140 people want to advance, and so on. 514 00:27:39,140 --> 00:27:41,450 But it's different. 515 00:27:41,450 --> 00:27:45,660 Finally, when you think about politics-- 516 00:27:45,660 --> 00:27:49,230 when you think about the market, the goals you think about 517 00:27:49,230 --> 00:27:50,700 are utility or wealth. 518 00:27:50,700 --> 00:27:52,770 And I just said wealth to save space, 519 00:27:52,770 --> 00:27:56,490 but you think of folks as self-interested 520 00:27:56,490 --> 00:27:59,910 in a particularly narrow way. 521 00:27:59,910 --> 00:28:04,590 In politics, of course, people pursue wealth-- 522 00:28:04,590 --> 00:28:06,250 of course. 523 00:28:06,250 --> 00:28:11,110 But they also pursue power and power is different. 524 00:28:11,110 --> 00:28:18,200 Power is sometimes-- sometimes is conferred by an office. 525 00:28:18,200 --> 00:28:21,200 You're president, the system has legitimacy, 526 00:28:21,200 --> 00:28:23,018 therefore you have power. 527 00:28:23,018 --> 00:28:24,560 Power means you can get others to act 528 00:28:24,560 --> 00:28:26,010 against their self-interest. 529 00:28:26,010 --> 00:28:30,720 You can get them to pay taxes, for instance. 530 00:28:30,720 --> 00:28:36,890 You can get them to put their lives on the line in a war. 531 00:28:36,890 --> 00:28:40,625 You have the ability to do a variety of things against-- 532 00:28:40,625 --> 00:28:42,250 to get people to do a variety of things 533 00:28:42,250 --> 00:28:46,850 against their self-interest, either for you or for your view 534 00:28:46,850 --> 00:28:49,600 of the public interest. 535 00:28:49,600 --> 00:28:53,250 So the important coin of the realm in politics-- and again, 536 00:28:53,250 --> 00:28:57,440 there's nothing quite like it in the market system-- 537 00:28:57,440 --> 00:29:00,490 is power-- is power. 538 00:29:00,490 --> 00:29:04,870 Power comes from influence, cooperation, loyalty, sometimes 539 00:29:04,870 --> 00:29:08,800 force, also comes from the legitimacy 540 00:29:08,800 --> 00:29:10,890 of the government you're in. 541 00:29:10,890 --> 00:29:12,630 You hear occasionally about people 542 00:29:12,630 --> 00:29:19,020 in legislatures being powerful not necessarily 543 00:29:19,020 --> 00:29:22,230 because they have some office that makes them powerful, 544 00:29:22,230 --> 00:29:26,100 but because they've managed to attract a set of followers 545 00:29:26,100 --> 00:29:28,860 because they have some ability to confer favors 546 00:29:28,860 --> 00:29:32,070 because, because, because. 547 00:29:32,070 --> 00:29:35,640 When I was in Washington, John Dingell, 548 00:29:35,640 --> 00:29:39,898 the Congressman from Michigan, was legendarily powerful. 549 00:29:39,898 --> 00:29:41,190 He was chairman of a committee. 550 00:29:41,190 --> 00:29:43,530 He was a Congressman, he was chairman of a committee. 551 00:29:43,530 --> 00:29:46,460 The committee had a lot of jurisdiction. 552 00:29:46,460 --> 00:29:49,850 Dingell also had a very smart staff. 553 00:29:49,850 --> 00:29:53,470 Dingell also knew everybody in town. 554 00:29:53,470 --> 00:29:56,350 Dingell would send letters to people in the executive branch 555 00:29:56,350 --> 00:29:59,320 called Dingellgrams that would consist 556 00:29:59,320 --> 00:30:01,660 of four pages of detailed questions written 557 00:30:01,660 --> 00:30:05,227 by his staff that needed to be answered within a week. 558 00:30:05,227 --> 00:30:07,310 You get a letter from like that from anybody else, 559 00:30:07,310 --> 00:30:08,870 you'd say, yeah, right. 560 00:30:08,870 --> 00:30:13,170 You got a letter like that from Dingell, you answered it. 561 00:30:13,170 --> 00:30:15,060 You put people on it and you answered it 562 00:30:15,060 --> 00:30:17,280 because Dingell had power-- 563 00:30:17,280 --> 00:30:19,080 Dingell had power. 564 00:30:19,080 --> 00:30:22,740 Hard to exactly describe why Dingell had power, 565 00:30:22,740 --> 00:30:24,360 but Dingell had power. 566 00:30:24,360 --> 00:30:28,910 He could move votes, he could build coalitions, 567 00:30:28,910 --> 00:30:29,850 he could operate. 568 00:30:29,850 --> 00:30:31,320 He had power. 569 00:30:31,320 --> 00:30:31,820 OK. 570 00:30:34,880 --> 00:30:37,400 We now have our introduction to political science 571 00:30:37,400 --> 00:30:39,110 and political philosophy. 572 00:30:39,110 --> 00:30:42,950 Let's do a little bit of Carter Coal. 573 00:30:42,950 --> 00:30:45,830 Some of the background-- which we didn't quite give you, 574 00:30:45,830 --> 00:30:49,340 but let me just do a little bit of that to get to it. 575 00:30:51,940 --> 00:30:57,030 This is the New Deal period, and Roosevelt is doing-- 576 00:30:57,030 --> 00:30:59,730 has gotten a Democratic Congress to pass 577 00:30:59,730 --> 00:31:03,330 a variety of laws that extend the power of government 578 00:31:03,330 --> 00:31:06,660 in an attempt to use the power of government 579 00:31:06,660 --> 00:31:09,562 in a variety of ways to deal with the Depression. 580 00:31:12,140 --> 00:31:14,510 Beginning in early 1935, the Supreme Court 581 00:31:14,510 --> 00:31:18,440 was striking these down regularly as unconstitutional. 582 00:31:18,440 --> 00:31:24,150 There was a fairly long list of things struck down. 583 00:31:24,150 --> 00:31:31,326 They'd struck down an earlier piece of legislation in the-- 584 00:31:31,326 --> 00:31:33,200 oh, I'm forgetting it now. 585 00:31:33,200 --> 00:31:39,530 It's one the-- the Schechter decision, Schechter Poultry, 586 00:31:39,530 --> 00:31:45,590 struck down basically an industry regulatory statute 587 00:31:45,590 --> 00:31:49,010 that, like the coal statute, the Bituminous Coal Conservation 588 00:31:49,010 --> 00:31:53,360 Act, was an attempt to raise prices and raise wages. 589 00:31:53,360 --> 00:31:57,475 The theory was we have ruinous competition, so we're 590 00:31:57,475 --> 00:31:58,850 going to deal with the Depression 591 00:31:58,850 --> 00:32:01,682 by getting prices up, which will get wages up, 592 00:32:01,682 --> 00:32:03,890 which will get people spending, which will get us out 593 00:32:03,890 --> 00:32:04,865 of this mess. 594 00:32:04,865 --> 00:32:08,600 Now it's not the best economics, but that was 595 00:32:08,600 --> 00:32:10,490 the deal he was trying to do. 596 00:32:10,490 --> 00:32:15,860 And this act which just focused on the coal industry, 597 00:32:15,860 --> 00:32:18,320 attempted to raise prices and wages, 598 00:32:18,320 --> 00:32:21,950 and was drafted to get around Schechter. 599 00:32:21,950 --> 00:32:25,253 So they'd thrown out an earlier law in the Schechter decision. 600 00:32:25,253 --> 00:32:26,420 So somebody said, all right. 601 00:32:26,420 --> 00:32:30,560 Let's write this so that under the standards of Schechter, 602 00:32:30,560 --> 00:32:33,660 its legal. 603 00:32:33,660 --> 00:32:38,610 It involved getting people to-- getting coal manufacturers 604 00:32:38,610 --> 00:32:43,110 to obey the law by imposing a tax on them, most of which 605 00:32:43,110 --> 00:32:47,370 was refunded if they followed the practices laid out 606 00:32:47,370 --> 00:32:49,140 in the act. 607 00:32:49,140 --> 00:32:51,900 It's Carter versus Carter Coal-- 608 00:32:51,900 --> 00:32:52,800 I love this. 609 00:32:52,800 --> 00:32:56,590 This guy's board of directors votes to pay the tax. 610 00:32:56,590 --> 00:32:59,760 The CEO sues them. 611 00:32:59,760 --> 00:33:02,550 This is an odd action. 612 00:33:02,550 --> 00:33:04,870 The law says you have to pay the tax. 613 00:33:04,870 --> 00:33:07,090 The board says, yeah, we'll pay the tax. 614 00:33:07,090 --> 00:33:11,130 The CEO says, the hell we will, and sues the board. 615 00:33:11,130 --> 00:33:11,910 Okey-doke. 616 00:33:14,430 --> 00:33:17,820 And as long as you have recognized, 617 00:33:17,820 --> 00:33:24,450 and as you've discussed last week, this case on its face 618 00:33:24,450 --> 00:33:27,580 is a technical exercise in legal analysis. 619 00:33:27,580 --> 00:33:30,480 This is how court decisions are always written. 620 00:33:33,330 --> 00:33:34,890 It's fascinating. 621 00:33:34,890 --> 00:33:37,410 Judges never say, well, there's this consideration 622 00:33:37,410 --> 00:33:38,850 and there's this consideration. 623 00:33:38,850 --> 00:33:41,610 And in the balance, I think I should go this way. 624 00:33:41,610 --> 00:33:44,700 They almost always say, there's this consideration 625 00:33:44,700 --> 00:33:46,840 and people have made this argument, but it's junk, 626 00:33:46,840 --> 00:33:49,950 so we should go this way. 627 00:33:49,950 --> 00:33:53,720 And those tend to be-- 628 00:33:53,720 --> 00:33:56,760 reflect differences in ideology, right? 629 00:33:56,760 --> 00:33:59,580 It's clear that Sutherland and Cardozo-- 630 00:33:59,580 --> 00:34:01,170 we'll talk briefly about Hughes-- 631 00:34:01,170 --> 00:34:04,980 but Sutherland and Cardozo have a different view 632 00:34:04,980 --> 00:34:09,469 of how the United States should be organized 633 00:34:09,469 --> 00:34:11,850 and how the government should be run. 634 00:34:11,850 --> 00:34:15,360 So let's do this. 635 00:34:15,360 --> 00:34:19,739 What are the two provisions at issue here? 636 00:34:19,739 --> 00:34:21,520 Anybody? 637 00:34:21,520 --> 00:34:23,650 Brendan, you've got a great sign. 638 00:34:23,650 --> 00:34:26,500 Other people will have a great sign, but I can read yours. 639 00:34:26,500 --> 00:34:28,960 What are the two provisions in the Bituminous Coal Act 640 00:34:28,960 --> 00:34:31,750 that the court is dealing with? 641 00:34:31,750 --> 00:34:33,603 AUDIENCE: First, like the Commerce Clause. 642 00:34:33,603 --> 00:34:35,608 Like whether the-- 643 00:34:35,608 --> 00:34:37,150 RICHARD SCHMALENSEE: That's the issue 644 00:34:37,150 --> 00:34:39,010 in terms of constitutionality. 645 00:34:39,010 --> 00:34:40,600 But what are two things that the act 646 00:34:40,600 --> 00:34:43,256 did that are challenged here? 647 00:34:43,256 --> 00:34:45,714 AUDIENCE: First, can you just set a manipulation for price, 648 00:34:45,714 --> 00:34:47,297 like this is what the price has to be. 649 00:34:47,297 --> 00:34:49,750 RICHARD SCHMALENSEE: It set a price for coal. 650 00:34:49,750 --> 00:34:50,590 OK. 651 00:34:50,590 --> 00:34:51,389 Anything else? 652 00:34:51,389 --> 00:34:52,989 Scott, what else did it do? 653 00:34:52,989 --> 00:34:54,072 AUDIENCE: Put a tax on it. 654 00:34:54,072 --> 00:34:55,870 RICHARD SCHMALENSEE: Put a tax, yeah, yeah. 655 00:34:55,870 --> 00:34:58,150 But that was an enforcement mechanism. 656 00:34:58,150 --> 00:35:00,280 What did it do in terms of-- 657 00:35:00,280 --> 00:35:01,058 Sam? 658 00:35:01,058 --> 00:35:02,350 AUDIENCE: Wage for the workers? 659 00:35:02,350 --> 00:35:04,100 RICHARD SCHMALENSEE: Wage for the workers. 660 00:35:04,100 --> 00:35:09,280 So you've got a price control and a wage control provision. 661 00:35:09,280 --> 00:35:11,500 Let's talk about Sutherland. 662 00:35:11,500 --> 00:35:14,620 Those of you over here must know what Sutherland-- 663 00:35:14,620 --> 00:35:20,050 why did Sutherland say both of them were unconstitutional? 664 00:35:20,050 --> 00:35:21,190 Yeah? 665 00:35:21,190 --> 00:35:23,100 AUDIENCE: It says that the mining of coal 666 00:35:23,100 --> 00:35:26,721 is strictly production and it doesn't deal with commerce. 667 00:35:26,721 --> 00:35:28,179 It's just production is local, then 668 00:35:28,179 --> 00:35:31,480 there's no reason for the federal government to-- 669 00:35:31,480 --> 00:35:35,050 RICHARD SCHMALENSEE: So the production is not commerce. 670 00:35:35,050 --> 00:35:39,430 Mining the coal, making the machine is not commerce. 671 00:35:39,430 --> 00:35:43,150 And the federal government has the power to regulate commerce. 672 00:35:43,150 --> 00:35:48,370 But it doesn't have the power to regulate production. 673 00:35:48,370 --> 00:35:51,400 Unless, of course, it's directly involved in commerce, 674 00:35:51,400 --> 00:35:54,490 and what did he say about that? 675 00:35:54,490 --> 00:35:55,840 Whatever the heck that means. 676 00:35:55,840 --> 00:35:58,190 It's indirect, it's not direct. 677 00:35:58,190 --> 00:35:58,690 OK. 678 00:35:58,690 --> 00:36:00,440 What did he say about the other provision? 679 00:36:00,440 --> 00:36:01,520 Rachel? 680 00:36:01,520 --> 00:36:03,978 AUDIENCE: He said that they were independent of each other. 681 00:36:03,978 --> 00:36:07,002 So that the first one was unconstitutional, 682 00:36:07,002 --> 00:36:09,857 that they could evaluate the second one separately? 683 00:36:09,857 --> 00:36:12,190 RICHARD SCHMALENSEE: It's an interesting opinion, right? 684 00:36:12,190 --> 00:36:13,400 They wrote the law. 685 00:36:13,400 --> 00:36:16,730 In the law, they said, invalidation 686 00:36:16,730 --> 00:36:18,980 of any part of this law will not affect 687 00:36:18,980 --> 00:36:21,080 the validity of the others. 688 00:36:21,080 --> 00:36:23,480 And Sutherland said, yeah, I know they said that, 689 00:36:23,480 --> 00:36:25,070 but they passed them both. 690 00:36:25,070 --> 00:36:26,760 So clearly, they're linked. 691 00:36:26,760 --> 00:36:30,830 So if one is bad, the other's bad, goodbye. 692 00:36:30,830 --> 00:36:33,860 That was interesting reasoning, right? 693 00:36:33,860 --> 00:36:38,340 That was one where you'd say, that's not technical. 694 00:36:38,340 --> 00:36:39,540 That's ideology. 695 00:36:39,540 --> 00:36:43,140 That's his statement about, I don't like that either. 696 00:36:43,140 --> 00:36:45,570 And since they're in the same bill-- 697 00:36:45,570 --> 00:36:48,300 you wonder, if they'd just gone on and done the second bill-- 698 00:36:48,300 --> 00:36:56,300 so group A, what's Sutherland saying about the proper role 699 00:36:56,300 --> 00:36:58,410 of government? 700 00:36:58,410 --> 00:36:59,018 Yeah? 701 00:36:59,018 --> 00:37:00,560 AUDIENCE: Basically a slippery slope. 702 00:37:00,560 --> 00:37:02,460 He said, every journey to a forbidden end 703 00:37:02,460 --> 00:37:03,640 begins with a first step. 704 00:37:03,640 --> 00:37:06,222 And if you're starting to remove power from the states, 705 00:37:06,222 --> 00:37:08,220 then it's easier to next step, basically, 706 00:37:08,220 --> 00:37:10,157 towards a more powerful [INAUDIBLE].. 707 00:37:10,157 --> 00:37:11,240 RICHARD SCHMALENSEE: Yeah. 708 00:37:11,240 --> 00:37:13,640 So that's a great line, isn't it? 709 00:37:13,640 --> 00:37:18,020 The slippery slope, single step. 710 00:37:18,020 --> 00:37:20,990 That was one of his better lines. 711 00:37:20,990 --> 00:37:22,250 It is exactly-- 712 00:37:22,250 --> 00:37:25,130 "Every journey to a forbidden end 713 00:37:25,130 --> 00:37:28,270 begins with the first step." 714 00:37:28,270 --> 00:37:30,460 The forbidden end. 715 00:37:30,460 --> 00:37:34,510 So Sutherland's view is we got to be very strict about what 716 00:37:34,510 --> 00:37:37,090 we let the federal government do because once it 717 00:37:37,090 --> 00:37:41,680 starts expanding, we're toast. 718 00:37:41,680 --> 00:37:45,340 But what's the forbidden end that he worries about? 719 00:37:45,340 --> 00:37:47,650 Where does he not want to go? 720 00:37:47,650 --> 00:37:49,080 Anybody over here? 721 00:37:49,080 --> 00:37:51,005 Chad? 722 00:37:51,005 --> 00:37:51,880 You've made it black. 723 00:37:51,880 --> 00:37:52,463 I can read it. 724 00:37:52,463 --> 00:37:54,010 That's great. 725 00:37:54,010 --> 00:37:55,520 We'll get you a better one soon. 726 00:37:55,520 --> 00:37:57,180 AUDIENCE: So I think that he doesn't 727 00:37:57,180 --> 00:38:04,970 want like the federal government to turn it [INAUDIBLE] 728 00:38:04,970 --> 00:38:05,970 RICHARD SCHMALENSEE: OK. 729 00:38:05,970 --> 00:38:08,386 What's your definition of tyranny? 730 00:38:08,386 --> 00:38:09,928 AUDIENCE: Having full power and doing 731 00:38:09,928 --> 00:38:13,470 whatever they want without going back to the people. 732 00:38:13,470 --> 00:38:14,610 RICHARD SCHMALENSEE: OK. 733 00:38:14,610 --> 00:38:18,210 Suppose they still had elections-- 734 00:38:18,210 --> 00:38:21,150 they still had elections, but the government 735 00:38:21,150 --> 00:38:22,500 had a much broader role. 736 00:38:22,500 --> 00:38:25,116 Is that tyranny? 737 00:38:25,116 --> 00:38:26,447 AUDIENCE: It depends. 738 00:38:26,447 --> 00:38:27,780 RICHARD SCHMALENSEE: It depends. 739 00:38:27,780 --> 00:38:30,860 There's an interesting-- I'm reading this monstrously 740 00:38:30,860 --> 00:38:32,990 thick biography of Hamilton. 741 00:38:32,990 --> 00:38:37,790 And this was exactly the debate over the Constitution. 742 00:38:37,790 --> 00:38:41,120 And it was the debate over Hamilton's extending 743 00:38:41,120 --> 00:38:43,520 executive powers, that it's going 744 00:38:43,520 --> 00:38:46,470 to be a tyranny unless there's a check-- 745 00:38:46,470 --> 00:38:48,330 unless there's a check. 746 00:38:48,330 --> 00:38:49,625 You had a comment? 747 00:38:49,625 --> 00:38:50,250 AUDIENCE: Yeah. 748 00:38:50,250 --> 00:38:54,510 To a degree, you could argue that when the government would 749 00:38:54,510 --> 00:38:59,310 begin to impose the tyranny of the majority on a minority, 750 00:38:59,310 --> 00:39:02,460 that would be when they overstepped their bounds. 751 00:39:02,460 --> 00:39:04,350 RICHARD SCHMALENSEE: And Sutherland 752 00:39:04,350 --> 00:39:07,050 wouldn't agree, would he, that the Bill of Rights 753 00:39:07,050 --> 00:39:09,580 is a sufficient check on that. 754 00:39:09,580 --> 00:39:12,900 Sutherland would say, the Constitution 755 00:39:12,900 --> 00:39:16,410 says the federal government has limited powers. 756 00:39:16,410 --> 00:39:20,620 Once you go beyond them, where do you stop? 757 00:39:20,620 --> 00:39:22,780 I mean, the Bill of Rights stops-- 758 00:39:22,780 --> 00:39:24,280 stops you at some point, but there's 759 00:39:24,280 --> 00:39:25,810 a lot of ground between-- 760 00:39:25,810 --> 00:39:27,363 yeah. 761 00:39:27,363 --> 00:39:27,863 yeah? 762 00:39:27,863 --> 00:39:29,020 AUDIENCE: He also says he doesn't 763 00:39:29,020 --> 00:39:31,353 like think the states should just become main divisions. 764 00:39:31,353 --> 00:39:32,728 He think it's important that they 765 00:39:32,728 --> 00:39:34,355 have their own identity where they 766 00:39:34,355 --> 00:39:35,480 can determine what happens. 767 00:39:35,480 --> 00:39:37,330 So even if the federal government 768 00:39:37,330 --> 00:39:41,530 when a tyranny, wasn't taking a toll on the people, per se, 769 00:39:41,530 --> 00:39:44,003 if they undermine the state's own laws, 770 00:39:44,003 --> 00:39:46,320 then that's what he thinks is wrong. 771 00:39:46,320 --> 00:39:48,150 RICHARD SCHMALENSEE: So he's-- 772 00:39:48,150 --> 00:39:50,100 he's what we now call a Federalist, what back 773 00:39:50,100 --> 00:39:51,870 in the day they called a Republican. 774 00:39:51,870 --> 00:39:53,795 He believes the Constitution says 775 00:39:53,795 --> 00:39:55,420 the states should be strong, the states 776 00:39:55,420 --> 00:39:57,750 should have a lot of power. 777 00:39:57,750 --> 00:40:00,150 Maybe states could regulate wages if they wanted to, 778 00:40:00,150 --> 00:40:02,880 but the federal government can't, OK? 779 00:40:02,880 --> 00:40:04,920 So this is a limited government point of view. 780 00:40:07,760 --> 00:40:10,930 Was Sutherland right? 781 00:40:10,930 --> 00:40:12,280 Team A? 782 00:40:12,280 --> 00:40:14,080 Let's hear a stirring presentation 783 00:40:14,080 --> 00:40:18,310 from team A. Somebody revved up here? 784 00:40:18,310 --> 00:40:19,980 Oh come on. 785 00:40:19,980 --> 00:40:21,660 Matthew, you ready to go? 786 00:40:21,660 --> 00:40:23,730 Did you get yourself psyched up over the weekend? 787 00:40:23,730 --> 00:40:24,810 OK. 788 00:40:24,810 --> 00:40:27,540 AUDIENCE: Based on the results of the case, yes, he was right. 789 00:40:27,540 --> 00:40:29,280 RICHARD SCHMALENSEE: Why? 790 00:40:29,280 --> 00:40:32,970 Why is that the right view of the role of government? 791 00:40:32,970 --> 00:40:34,860 You could quote Howard Roark, right? 792 00:40:34,860 --> 00:40:37,050 Howard Roark would have liked this. 793 00:40:37,050 --> 00:40:38,840 Regulate wages? 794 00:40:38,840 --> 00:40:39,340 Anyway. 795 00:40:39,340 --> 00:40:39,770 AUDIENCE: Yeah. 796 00:40:39,770 --> 00:40:42,228 I mean, they were trying to regulate something that was not 797 00:40:42,228 --> 00:40:45,160 defined in the Constitution for that government to do, 798 00:40:45,160 --> 00:40:46,705 which was the production of the coal. 799 00:40:49,350 --> 00:40:54,140 RICHARD SCHMALENSEE: So put aside the legal argument. 800 00:40:54,140 --> 00:40:57,650 How about the philosophical or ideological argument? 801 00:40:57,650 --> 00:40:59,480 Why would you-- if you would-- 802 00:40:59,480 --> 00:41:05,030 agree with him absent the legal background? 803 00:41:05,030 --> 00:41:10,200 I mean, what's your view about how-- 804 00:41:10,200 --> 00:41:13,680 team A-- about how society should be organized 805 00:41:13,680 --> 00:41:15,540 and about how it should function? 806 00:41:15,540 --> 00:41:17,190 Because Sutherland has a view. 807 00:41:17,190 --> 00:41:18,270 Is that a view you share? 808 00:41:18,270 --> 00:41:19,620 If so, why is that a good view? 809 00:41:24,320 --> 00:41:25,400 I don't mean to push you. 810 00:41:25,400 --> 00:41:25,920 There we go. 811 00:41:25,920 --> 00:41:26,420 We'll go-- 812 00:41:26,420 --> 00:41:28,190 AUDIENCE: An interesting analogy would 813 00:41:28,190 --> 00:41:31,700 be that we're being recorded here-- recorded here-- 814 00:41:31,700 --> 00:41:34,400 and it's, say, crossing national lines. 815 00:41:34,400 --> 00:41:37,130 And I can say something which might 816 00:41:37,130 --> 00:41:38,990 be censored in other countries. 817 00:41:38,990 --> 00:41:39,920 But this law-- 818 00:41:39,920 --> 00:41:42,390 I know it's an analogy and you should take it that way-- 819 00:41:42,390 --> 00:41:44,090 but what this law would want to do 820 00:41:44,090 --> 00:41:49,850 is censor me as opposed to censor the broadcast. 821 00:41:49,850 --> 00:41:54,180 Because they're trying to change production, not commerce. 822 00:41:54,180 --> 00:41:57,240 So what they're saying is, let us produce what we have. 823 00:41:57,240 --> 00:41:58,790 And then once it crosses state lines, 824 00:41:58,790 --> 00:42:01,910 if you want to regulate it at that point, that's commerce. 825 00:42:01,910 --> 00:42:05,330 But don't change production. 826 00:42:05,330 --> 00:42:08,780 RICHARD SCHMALENSEE: Could-- would you agree that it would 827 00:42:08,780 --> 00:42:12,620 be appropriate for the state of West Virginia to set wages 828 00:42:12,620 --> 00:42:16,010 for coal mines if the federal government can't? 829 00:42:16,010 --> 00:42:19,850 Because a Sutherland person-- 830 00:42:19,850 --> 00:42:23,180 a good team A person would say, yeah yeah, yeah. 831 00:42:23,180 --> 00:42:26,210 There's a constitutional reason why the feds shouldn't do it. 832 00:42:26,210 --> 00:42:29,060 But I'm not happy with the states doing it. 833 00:42:29,060 --> 00:42:29,560 Yeah? 834 00:42:29,560 --> 00:42:31,393 AUDIENCE: Because it's up to the free market 835 00:42:31,393 --> 00:42:33,670 to decide what the wages should be, not the government 836 00:42:33,670 --> 00:42:35,175 to step in and do it for the market. 837 00:42:35,175 --> 00:42:36,550 RICHARD SCHMALENSEE: So you think 838 00:42:36,550 --> 00:42:38,650 this is overruling individual choice 839 00:42:38,650 --> 00:42:40,060 in a way that's inappropriate? 840 00:42:40,060 --> 00:42:41,440 Yeah? 841 00:42:41,440 --> 00:42:43,940 AUDIENCE: Just in my opinion, I think in this case, 842 00:42:43,940 --> 00:42:46,840 it's saying that the central government-- or I guess, 843 00:42:46,840 --> 00:42:48,820 if you want to push it to state governments-- 844 00:42:48,820 --> 00:42:50,800 they're taking over too much power 845 00:42:50,800 --> 00:42:53,290 and they're basically dictating how a person should 846 00:42:53,290 --> 00:42:55,240 run their company by saying, OK, you 847 00:42:55,240 --> 00:42:56,900 have to sell it at this price. 848 00:42:56,900 --> 00:42:58,870 You have to give this amount of wages. 849 00:42:58,870 --> 00:43:01,480 This is like they're setting the guidelines and instructions 850 00:43:01,480 --> 00:43:04,882 on how to run your company, whereas in this-- where 851 00:43:04,882 --> 00:43:06,340 as Coal in this case, says, I don't 852 00:43:06,340 --> 00:43:07,465 want to follow these rules. 853 00:43:07,465 --> 00:43:09,010 I want to run my company how I run. 854 00:43:09,010 --> 00:43:10,218 How I want to run my company. 855 00:43:10,218 --> 00:43:12,530 I have a vision of how I want to sell coal, 856 00:43:12,530 --> 00:43:14,780 how I want to make the lifestyle for the workers here. 857 00:43:14,780 --> 00:43:16,947 And if it's my company, I should be able to do that. 858 00:43:16,947 --> 00:43:19,197 RICHARD SCHMALENSEE: Is that the right way for society 859 00:43:19,197 --> 00:43:20,150 to be organized? 860 00:43:20,150 --> 00:43:21,970 That's a statement about-- 861 00:43:21,970 --> 00:43:23,320 that's an ideological statement. 862 00:43:23,320 --> 00:43:25,900 That not only is that what he's saying, 863 00:43:25,900 --> 00:43:27,938 but that's the right thing to say 864 00:43:27,938 --> 00:43:29,980 because that's the right way to organize society. 865 00:43:29,980 --> 00:43:31,300 Let me go back to the back-- yeah? 866 00:43:31,300 --> 00:43:31,925 AUDIENCE: Yeah. 867 00:43:31,925 --> 00:43:36,220 I think on the philosophical side, like you want-- 868 00:43:36,220 --> 00:43:37,840 if the federal government puts a lot 869 00:43:37,840 --> 00:43:41,717 of regulations on wages and production, then you-- 870 00:43:41,717 --> 00:43:43,425 like Steve was just saying, you take away 871 00:43:43,425 --> 00:43:46,224 all the are entrepreneur like opportunities 872 00:43:46,224 --> 00:43:49,990 out of that situation so that it's just kind 873 00:43:49,990 --> 00:43:51,880 of filling the [INAUDIBLE]. 874 00:43:51,880 --> 00:43:52,680 RICHARD SCHMALENSEE: So it's a bad way 875 00:43:52,680 --> 00:43:55,350 to organize society when there's too much government because you 876 00:43:55,350 --> 00:43:57,660 restrict, as Howard Roark would say, 877 00:43:57,660 --> 00:44:01,780 the entrepreneurial energies, the creativity, et cetera. 878 00:44:01,780 --> 00:44:04,800 And of course, the ability of Carter to squeeze his workers. 879 00:44:04,800 --> 00:44:06,153 Andreas? 880 00:44:06,153 --> 00:44:08,320 AUDIENCE: I was going to say, yeah, in general, he's 881 00:44:08,320 --> 00:44:11,370 thinking about markets and thinking about their-- 882 00:44:11,370 --> 00:44:13,930 they might not be fair, per se, in whatever division-- 883 00:44:13,930 --> 00:44:16,305 RICHARD SCHMALENSEE: Wait a minute, you're on team A now. 884 00:44:16,305 --> 00:44:17,120 Hold on here. 885 00:44:17,120 --> 00:44:19,120 AUDIENCE: Yeah, that's what I was going to say-- 886 00:44:19,120 --> 00:44:20,340 RICHARD SCHMALENSEE: OK. 887 00:44:20,340 --> 00:44:22,590 AUDIENCE: You hear a word based on the effort you put. 888 00:44:22,590 --> 00:44:26,700 And until they are the same, like as brutal as they 889 00:44:26,700 --> 00:44:29,790 are to person A, they're going to be to person B, [INAUDIBLE] 890 00:44:29,790 --> 00:44:30,620 prejudice. 891 00:44:30,620 --> 00:44:32,520 And like if you were-- 892 00:44:32,520 --> 00:44:35,460 I would trust that markets would be 893 00:44:35,460 --> 00:44:39,860 more consistent in that sense, more fair than government. 894 00:44:39,860 --> 00:44:42,300 So I think that it makes sense for-- 895 00:44:42,300 --> 00:44:45,810 to have a system where you have markets dictating the rules. 896 00:44:45,810 --> 00:44:48,330 And when you have externalities or problems, 897 00:44:48,330 --> 00:44:51,650 then you might think about state or a federal government 898 00:44:51,650 --> 00:44:52,380 stepping in. 899 00:44:52,380 --> 00:44:57,540 But in general, I would think that a nicer rule to have is 900 00:44:57,540 --> 00:45:00,030 look at the case where markets do not work. 901 00:45:00,030 --> 00:45:01,830 Well, then you would have to go to, wait, 902 00:45:01,830 --> 00:45:04,410 where do the markets not work, and that's another big upset. 903 00:45:04,410 --> 00:45:06,420 But what I'm saying is that markets I think 904 00:45:06,420 --> 00:45:08,460 are fair in that since. 905 00:45:08,460 --> 00:45:09,930 RICHARD SCHMALENSEE: Well, suppose 906 00:45:09,930 --> 00:45:17,040 I told you that I knew that all owners of coal miners 907 00:45:17,040 --> 00:45:18,870 were terrible racists. 908 00:45:18,870 --> 00:45:21,930 And that, in fact, just out of prejudice, 909 00:45:21,930 --> 00:45:28,143 they paid half as much to Black workers as the white workers? 910 00:45:28,143 --> 00:45:30,810 AUDIENCE: Then that would happen is probably you would have like 911 00:45:30,810 --> 00:45:34,524 another company that would come out with-- 912 00:45:34,524 --> 00:45:38,598 that would pay like better wages and could probably-- 913 00:45:38,598 --> 00:45:40,890 RICHARD SCHMALENSEE: Could hire away good Black workers 914 00:45:40,890 --> 00:45:41,780 for cheap wages. 915 00:45:41,780 --> 00:45:42,280 OK. 916 00:45:42,280 --> 00:45:42,810 OK. 917 00:45:42,810 --> 00:45:45,660 So the market does have a tendency to be self-correcting. 918 00:45:45,660 --> 00:45:47,490 So let me move on. 919 00:45:47,490 --> 00:45:50,800 We'll get to the socialists over here in a minute. 920 00:45:50,800 --> 00:45:56,790 But we didn't assign Hughes, but did you 921 00:45:56,790 --> 00:45:59,320 notice Hughes said in dissent? 922 00:46:01,930 --> 00:46:03,960 Hughes was a Chief Justice. 923 00:46:03,960 --> 00:46:05,401 He had a-- yeah, Rory? 924 00:46:05,401 --> 00:46:07,057 AUDIENCE: I think also studies. 925 00:46:07,057 --> 00:46:08,140 RICHARD SCHMALENSEE: Yeah. 926 00:46:08,140 --> 00:46:11,560 He just said, how can you possibly staple these together 927 00:46:11,560 --> 00:46:13,990 when the terms of the law says they're not? 928 00:46:13,990 --> 00:46:17,380 That I don't get that, which is a pretty narrow 929 00:46:17,380 --> 00:46:18,250 technical argument. 930 00:46:18,250 --> 00:46:20,530 And that's why we're not going to talk about him. 931 00:46:20,530 --> 00:46:22,810 How about Cardozo? 932 00:46:22,810 --> 00:46:23,310 Casey? 933 00:46:23,310 --> 00:46:25,880 AUDIENCE: So he said in regards to the price fixing 934 00:46:25,880 --> 00:46:32,600 provision of the act that it was legal because of the Commerce 935 00:46:32,600 --> 00:46:35,990 Clause because the price of coal definitely 936 00:46:35,990 --> 00:46:38,960 affects interstate commerce. 937 00:46:38,960 --> 00:46:41,560 And then he didn't make a decision necessarily 938 00:46:41,560 --> 00:46:44,810 with regards to the other provision of the act that was 939 00:46:44,810 --> 00:46:45,730 [INAUDIBLE]. 940 00:46:45,730 --> 00:46:47,522 RICHARD SCHMALENSEE: It's a little obscure. 941 00:46:47,522 --> 00:46:50,190 Did anybody see something that he 942 00:46:50,190 --> 00:46:54,733 said that related to the other provision as well? 943 00:46:54,733 --> 00:46:56,400 He didn't say it directly, you're right. 944 00:46:58,920 --> 00:47:01,140 But he did say-- 945 00:47:01,140 --> 00:47:02,993 yeah, anybody? 946 00:47:02,993 --> 00:47:04,160 The collectivists over here? 947 00:47:04,160 --> 00:47:04,670 No. 948 00:47:04,670 --> 00:47:17,790 He said-- he comes on to this distinction 949 00:47:17,790 --> 00:47:20,475 by Sutherland of direct and indirect effects. 950 00:47:23,940 --> 00:47:26,333 And he says, "The question remains 951 00:47:26,333 --> 00:47:27,750 whether it comes within that power 952 00:47:27,750 --> 00:47:30,390 is applied to interstate sales where interstate prices are 953 00:47:30,390 --> 00:47:32,310 directly or intimately affected. 954 00:47:35,700 --> 00:47:37,780 Mining and agriculture and manufacture 955 00:47:37,780 --> 00:47:39,750 are not interstate commerce, yet their relation 956 00:47:39,750 --> 00:47:43,680 may be such that for the protection of the one, 957 00:47:43,680 --> 00:47:46,270 there is need to regulate the other." 958 00:47:46,270 --> 00:47:50,580 And he goes on and says that all events direct and indirect, 959 00:47:50,580 --> 00:47:53,380 even if accepted as sufficient-- that is to say, 960 00:47:53,380 --> 00:47:56,550 even if you buy Sutherland's distinction-- must not 961 00:47:56,550 --> 00:47:58,320 be read too narrowly. 962 00:47:58,320 --> 00:48:00,900 In fact, I don't know how anybody can tell the difference 963 00:48:00,900 --> 00:48:02,700 or what the difference means. 964 00:48:02,700 --> 00:48:05,800 I read Sutherland several times and it made no sense to me. 965 00:48:05,800 --> 00:48:09,300 But so Cardozo, as you point out, 966 00:48:09,300 --> 00:48:12,600 it's very clear that, look, it's interstate commerce. 967 00:48:12,600 --> 00:48:14,760 We can fix prices of coal in interstate commerce 968 00:48:14,760 --> 00:48:16,380 for heaven's sakes. 969 00:48:16,380 --> 00:48:19,330 And then he kind of waffles around and says, 970 00:48:19,330 --> 00:48:26,310 you know, to say that wages don't affect prices directly-- 971 00:48:26,310 --> 00:48:28,560 kind of odd. 972 00:48:28,560 --> 00:48:32,640 You'd have to read it kind of narrowly. 973 00:48:32,640 --> 00:48:35,670 That may be the criterion-- 974 00:48:35,670 --> 00:48:38,010 Sutherland may have the criterion. 975 00:48:38,010 --> 00:48:46,620 But to say-- to treat directly, narrowly is inappropriate. 976 00:48:46,620 --> 00:48:49,350 So what is Cardozo's view of the proper role? 977 00:48:52,200 --> 00:48:53,437 Erica, what do you say? 978 00:48:53,437 --> 00:48:55,020 What does Cardozo think the government 979 00:48:55,020 --> 00:48:57,738 should be able to do? 980 00:48:57,738 --> 00:49:05,173 AUDIENCE: [INAUDIBLE] 981 00:49:05,173 --> 00:49:07,090 RICHARD SCHMALENSEE: So he says the government 982 00:49:07,090 --> 00:49:10,710 should be able to regulate it, more or less. 983 00:49:16,060 --> 00:49:20,710 Where is he versus Sutherland on, in general terms, the role 984 00:49:20,710 --> 00:49:22,280 of government-- 985 00:49:22,280 --> 00:49:23,900 or the role of the federal government? 986 00:49:23,900 --> 00:49:24,650 Let's start there. 987 00:49:24,650 --> 00:49:25,357 Rory? 988 00:49:25,357 --> 00:49:27,940 AUDIENCE: He seems to be able to do that, or should be allowed 989 00:49:27,940 --> 00:49:31,300 to regulate it because given the checks and balances 990 00:49:31,300 --> 00:49:34,330 you have in the system, while you may create a rule, 991 00:49:34,330 --> 00:49:35,650 the rule can have degrees. 992 00:49:35,650 --> 00:49:38,963 And so I think he talks about the fact that-- 993 00:49:38,963 --> 00:49:41,130 I think he said something along the lines of the law 994 00:49:41,130 --> 00:49:41,675 isn't stupid. 995 00:49:41,675 --> 00:49:44,950 It can work out when one thing is a direct action 996 00:49:44,950 --> 00:49:47,220 and one's an indirect action. 997 00:49:47,220 --> 00:49:48,270 RICHARD SCHMALENSEE: Yeah, I didn't get the word stupid, 998 00:49:48,270 --> 00:49:48,770 but-- 999 00:49:51,210 --> 00:49:52,920 but, yeah. 1000 00:49:52,920 --> 00:49:53,730 Yeah, yeah, yeah. 1001 00:50:02,540 --> 00:50:05,750 Well, that's his-- that's his, don't define them too narrowly. 1002 00:50:05,750 --> 00:50:09,320 A survey of the cases shows that the words direct and indirect 1003 00:50:09,320 --> 00:50:12,710 have been interpreted with suppleness of adaption 1004 00:50:12,710 --> 00:50:15,230 and flexibility of meaning. 1005 00:50:15,230 --> 00:50:19,040 The power is as broad as the need that evokes it. 1006 00:50:19,040 --> 00:50:20,780 That's a nice little phrase, too. 1007 00:50:20,780 --> 00:50:24,230 That kind of matches Sutherland's journey 1008 00:50:24,230 --> 00:50:25,280 toward a forbidden end. 1009 00:50:25,280 --> 00:50:30,000 The power is as broad as the need that evokes it. 1010 00:50:30,000 --> 00:50:33,750 That's a statement-- thank you for reminding me of that lovely 1011 00:50:33,750 --> 00:50:34,590 phrase-- 1012 00:50:34,590 --> 00:50:37,470 that's a statement about the role of government. 1013 00:50:37,470 --> 00:50:39,630 That's a statement about how society 1014 00:50:39,630 --> 00:50:40,800 should be organized, right? 1015 00:50:40,800 --> 00:50:42,780 What government should be able to do. 1016 00:50:45,630 --> 00:50:48,600 It says, if you have a representative government-- 1017 00:50:48,600 --> 00:50:50,550 which is kind of assumed here-- 1018 00:50:50,550 --> 00:50:53,370 and the government says there is a need, 1019 00:50:53,370 --> 00:50:57,000 then the government can act. 1020 00:50:57,000 --> 00:50:59,790 I don't see a forbidden end here. 1021 00:50:59,790 --> 00:51:04,070 I don't see a concern for the sovereignty of the states. 1022 00:51:04,070 --> 00:51:06,500 I see a government concerned with meeting needs. 1023 00:51:09,320 --> 00:51:12,060 Team B, you like that? 1024 00:51:12,060 --> 00:51:14,830 Why is that good? 1025 00:51:14,830 --> 00:51:15,460 Jackie? 1026 00:51:15,460 --> 00:51:18,085 AUDIENCE: I think it makes sense for the government as the role 1027 00:51:18,085 --> 00:51:21,760 of the protector, especially like during the era of the New 1028 00:51:21,760 --> 00:51:24,740 Deal, when it's all about recovery, 1029 00:51:24,740 --> 00:51:26,750 it makes sense that the government has more 1030 00:51:26,750 --> 00:51:29,390 say in what's going on than it normally has because you can't 1031 00:51:29,390 --> 00:51:33,457 follow the collective decisions of various individuals 1032 00:51:33,457 --> 00:51:36,199 and varying practices to solve for something that's 1033 00:51:36,199 --> 00:51:37,785 a national issue. 1034 00:51:37,785 --> 00:51:39,410 I think that's one of the reasons why-- 1035 00:51:39,410 --> 00:51:41,620 like in ancient Rome, people were willing to accept 1036 00:51:41,620 --> 00:51:43,990 the role of the dictator during times of war 1037 00:51:43,990 --> 00:51:47,549 because they learned from Athens democracy could be paralyzing. 1038 00:51:47,549 --> 00:51:48,674 RICHARD SCHMALENSEE: Right. 1039 00:51:48,674 --> 00:51:50,528 AUDIENCE: [INAUDIBLE] 1040 00:51:50,528 --> 00:51:52,320 RICHARD SCHMALENSEE: So because they also-- 1041 00:51:52,320 --> 00:51:55,020 they also accepted emperors in times of peace 1042 00:51:55,020 --> 00:51:57,210 after a little while, but, hey-- 1043 00:51:57,210 --> 00:51:58,890 but, hey. 1044 00:51:58,890 --> 00:52:01,410 But that's an interesting example 1045 00:52:01,410 --> 00:52:03,540 of sources of legitimacy, right? 1046 00:52:03,540 --> 00:52:07,580 As long as the empire is growing and people are prosperous, 1047 00:52:07,580 --> 00:52:09,990 do I really care that the Praetorian Guard 1048 00:52:09,990 --> 00:52:13,890 put the emperor in his place, as long as things are going well? 1049 00:52:13,890 --> 00:52:16,100 I'll play along. 1050 00:52:16,100 --> 00:52:23,400 So you think, with Cardozo, that if a legitimately installed 1051 00:52:23,400 --> 00:52:28,380 government finds a real need, the government 1052 00:52:28,380 --> 00:52:31,020 should be able to deal with it. 1053 00:52:31,020 --> 00:52:31,906 Yeah? 1054 00:52:31,906 --> 00:52:35,180 AUDIENCE: I think this is more Smith's opinion, because it 1055 00:52:35,180 --> 00:52:38,030 doesn't necessarily completely contradict 1056 00:52:38,030 --> 00:52:40,370 with what Cardozo says. 1057 00:52:40,370 --> 00:52:42,095 He says, particularly, if we think 1058 00:52:42,095 --> 00:52:45,610 of the real policy as supposed to deal, 1059 00:52:45,610 --> 00:52:49,370 or account for any externality that the free market usually 1060 00:52:49,370 --> 00:52:51,170 would have considered. 1061 00:52:51,170 --> 00:52:54,200 And Smith says the best representative 1062 00:52:54,200 --> 00:52:56,780 would be the person who truly understands 1063 00:52:56,780 --> 00:53:00,430 the local population, the climate, the geography 1064 00:53:00,430 --> 00:53:02,010 of that specific area. 1065 00:53:02,010 --> 00:53:05,850 So he what he says is there's nothing wrong with policy, 1066 00:53:05,850 --> 00:53:09,890 but it's who should be the people making that decision. 1067 00:53:09,890 --> 00:53:14,270 He basically-- he's against the government making a decision 1068 00:53:14,270 --> 00:53:18,920 for all of the states, but he's not necessarily against some 1069 00:53:18,920 --> 00:53:21,860 sort of policy for directing-- 1070 00:53:21,860 --> 00:53:25,130 RICHARD SCHMALENSEE: But suppose your real concern 1071 00:53:25,130 --> 00:53:29,330 is terrible poverty in coal mining areas, which was pretty 1072 00:53:29,330 --> 00:53:31,460 brutal, actually, in the '30s. 1073 00:53:31,460 --> 00:53:34,460 And you say, well, here's what we're going to do. 1074 00:53:34,460 --> 00:53:38,150 We're going to let West Virginia, a poor state, 1075 00:53:38,150 --> 00:53:41,150 deal with poverty in West Virginia. 1076 00:53:41,150 --> 00:53:43,640 And West Virginia doesn't have the money. 1077 00:53:43,640 --> 00:53:45,620 It could try to fix wages-- 1078 00:53:45,620 --> 00:53:48,635 maybe that would be the way for West Virginia to go forward. 1079 00:53:51,310 --> 00:53:54,670 But maybe not. 1080 00:53:54,670 --> 00:53:56,590 Maybe West Virginia has a government 1081 00:53:56,590 --> 00:53:58,720 that isn't concerned with poverty in poor areas 1082 00:53:58,720 --> 00:54:02,120 because it was put in place by the coal miners. 1083 00:54:02,120 --> 00:54:04,590 Maybe that system broke down. 1084 00:54:04,590 --> 00:54:05,280 I don't know. 1085 00:54:05,280 --> 00:54:06,614 Rory? 1086 00:54:06,614 --> 00:54:09,275 AUDIENCE: [INAUDIBLE] because if I only do it in West Virginia, 1087 00:54:09,275 --> 00:54:12,600 then the companies move to somewhere else. 1088 00:54:12,600 --> 00:54:14,270 And those prices get forced down. 1089 00:54:14,270 --> 00:54:16,040 And you create a government there, 1090 00:54:16,040 --> 00:54:18,682 and then only eventually do they move back to West Virginia. 1091 00:54:18,682 --> 00:54:20,390 RICHARD SCHMALENSEE: So you worry about-- 1092 00:54:20,390 --> 00:54:23,060 this is something the European Union worries about a lot. 1093 00:54:23,060 --> 00:54:26,750 You worry about states-- 1094 00:54:26,750 --> 00:54:29,300 or in the European case, countries-- 1095 00:54:29,300 --> 00:54:31,940 racing to the bottom, subsidizing industries, 1096 00:54:31,940 --> 00:54:36,920 regulating lightly in a way that attracts jobs, but takes them 1097 00:54:36,920 --> 00:54:39,740 away from somebody else that's part of the same club. 1098 00:54:39,740 --> 00:54:42,290 So you say the federal government 1099 00:54:42,290 --> 00:54:45,770 should be able to act on problems like this 1100 00:54:45,770 --> 00:54:49,040 because you'll get competition among the states that might 1101 00:54:49,040 --> 00:54:52,520 be destructive, in essence. 1102 00:54:52,520 --> 00:54:56,340 Anybody else from the left wing? 1103 00:54:56,340 --> 00:54:56,850 Yeah? 1104 00:54:56,850 --> 00:54:57,285 I'd 1105 00:54:57,285 --> 00:54:58,993 AUDIENCE: Say, because the Depression was 1106 00:54:58,993 --> 00:55:01,020 like a national problem, that you're 1107 00:55:01,020 --> 00:55:06,290 going to need like a national lawmaker to bring it back up 1108 00:55:06,290 --> 00:55:10,130 and corporations would cause also, 1109 00:55:10,130 --> 00:55:12,600 something that affects a lot more-- 1110 00:55:12,600 --> 00:55:13,440 prices will affect-- 1111 00:55:13,440 --> 00:55:14,940 RICHARD SCHMALENSEE: Lots of things. 1112 00:55:14,940 --> 00:55:15,740 AUDIENCE: --areas all over and around it. 1113 00:55:15,740 --> 00:55:18,150 So I guess I think the federal government should be able to-- 1114 00:55:18,150 --> 00:55:20,108 RICHARD SCHMALENSEE: So you would expand powers 1115 00:55:20,108 --> 00:55:21,840 in times of depression, just like they 1116 00:55:21,840 --> 00:55:25,060 have tended historically to be expanded in times of war, 1117 00:55:25,060 --> 00:55:25,560 right? 1118 00:55:25,560 --> 00:55:27,727 Lincoln expanded the power of the federal government 1119 00:55:27,727 --> 00:55:30,750 enormously during the Civil War. 1120 00:55:30,750 --> 00:55:31,820 Do they get rolled back? 1121 00:55:36,290 --> 00:55:40,250 Once you've built the agency and put the law in place, 1122 00:55:40,250 --> 00:55:42,080 do they roll back? 1123 00:55:42,080 --> 00:55:42,745 Jessica? 1124 00:55:42,745 --> 00:55:43,370 AUDIENCE: Yeah. 1125 00:55:43,370 --> 00:55:44,840 I'm sitting here thinking-- because I'm 1126 00:55:44,840 --> 00:55:45,710 a refugee from Cuba. 1127 00:55:45,710 --> 00:55:47,150 So I'm definitely not a socialist. 1128 00:55:47,150 --> 00:55:48,200 But when you opened with-- 1129 00:55:48,200 --> 00:55:50,158 RICHARD SCHMALENSEE: But you're on team B here. 1130 00:55:50,158 --> 00:55:51,780 I mean, I'm sorry, we need-- 1131 00:55:51,780 --> 00:55:52,610 we need you with-- 1132 00:55:52,610 --> 00:55:53,120 OK. 1133 00:55:53,120 --> 00:55:53,720 AUDIENCE: When you opened-- 1134 00:55:53,720 --> 00:55:55,262 RICHARD SCHMALENSEE: Support Cardozo. 1135 00:55:55,262 --> 00:55:55,940 I was joking. 1136 00:55:55,940 --> 00:55:57,410 You don't have to be socialist, over here. 1137 00:55:57,410 --> 00:55:57,611 AUDIENCE: No, it's fine. 1138 00:55:57,611 --> 00:55:58,400 But when you opened it, then I was like, wow, 1139 00:55:58,400 --> 00:56:01,430 there are more correlations than I realized at first. 1140 00:56:01,430 --> 00:56:05,420 And there's a joke that when Castro was asking for-- 1141 00:56:05,420 --> 00:56:09,560 when Castro was asking for an economist, Che heard Communist. 1142 00:56:09,560 --> 00:56:11,562 And that's why he signed up. 1143 00:56:11,562 --> 00:56:14,017 So that being the opposite sort of implication, 1144 00:56:14,017 --> 00:56:16,340 which is where markets took over and they 1145 00:56:16,340 --> 00:56:20,930 were so bad for the people that they just needed a government 1146 00:56:20,930 --> 00:56:22,170 to take over the markets. 1147 00:56:22,170 --> 00:56:23,870 And that's when they turned to-- 1148 00:56:23,870 --> 00:56:26,960 let's be-- let's give everything to this one guy. 1149 00:56:26,960 --> 00:56:29,243 So it might also be a preemptive attack. 1150 00:56:29,243 --> 00:56:31,160 RICHARD SCHMALENSEE: You're talking about Cuba 1151 00:56:31,160 --> 00:56:35,870 before the revolution, and the Batista government was corrupt, 1152 00:56:35,870 --> 00:56:38,900 was basically an oligarchy, and gave 1153 00:56:38,900 --> 00:56:43,130 really nice parties in Havana and great nightlife in Havana 1154 00:56:43,130 --> 00:56:47,240 for visiting Americans, and immense poverty for much 1155 00:56:47,240 --> 00:56:49,150 of Cuba. 1156 00:56:49,150 --> 00:56:52,840 And that government lost legitimacy. 1157 00:56:52,840 --> 00:56:58,860 And you got central action, which brought a lot of literacy 1158 00:56:58,860 --> 00:57:02,190 to the Cuban people, improved medical care, 1159 00:57:02,190 --> 00:57:04,770 and, well, better than it was. 1160 00:57:04,770 --> 00:57:10,890 And of course, now we're back to grinding poverty again now 1161 00:57:10,890 --> 00:57:12,850 that the Soviet support is gone, but yeah. 1162 00:57:12,850 --> 00:57:14,850 AUDIENCE: But the system of checks and balances, 1163 00:57:14,850 --> 00:57:17,310 having that flexibility to like open-- 1164 00:57:17,310 --> 00:57:20,400 to give government more power when it's needed and less when 1165 00:57:20,400 --> 00:57:23,100 it's not needed it might be a preemptive strategy 1166 00:57:23,100 --> 00:57:26,850 to make it radical in one direction. 1167 00:57:26,850 --> 00:57:32,700 RICHARD SCHMALENSEE: Any other defense of Cardozo's view? 1168 00:57:32,700 --> 00:57:38,580 The power-- let me read that one sentence again. 1169 00:57:38,580 --> 00:57:42,450 The power is as broad as the need that evokes it. 1170 00:57:42,450 --> 00:57:43,223 Yeah? 1171 00:57:43,223 --> 00:57:46,555 AUDIENCE: My problem here is, one argument 1172 00:57:46,555 --> 00:57:51,120 lies with wages and prices, the people who would be affected 1173 00:57:51,120 --> 00:57:53,130 is the general public. 1174 00:57:53,130 --> 00:57:56,598 And the argument is between the market and the policymakers, 1175 00:57:56,598 --> 00:57:58,390 but the people who are going to be affected 1176 00:57:58,390 --> 00:57:59,570 are the general public. 1177 00:57:59,570 --> 00:58:02,850 So let's think if we had this debate, or we had this-- 1178 00:58:02,850 --> 00:58:05,100 if we go back to the general public and see what's 1179 00:58:05,100 --> 00:58:07,200 their opinion about this point. 1180 00:58:07,200 --> 00:58:09,245 So once the public-- once people would 1181 00:58:09,245 --> 00:58:11,700 just-- they want to have a regular prices 1182 00:58:11,700 --> 00:58:13,870 and they want to have regular wages. 1183 00:58:13,870 --> 00:58:15,810 They don't want like the price to depend 1184 00:58:15,810 --> 00:58:19,020 on the decision of people who own these companies 1185 00:58:19,020 --> 00:58:20,520 or people who run the market. 1186 00:58:20,520 --> 00:58:22,478 RICHARD SCHMALENSEE: So most people, you think, 1187 00:58:22,478 --> 00:58:23,940 would in fact-- 1188 00:58:23,940 --> 00:58:26,970 if you put this to a vote, put the Constitution to one side-- 1189 00:58:26,970 --> 00:58:29,870 if you put it to a vote and you said-- 1190 00:58:29,870 --> 00:58:32,330 and by the way, there's another reading 1191 00:58:32,330 --> 00:58:35,930 that's optional that gives you a sense of how really awful 1192 00:58:35,930 --> 00:58:39,200 it was to be a coal miner in this period-- 1193 00:58:39,200 --> 00:58:40,407 and beyond, perhaps. 1194 00:58:40,407 --> 00:58:41,990 If you put it to a vote, and you said, 1195 00:58:41,990 --> 00:58:45,050 these people have terrible jobs, they die young, 1196 00:58:45,050 --> 00:58:48,590 they're dirt poor, things have gotten worse. 1197 00:58:48,590 --> 00:58:51,415 How about we pay them a living wage and the cost of coal 1198 00:58:51,415 --> 00:58:52,290 goes up a little bit? 1199 00:58:52,290 --> 00:58:53,600 You think that would pass. 1200 00:58:53,600 --> 00:58:56,330 And that that ought to be enough. 1201 00:58:56,330 --> 00:58:58,940 The Constitution saying, maybe you can't do it, 1202 00:58:58,940 --> 00:59:00,470 maybe you can-- 1203 00:59:00,470 --> 00:59:03,870 the fact that you could get a vote on it, which you probably 1204 00:59:03,870 --> 00:59:04,410 could. 1205 00:59:04,410 --> 00:59:08,370 You probably could have in the Depression. 1206 00:59:08,370 --> 00:59:12,180 There was a 1933 case called Appalachian Coals, 1207 00:59:12,180 --> 00:59:14,790 an antitrust case that went to the same Supreme 1208 00:59:14,790 --> 00:59:16,500 Court two years earlier. 1209 00:59:16,500 --> 00:59:20,610 And Appalachian Coals was an attempt 1210 00:59:20,610 --> 00:59:23,210 by a group of coal miners-- 1211 00:59:23,210 --> 00:59:24,090 they colluded. 1212 00:59:24,090 --> 00:59:25,140 They fixed the price. 1213 00:59:25,140 --> 00:59:27,480 They set a minimum price of coal, 1214 00:59:27,480 --> 00:59:31,798 which by all the antitrust law precedent up to that point, 1215 00:59:31,798 --> 00:59:32,715 was just flat illegal. 1216 00:59:32,715 --> 00:59:34,320 It was just no question about it. 1217 00:59:34,320 --> 00:59:36,990 Go to jail-- well, yeah-- go to jail illegal. 1218 00:59:36,990 --> 00:59:38,940 The Supreme Court managed to find 1219 00:59:38,940 --> 00:59:42,130 it legal in one of the most bizarre opinions 1220 00:59:42,130 --> 00:59:45,810 you'll ever read because it was the '30s. 1221 00:59:45,810 --> 00:59:47,460 It was coal miners. 1222 00:59:47,460 --> 00:59:49,690 These people were in terrible shape. 1223 00:59:49,690 --> 00:59:55,500 So you would say, if it's such a terrible problem, 1224 00:59:55,500 --> 00:59:58,770 there's clear popular will, just do it. 1225 00:59:58,770 --> 01:00:02,480 Forget about the forbidden place, forget about the states. 1226 01:00:02,480 --> 01:00:05,270 OK. 1227 01:00:05,270 --> 01:00:06,770 We got that. 1228 01:00:06,770 --> 01:00:07,520 Rebuttals? 1229 01:00:07,520 --> 01:00:10,310 Team A, you've heard what they said. 1230 01:00:10,310 --> 01:00:12,815 That the power is as broad as the need that evokes it. 1231 01:00:12,815 --> 01:00:13,940 You're right in the middle. 1232 01:00:13,940 --> 01:00:15,620 Remind me which team you're on? 1233 01:00:15,620 --> 01:00:16,743 OK. 1234 01:00:16,743 --> 01:00:17,660 You're a right-winger. 1235 01:00:17,660 --> 01:00:18,160 All right. 1236 01:00:18,160 --> 01:00:19,460 AUDIENCE: So I think that-- 1237 01:00:19,460 --> 01:00:21,768 like so I personally probably agree with the statement 1238 01:00:21,768 --> 01:00:23,810 that the coal miners were in horrible conditions, 1239 01:00:23,810 --> 01:00:27,120 and by putting it to a vote, you could probably pass it. 1240 01:00:27,120 --> 01:00:29,930 But I think that Sutherland's position is, yeah, maybe that's 1241 01:00:29,930 --> 01:00:30,560 true. 1242 01:00:30,560 --> 01:00:34,070 But in many Supreme Court cases, the basis of the decision 1243 01:00:34,070 --> 01:00:36,300 is what has been said in the past. 1244 01:00:36,300 --> 01:00:38,948 And so if you pass-- if you made this legal for this case, 1245 01:00:38,948 --> 01:00:40,490 that in future cases, it would, like, 1246 01:00:40,490 --> 01:00:43,700 baby steps to the government having 1247 01:00:43,700 --> 01:00:45,310 full control over everything. 1248 01:00:45,310 --> 01:00:48,170 So maybe like it would have been right in that case, 1249 01:00:48,170 --> 01:00:49,880 but considering the big picture, you 1250 01:00:49,880 --> 01:00:51,650 might be going down a road that you 1251 01:00:51,650 --> 01:00:53,042 don't want to take any further. 1252 01:00:53,042 --> 01:00:54,500 RICHARD SCHMALENSEE: And the reason 1253 01:00:54,500 --> 01:00:57,860 you don't want to take it is because in 1793, 1254 01:00:57,860 --> 01:01:01,700 the Constitution was ratified by a bunch of guys 1255 01:01:01,700 --> 01:01:03,920 in breaches and powdered wigs. 1256 01:01:03,920 --> 01:01:06,020 AUDIENCE: And because you don't want 1257 01:01:06,020 --> 01:01:09,110 to disrespect the different corporations' 1258 01:01:09,110 --> 01:01:11,810 own entrepreneurial creativity. 1259 01:01:11,810 --> 01:01:13,080 RICHARD SCHMALENSEE: OK. 1260 01:01:13,080 --> 01:01:15,568 And the answer from this side? 1261 01:01:15,568 --> 01:01:16,860 We're a little unbalanced here. 1262 01:01:16,860 --> 01:01:20,130 We've got a lot of market lovers not a lot of-- 1263 01:01:20,130 --> 01:01:26,757 Rory, stand up for the poor suffering miners. 1264 01:01:26,757 --> 01:01:28,090 AUDIENCE: Well, if you go back-- 1265 01:01:28,090 --> 01:01:29,650 RICHARD SCHMALENSEE: You've got a forbidden place argument 1266 01:01:29,650 --> 01:01:31,990 there, a slippery slope, take one step, 1267 01:01:31,990 --> 01:01:34,810 got to draw the line someplace, we're going to draw it here. 1268 01:01:34,810 --> 01:01:37,690 AUDIENCE: From my very poor knowledge of the Constitution, 1269 01:01:37,690 --> 01:01:40,840 I think it like has clauses on eminent domain. 1270 01:01:40,840 --> 01:01:43,300 And you could argue that the government of certain times 1271 01:01:43,300 --> 01:01:45,530 has the right to take property from you. 1272 01:01:45,530 --> 01:01:48,817 And I think recently, they even took it from private people 1273 01:01:48,817 --> 01:01:50,150 to give to other private people. 1274 01:01:50,150 --> 01:01:52,722 And the Supreme Court said that was OK. 1275 01:01:52,722 --> 01:01:54,430 RICHARD SCHMALENSEE: Things are different 1276 01:01:54,430 --> 01:01:56,595 now than they were in 1935. 1277 01:01:56,595 --> 01:01:58,720 Let me just say-- and, boy, was that controversial. 1278 01:01:58,720 --> 01:01:59,520 AUDIENCE: Well, OK. 1279 01:01:59,520 --> 01:02:02,230 So another example would be police laws 1280 01:02:02,230 --> 01:02:04,600 are pretty tyrannical in their own way. 1281 01:02:04,600 --> 01:02:07,630 But they're appropriate to the crime. 1282 01:02:07,630 --> 01:02:12,850 And so in the same way, you could create tyrannical laws 1283 01:02:12,850 --> 01:02:15,553 in business if they're appropriate to the crime. 1284 01:02:15,553 --> 01:02:17,470 And that would come from eminent domain, which 1285 01:02:17,470 --> 01:02:19,833 I think is from the early '90s. 1286 01:02:19,833 --> 01:02:22,000 RICHARD SCHMALENSEE: Eminent domain is a provision-- 1287 01:02:22,000 --> 01:02:23,870 I'm not sure it's in the federal-- 1288 01:02:23,870 --> 01:02:26,740 well, I think it comes out of the common law. 1289 01:02:26,740 --> 01:02:30,670 It's the ability of a government to take private property 1290 01:02:30,670 --> 01:02:33,670 for public purpose and pay fair compensation-- 1291 01:02:33,670 --> 01:02:37,160 there is a fair compensation requirement-- 1292 01:02:37,160 --> 01:02:39,730 which is the only way you get power lines built, 1293 01:02:39,730 --> 01:02:42,040 or railroads, or lots of other things. 1294 01:02:42,040 --> 01:02:44,690 You have to assemble parcels. 1295 01:02:44,690 --> 01:02:46,060 Yeah? 1296 01:02:46,060 --> 01:02:48,280 AUDIENCE: I think-- sorry-- 1297 01:02:48,280 --> 01:02:49,450 I'm like getting sick. 1298 01:02:49,450 --> 01:02:52,240 Fundamentally, there is a trade-off between-- 1299 01:02:52,240 --> 01:02:53,390 yeah, it's gross. 1300 01:02:53,390 --> 01:02:54,460 I think I'm getting better, so I don't 1301 01:02:54,460 --> 01:02:55,668 think I'm contagious anymore. 1302 01:02:55,668 --> 01:02:58,260 RICHARD SCHMALENSEE: OK. 1303 01:02:58,260 --> 01:02:59,380 Everybody now inhales. 1304 01:02:59,380 --> 01:03:00,320 Go ahead-- sorry. 1305 01:03:00,320 --> 01:03:02,320 AUDIENCE: There's always going to be a trade-off 1306 01:03:02,320 --> 01:03:04,430 between freedom and equality. 1307 01:03:04,430 --> 01:03:07,240 And I think that like all of this conversation 1308 01:03:07,240 --> 01:03:10,120 is about where do you want to fall on that scale. 1309 01:03:10,120 --> 01:03:12,860 Personally-- and I think Sutherland would agree-- 1310 01:03:12,860 --> 01:03:15,400 that it's not OK to take away other people's freedoms 1311 01:03:15,400 --> 01:03:16,778 to make them more equal. 1312 01:03:16,778 --> 01:03:18,820 You know, it would be nice if in the whole world, 1313 01:03:18,820 --> 01:03:20,945 everyone was fine and had the same amount of money, 1314 01:03:20,945 --> 01:03:24,040 and it was immaterial because there was enough food 1315 01:03:24,040 --> 01:03:25,660 and everyone had equal access. 1316 01:03:25,660 --> 01:03:27,183 But that's not the case. 1317 01:03:27,183 --> 01:03:28,600 But that doesn't mean that you get 1318 01:03:28,600 --> 01:03:30,970 to go around taking away people's freedoms, 1319 01:03:30,970 --> 01:03:33,610 and freedoms that have been guaranteed to them, just 1320 01:03:33,610 --> 01:03:36,460 to make other people better off. 1321 01:03:36,460 --> 01:03:40,660 RICHARD SCHMALENSEE: You point to two different conceptions 1322 01:03:40,660 --> 01:03:41,920 of justice. 1323 01:03:41,920 --> 01:03:45,200 There's justice in terms of fair outcomes 1324 01:03:45,200 --> 01:03:48,430 and there's justice in terms of fair process. 1325 01:03:48,430 --> 01:03:53,050 And they're fundamentally different notions. 1326 01:03:53,050 --> 01:03:57,250 What you're saying is, I don't want to trample with a process 1327 01:03:57,250 --> 01:04:00,180 that I think is fair in order to produce, say, 1328 01:04:00,180 --> 01:04:03,100 more equality than that process would produce. 1329 01:04:03,100 --> 01:04:05,350 Other people might say, well, I'm 1330 01:04:05,350 --> 01:04:08,050 really concerned with inequality, say, 1331 01:04:08,050 --> 01:04:10,780 in the United States today, where inequality has 1332 01:04:10,780 --> 01:04:13,010 been growing by any measure. 1333 01:04:13,010 --> 01:04:16,420 And yeah, maybe everything's competitive 1334 01:04:16,420 --> 01:04:19,720 and everything's swell, but I don't like that outcome. 1335 01:04:19,720 --> 01:04:22,120 So I'll fiddle with it with taxes. 1336 01:04:22,120 --> 01:04:25,060 So I'm just saying there are these two different views. 1337 01:04:25,060 --> 01:04:27,130 I'm not saying either one is necessarily right. 1338 01:04:27,130 --> 01:04:29,050 You are more of a process person. 1339 01:04:29,050 --> 01:04:31,150 You like a fair process. 1340 01:04:31,150 --> 01:04:33,520 And the outcome of a fair process is fair. 1341 01:04:33,520 --> 01:04:36,730 Others might say, take executive salaries. 1342 01:04:36,730 --> 01:04:38,530 Nobody's forcing boards of directors 1343 01:04:38,530 --> 01:04:41,230 to pay high salaries-- they're very high. 1344 01:04:41,230 --> 01:04:42,700 Should we do something about it? 1345 01:04:42,700 --> 01:04:45,130 Process people say no, outcome people say yes. 1346 01:04:48,180 --> 01:04:49,980 Thank you. 1347 01:04:49,980 --> 01:04:52,160 Other comments? 1348 01:04:52,160 --> 01:04:52,660 Yeah? 1349 01:04:52,660 --> 01:04:53,780 AUDIENCE: I think going back to what 1350 01:04:53,780 --> 01:04:56,560 Rory said, while I sympathize with the plight of the miners, 1351 01:04:56,560 --> 01:04:58,990 and I understand that it's difficult to be impoverished, 1352 01:04:58,990 --> 01:05:02,090 especially in impoverished states, these tyrannical laws 1353 01:05:02,090 --> 01:05:05,450 that TV is suggesting, are still just a short-term solution. 1354 01:05:05,450 --> 01:05:07,290 And because the markets are self-correcting 1355 01:05:07,290 --> 01:05:10,940 and because those participants are voluntary, in the end, 1356 01:05:10,940 --> 01:05:12,940 in the long-term, maybe after a few generations, 1357 01:05:12,940 --> 01:05:16,710 everything will solve itself without these tyrannical laws 1358 01:05:16,710 --> 01:05:19,450 that are just inappropriate in this situation. 1359 01:05:19,450 --> 01:05:22,000 RICHARD SCHMALENSEE: Minimum wage law is a tyrannical law. 1360 01:05:22,000 --> 01:05:23,140 Okey-doke. 1361 01:05:23,140 --> 01:05:23,748 I'm with you. 1362 01:05:23,748 --> 01:05:24,290 I'm with you. 1363 01:05:24,290 --> 01:05:24,950 I got it. 1364 01:05:24,950 --> 01:05:25,450 No, no. 1365 01:05:25,450 --> 01:05:26,440 You just play the role. 1366 01:05:26,440 --> 01:05:27,750 Yeah. 1367 01:05:27,750 --> 01:05:29,250 AUDIENCE: I'm kind of a right-winger 1368 01:05:29,250 --> 01:05:31,750 in enemy territory over here. 1369 01:05:31,750 --> 01:05:33,850 But I'd say, like, I don't like really 1370 01:05:33,850 --> 01:05:36,160 the idea of the government ideologically being 1371 01:05:36,160 --> 01:05:39,010 able to step on the toes of private enterprise, 1372 01:05:39,010 --> 01:05:41,120 just the ideology of it. 1373 01:05:41,120 --> 01:05:42,790 But I don't know if this is so much 1374 01:05:42,790 --> 01:05:44,560 an opinion on a hindsight suggestion, 1375 01:05:44,560 --> 01:05:47,380 but as far as the plight of the workers, I mean, 1376 01:05:47,380 --> 01:05:49,843 they have just as much right to deny to work. 1377 01:05:49,843 --> 01:05:51,510 And so if you're the federal government, 1378 01:05:51,510 --> 01:05:54,820 I don't know how much union labor laws you can pass, 1379 01:05:54,820 --> 01:05:57,840 but I think pro-union labor laws for coal miners, I think 1380 01:05:57,840 --> 01:05:59,590 would be more effective way, if you wanted 1381 01:05:59,590 --> 01:06:03,040 to do it without stepping on the toes in the Constitution 1382 01:06:03,040 --> 01:06:03,957 or anything like that. 1383 01:06:03,957 --> 01:06:05,415 RICHARD SCHMALENSEE: They, in fact, 1384 01:06:05,415 --> 01:06:07,090 moved in that direction, the Wagner Act 1385 01:06:07,090 --> 01:06:09,400 and the National Labor Relations Act I believe 1386 01:06:09,400 --> 01:06:12,010 came after this legislation, which strengthened 1387 01:06:12,010 --> 01:06:13,710 the ability of unions. 1388 01:06:13,710 --> 01:06:16,450 The only thing-- since the left wing is being very timid over 1389 01:06:16,450 --> 01:06:17,110 here-- 1390 01:06:17,110 --> 01:06:20,020 the only thing I would say is these little towns 1391 01:06:20,020 --> 01:06:25,270 in West Virginia, if you're a miner and the mine goes bust, 1392 01:06:25,270 --> 01:06:27,550 and you own a home, it's worthless. 1393 01:06:27,550 --> 01:06:31,510 So you got no job and you've got no assets to sell to move. 1394 01:06:31,510 --> 01:06:34,420 Yeah, you could withhold your labor, but I mean, 1395 01:06:34,420 --> 01:06:36,080 you don't have a lot of options. 1396 01:06:36,080 --> 01:06:41,600 It's not a frictionless-- it's not a frictionless plane. 1397 01:06:41,600 --> 01:06:45,760 I was involved in Washington in the Northern Spotted Owl 1398 01:06:45,760 --> 01:06:48,640 debate around 1990. 1399 01:06:48,640 --> 01:06:50,620 And the issue there-- 1400 01:06:50,620 --> 01:06:53,230 one of the factors in that debate 1401 01:06:53,230 --> 01:06:56,410 turned on people in small towns in Oregon 1402 01:06:56,410 --> 01:06:59,140 who made their living cutting down trees. 1403 01:06:59,140 --> 01:07:04,930 If you regulated logging sharply, 1404 01:07:04,930 --> 01:07:07,060 they had worthless homes. 1405 01:07:07,060 --> 01:07:09,940 And their skill was cutting down trees. 1406 01:07:09,940 --> 01:07:12,190 And they got no place to go. 1407 01:07:12,190 --> 01:07:17,270 So unless you did something to compensate them for that 1408 01:07:17,270 --> 01:07:19,520 situation-- that was a case where it was a government 1409 01:07:19,520 --> 01:07:22,200 regulation, but it could easily have been a market-- 1410 01:07:22,200 --> 01:07:24,140 they are just stuck. 1411 01:07:24,140 --> 01:07:27,805 And you get alcoholism, and child abuse, and spousal abuse, 1412 01:07:27,805 --> 01:07:29,180 and all of the things that happen 1413 01:07:29,180 --> 01:07:30,470 when communities break down. 1414 01:07:30,470 --> 01:07:34,748 So it's not-- it's not pretty. 1415 01:07:34,748 --> 01:07:36,290 I'm trying to help the left over here 1416 01:07:36,290 --> 01:07:38,750 with a little tear-jerking argument. 1417 01:07:38,750 --> 01:07:41,890 But-- yeah? 1418 01:07:41,890 --> 01:07:44,377 AUDIENCE: I was going to say just for the left-wing side, 1419 01:07:44,377 --> 01:07:45,210 I was going to say-- 1420 01:07:45,210 --> 01:07:45,680 RICHARD SCHMALENSEE: Please. 1421 01:07:45,680 --> 01:07:47,840 AUDIENCE: --you get back into the argument 1422 01:07:47,840 --> 01:07:51,630 that electricity does cross interstate lines. 1423 01:07:51,630 --> 01:07:54,660 So Congress does have the power to regulate these laws, 1424 01:07:54,660 --> 01:07:59,070 regardless of how ideologically you feel about it. 1425 01:07:59,070 --> 01:08:01,505 Constitutionally, it should be allowed. 1426 01:08:01,505 --> 01:08:02,880 RICHARD SCHMALENSEE: So you'd say 1427 01:08:02,880 --> 01:08:05,820 that this whole direct/indirect thing that Sutherland 1428 01:08:05,820 --> 01:08:07,480 was writing-- 1429 01:08:07,480 --> 01:08:10,350 which he couldn't define other than to mush around 1430 01:08:10,350 --> 01:08:12,150 for a couple of pages-- 1431 01:08:12,150 --> 01:08:14,580 is really not a distinction. 1432 01:08:14,580 --> 01:08:15,660 That if it affects-- 1433 01:08:15,660 --> 01:08:19,800 it affects, and there's no direct/indirect sensible 1434 01:08:19,800 --> 01:08:23,310 distinction, and wages affect prices of coal. 1435 01:08:23,310 --> 01:08:24,005 Yeah? 1436 01:08:24,005 --> 01:08:24,630 AUDIENCE: Sure. 1437 01:08:24,630 --> 01:08:27,359 I'm like a fair believer in the markets, 1438 01:08:27,359 --> 01:08:29,580 but I'm sitting on this side, so I figured I'd-- 1439 01:08:29,580 --> 01:08:30,955 RICHARD SCHMALENSEE: Do your job. 1440 01:08:30,955 --> 01:08:31,830 AUDIENCE: Yeah. 1441 01:08:31,830 --> 01:08:34,590 And it was pertaining to the-- 1442 01:08:34,590 --> 01:08:36,090 to having a fair process. 1443 01:08:36,090 --> 01:08:38,970 And I mean, I believe in a fair process, 1444 01:08:38,970 --> 01:08:44,279 but it's always like the kind of recursive nature in the sense 1445 01:08:44,279 --> 01:08:47,040 that you have to establish a fair playground in order 1446 01:08:47,040 --> 01:08:49,770 for the outcome of a fair process to be fair. 1447 01:08:49,770 --> 01:08:52,890 And perhaps in this case, when shit's hitting the fan, 1448 01:08:52,890 --> 01:08:56,760 you really need to try and have the government interfere 1449 01:08:56,760 --> 01:09:01,590 and create somewhat equality so that the process is then fair. 1450 01:09:01,590 --> 01:09:04,410 And from then on, you can then say, well, you know, 1451 01:09:04,410 --> 01:09:06,660 we've allowed everyone with the same-- 1452 01:09:06,660 --> 01:09:09,180 we've tried to give everyone the same kind of benefits 1453 01:09:09,180 --> 01:09:10,710 or the same opportunities. 1454 01:09:10,710 --> 01:09:13,109 And from here, whoever takes it, well, 1455 01:09:13,109 --> 01:09:15,558 is then a CEO and is making money and who doesn't isn't. 1456 01:09:15,558 --> 01:09:17,850 RICHARD SCHMALENSEE: And what do the folks on this side 1457 01:09:17,850 --> 01:09:19,859 say in response to that? 1458 01:09:19,859 --> 01:09:21,910 Somebody who hasn't spoken. 1459 01:09:21,910 --> 01:09:22,410 Max? 1460 01:09:22,410 --> 01:09:24,410 AUDIENCE: I think it's a big issue with conflict 1461 01:09:24,410 --> 01:09:25,575 of interest. 1462 01:09:25,575 --> 01:09:27,450 In this situation, you'll have the government 1463 01:09:27,450 --> 01:09:31,830 that may have been trying to act in the interest of workers, 1464 01:09:31,830 --> 01:09:34,330 in labor rights, things of that nature. 1465 01:09:34,330 --> 01:09:36,000 But that might not always be the case. 1466 01:09:36,000 --> 01:09:37,500 We've been looking at the government 1467 01:09:37,500 --> 01:09:39,870 as kind of this benevolent power that's trying 1468 01:09:39,870 --> 01:09:41,550 to improve workers rights. 1469 01:09:41,550 --> 01:09:45,450 But in the future, you'll have all these congressmen 1470 01:09:45,450 --> 01:09:48,779 from different states, and legislation passed 1471 01:09:48,779 --> 01:09:50,529 might not be in the interest of one state. 1472 01:09:50,529 --> 01:09:52,237 It might be an interest to another state. 1473 01:09:52,237 --> 01:09:54,000 And if there's a majority, you end up 1474 01:09:54,000 --> 01:09:57,370 affecting one state in the interest of many others. 1475 01:09:57,370 --> 01:09:59,520 And so it's where the-- 1476 01:09:59,520 --> 01:10:02,560 if it doesn't affect interstate commerce-- and in this case, 1477 01:10:02,560 --> 01:10:04,590 the argument was that production does not 1478 01:10:04,590 --> 01:10:07,320 affect interstate commerce-- the federal government 1479 01:10:07,320 --> 01:10:09,362 shouldn't have the power to regulate it because 1480 01:10:09,362 --> 01:10:10,570 of that conflict of interest. 1481 01:10:10,570 --> 01:10:12,670 RICHARD SCHMALENSEE: So you think we draw 1482 01:10:12,670 --> 01:10:15,390 a simple, clear bright line. 1483 01:10:15,390 --> 01:10:17,880 There's a lot of good stuff on the other side of that line, 1484 01:10:17,880 --> 01:10:20,250 but there's a lot of bad stuff there. 1485 01:10:20,250 --> 01:10:22,128 Sutherland's forbidden place is on that side. 1486 01:10:22,128 --> 01:10:23,670 AUDIENCE: I think one of the comments 1487 01:10:23,670 --> 01:10:27,120 was the necessary evil of an open market, where 1488 01:10:27,120 --> 01:10:30,690 while the government has to accept that there are 1489 01:10:30,690 --> 01:10:35,040 some evils, maybe unfair labor standards that they can't deal, 1490 01:10:35,040 --> 01:10:37,793 with but to have a truly fair and open market, 1491 01:10:37,793 --> 01:10:39,960 you need to let those evils exist and let the states 1492 01:10:39,960 --> 01:10:41,823 deal with them if they think it's proper. 1493 01:10:41,823 --> 01:10:43,740 RICHARD SCHMALENSEE: And if I were Sutherland, 1494 01:10:43,740 --> 01:10:47,820 I might say, look, today it's the poor coal miners-- 1495 01:10:47,820 --> 01:10:51,060 tomorrow, it's the poor investment bankers. 1496 01:10:51,060 --> 01:10:53,070 And if we get votes in Congress-- 1497 01:10:53,070 --> 01:10:56,072 God knows how-- that investment bankers' wages are too low 1498 01:10:56,072 --> 01:10:57,780 and they need to be increased, and if you 1499 01:10:57,780 --> 01:11:00,000 let me fix a wage for coal miners, 1500 01:11:00,000 --> 01:11:02,490 I'll fix a weight for investment bankers tomorrow. 1501 01:11:02,490 --> 01:11:05,110 And we know that's nuts and we need a wall. 1502 01:11:05,110 --> 01:11:05,610 OK. 1503 01:11:05,610 --> 01:11:07,570 Let me bring it to a close. 1504 01:11:07,570 --> 01:11:08,340 Thank you all. 1505 01:11:08,340 --> 01:11:09,180 This was good. 1506 01:11:09,180 --> 01:11:12,930 You aired a lot of the main issues. 1507 01:11:12,930 --> 01:11:15,360 Let me just tell you what happened. 1508 01:11:15,360 --> 01:11:19,410 After this, Roosevelt found this string of defeats-- 1509 01:11:19,410 --> 01:11:22,950 this was just another defeat for the New Deal-- 1510 01:11:22,950 --> 01:11:24,210 very frustrating. 1511 01:11:24,210 --> 01:11:28,650 And in 1937, he issued a bill which 1512 01:11:28,650 --> 01:11:31,380 would have let him appoint more justices to the Supreme 1513 01:11:31,380 --> 01:11:33,990 Court, the so-called court-packing bill. 1514 01:11:38,180 --> 01:11:42,420 Two months later, the court reversed itself 1515 01:11:42,420 --> 01:11:46,050 on the federal government's ability to regulate wages. 1516 01:11:46,050 --> 01:11:47,550 One judge switched. 1517 01:11:47,550 --> 01:11:51,270 Carter versus Carter Coal was a 5 to 4 decision. 1518 01:11:51,270 --> 01:11:53,940 In 1937, they switched. 1519 01:11:53,940 --> 01:11:57,810 This was referred to as the switch in time that saved 1520 01:11:57,810 --> 01:12:00,510 nine-- nine justices in the Supreme Court-- 1521 01:12:00,510 --> 01:12:02,010 clever language. 1522 01:12:02,010 --> 01:12:06,120 The Court says, however, they'd taken the vote earlier. 1523 01:12:06,120 --> 01:12:08,670 The bill died in any case in the Senate 1524 01:12:08,670 --> 01:12:11,250 in July, which is why we still have nine 1525 01:12:11,250 --> 01:12:15,440 justices on the Supreme Court. 1526 01:12:15,440 --> 01:12:17,960 Who has won historically, Sutherland or Cardozo? 1527 01:12:22,130 --> 01:12:22,880 AUDIENCE: Cardozo. 1528 01:12:22,880 --> 01:12:23,870 RICHARD SCHMALENSEE: Cardozo. 1529 01:12:23,870 --> 01:12:25,287 Do we have a federal minimum wage? 1530 01:12:25,287 --> 01:12:26,210 Yes. 1531 01:12:26,210 --> 01:12:27,210 Scott? 1532 01:12:27,210 --> 01:12:29,418 AUDIENCE: I would say that's different than this case 1533 01:12:29,418 --> 01:12:32,120 because the minimum wage law isn't just for coal. 1534 01:12:32,120 --> 01:12:32,530 RICHARD SCHMALENSEE: That's true. 1535 01:12:32,530 --> 01:12:34,580 AUDIENCE: --coal, it gives it every generation. 1536 01:12:34,580 --> 01:12:37,880 RICHARD SCHMALENSEE: But the fundamental question of does 1537 01:12:37,880 --> 01:12:40,340 the Commerce Clause stop-- 1538 01:12:40,340 --> 01:12:43,910 that fundamental question-- stop the federal government 1539 01:12:43,910 --> 01:12:46,310 from regulating things that occur inside states, 1540 01:12:46,310 --> 01:12:50,060 like paying wages or setting safety 1541 01:12:50,060 --> 01:12:54,470 conditions for this room, or lots of other things? 1542 01:12:54,470 --> 01:12:57,780 Cardozo won. 1543 01:12:57,780 --> 01:13:02,430 The view, at least until recently, 1544 01:13:02,430 --> 01:13:05,790 was that if you could find an impact on interstate commerce, 1545 01:13:05,790 --> 01:13:09,160 the federal government could regulate it. 1546 01:13:09,160 --> 01:13:14,170 That's disputed now, and we have a Supreme Court that 1547 01:13:14,170 --> 01:13:16,550 is tilting the other direction. 1548 01:13:16,550 --> 01:13:21,910 But the run of decisions from the '30s 1549 01:13:21,910 --> 01:13:26,020 forward has largely been in Cardozo's direction, at least 1550 01:13:26,020 --> 01:13:29,890 as regards the Commerce Clause. 1551 01:13:29,890 --> 01:13:34,670 But issues like this don't get settled permanently. 1552 01:13:34,670 --> 01:13:36,230 The pendulum may swing. 1553 01:13:36,230 --> 01:13:40,670 There's a lot more concern with states' rights, as I say. 1554 01:13:40,670 --> 01:13:42,590 To actually say the federal government 1555 01:13:42,590 --> 01:13:45,590 should just fix the electric system 1556 01:13:45,590 --> 01:13:47,420 is to get laughed out of town. 1557 01:13:47,420 --> 01:13:51,680 It's a state function, full stop. 1558 01:13:51,680 --> 01:13:53,333 OK. 1559 01:13:53,333 --> 01:13:55,250 I think we've covered what there was to cover. 1560 01:13:55,250 --> 01:13:56,900 Questions, comments, reactions? 1561 01:14:00,310 --> 01:14:00,810 Thank you. 1562 01:14:00,810 --> 01:14:03,890 I'll see you all tomorrow, believe it or not.