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RICHARD SCHMALENSEE: Let's do
a little general discussion

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of some of the political
issues that we will encounter.

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This is a-- if you read
why there are governments,

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if you read what governments say
about why they are established,

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you get very
high-flown language.

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This is The Declaration of
Independence, life, liberty,

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and the pursuit of happiness.

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Governments are to
assure those rights.

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This is The Constitution,
a little less high-flying--

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establish justice, ensure
domestic tranquility,

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provide for the common defense,
promote the general welfare,

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and secure the
blessings of liberty.

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You will notice that we
have domestic tranquility,

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common defense, things
that are a little less

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high-flowing than life, liberty,
and the pursuit of happiness.

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Does anybody know
where this comes from?

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This is the law
that it's actually

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an act the English
government that sets up

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Canada as a separate state.

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Peace, order, and good
government-- somewhat different

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emphasis than life, liberty,
and the pursuit of happiness.

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If you look at--

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lots of other governments
don't write down--

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or lots of other countries, lots
of regimes, postrevolutionary,

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Henry VIII, Ivan the Terrible,
Khmer Rouge, Joseph Stalin,

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Adolf Hitler would not
write statements like that.

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But they had goals.

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They have goals.

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A key element of a
functioning government

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is a near monopoly
on the use of force.

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If you think about it, when
you think about Somalia

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is a failed state, or
Libya is a failing state

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not that long ago.

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What broke was the monopoly
on the use of deadly force--

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near monopoly-- near monopoly.

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Is Syria a failed state yet?

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Probably not.

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Is it en route?

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Maybe.

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But that's-- every government
that's really a government--

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really a government-- has a
monopoly on the use of force.

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It also has-- governments
tend to have legitimacy.

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That is to say,
even in North Korea,

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people aren't followed
around by a man with a gun.

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People follow orders without
the use of force, generally--

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generally.

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Legitimacy can come from
a number of sources.

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Again, if you think
about it in the abstract,

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the US government probably gets
its legitimacy from the fact

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that most people think
the processes followed

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are reasonably fair.

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You might not have
liked the decision

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in Bush versus Gore that
gave the election to Bush,

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but it followed
a certain process

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and, yeah, you didn't like it,
but fundamentally, the process

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was OK.

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You don't like the Bills that
come out of Congress, but you

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know how people are elected--

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blah, blah, blah.

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In the days of the
divine right of kings,

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legitimacy came
from someplace else.

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Legitimacy came from the fact
that that king was the king.

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And God said, he's the king.

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Do what he says.

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That's a pretty good
source of legitimacy.

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Or you could have
a government that's

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arbitrary, doesn't
have divine rights,

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but is doing things
that people like.

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You might ask, why was
the Hitler government--

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why did it have
legitimacy in Germany?

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Because the variety
of the goals it

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was pursuing were popular goals.

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Was the process that
put it in office fair?

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Not really.

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Was Adolf Hitler
divinely endorsed?

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Not really.

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But restoring
German self-respect,

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expanding the territory
of the country,

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making it a power again,
et cetera, et cetera,

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those were popular goals.

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And sometimes-- North Korea--

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you have legitimacy
because the consequences

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of not following orders
are pretty terrible.

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So you follow orders.

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Governments also have
policies and a process

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for changing them.

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I want to spend just
a couple of minutes

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about how the market system--

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the market, which you
all studied in economics,

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differs from the political
world, which we will

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be spending some time on here.

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In the market, we think
of individuals or firms

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pursuing self-interest.

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That happens in the
political world.

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But what also happens in
the political world is, A,

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groups are involved,
not just individuals--

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parties, interest groups,
trade associations,

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industries acting together.

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And you see the pursuit
both of self-interest

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and have different views
of the public interest.

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Because in the market--

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right-- you make
decisions for yourself,

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firm makes decisions for itself.

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In the political
world most decisions

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are for the community.

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So the question is not
only what's good for me--

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that matters, obviously--

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but what's good
for the community.

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How do I think a
government should work?

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How do I think a
community, a state,

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a country should be organized?

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What goals should it pursue?

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That gets us to the
question of ideology.

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In the market,
individual decisions

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are driven by
individual preferences.

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In the political world,
ideology matters.

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Different views of how
the state should operate,

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how society should
work, and what

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arrangements should be adopted.

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So you and I might,
for instance,

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agree that society should
take care of poor people--

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or that poor people
should be taken care of.

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People on the market
side might say, yeah,

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that's what families are for.

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That's how the state should be
organized to achieve that goal,

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is families should understand
that that's their duty to take

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care of poor relatives
and poor friends.

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People on the state
side might, say, well,

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that's all well and good,
but that won't work.

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That won't work.

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You might have different
goals, of course.

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People on the market
side might say,

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the notion that the poor should
be taken care of is a bad idea.

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It'll rob them of incentives.

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And if the poor don't
have incentives,

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they'll be a burden
on the rest of us,

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and we just shouldn't have that.

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People on the state side
might say, no, no, no.

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You've got to take care of the
poor, it's simple humanity.

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Forget all the incentives.

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Those are ideological
statements.

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Those are statements about
how the government, how

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the society, how the community,
what should it work to do?

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And how best to get there?

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They don't arise--
those kinds of issues

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don't arise in
the market, right?

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Market economy, you're
buying, you're selling,

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you're pursuing your interest,
you're maximizing profit.

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None of this stuff comes--

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it may come up, but
it's not central.

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It's not central.

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In the political
system, it's central.

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So if I can do this--

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let me just for fun--

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if I've still got it.

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No, I don't still have it--

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wait a sec.

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Yeah, I do.

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Just for humor.

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Let's do Howard Roark.

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This is a statement of ideology.

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[VIDEO PLAYBACK]

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- I shall call no witnesses.

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This will be my testimony
and my summation.

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- Take the oath.

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- Do you swear to tell the
truth, the whole truth,

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and nothing but the
truth, so help you God?

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- I do.

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- Thousands of years
ago, the first man

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discovered how to make fire.

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He was probably
burned at the stake

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he taught his brothers to
light, but he left them

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a gift they had not conceived.

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And he lit the
darkness off the Earth.

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Throughout the
centuries, there were

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men who took first steps down
new roads armed with nothing

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but their own vision.

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The great creators.

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The thinkers, the artists,
the scientists, the inventors

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stood alone against
the men of their time.

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Every new thought was opposed.

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Every new invention
was denounced.

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But the men of unborrowed
vision went ahead.

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They fought, they suffered,
and they paid, but they won.

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No creator was prompted by a
desire to please his brothers.

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His brothers hated
the gift he offered.

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His truth was his only motive.

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His work was his only goal.

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RICHARD SCHMALENSEE: This
is a model of progress.

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Where does it come from?

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- --his creation, not the
benefits others derived from

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it.

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The creation which
gave form to his truth.

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He held his truth above all
things and against all men.

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He went ahead whether others
agreed with him or not,

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with his integrity
as his only banner.

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He served nothing and no one.

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He lived for himself.

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And only by living
for himself was

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he able to achieve the things
which are the glory of mankind.

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Such is the nature
of achievement.

00:11:04.650 --> 00:11:08.040
Man cannot survive
except through his mind.

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He comes on Earth unarmed.

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His brain is his only weapon.

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But the mind is an
attribute of the individual.

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There is no such thing
as a collective brain.

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The man who thinks must
think and act on his own.

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The reasoning mind cannot work
under any form of compulsion.

00:11:27.450 --> 00:11:31.410
It cannot be subordinated
to the needs, opinions,

00:11:31.410 --> 00:11:33.370
or wishes of others.

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It is not an object
of sacrifice.

00:11:36.660 --> 00:11:40.380
The creator stands
on his own judgment.

00:11:40.380 --> 00:11:44.640
The parasite follows
the opinions of others.

00:11:44.640 --> 00:11:46.380
The creator thinks.

00:11:46.380 --> 00:11:48.570
The parasite copies.

00:11:48.570 --> 00:11:52.110
The creator produces,
the parasite loots.

00:11:52.110 --> 00:11:55.710
The creator is concern is
the conquest of nature.

00:11:55.710 --> 00:11:58.860
The parasite's concerned
is the conquest of man.

00:11:58.860 --> 00:12:00.850
The creator requires
independence--

00:12:00.850 --> 00:12:03.120
he neither serves nor rules.

00:12:03.120 --> 00:12:07.040
He deals with men by free
exchange and voluntary choice.

00:12:07.040 --> 00:12:09.140
The parasite seeks power.

00:12:09.140 --> 00:12:10.680
He wants to bind
all men together

00:12:10.680 --> 00:12:12.983
in common action
and common slavery.

00:12:12.983 --> 00:12:13.483
He claims--

00:12:13.483 --> 00:12:15.733
RICHARD SCHMALENSEE: That's
what we call a government.

00:12:15.733 --> 00:12:17.280
- --a tool for
the use of others.

00:12:17.280 --> 00:12:20.040
That he must think as they
think, act that they act,

00:12:20.040 --> 00:12:23.120
and live in selfless,
joyless servitude

00:12:23.120 --> 00:12:25.440
to any need but his own.

00:12:25.440 --> 00:12:26.670
Look at history.

00:12:26.670 --> 00:12:29.670
Everything we have,
every great achievement

00:12:29.670 --> 00:12:34.200
has come from the independent
work of some independent mind.

00:12:34.200 --> 00:12:38.190
Every horror and destruction
came from attempts

00:12:38.190 --> 00:12:42.210
to force men into a herd of
brainless, soulless robots

00:12:42.210 --> 00:12:46.200
without personal rights,
without personal ambition,

00:12:46.200 --> 00:12:49.350
without will, hope, or dignity.

00:12:49.350 --> 00:12:51.120
It is an ancient conflict.

00:12:51.120 --> 00:12:53.210
It has another name.

00:12:53.210 --> 00:12:57.810
The individual against
the collective.

00:12:57.810 --> 00:13:00.750
Our country, the noblest
country in the history of men,

00:13:00.750 --> 00:13:03.330
was based on the principle
of individualism.

00:13:03.330 --> 00:13:07.380
The principle of man's
inalienable rights.

00:13:07.380 --> 00:13:10.500
It was a country where a man was
free to seek his own happiness,

00:13:10.500 --> 00:13:14.310
to gain and produce, not
to give up and renounce;

00:13:14.310 --> 00:13:21.330
to prosper, not to starve;
to achieve, not to plunder;

00:13:21.330 --> 00:13:25.320
to hold as his highest position
a sense of his personal value,

00:13:25.320 --> 00:13:29.760
and as his highest
virtue his self-respect.

00:13:29.760 --> 00:13:31.770
Look at the results.

00:13:31.770 --> 00:13:35.400
That is what the collectivists
are now asking you to destroy,

00:13:35.400 --> 00:13:39.300
as much of the Earth
has been destroyed.

00:13:39.300 --> 00:13:40.950
I am an architect.

00:13:40.950 --> 00:13:44.880
I know what is to come by the
principle on which it is built.

00:13:44.880 --> 00:13:48.060
We are approaching a world in
which I cannot permit myself

00:13:48.060 --> 00:13:49.530
to live.

00:13:49.530 --> 00:13:51.910
My ideas are my property.

00:13:51.910 --> 00:13:56.190
They were taken from me by
force by breach of contract.

00:13:56.190 --> 00:13:58.890
No appeal was left to me.

00:13:58.890 --> 00:14:01.320
It was believed that my
work belonged to others

00:14:01.320 --> 00:14:02.730
to do with as they pleased.

00:14:02.730 --> 00:14:05.610
That they had a claim upon
me without my consent,

00:14:05.610 --> 00:14:09.570
that it was my duty to serve
them without choice or reward.

00:14:09.570 --> 00:14:11.820
Now you know why I
dynamited Courtland.

00:14:11.820 --> 00:14:13.500
I designed Courtland.

00:14:13.500 --> 00:14:15.330
I made it possible.

00:14:15.330 --> 00:14:17.040
I destroyed it.

00:14:17.040 --> 00:14:18.960
I agreed to design
it for the purpose

00:14:18.960 --> 00:14:21.300
of seeing it built as I wished.

00:14:21.300 --> 00:14:24.150
That was the price
that I set for my work.

00:14:24.150 --> 00:14:25.860
I was not paid.

00:14:25.860 --> 00:14:27.690
My building was
disfigured at the whim

00:14:27.690 --> 00:14:29.880
of others who took all
the benefits of my work

00:14:29.880 --> 00:14:32.740
and gave me nothing in return.

00:14:32.740 --> 00:14:36.210
I came here to say that I do not
recognize anyone's right to one

00:14:36.210 --> 00:14:39.630
minute of my life, nor
to any part of my energy,

00:14:39.630 --> 00:14:43.740
nor to any achievement of mine,
no matter who makes the claim.

00:14:43.740 --> 00:14:45.540
It had to be said.

00:14:45.540 --> 00:14:48.870
The world is perishing from
an orgy of self-sacrificing.

00:14:48.870 --> 00:14:51.630
I came here to be
heard in the name

00:14:51.630 --> 00:14:54.510
of every man of independence
still left in the world.

00:14:54.510 --> 00:14:56.310
I wanted to state my terms.

00:14:56.310 --> 00:14:59.550
I do not care to work
or live on any others'.

00:14:59.550 --> 00:15:04.230
My terms are a man's right
to exist for his own sake.

00:15:11.535 --> 00:15:12.520
[END PLAYBACK]

00:15:12.520 --> 00:15:15.260
RICHARD SCHMALENSEE:
So I'm not--

00:15:15.260 --> 00:15:18.010
I'm not going to ask for a vote.

00:15:18.010 --> 00:15:20.920
But you see that is an
ideological statement.

00:15:20.920 --> 00:15:24.970
It is about how the
world must be organized--

00:15:24.970 --> 00:15:26.620
should be organized--

00:15:26.620 --> 00:15:28.960
to permit progress.

00:15:28.960 --> 00:15:31.060
The inventors have
to be free to invent,

00:15:31.060 --> 00:15:33.100
the parasites have
to be suppressed.

00:15:33.100 --> 00:15:34.630
It's an ideological statement.

00:15:34.630 --> 00:15:37.420
It's not just how
he wants to live,

00:15:37.420 --> 00:15:40.030
but how others should live.

00:15:40.030 --> 00:15:44.050
How the government, how the
society should be organized.

00:15:44.050 --> 00:15:47.440
There's another example
on the list, which

00:15:47.440 --> 00:15:49.420
was long, and
tedious, and optional,

00:15:49.420 --> 00:15:52.490
so I assume nobody read it.

00:15:52.490 --> 00:15:56.980
But I will give you the story.

00:15:56.980 --> 00:15:59.930
It's kind of an amazing story.

00:15:59.930 --> 00:16:03.500
It's a description of the
London electrical system--

00:16:03.500 --> 00:16:06.410
the Hughes reading--
before the First World War.

00:16:06.410 --> 00:16:12.670
Now by, say, 1914, there was
lots of electricity in Chicago.

00:16:12.670 --> 00:16:14.050
Chicago was electrified.

00:16:14.050 --> 00:16:15.440
There were trolleys.

00:16:15.440 --> 00:16:17.710
There was a company
that spanned the city.

00:16:17.710 --> 00:16:19.270
There was a lot of--

00:16:19.270 --> 00:16:22.660
electricity had penetrated
a good deal in Berlin.

00:16:22.660 --> 00:16:26.950
Again, a single system, modern
by the standards of the day.

00:16:26.950 --> 00:16:29.950
In London, there were--

00:16:29.950 --> 00:16:30.580
what's it say?

00:16:30.580 --> 00:16:37.070
65 utilities operating on
10 different frequencies

00:16:37.070 --> 00:16:43.320
with 24 different voltages
delivered to customers.

00:16:43.320 --> 00:16:47.570
And it's not like London
was populated by idiots

00:16:47.570 --> 00:16:49.348
or there weren't engineers.

00:16:49.348 --> 00:16:50.640
There were plenty of engineers.

00:16:50.640 --> 00:16:52.740
They had societies of
electrical engineers,

00:16:52.740 --> 00:16:55.530
just like the Germans did
and the Americans did.

00:16:55.530 --> 00:17:00.500
And commissions regularly
said, this is insane.

00:17:00.500 --> 00:17:01.890
This is crazy.

00:17:01.890 --> 00:17:05.609
Appliance makers
said, this is nuts.

00:17:05.609 --> 00:17:07.319
We can't sell the
same appliances

00:17:07.319 --> 00:17:10.680
in this part of London that we
sell in that part of London.

00:17:10.680 --> 00:17:14.220
The US has a standard,
Germany has the standard,

00:17:14.220 --> 00:17:21.730
London has 10 frequencies and
24 voltages and 65 companies.

00:17:21.730 --> 00:17:24.380
So why?

00:17:24.380 --> 00:17:28.700
Well, since nobody read it
but me, I'll tell you why.

00:17:28.700 --> 00:17:33.410
Because London was divided
into a set of local governments

00:17:33.410 --> 00:17:39.830
that had, since the Middle Ages,
authority over their domains.

00:17:39.830 --> 00:17:42.200
And the ideology
was this is local.

00:17:42.200 --> 00:17:43.460
It goes to residences.

00:17:43.460 --> 00:17:45.620
It goes to factories.

00:17:45.620 --> 00:17:48.900
It's the domain of
local government.

00:17:48.900 --> 00:17:50.100
That was the ideology.

00:17:50.100 --> 00:17:53.850
That's the statement about
how that society should

00:17:53.850 --> 00:17:55.140
be organized.

00:17:55.140 --> 00:18:00.070
Local government should--
no maximization here--

00:18:00.070 --> 00:18:05.810
local government should have
control over local utilities.

00:18:05.810 --> 00:18:10.190
It took them a long
time to get past that.

00:18:10.190 --> 00:18:12.170
And you say, wait,
couldn't you just say

00:18:12.170 --> 00:18:14.750
that that's all fine,
that's a nice ideology.

00:18:14.750 --> 00:18:19.320
But why don't we just get
the electrical system right?

00:18:19.320 --> 00:18:23.190
It was the biggest,
richest city in the world

00:18:23.190 --> 00:18:25.860
and it had a terrible
electrical system

00:18:25.860 --> 00:18:27.630
because of this ideology.

00:18:27.630 --> 00:18:32.400
How could they possibly
have gone with it?

00:18:32.400 --> 00:18:38.730
Well, you will see in the
course of human event,

00:18:38.730 --> 00:18:40.500
as you read the
paper and as you read

00:18:40.500 --> 00:18:45.200
other things, this kind of
thing happens all the time.

00:18:45.200 --> 00:18:49.310
Beliefs about how things
should be organized, beliefs

00:18:49.310 --> 00:18:53.570
about the right way for
a community to organize

00:18:53.570 --> 00:18:54.960
are very strong.

00:18:54.960 --> 00:18:57.450
They don't change rapidly.

00:18:57.450 --> 00:19:00.470
We have a federal system.

00:19:00.470 --> 00:19:03.890
I will discuss later on how
we regulate the electric power

00:19:03.890 --> 00:19:06.030
system in this country.

00:19:06.030 --> 00:19:08.130
And we do a lot of
pretending that electrons

00:19:08.130 --> 00:19:10.520
don't cross state lines.

00:19:10.520 --> 00:19:12.450
But of course they do.

00:19:12.450 --> 00:19:16.880
But the ideology is
that's a state function.

00:19:16.880 --> 00:19:20.287
And if you stand up and
say, why in heaven's name--

00:19:20.287 --> 00:19:21.870
I mean, we do have
national standards.

00:19:21.870 --> 00:19:23.660
It's not like London.

00:19:23.660 --> 00:19:25.040
But if you stand
up and say, this

00:19:25.040 --> 00:19:28.980
ought to be a federal
function, you'd get shot.

00:19:28.980 --> 00:19:33.630
I mean, it's just
not on the table.

00:19:33.630 --> 00:19:36.060
You can't have a
technical debate

00:19:36.060 --> 00:19:38.690
about would it be good or
bad because of the strength

00:19:38.690 --> 00:19:40.290
of the ideologies.

00:19:40.290 --> 00:19:46.310
Now I don't say that as an
indictment of human society.

00:19:46.310 --> 00:19:47.810
You have to have
beliefs about how

00:19:47.810 --> 00:19:49.430
the world should be organized.

00:19:49.430 --> 00:19:51.050
How do you function
without them?

00:19:51.050 --> 00:19:53.390
Just like you have to have
preferences about do you

00:19:53.390 --> 00:19:54.560
like tacos or burritos?

00:19:54.560 --> 00:19:56.390
I mean, you have to
get through life.

00:19:56.390 --> 00:20:00.710
You have to have views of how
the world should be organized

00:20:00.710 --> 00:20:02.210
and how people--

00:20:02.210 --> 00:20:05.390
how the government should
pursue certain goals.

00:20:05.390 --> 00:20:07.700
Those beliefs might want
to occasionally brush up

00:20:07.700 --> 00:20:11.920
against facts, just like your
preferences for ice cream

00:20:11.920 --> 00:20:14.260
might occasionally want
to brush up against facts

00:20:14.260 --> 00:20:15.820
about cholesterol.

00:20:15.820 --> 00:20:20.260
But fundamentally, just like
you need preferences and habits

00:20:20.260 --> 00:20:22.270
to get through the
day, individuals

00:20:22.270 --> 00:20:25.600
in the political
world need ideologies.

00:20:25.600 --> 00:20:28.690
So that's not a
pejorative statement.

00:20:28.690 --> 00:20:30.820
The other point I want to make--

00:20:30.820 --> 00:20:37.120
a difference between the
market and the polis,

00:20:37.120 --> 00:20:42.010
the political world,
is we generally assume

00:20:42.010 --> 00:20:45.320
in economics that individuals--

00:20:45.320 --> 00:20:47.060
at some point in
time, at least--

00:20:47.060 --> 00:20:50.150
have relatively
well-defined preferences.

00:20:50.150 --> 00:20:51.890
Well-defined preferences
basically just

00:20:51.890 --> 00:20:53.000
means you're consistent.

00:20:57.520 --> 00:21:01.180
You don't behave in a
way that that's obviously

00:21:01.180 --> 00:21:05.140
evidence of an unsound mind.

00:21:05.140 --> 00:21:10.750
Political judgment can be
inconsistent in that sense.

00:21:10.750 --> 00:21:12.940
Let me just give you
the simplest case

00:21:12.940 --> 00:21:17.380
of the Condorcet paradox,
which a very bright Frenchman

00:21:17.380 --> 00:21:20.500
discovered in 1785.

00:21:20.500 --> 00:21:26.890
And it's a special case of
a general rule that says--

00:21:26.890 --> 00:21:29.365
for which Ken Arrow
got a Nobel Prize--

00:21:29.365 --> 00:21:35.350
and it says, basically, any
regime without a dictator

00:21:35.350 --> 00:21:40.510
will behave inconsistently in
roughly the following sense.

00:21:40.510 --> 00:21:43.630
Let me say I've got three
individuals, three voters.

00:21:46.580 --> 00:21:48.110
This is what the
slide says, but I'm

00:21:48.110 --> 00:21:52.670
going to unpack it a
little bit, 1, 2, and 3.

00:21:52.670 --> 00:21:56.780
And there are three alternatives
A, B, and C. So individual 1

00:21:56.780 --> 00:22:05.870
prefers A to B and prefers B
to C. Individual 2 prefers C--

00:22:05.870 --> 00:22:07.850
that's her first choice--

00:22:07.850 --> 00:22:24.050
C to A, and A to B. Individual
3 prefers B to C to A.

00:22:24.050 --> 00:22:24.800
OK.

00:22:24.800 --> 00:22:30.770
So suppose I have a
vote between A and B.

00:22:30.770 --> 00:22:34.400
If I have a vote between
A and B, 1 prefers A to B,

00:22:34.400 --> 00:22:46.430
2 prefers A to B. So if I
vote, A is preferred to B.

00:22:46.430 --> 00:22:53.030
Now let me do B versus
C. 1 prefers B to C,

00:22:53.030 --> 00:22:57.230
3 prefers B to C.
So the vote tells me

00:22:57.230 --> 00:23:03.310
that B is preferred to C.

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

00:23:11.320 --> 00:23:20.560
is preferred to A. That
is inconsistent behavior.

00:23:23.120 --> 00:23:26.090
If an individual behaved
in that fashion, and said,

00:23:26.090 --> 00:23:28.770
I prefer chocolate
to strawberry,

00:23:28.770 --> 00:23:30.477
I prefer strawberry
to vanilla, but I

00:23:30.477 --> 00:23:32.560
prefer vanilla to chocolate,
you'd say, I'm sorry,

00:23:32.560 --> 00:23:33.143
wait a minute.

00:23:33.143 --> 00:23:34.410
What?

00:23:34.410 --> 00:23:39.150
But in voting, that can
happen all the time.

00:23:39.150 --> 00:23:43.320
And it also says, for
instance, if you'd like to--

00:23:43.320 --> 00:23:46.680
you'd really like to be the
chairman of this committee

00:23:46.680 --> 00:23:49.830
because if you're the chairman
of this committee, whoever

00:23:49.830 --> 00:23:53.700
you are, you can set the agenda
to get the outcome you want.

00:23:56.610 --> 00:23:58.770
Suppose you're number 1.

00:23:58.770 --> 00:24:02.020
You want A. So what do you do?

00:24:02.020 --> 00:24:07.650
You first have a vote
between B and C. B wins.

00:24:07.650 --> 00:24:10.020
Then you say, OK,
let's try A and B--

00:24:10.020 --> 00:24:11.740
A wins.

00:24:11.740 --> 00:24:17.190
Of course, if you're number
2, then what you'd like to do

00:24:17.190 --> 00:24:19.320
is start with the A/B vote--

00:24:19.320 --> 00:24:20.520
A wins.

00:24:20.520 --> 00:24:22.200
And then do the A/C vote--

00:24:22.200 --> 00:24:22.920
C wins.

00:24:26.310 --> 00:24:31.140
The kind of consistency
that we expect

00:24:31.140 --> 00:24:34.320
when we talk about
individual behavior

00:24:34.320 --> 00:24:38.610
is not a necessary feature
of political behavior,

00:24:38.610 --> 00:24:40.850
of collective behavior.

00:24:40.850 --> 00:24:43.890
With a dictator, OK, sure.

00:24:43.890 --> 00:24:46.080
With a voting system--

00:24:46.080 --> 00:24:50.350
you name your system, it
is capable of that kind

00:24:50.350 --> 00:24:52.510
of inconsistency,
even if it's not--

00:24:52.510 --> 00:24:54.610
even if it's not voting.

00:24:54.610 --> 00:24:56.020
So let me do just--

00:24:56.020 --> 00:25:02.060
have a couple more remarks
before we get to the case.

00:25:02.060 --> 00:25:08.970
In the market system, the
main process is competition.

00:25:08.970 --> 00:25:12.180
There may be other things going
on, depending on the system.

00:25:12.180 --> 00:25:14.520
Is competition perfect,
is it not perfect?

00:25:14.520 --> 00:25:15.840
Is there monopoly?

00:25:15.840 --> 00:25:19.020
But the central feature of a
market system is competition.

00:25:19.020 --> 00:25:27.920
Competition happens in politics,
but it's not the only process.

00:25:27.920 --> 00:25:29.790
Think about what we're
going through now

00:25:29.790 --> 00:25:33.570
in the Republican
primary process.

00:25:33.570 --> 00:25:38.600
There's a ton spent
trying to influence.

00:25:38.600 --> 00:25:40.160
That happens in politics.

00:25:40.160 --> 00:25:42.200
It happens through TV ads.

00:25:42.200 --> 00:25:45.590
It also happens in
parliaments and legislatures

00:25:45.590 --> 00:25:48.920
when people try to
persuade other people.

00:25:48.920 --> 00:25:53.740
You try to persuade them to
act in ways that benefit you,

00:25:53.740 --> 00:25:55.780
and you try to persuade
them that, in fact, it

00:25:55.780 --> 00:25:57.910
benefits them to do so--

00:25:57.910 --> 00:25:59.500
influence.

00:25:59.500 --> 00:26:06.020
Cooperation-- again, what are
political parties all about?

00:26:06.020 --> 00:26:07.770
They're a group of
people working together

00:26:07.770 --> 00:26:10.650
for a common end,
typically, or a team,

00:26:10.650 --> 00:26:13.740
or a set of folks in
a legislature trying

00:26:13.740 --> 00:26:15.270
to get something done.

00:26:15.270 --> 00:26:20.000
Groups act politically.

00:26:20.000 --> 00:26:23.120
You listen to-- you
read descriptions

00:26:23.120 --> 00:26:26.240
of Japanese politics, and
it's all about this faction

00:26:26.240 --> 00:26:27.650
and that faction.

00:26:27.650 --> 00:26:32.060
It's all about cooperating
groups in the same party

00:26:32.060 --> 00:26:35.030
but pursuing different ends.

00:26:35.030 --> 00:26:42.440
And loyalty-- changing your
position a lot in politics

00:26:42.440 --> 00:26:45.320
costs your friends,
costs you influence.

00:26:45.320 --> 00:26:50.422
So a lot of what happens is
Democrats hold their noses

00:26:50.422 --> 00:26:52.130
and vote for a Democrat
they don't really

00:26:52.130 --> 00:26:54.020
like because she's a Democrat.

00:26:54.020 --> 00:26:56.400
Republicans do the same thing.

00:26:56.400 --> 00:26:58.070
We'll see that in the fall.

00:26:58.070 --> 00:27:00.410
I'm loyal, this
is what I believe.

00:27:00.410 --> 00:27:02.360
It's not perfect,
I'm going there.

00:27:02.360 --> 00:27:06.043
There's nothing like
that in the marketplace.

00:27:06.043 --> 00:27:07.460
You may be loyal
to Chevrolet even

00:27:07.460 --> 00:27:11.870
though it produces a lousy car,
but this is not a common event.

00:27:11.870 --> 00:27:13.850
Loyalty in politics
is more important,

00:27:13.850 --> 00:27:17.180
cooperation's more important,
and influence Yeah, there's

00:27:17.180 --> 00:27:18.920
influence in the market--

00:27:18.920 --> 00:27:20.930
of course, people advertise.

00:27:20.930 --> 00:27:26.210
But influence is sort
of central to politics.

00:27:26.210 --> 00:27:28.860
There's not much influence
in the wheat market.

00:27:28.860 --> 00:27:30.360
But there's a lot
of influence in

00:27:30.360 --> 00:27:32.870
the Republican primary market.

00:27:32.870 --> 00:27:33.370
All right.

00:27:33.370 --> 00:27:34.600
So when you think about--

00:27:34.600 --> 00:27:36.280
there's competition--
people try to win,

00:27:36.280 --> 00:27:39.140
people want to
advance, and so on.

00:27:39.140 --> 00:27:41.450
But it's different.

00:27:41.450 --> 00:27:45.660
Finally, when you
think about politics--

00:27:45.660 --> 00:27:49.230
when you think about the market,
the goals you think about

00:27:49.230 --> 00:27:50.700
are utility or wealth.

00:27:50.700 --> 00:27:52.770
And I just said
wealth to save space,

00:27:52.770 --> 00:27:56.490
but you think of folks
as self-interested

00:27:56.490 --> 00:27:59.910
in a particularly narrow way.

00:27:59.910 --> 00:28:04.590
In politics, of course,
people pursue wealth--

00:28:04.590 --> 00:28:06.250
of course.

00:28:06.250 --> 00:28:11.110
But they also pursue power
and power is different.

00:28:11.110 --> 00:28:18.200
Power is sometimes-- sometimes
is conferred by an office.

00:28:18.200 --> 00:28:21.200
You're president, the
system has legitimacy,

00:28:21.200 --> 00:28:23.018
therefore you have power.

00:28:23.018 --> 00:28:24.560
Power means you can
get others to act

00:28:24.560 --> 00:28:26.010
against their self-interest.

00:28:26.010 --> 00:28:30.720
You can get them to pay
taxes, for instance.

00:28:30.720 --> 00:28:36.890
You can get them to put their
lives on the line in a war.

00:28:36.890 --> 00:28:40.625
You have the ability to do a
variety of things against--

00:28:40.625 --> 00:28:42.250
to get people to do
a variety of things

00:28:42.250 --> 00:28:46.850
against their self-interest,
either for you or for your view

00:28:46.850 --> 00:28:49.600
of the public interest.

00:28:49.600 --> 00:28:53.250
So the important coin of the
realm in politics-- and again,

00:28:53.250 --> 00:28:57.440
there's nothing quite like
it in the market system--

00:28:57.440 --> 00:29:00.490
is power-- is power.

00:29:00.490 --> 00:29:04.870
Power comes from influence,
cooperation, loyalty, sometimes

00:29:04.870 --> 00:29:08.800
force, also comes
from the legitimacy

00:29:08.800 --> 00:29:10.890
of the government you're in.

00:29:10.890 --> 00:29:12.630
You hear occasionally
about people

00:29:12.630 --> 00:29:19.020
in legislatures being
powerful not necessarily

00:29:19.020 --> 00:29:22.230
because they have some office
that makes them powerful,

00:29:22.230 --> 00:29:26.100
but because they've managed
to attract a set of followers

00:29:26.100 --> 00:29:28.860
because they have some
ability to confer favors

00:29:28.860 --> 00:29:32.070
because, because, because.

00:29:32.070 --> 00:29:35.640
When I was in
Washington, John Dingell,

00:29:35.640 --> 00:29:39.898
the Congressman from Michigan,
was legendarily powerful.

00:29:39.898 --> 00:29:41.190
He was chairman of a committee.

00:29:41.190 --> 00:29:43.530
He was a Congressman, he
was chairman of a committee.

00:29:43.530 --> 00:29:46.460
The committee had a
lot of jurisdiction.

00:29:46.460 --> 00:29:49.850
Dingell also had a
very smart staff.

00:29:49.850 --> 00:29:53.470
Dingell also knew
everybody in town.

00:29:53.470 --> 00:29:56.350
Dingell would send letters to
people in the executive branch

00:29:56.350 --> 00:29:59.320
called Dingellgrams
that would consist

00:29:59.320 --> 00:30:01.660
of four pages of detailed
questions written

00:30:01.660 --> 00:30:05.227
by his staff that needed to
be answered within a week.

00:30:05.227 --> 00:30:07.310
You get a letter from like
that from anybody else,

00:30:07.310 --> 00:30:08.870
you'd say, yeah, right.

00:30:08.870 --> 00:30:13.170
You got a letter like that
from Dingell, you answered it.

00:30:13.170 --> 00:30:15.060
You put people on it
and you answered it

00:30:15.060 --> 00:30:17.280
because Dingell had power--

00:30:17.280 --> 00:30:19.080
Dingell had power.

00:30:19.080 --> 00:30:22.740
Hard to exactly describe
why Dingell had power,

00:30:22.740 --> 00:30:24.360
but Dingell had power.

00:30:24.360 --> 00:30:28.910
He could move votes, he
could build coalitions,

00:30:28.910 --> 00:30:29.850
he could operate.

00:30:29.850 --> 00:30:31.320
He had power.

00:30:31.320 --> 00:30:31.820
OK.

00:30:34.880 --> 00:30:37.400
We now have our introduction
to political science

00:30:37.400 --> 00:30:39.110
and political philosophy.

00:30:39.110 --> 00:30:42.950
Let's do a little
bit of Carter Coal.

00:30:42.950 --> 00:30:45.830
Some of the background-- which
we didn't quite give you,

00:30:45.830 --> 00:30:49.340
but let me just do a little
bit of that to get to it.

00:30:51.940 --> 00:30:57.030
This is the New Deal period,
and Roosevelt is doing--

00:30:57.030 --> 00:30:59.730
has gotten a Democratic
Congress to pass

00:30:59.730 --> 00:31:03.330
a variety of laws that extend
the power of government

00:31:03.330 --> 00:31:06.660
in an attempt to use
the power of government

00:31:06.660 --> 00:31:09.562
in a variety of ways to
deal with the Depression.

00:31:12.140 --> 00:31:14.510
Beginning in early
1935, the Supreme Court

00:31:14.510 --> 00:31:18.440
was striking these down
regularly as unconstitutional.

00:31:18.440 --> 00:31:24.150
There was a fairly long
list of things struck down.

00:31:24.150 --> 00:31:31.326
They'd struck down an earlier
piece of legislation in the--

00:31:31.326 --> 00:31:33.200
oh, I'm forgetting it now.

00:31:33.200 --> 00:31:39.530
It's one the-- the Schechter
decision, Schechter Poultry,

00:31:39.530 --> 00:31:45.590
struck down basically an
industry regulatory statute

00:31:45.590 --> 00:31:49.010
that, like the coal statute,
the Bituminous Coal Conservation

00:31:49.010 --> 00:31:53.360
Act, was an attempt to raise
prices and raise wages.

00:31:53.360 --> 00:31:57.475
The theory was we have
ruinous competition, so we're

00:31:57.475 --> 00:31:58.850
going to deal with
the Depression

00:31:58.850 --> 00:32:01.682
by getting prices up,
which will get wages up,

00:32:01.682 --> 00:32:03.890
which will get people
spending, which will get us out

00:32:03.890 --> 00:32:04.865
of this mess.

00:32:04.865 --> 00:32:08.600
Now it's not the best
economics, but that was

00:32:08.600 --> 00:32:10.490
the deal he was trying to do.

00:32:10.490 --> 00:32:15.860
And this act which just
focused on the coal industry,

00:32:15.860 --> 00:32:18.320
attempted to raise
prices and wages,

00:32:18.320 --> 00:32:21.950
and was drafted to
get around Schechter.

00:32:21.950 --> 00:32:25.253
So they'd thrown out an earlier
law in the Schechter decision.

00:32:25.253 --> 00:32:26.420
So somebody said, all right.

00:32:26.420 --> 00:32:30.560
Let's write this so that under
the standards of Schechter,

00:32:30.560 --> 00:32:33.660
its legal.

00:32:33.660 --> 00:32:38.610
It involved getting people
to-- getting coal manufacturers

00:32:38.610 --> 00:32:43.110
to obey the law by imposing
a tax on them, most of which

00:32:43.110 --> 00:32:47.370
was refunded if they followed
the practices laid out

00:32:47.370 --> 00:32:49.140
in the act.

00:32:49.140 --> 00:32:51.900
It's Carter versus Carter Coal--

00:32:51.900 --> 00:32:52.800
I love this.

00:32:52.800 --> 00:32:56.590
This guy's board of directors
votes to pay the tax.

00:32:56.590 --> 00:32:59.760
The CEO sues them.

00:32:59.760 --> 00:33:02.550
This is an odd action.

00:33:02.550 --> 00:33:04.870
The law says you
have to pay the tax.

00:33:04.870 --> 00:33:07.090
The board says, yeah,
we'll pay the tax.

00:33:07.090 --> 00:33:11.130
The CEO says, the hell we
will, and sues the board.

00:33:11.130 --> 00:33:11.910
Okey-doke.

00:33:14.430 --> 00:33:17.820
And as long as you
have recognized,

00:33:17.820 --> 00:33:24.450
and as you've discussed last
week, this case on its face

00:33:24.450 --> 00:33:27.580
is a technical exercise
in legal analysis.

00:33:27.580 --> 00:33:30.480
This is how court decisions
are always written.

00:33:33.330 --> 00:33:34.890
It's fascinating.

00:33:34.890 --> 00:33:37.410
Judges never say, well,
there's this consideration

00:33:37.410 --> 00:33:38.850
and there's this consideration.

00:33:38.850 --> 00:33:41.610
And in the balance, I
think I should go this way.

00:33:41.610 --> 00:33:44.700
They almost always say,
there's this consideration

00:33:44.700 --> 00:33:46.840
and people have made this
argument, but it's junk,

00:33:46.840 --> 00:33:49.950
so we should go this way.

00:33:49.950 --> 00:33:53.720
And those tend to be--

00:33:53.720 --> 00:33:56.760
reflect differences
in ideology, right?

00:33:56.760 --> 00:33:59.580
It's clear that
Sutherland and Cardozo--

00:33:59.580 --> 00:34:01.170
we'll talk briefly
about Hughes--

00:34:01.170 --> 00:34:04.980
but Sutherland and Cardozo
have a different view

00:34:04.980 --> 00:34:09.469
of how the United States
should be organized

00:34:09.469 --> 00:34:11.850
and how the government
should be run.

00:34:11.850 --> 00:34:15.360
So let's do this.

00:34:15.360 --> 00:34:19.739
What are the two
provisions at issue here?

00:34:19.739 --> 00:34:21.520
Anybody?

00:34:21.520 --> 00:34:23.650
Brendan, you've
got a great sign.

00:34:23.650 --> 00:34:26.500
Other people will have a great
sign, but I can read yours.

00:34:26.500 --> 00:34:28.960
What are the two provisions
in the Bituminous Coal Act

00:34:28.960 --> 00:34:31.750
that the court is dealing with?

00:34:31.750 --> 00:34:33.603
AUDIENCE: First, like
the Commerce Clause.

00:34:33.603 --> 00:34:35.608
Like whether the--

00:34:35.608 --> 00:34:37.150
RICHARD SCHMALENSEE:
That's the issue

00:34:37.150 --> 00:34:39.010
in terms of constitutionality.

00:34:39.010 --> 00:34:40.600
But what are two
things that the act

00:34:40.600 --> 00:34:43.256
did that are challenged here?

00:34:43.256 --> 00:34:45.714
AUDIENCE: First, can you just
set a manipulation for price,

00:34:45.714 --> 00:34:47.297
like this is what
the price has to be.

00:34:47.297 --> 00:34:49.750
RICHARD SCHMALENSEE: It
set a price for coal.

00:34:49.750 --> 00:34:50.590
OK.

00:34:50.590 --> 00:34:51.389
Anything else?

00:34:51.389 --> 00:34:52.989
Scott, what else did it do?

00:34:52.989 --> 00:34:54.072
AUDIENCE: Put a tax on it.

00:34:54.072 --> 00:34:55.870
RICHARD SCHMALENSEE:
Put a tax, yeah, yeah.

00:34:55.870 --> 00:34:58.150
But that was an
enforcement mechanism.

00:34:58.150 --> 00:35:00.280
What did it do in terms of--

00:35:00.280 --> 00:35:01.058
Sam?

00:35:01.058 --> 00:35:02.350
AUDIENCE: Wage for the workers?

00:35:02.350 --> 00:35:04.100
RICHARD SCHMALENSEE:
Wage for the workers.

00:35:04.100 --> 00:35:09.280
So you've got a price control
and a wage control provision.

00:35:09.280 --> 00:35:11.500
Let's talk about Sutherland.

00:35:11.500 --> 00:35:14.620
Those of you over here
must know what Sutherland--

00:35:14.620 --> 00:35:20.050
why did Sutherland say both
of them were unconstitutional?

00:35:20.050 --> 00:35:21.190
Yeah?

00:35:21.190 --> 00:35:23.100
AUDIENCE: It says that
the mining of coal

00:35:23.100 --> 00:35:26.721
is strictly production and it
doesn't deal with commerce.

00:35:26.721 --> 00:35:28.179
It's just production
is local, then

00:35:28.179 --> 00:35:31.480
there's no reason for the
federal government to--

00:35:31.480 --> 00:35:35.050
RICHARD SCHMALENSEE: So the
production is not commerce.

00:35:35.050 --> 00:35:39.430
Mining the coal, making the
machine is not commerce.

00:35:39.430 --> 00:35:43.150
And the federal government has
the power to regulate commerce.

00:35:43.150 --> 00:35:48.370
But it doesn't have the
power to regulate production.

00:35:48.370 --> 00:35:51.400
Unless, of course, it's
directly involved in commerce,

00:35:51.400 --> 00:35:54.490
and what did he say about that?

00:35:54.490 --> 00:35:55.840
Whatever the heck that means.

00:35:55.840 --> 00:35:58.190
It's indirect, it's not direct.

00:35:58.190 --> 00:35:58.690
OK.

00:35:58.690 --> 00:36:00.440
What did he say about
the other provision?

00:36:00.440 --> 00:36:01.520
Rachel?

00:36:01.520 --> 00:36:03.978
AUDIENCE: He said that they
were independent of each other.

00:36:03.978 --> 00:36:07.002
So that the first one
was unconstitutional,

00:36:07.002 --> 00:36:09.857
that they could evaluate
the second one separately?

00:36:09.857 --> 00:36:12.190
RICHARD SCHMALENSEE: It's an
interesting opinion, right?

00:36:12.190 --> 00:36:13.400
They wrote the law.

00:36:13.400 --> 00:36:16.730
In the law, they
said, invalidation

00:36:16.730 --> 00:36:18.980
of any part of this
law will not affect

00:36:18.980 --> 00:36:21.080
the validity of the others.

00:36:21.080 --> 00:36:23.480
And Sutherland said, yeah,
I know they said that,

00:36:23.480 --> 00:36:25.070
but they passed them both.

00:36:25.070 --> 00:36:26.760
So clearly, they're linked.

00:36:26.760 --> 00:36:30.830
So if one is bad, the
other's bad, goodbye.

00:36:30.830 --> 00:36:33.860
That was interesting
reasoning, right?

00:36:33.860 --> 00:36:38.340
That was one where you'd
say, that's not technical.

00:36:38.340 --> 00:36:39.540
That's ideology.

00:36:39.540 --> 00:36:43.140
That's his statement about,
I don't like that either.

00:36:43.140 --> 00:36:45.570
And since they're
in the same bill--

00:36:45.570 --> 00:36:48.300
you wonder, if they'd just gone
on and done the second bill--

00:36:48.300 --> 00:36:56.300
so group A, what's Sutherland
saying about the proper role

00:36:56.300 --> 00:36:58.410
of government?

00:36:58.410 --> 00:36:59.018
Yeah?

00:36:59.018 --> 00:37:00.560
AUDIENCE: Basically
a slippery slope.

00:37:00.560 --> 00:37:02.460
He said, every journey
to a forbidden end

00:37:02.460 --> 00:37:03.640
begins with a first step.

00:37:03.640 --> 00:37:06.222
And if you're starting to
remove power from the states,

00:37:06.222 --> 00:37:08.220
then it's easier to
next step, basically,

00:37:08.220 --> 00:37:10.157
towards a more
powerful [INAUDIBLE]..

00:37:10.157 --> 00:37:11.240
RICHARD SCHMALENSEE: Yeah.

00:37:11.240 --> 00:37:13.640
So that's a great
line, isn't it?

00:37:13.640 --> 00:37:18.020
The slippery slope, single step.

00:37:18.020 --> 00:37:20.990
That was one of
his better lines.

00:37:20.990 --> 00:37:22.250
It is exactly--

00:37:22.250 --> 00:37:25.130
"Every journey to
a forbidden end

00:37:25.130 --> 00:37:28.270
begins with the first step."

00:37:28.270 --> 00:37:30.460
The forbidden end.

00:37:30.460 --> 00:37:34.510
So Sutherland's view is we got
to be very strict about what

00:37:34.510 --> 00:37:37.090
we let the federal
government do because once it

00:37:37.090 --> 00:37:41.680
starts expanding, we're toast.

00:37:41.680 --> 00:37:45.340
But what's the forbidden
end that he worries about?

00:37:45.340 --> 00:37:47.650
Where does he not want to go?

00:37:47.650 --> 00:37:49.080
Anybody over here?

00:37:49.080 --> 00:37:51.005
Chad?

00:37:51.005 --> 00:37:51.880
You've made it black.

00:37:51.880 --> 00:37:52.463
I can read it.

00:37:52.463 --> 00:37:54.010
That's great.

00:37:54.010 --> 00:37:55.520
We'll get you a better one soon.

00:37:55.520 --> 00:37:57.180
AUDIENCE: So I think
that he doesn't

00:37:57.180 --> 00:38:04.970
want like the federal government
to turn it [INAUDIBLE]

00:38:04.970 --> 00:38:05.970
RICHARD SCHMALENSEE: OK.

00:38:05.970 --> 00:38:08.386
What's your
definition of tyranny?

00:38:08.386 --> 00:38:09.928
AUDIENCE: Having
full power and doing

00:38:09.928 --> 00:38:13.470
whatever they want without
going back to the people.

00:38:13.470 --> 00:38:14.610
RICHARD SCHMALENSEE: OK.

00:38:14.610 --> 00:38:18.210
Suppose they still
had elections--

00:38:18.210 --> 00:38:21.150
they still had elections,
but the government

00:38:21.150 --> 00:38:22.500
had a much broader role.

00:38:22.500 --> 00:38:25.116
Is that tyranny?

00:38:25.116 --> 00:38:26.447
AUDIENCE: It depends.

00:38:26.447 --> 00:38:27.780
RICHARD SCHMALENSEE: It depends.

00:38:27.780 --> 00:38:30.860
There's an interesting--
I'm reading this monstrously

00:38:30.860 --> 00:38:32.990
thick biography of Hamilton.

00:38:32.990 --> 00:38:37.790
And this was exactly the
debate over the Constitution.

00:38:37.790 --> 00:38:41.120
And it was the debate
over Hamilton's extending

00:38:41.120 --> 00:38:43.520
executive powers,
that it's going

00:38:43.520 --> 00:38:46.470
to be a tyranny unless
there's a check--

00:38:46.470 --> 00:38:48.330
unless there's a check.

00:38:48.330 --> 00:38:49.625
You had a comment?

00:38:49.625 --> 00:38:50.250
AUDIENCE: Yeah.

00:38:50.250 --> 00:38:54.510
To a degree, you could argue
that when the government would

00:38:54.510 --> 00:38:59.310
begin to impose the tyranny
of the majority on a minority,

00:38:59.310 --> 00:39:02.460
that would be when they
overstepped their bounds.

00:39:02.460 --> 00:39:04.350
RICHARD SCHMALENSEE:
And Sutherland

00:39:04.350 --> 00:39:07.050
wouldn't agree, would he,
that the Bill of Rights

00:39:07.050 --> 00:39:09.580
is a sufficient check on that.

00:39:09.580 --> 00:39:12.900
Sutherland would
say, the Constitution

00:39:12.900 --> 00:39:16.410
says the federal government
has limited powers.

00:39:16.410 --> 00:39:20.620
Once you go beyond
them, where do you stop?

00:39:20.620 --> 00:39:22.780
I mean, the Bill
of Rights stops--

00:39:22.780 --> 00:39:24.280
stops you at some
point, but there's

00:39:24.280 --> 00:39:25.810
a lot of ground between--

00:39:25.810 --> 00:39:27.363
yeah.

00:39:27.363 --> 00:39:27.863
yeah?

00:39:27.863 --> 00:39:29.020
AUDIENCE: He also
says he doesn't

00:39:29.020 --> 00:39:31.353
like think the states should
just become main divisions.

00:39:31.353 --> 00:39:32.728
He think it's
important that they

00:39:32.728 --> 00:39:34.355
have their own
identity where they

00:39:34.355 --> 00:39:35.480
can determine what happens.

00:39:35.480 --> 00:39:37.330
So even if the
federal government

00:39:37.330 --> 00:39:41.530
when a tyranny, wasn't taking
a toll on the people, per se,

00:39:41.530 --> 00:39:44.003
if they undermine
the state's own laws,

00:39:44.003 --> 00:39:46.320
then that's what
he thinks is wrong.

00:39:46.320 --> 00:39:48.150
RICHARD SCHMALENSEE: So he's--

00:39:48.150 --> 00:39:50.100
he's what we now call
a Federalist, what back

00:39:50.100 --> 00:39:51.870
in the day they
called a Republican.

00:39:51.870 --> 00:39:53.795
He believes the
Constitution says

00:39:53.795 --> 00:39:55.420
the states should be
strong, the states

00:39:55.420 --> 00:39:57.750
should have a lot of power.

00:39:57.750 --> 00:40:00.150
Maybe states could regulate
wages if they wanted to,

00:40:00.150 --> 00:40:02.880
but the federal
government can't, OK?

00:40:02.880 --> 00:40:04.920
So this is a limited
government point of view.

00:40:07.760 --> 00:40:10.930
Was Sutherland right?

00:40:10.930 --> 00:40:12.280
Team A?

00:40:12.280 --> 00:40:14.080
Let's hear a
stirring presentation

00:40:14.080 --> 00:40:18.310
from team A. Somebody
revved up here?

00:40:18.310 --> 00:40:19.980
Oh come on.

00:40:19.980 --> 00:40:21.660
Matthew, you ready to go?

00:40:21.660 --> 00:40:23.730
Did you get yourself
psyched up over the weekend?

00:40:23.730 --> 00:40:24.810
OK.

00:40:24.810 --> 00:40:27.540
AUDIENCE: Based on the results
of the case, yes, he was right.

00:40:27.540 --> 00:40:29.280
RICHARD SCHMALENSEE: Why?

00:40:29.280 --> 00:40:32.970
Why is that the right view
of the role of government?

00:40:32.970 --> 00:40:34.860
You could quote
Howard Roark, right?

00:40:34.860 --> 00:40:37.050
Howard Roark would
have liked this.

00:40:37.050 --> 00:40:38.840
Regulate wages?

00:40:38.840 --> 00:40:39.340
Anyway.

00:40:39.340 --> 00:40:39.770
AUDIENCE: Yeah.

00:40:39.770 --> 00:40:42.228
I mean, they were trying to
regulate something that was not

00:40:42.228 --> 00:40:45.160
defined in the Constitution
for that government to do,

00:40:45.160 --> 00:40:46.705
which was the
production of the coal.

00:40:49.350 --> 00:40:54.140
RICHARD SCHMALENSEE: So put
aside the legal argument.

00:40:54.140 --> 00:40:57.650
How about the philosophical
or ideological argument?

00:40:57.650 --> 00:40:59.480
Why would you-- if you would--

00:40:59.480 --> 00:41:05.030
agree with him absent
the legal background?

00:41:05.030 --> 00:41:10.200
I mean, what's your
view about how--

00:41:10.200 --> 00:41:13.680
team A-- about how society
should be organized

00:41:13.680 --> 00:41:15.540
and about how it
should function?

00:41:15.540 --> 00:41:17.190
Because Sutherland has a view.

00:41:17.190 --> 00:41:18.270
Is that a view you share?

00:41:18.270 --> 00:41:19.620
If so, why is that a good view?

00:41:24.320 --> 00:41:25.400
I don't mean to push you.

00:41:25.400 --> 00:41:25.920
There we go.

00:41:25.920 --> 00:41:26.420
We'll go--

00:41:26.420 --> 00:41:28.190
AUDIENCE: An interesting
analogy would

00:41:28.190 --> 00:41:31.700
be that we're being recorded
here-- recorded here--

00:41:31.700 --> 00:41:34.400
and it's, say, crossing
national lines.

00:41:34.400 --> 00:41:37.130
And I can say
something which might

00:41:37.130 --> 00:41:38.990
be censored in other countries.

00:41:38.990 --> 00:41:39.920
But this law--

00:41:39.920 --> 00:41:42.390
I know it's an analogy and
you should take it that way--

00:41:42.390 --> 00:41:44.090
but what this law
would want to do

00:41:44.090 --> 00:41:49.850
is censor me as opposed
to censor the broadcast.

00:41:49.850 --> 00:41:54.180
Because they're trying to
change production, not commerce.

00:41:54.180 --> 00:41:57.240
So what they're saying is,
let us produce what we have.

00:41:57.240 --> 00:41:58.790
And then once it
crosses state lines,

00:41:58.790 --> 00:42:01.910
if you want to regulate it at
that point, that's commerce.

00:42:01.910 --> 00:42:05.330
But don't change production.

00:42:05.330 --> 00:42:08.780
RICHARD SCHMALENSEE: Could--
would you agree that it would

00:42:08.780 --> 00:42:12.620
be appropriate for the state
of West Virginia to set wages

00:42:12.620 --> 00:42:16.010
for coal mines if the
federal government can't?

00:42:16.010 --> 00:42:19.850
Because a Sutherland person--

00:42:19.850 --> 00:42:23.180
a good team A person would
say, yeah yeah, yeah.

00:42:23.180 --> 00:42:26.210
There's a constitutional reason
why the feds shouldn't do it.

00:42:26.210 --> 00:42:29.060
But I'm not happy with
the states doing it.

00:42:29.060 --> 00:42:29.560
Yeah?

00:42:29.560 --> 00:42:31.393
AUDIENCE: Because it's
up to the free market

00:42:31.393 --> 00:42:33.670
to decide what the wages
should be, not the government

00:42:33.670 --> 00:42:35.175
to step in and do
it for the market.

00:42:35.175 --> 00:42:36.550
RICHARD SCHMALENSEE:
So you think

00:42:36.550 --> 00:42:38.650
this is overruling
individual choice

00:42:38.650 --> 00:42:40.060
in a way that's inappropriate?

00:42:40.060 --> 00:42:41.440
Yeah?

00:42:41.440 --> 00:42:43.940
AUDIENCE: Just in my opinion,
I think in this case,

00:42:43.940 --> 00:42:46.840
it's saying that the central
government-- or I guess,

00:42:46.840 --> 00:42:48.820
if you want to push it
to state governments--

00:42:48.820 --> 00:42:50.800
they're taking
over too much power

00:42:50.800 --> 00:42:53.290
and they're basically
dictating how a person should

00:42:53.290 --> 00:42:55.240
run their company
by saying, OK, you

00:42:55.240 --> 00:42:56.900
have to sell it at this price.

00:42:56.900 --> 00:42:58.870
You have to give
this amount of wages.

00:42:58.870 --> 00:43:01.480
This is like they're setting
the guidelines and instructions

00:43:01.480 --> 00:43:04.882
on how to run your company,
whereas in this-- where

00:43:04.882 --> 00:43:06.340
as Coal in this
case, says, I don't

00:43:06.340 --> 00:43:07.465
want to follow these rules.

00:43:07.465 --> 00:43:09.010
I want to run my
company how I run.

00:43:09.010 --> 00:43:10.218
How I want to run my company.

00:43:10.218 --> 00:43:12.530
I have a vision of how
I want to sell coal,

00:43:12.530 --> 00:43:14.780
how I want to make the
lifestyle for the workers here.

00:43:14.780 --> 00:43:16.947
And if it's my company, I
should be able to do that.

00:43:16.947 --> 00:43:19.197
RICHARD SCHMALENSEE: Is that
the right way for society

00:43:19.197 --> 00:43:20.150
to be organized?

00:43:20.150 --> 00:43:21.970
That's a statement about--

00:43:21.970 --> 00:43:23.320
that's an ideological statement.

00:43:23.320 --> 00:43:25.900
That not only is that
what he's saying,

00:43:25.900 --> 00:43:27.938
but that's the
right thing to say

00:43:27.938 --> 00:43:29.980
because that's the right
way to organize society.

00:43:29.980 --> 00:43:31.300
Let me go back to
the back-- yeah?

00:43:31.300 --> 00:43:31.925
AUDIENCE: Yeah.

00:43:31.925 --> 00:43:36.220
I think on the philosophical
side, like you want--

00:43:36.220 --> 00:43:37.840
if the federal
government puts a lot

00:43:37.840 --> 00:43:41.717
of regulations on wages
and production, then you--

00:43:41.717 --> 00:43:43.425
like Steve was just
saying, you take away

00:43:43.425 --> 00:43:46.224
all the are entrepreneur
like opportunities

00:43:46.224 --> 00:43:49.990
out of that situation
so that it's just kind

00:43:49.990 --> 00:43:51.880
of filling the [INAUDIBLE].

00:43:51.880 --> 00:43:52.680
RICHARD SCHMALENSEE:
So it's a bad way

00:43:52.680 --> 00:43:55.350
to organize society when there's
too much government because you

00:43:55.350 --> 00:43:57.660
restrict, as Howard
Roark would say,

00:43:57.660 --> 00:44:01.780
the entrepreneurial energies,
the creativity, et cetera.

00:44:01.780 --> 00:44:04.800
And of course, the ability of
Carter to squeeze his workers.

00:44:04.800 --> 00:44:06.153
Andreas?

00:44:06.153 --> 00:44:08.320
AUDIENCE: I was going to
say, yeah, in general, he's

00:44:08.320 --> 00:44:11.370
thinking about markets
and thinking about their--

00:44:11.370 --> 00:44:13.930
they might not be fair, per
se, in whatever division--

00:44:13.930 --> 00:44:16.305
RICHARD SCHMALENSEE: Wait a
minute, you're on team A now.

00:44:16.305 --> 00:44:17.120
Hold on here.

00:44:17.120 --> 00:44:19.120
AUDIENCE: Yeah, that's
what I was going to say--

00:44:19.120 --> 00:44:20.340
RICHARD SCHMALENSEE: OK.

00:44:20.340 --> 00:44:22.590
AUDIENCE: You hear a word
based on the effort you put.

00:44:22.590 --> 00:44:26.700
And until they are the
same, like as brutal as they

00:44:26.700 --> 00:44:29.790
are to person A, they're going
to be to person B, [INAUDIBLE]

00:44:29.790 --> 00:44:30.620
prejudice.

00:44:30.620 --> 00:44:32.520
And like if you were--

00:44:32.520 --> 00:44:35.460
I would trust that
markets would be

00:44:35.460 --> 00:44:39.860
more consistent in that sense,
more fair than government.

00:44:39.860 --> 00:44:42.300
So I think that it
makes sense for--

00:44:42.300 --> 00:44:45.810
to have a system where you have
markets dictating the rules.

00:44:45.810 --> 00:44:48.330
And when you have
externalities or problems,

00:44:48.330 --> 00:44:51.650
then you might think about
state or a federal government

00:44:51.650 --> 00:44:52.380
stepping in.

00:44:52.380 --> 00:44:57.540
But in general, I would think
that a nicer rule to have is

00:44:57.540 --> 00:45:00.030
look at the case where
markets do not work.

00:45:00.030 --> 00:45:01.830
Well, then you would
have to go to, wait,

00:45:01.830 --> 00:45:04.410
where do the markets not work,
and that's another big upset.

00:45:04.410 --> 00:45:06.420
But what I'm saying is
that markets I think

00:45:06.420 --> 00:45:08.460
are fair in that since.

00:45:08.460 --> 00:45:09.930
RICHARD SCHMALENSEE:
Well, suppose

00:45:09.930 --> 00:45:17.040
I told you that I knew that
all owners of coal miners

00:45:17.040 --> 00:45:18.870
were terrible racists.

00:45:18.870 --> 00:45:21.930
And that, in fact,
just out of prejudice,

00:45:21.930 --> 00:45:28.143
they paid half as much to Black
workers as the white workers?

00:45:28.143 --> 00:45:30.810
AUDIENCE: Then that would happen
is probably you would have like

00:45:30.810 --> 00:45:34.524
another company that
would come out with--

00:45:34.524 --> 00:45:38.598
that would pay like better
wages and could probably--

00:45:38.598 --> 00:45:40.890
RICHARD SCHMALENSEE: Could
hire away good Black workers

00:45:40.890 --> 00:45:41.780
for cheap wages.

00:45:41.780 --> 00:45:42.280
OK.

00:45:42.280 --> 00:45:42.810
OK.

00:45:42.810 --> 00:45:45.660
So the market does have a
tendency to be self-correcting.

00:45:45.660 --> 00:45:47.490
So let me move on.

00:45:47.490 --> 00:45:50.800
We'll get to the socialists
over here in a minute.

00:45:50.800 --> 00:45:56.790
But we didn't assign
Hughes, but did you

00:45:56.790 --> 00:45:59.320
notice Hughes said in dissent?

00:46:01.930 --> 00:46:03.960
Hughes was a Chief Justice.

00:46:03.960 --> 00:46:05.401
He had a-- yeah, Rory?

00:46:05.401 --> 00:46:07.057
AUDIENCE: I think also studies.

00:46:07.057 --> 00:46:08.140
RICHARD SCHMALENSEE: Yeah.

00:46:08.140 --> 00:46:11.560
He just said, how can you
possibly staple these together

00:46:11.560 --> 00:46:13.990
when the terms of the
law says they're not?

00:46:13.990 --> 00:46:17.380
That I don't get that,
which is a pretty narrow

00:46:17.380 --> 00:46:18.250
technical argument.

00:46:18.250 --> 00:46:20.530
And that's why we're not
going to talk about him.

00:46:20.530 --> 00:46:22.810
How about Cardozo?

00:46:22.810 --> 00:46:23.310
Casey?

00:46:23.310 --> 00:46:25.880
AUDIENCE: So he said in
regards to the price fixing

00:46:25.880 --> 00:46:32.600
provision of the act that it was
legal because of the Commerce

00:46:32.600 --> 00:46:35.990
Clause because the
price of coal definitely

00:46:35.990 --> 00:46:38.960
affects interstate commerce.

00:46:38.960 --> 00:46:41.560
And then he didn't make
a decision necessarily

00:46:41.560 --> 00:46:44.810
with regards to the other
provision of the act that was

00:46:44.810 --> 00:46:45.730
[INAUDIBLE].

00:46:45.730 --> 00:46:47.522
RICHARD SCHMALENSEE:
It's a little obscure.

00:46:47.522 --> 00:46:50.190
Did anybody see
something that he

00:46:50.190 --> 00:46:54.733
said that related to the
other provision as well?

00:46:54.733 --> 00:46:56.400
He didn't say it
directly, you're right.

00:46:58.920 --> 00:47:01.140
But he did say--

00:47:01.140 --> 00:47:02.993
yeah, anybody?

00:47:02.993 --> 00:47:04.160
The collectivists over here?

00:47:04.160 --> 00:47:04.670
No.

00:47:04.670 --> 00:47:17.790
He said-- he comes on
to this distinction

00:47:17.790 --> 00:47:20.475
by Sutherland of direct
and indirect effects.

00:47:23.940 --> 00:47:26.333
And he says, "The
question remains

00:47:26.333 --> 00:47:27.750
whether it comes
within that power

00:47:27.750 --> 00:47:30.390
is applied to interstate sales
where interstate prices are

00:47:30.390 --> 00:47:32.310
directly or intimately affected.

00:47:35.700 --> 00:47:37.780
Mining and agriculture
and manufacture

00:47:37.780 --> 00:47:39.750
are not interstate
commerce, yet their relation

00:47:39.750 --> 00:47:43.680
may be such that for the
protection of the one,

00:47:43.680 --> 00:47:46.270
there is need to
regulate the other."

00:47:46.270 --> 00:47:50.580
And he goes on and says that
all events direct and indirect,

00:47:50.580 --> 00:47:53.380
even if accepted as
sufficient-- that is to say,

00:47:53.380 --> 00:47:56.550
even if you buy Sutherland's
distinction-- must not

00:47:56.550 --> 00:47:58.320
be read too narrowly.

00:47:58.320 --> 00:48:00.900
In fact, I don't know how
anybody can tell the difference

00:48:00.900 --> 00:48:02.700
or what the difference means.

00:48:02.700 --> 00:48:05.800
I read Sutherland several times
and it made no sense to me.

00:48:05.800 --> 00:48:09.300
But so Cardozo,
as you point out,

00:48:09.300 --> 00:48:12.600
it's very clear that, look,
it's interstate commerce.

00:48:12.600 --> 00:48:14.760
We can fix prices of coal
in interstate commerce

00:48:14.760 --> 00:48:16.380
for heaven's sakes.

00:48:16.380 --> 00:48:19.330
And then he kind of
waffles around and says,

00:48:19.330 --> 00:48:26.310
you know, to say that wages
don't affect prices directly--

00:48:26.310 --> 00:48:28.560
kind of odd.

00:48:28.560 --> 00:48:32.640
You'd have to read
it kind of narrowly.

00:48:32.640 --> 00:48:35.670
That may be the criterion--

00:48:35.670 --> 00:48:38.010
Sutherland may
have the criterion.

00:48:38.010 --> 00:48:46.620
But to say-- to treat directly,
narrowly is inappropriate.

00:48:46.620 --> 00:48:49.350
So what is Cardozo's
view of the proper role?

00:48:52.200 --> 00:48:53.437
Erica, what do you say?

00:48:53.437 --> 00:48:55.020
What does Cardozo
think the government

00:48:55.020 --> 00:48:57.738
should be able to do?

00:48:57.738 --> 00:49:05.173
AUDIENCE: [INAUDIBLE]

00:49:05.173 --> 00:49:07.090
RICHARD SCHMALENSEE: So
he says the government

00:49:07.090 --> 00:49:10.710
should be able to
regulate it, more or less.

00:49:16.060 --> 00:49:20.710
Where is he versus Sutherland
on, in general terms, the role

00:49:20.710 --> 00:49:22.280
of government--

00:49:22.280 --> 00:49:23.900
or the role of the
federal government?

00:49:23.900 --> 00:49:24.650
Let's start there.

00:49:24.650 --> 00:49:25.357
Rory?

00:49:25.357 --> 00:49:27.940
AUDIENCE: He seems to be able
to do that, or should be allowed

00:49:27.940 --> 00:49:31.300
to regulate it because given
the checks and balances

00:49:31.300 --> 00:49:34.330
you have in the system,
while you may create a rule,

00:49:34.330 --> 00:49:35.650
the rule can have degrees.

00:49:35.650 --> 00:49:38.963
And so I think he talks
about the fact that--

00:49:38.963 --> 00:49:41.130
I think he said something
along the lines of the law

00:49:41.130 --> 00:49:41.675
isn't stupid.

00:49:41.675 --> 00:49:44.950
It can work out when one
thing is a direct action

00:49:44.950 --> 00:49:47.220
and one's an indirect action.

00:49:47.220 --> 00:49:48.270
RICHARD SCHMALENSEE: Yeah, I
didn't get the word stupid,

00:49:48.270 --> 00:49:48.770
but--

00:49:51.210 --> 00:49:52.920
but, yeah.

00:49:52.920 --> 00:49:53.730
Yeah, yeah, yeah.

00:50:02.540 --> 00:50:05.750
Well, that's his-- that's his,
don't define them too narrowly.

00:50:05.750 --> 00:50:09.320
A survey of the cases shows that
the words direct and indirect

00:50:09.320 --> 00:50:12.710
have been interpreted with
suppleness of adaption

00:50:12.710 --> 00:50:15.230
and flexibility of meaning.

00:50:15.230 --> 00:50:19.040
The power is as broad as
the need that evokes it.

00:50:19.040 --> 00:50:20.780
That's a nice
little phrase, too.

00:50:20.780 --> 00:50:24.230
That kind of matches
Sutherland's journey

00:50:24.230 --> 00:50:25.280
toward a forbidden end.

00:50:25.280 --> 00:50:30.000
The power is as broad as
the need that evokes it.

00:50:30.000 --> 00:50:33.750
That's a statement-- thank you
for reminding me of that lovely

00:50:33.750 --> 00:50:34.590
phrase--

00:50:34.590 --> 00:50:37.470
that's a statement about
the role of government.

00:50:37.470 --> 00:50:39.630
That's a statement
about how society

00:50:39.630 --> 00:50:40.800
should be organized, right?

00:50:40.800 --> 00:50:42.780
What government
should be able to do.

00:50:45.630 --> 00:50:48.600
It says, if you have a
representative government--

00:50:48.600 --> 00:50:50.550
which is kind of assumed here--

00:50:50.550 --> 00:50:53.370
and the government
says there is a need,

00:50:53.370 --> 00:50:57.000
then the government can act.

00:50:57.000 --> 00:50:59.790
I don't see a
forbidden end here.

00:50:59.790 --> 00:51:04.070
I don't see a concern for the
sovereignty of the states.

00:51:04.070 --> 00:51:06.500
I see a government concerned
with meeting needs.

00:51:09.320 --> 00:51:12.060
Team B, you like that?

00:51:12.060 --> 00:51:14.830
Why is that good?

00:51:14.830 --> 00:51:15.460
Jackie?

00:51:15.460 --> 00:51:18.085
AUDIENCE: I think it makes sense
for the government as the role

00:51:18.085 --> 00:51:21.760
of the protector, especially
like during the era of the New

00:51:21.760 --> 00:51:24.740
Deal, when it's
all about recovery,

00:51:24.740 --> 00:51:26.750
it makes sense that
the government has more

00:51:26.750 --> 00:51:29.390
say in what's going on than it
normally has because you can't

00:51:29.390 --> 00:51:33.457
follow the collective decisions
of various individuals

00:51:33.457 --> 00:51:36.199
and varying practices to
solve for something that's

00:51:36.199 --> 00:51:37.785
a national issue.

00:51:37.785 --> 00:51:39.410
I think that's one
of the reasons why--

00:51:39.410 --> 00:51:41.620
like in ancient Rome, people
were willing to accept

00:51:41.620 --> 00:51:43.990
the role of the dictator
during times of war

00:51:43.990 --> 00:51:47.549
because they learned from Athens
democracy could be paralyzing.

00:51:47.549 --> 00:51:48.674
RICHARD SCHMALENSEE: Right.

00:51:48.674 --> 00:51:50.528
AUDIENCE: [INAUDIBLE]

00:51:50.528 --> 00:51:52.320
RICHARD SCHMALENSEE:
So because they also--

00:51:52.320 --> 00:51:55.020
they also accepted
emperors in times of peace

00:51:55.020 --> 00:51:57.210
after a little while, but, hey--

00:51:57.210 --> 00:51:58.890
but, hey.

00:51:58.890 --> 00:52:01.410
But that's an
interesting example

00:52:01.410 --> 00:52:03.540
of sources of legitimacy, right?

00:52:03.540 --> 00:52:07.580
As long as the empire is growing
and people are prosperous,

00:52:07.580 --> 00:52:09.990
do I really care that
the Praetorian Guard

00:52:09.990 --> 00:52:13.890
put the emperor in his place, as
long as things are going well?

00:52:13.890 --> 00:52:16.100
I'll play along.

00:52:16.100 --> 00:52:23.400
So you think, with Cardozo,
that if a legitimately installed

00:52:23.400 --> 00:52:28.380
government finds a real
need, the government

00:52:28.380 --> 00:52:31.020
should be able to deal with it.

00:52:31.020 --> 00:52:31.906
Yeah?

00:52:31.906 --> 00:52:35.180
AUDIENCE: I think this is more
Smith's opinion, because it

00:52:35.180 --> 00:52:38.030
doesn't necessarily
completely contradict

00:52:38.030 --> 00:52:40.370
with what Cardozo says.

00:52:40.370 --> 00:52:42.095
He says, particularly,
if we think

00:52:42.095 --> 00:52:45.610
of the real policy
as supposed to deal,

00:52:45.610 --> 00:52:49.370
or account for any externality
that the free market usually

00:52:49.370 --> 00:52:51.170
would have considered.

00:52:51.170 --> 00:52:54.200
And Smith says the
best representative

00:52:54.200 --> 00:52:56.780
would be the person
who truly understands

00:52:56.780 --> 00:53:00.430
the local population, the
climate, the geography

00:53:00.430 --> 00:53:02.010
of that specific area.

00:53:02.010 --> 00:53:05.850
So he what he says is there's
nothing wrong with policy,

00:53:05.850 --> 00:53:09.890
but it's who should be the
people making that decision.

00:53:09.890 --> 00:53:14.270
He basically-- he's against the
government making a decision

00:53:14.270 --> 00:53:18.920
for all of the states, but he's
not necessarily against some

00:53:18.920 --> 00:53:21.860
sort of policy for directing--

00:53:21.860 --> 00:53:25.130
RICHARD SCHMALENSEE: But
suppose your real concern

00:53:25.130 --> 00:53:29.330
is terrible poverty in coal
mining areas, which was pretty

00:53:29.330 --> 00:53:31.460
brutal, actually, in the '30s.

00:53:31.460 --> 00:53:34.460
And you say, well, here's
what we're going to do.

00:53:34.460 --> 00:53:38.150
We're going to let West
Virginia, a poor state,

00:53:38.150 --> 00:53:41.150
deal with poverty
in West Virginia.

00:53:41.150 --> 00:53:43.640
And West Virginia
doesn't have the money.

00:53:43.640 --> 00:53:45.620
It could try to fix wages--

00:53:45.620 --> 00:53:48.635
maybe that would be the way for
West Virginia to go forward.

00:53:51.310 --> 00:53:54.670
But maybe not.

00:53:54.670 --> 00:53:56.590
Maybe West Virginia
has a government

00:53:56.590 --> 00:53:58.720
that isn't concerned with
poverty in poor areas

00:53:58.720 --> 00:54:02.120
because it was put in
place by the coal miners.

00:54:02.120 --> 00:54:04.590
Maybe that system broke down.

00:54:04.590 --> 00:54:05.280
I don't know.

00:54:05.280 --> 00:54:06.614
Rory?

00:54:06.614 --> 00:54:09.275
AUDIENCE: [INAUDIBLE] because if
I only do it in West Virginia,

00:54:09.275 --> 00:54:12.600
then the companies
move to somewhere else.

00:54:12.600 --> 00:54:14.270
And those prices
get forced down.

00:54:14.270 --> 00:54:16.040
And you create a
government there,

00:54:16.040 --> 00:54:18.682
and then only eventually do
they move back to West Virginia.

00:54:18.682 --> 00:54:20.390
RICHARD SCHMALENSEE:
So you worry about--

00:54:20.390 --> 00:54:23.060
this is something the European
Union worries about a lot.

00:54:23.060 --> 00:54:26.750
You worry about states--

00:54:26.750 --> 00:54:29.300
or in the European
case, countries--

00:54:29.300 --> 00:54:31.940
racing to the bottom,
subsidizing industries,

00:54:31.940 --> 00:54:36.920
regulating lightly in a way that
attracts jobs, but takes them

00:54:36.920 --> 00:54:39.740
away from somebody else
that's part of the same club.

00:54:39.740 --> 00:54:42.290
So you say the
federal government

00:54:42.290 --> 00:54:45.770
should be able to act
on problems like this

00:54:45.770 --> 00:54:49.040
because you'll get competition
among the states that might

00:54:49.040 --> 00:54:52.520
be destructive, in essence.

00:54:52.520 --> 00:54:56.340
Anybody else from the left wing?

00:54:56.340 --> 00:54:56.850
Yeah?

00:54:56.850 --> 00:54:57.285
I'd

00:54:57.285 --> 00:54:58.993
AUDIENCE: Say, because
the Depression was

00:54:58.993 --> 00:55:01.020
like a national
problem, that you're

00:55:01.020 --> 00:55:06.290
going to need like a national
lawmaker to bring it back up

00:55:06.290 --> 00:55:10.130
and corporations
would cause also,

00:55:10.130 --> 00:55:12.600
something that
affects a lot more--

00:55:12.600 --> 00:55:13.440
prices will affect--

00:55:13.440 --> 00:55:14.940
RICHARD SCHMALENSEE:
Lots of things.

00:55:14.940 --> 00:55:15.740
AUDIENCE: --areas all
over and around it.

00:55:15.740 --> 00:55:18.150
So I guess I think the federal
government should be able to--

00:55:18.150 --> 00:55:20.108
RICHARD SCHMALENSEE: So
you would expand powers

00:55:20.108 --> 00:55:21.840
in times of depression,
just like they

00:55:21.840 --> 00:55:25.060
have tended historically to
be expanded in times of war,

00:55:25.060 --> 00:55:25.560
right?

00:55:25.560 --> 00:55:27.727
Lincoln expanded the power
of the federal government

00:55:27.727 --> 00:55:30.750
enormously during the Civil War.

00:55:30.750 --> 00:55:31.820
Do they get rolled back?

00:55:36.290 --> 00:55:40.250
Once you've built the agency
and put the law in place,

00:55:40.250 --> 00:55:42.080
do they roll back?

00:55:42.080 --> 00:55:42.745
Jessica?

00:55:42.745 --> 00:55:43.370
AUDIENCE: Yeah.

00:55:43.370 --> 00:55:44.840
I'm sitting here
thinking-- because I'm

00:55:44.840 --> 00:55:45.710
a refugee from Cuba.

00:55:45.710 --> 00:55:47.150
So I'm definitely
not a socialist.

00:55:47.150 --> 00:55:48.200
But when you opened with--

00:55:48.200 --> 00:55:50.158
RICHARD SCHMALENSEE: But
you're on team B here.

00:55:50.158 --> 00:55:51.780
I mean, I'm sorry, we need--

00:55:51.780 --> 00:55:52.610
we need you with--

00:55:52.610 --> 00:55:53.120
OK.

00:55:53.120 --> 00:55:53.720
AUDIENCE: When you opened--

00:55:53.720 --> 00:55:55.262
RICHARD SCHMALENSEE:
Support Cardozo.

00:55:55.262 --> 00:55:55.940
I was joking.

00:55:55.940 --> 00:55:57.410
You don't have to be
socialist, over here.

00:55:57.410 --> 00:55:57.611
AUDIENCE: No, it's fine.

00:55:57.611 --> 00:55:58.400
But when you opened it,
then I was like, wow,

00:55:58.400 --> 00:56:01.430
there are more correlations
than I realized at first.

00:56:01.430 --> 00:56:05.420
And there's a joke that
when Castro was asking for--

00:56:05.420 --> 00:56:09.560
when Castro was asking for an
economist, Che heard Communist.

00:56:09.560 --> 00:56:11.562
And that's why he signed up.

00:56:11.562 --> 00:56:14.017
So that being the opposite
sort of implication,

00:56:14.017 --> 00:56:16.340
which is where markets
took over and they

00:56:16.340 --> 00:56:20.930
were so bad for the people that
they just needed a government

00:56:20.930 --> 00:56:22.170
to take over the markets.

00:56:22.170 --> 00:56:23.870
And that's when they turned to--

00:56:23.870 --> 00:56:26.960
let's be-- let's give
everything to this one guy.

00:56:26.960 --> 00:56:29.243
So it might also be
a preemptive attack.

00:56:29.243 --> 00:56:31.160
RICHARD SCHMALENSEE:
You're talking about Cuba

00:56:31.160 --> 00:56:35.870
before the revolution, and the
Batista government was corrupt,

00:56:35.870 --> 00:56:38.900
was basically an
oligarchy, and gave

00:56:38.900 --> 00:56:43.130
really nice parties in Havana
and great nightlife in Havana

00:56:43.130 --> 00:56:47.240
for visiting Americans, and
immense poverty for much

00:56:47.240 --> 00:56:49.150
of Cuba.

00:56:49.150 --> 00:56:52.840
And that government
lost legitimacy.

00:56:52.840 --> 00:56:58.860
And you got central action,
which brought a lot of literacy

00:56:58.860 --> 00:57:02.190
to the Cuban people,
improved medical care,

00:57:02.190 --> 00:57:04.770
and, well, better than it was.

00:57:04.770 --> 00:57:10.890
And of course, now we're back
to grinding poverty again now

00:57:10.890 --> 00:57:12.850
that the Soviet support
is gone, but yeah.

00:57:12.850 --> 00:57:14.850
AUDIENCE: But the system
of checks and balances,

00:57:14.850 --> 00:57:17.310
having that flexibility
to like open--

00:57:17.310 --> 00:57:20.400
to give government more power
when it's needed and less when

00:57:20.400 --> 00:57:23.100
it's not needed it might
be a preemptive strategy

00:57:23.100 --> 00:57:26.850
to make it radical
in one direction.

00:57:26.850 --> 00:57:32.700
RICHARD SCHMALENSEE: Any other
defense of Cardozo's view?

00:57:32.700 --> 00:57:38.580
The power-- let me read
that one sentence again.

00:57:38.580 --> 00:57:42.450
The power is as broad as
the need that evokes it.

00:57:42.450 --> 00:57:43.223
Yeah?

00:57:43.223 --> 00:57:46.555
AUDIENCE: My problem
here is, one argument

00:57:46.555 --> 00:57:51.120
lies with wages and prices, the
people who would be affected

00:57:51.120 --> 00:57:53.130
is the general public.

00:57:53.130 --> 00:57:56.598
And the argument is between the
market and the policymakers,

00:57:56.598 --> 00:57:58.390
but the people who are
going to be affected

00:57:58.390 --> 00:57:59.570
are the general public.

00:57:59.570 --> 00:58:02.850
So let's think if we had
this debate, or we had this--

00:58:02.850 --> 00:58:05.100
if we go back to the general
public and see what's

00:58:05.100 --> 00:58:07.200
their opinion about this point.

00:58:07.200 --> 00:58:09.245
So once the public--
once people would

00:58:09.245 --> 00:58:11.700
just-- they want to
have a regular prices

00:58:11.700 --> 00:58:13.870
and they want to
have regular wages.

00:58:13.870 --> 00:58:15.810
They don't want like
the price to depend

00:58:15.810 --> 00:58:19.020
on the decision of people
who own these companies

00:58:19.020 --> 00:58:20.520
or people who run the market.

00:58:20.520 --> 00:58:22.478
RICHARD SCHMALENSEE: So
most people, you think,

00:58:22.478 --> 00:58:23.940
would in fact--

00:58:23.940 --> 00:58:26.970
if you put this to a vote, put
the Constitution to one side--

00:58:26.970 --> 00:58:29.870
if you put it to a
vote and you said--

00:58:29.870 --> 00:58:32.330
and by the way,
there's another reading

00:58:32.330 --> 00:58:35.930
that's optional that gives you
a sense of how really awful

00:58:35.930 --> 00:58:39.200
it was to be a coal
miner in this period--

00:58:39.200 --> 00:58:40.407
and beyond, perhaps.

00:58:40.407 --> 00:58:41.990
If you put it to a
vote, and you said,

00:58:41.990 --> 00:58:45.050
these people have terrible
jobs, they die young,

00:58:45.050 --> 00:58:48.590
they're dirt poor,
things have gotten worse.

00:58:48.590 --> 00:58:51.415
How about we pay them a living
wage and the cost of coal

00:58:51.415 --> 00:58:52.290
goes up a little bit?

00:58:52.290 --> 00:58:53.600
You think that would pass.

00:58:53.600 --> 00:58:56.330
And that that
ought to be enough.

00:58:56.330 --> 00:58:58.940
The Constitution saying,
maybe you can't do it,

00:58:58.940 --> 00:59:00.470
maybe you can--

00:59:00.470 --> 00:59:03.870
the fact that you could get a
vote on it, which you probably

00:59:03.870 --> 00:59:04.410
could.

00:59:04.410 --> 00:59:08.370
You probably could
have in the Depression.

00:59:08.370 --> 00:59:12.180
There was a 1933 case
called Appalachian Coals,

00:59:12.180 --> 00:59:14.790
an antitrust case that
went to the same Supreme

00:59:14.790 --> 00:59:16.500
Court two years earlier.

00:59:16.500 --> 00:59:20.610
And Appalachian
Coals was an attempt

00:59:20.610 --> 00:59:23.210
by a group of coal miners--

00:59:23.210 --> 00:59:24.090
they colluded.

00:59:24.090 --> 00:59:25.140
They fixed the price.

00:59:25.140 --> 00:59:27.480
They set a minimum
price of coal,

00:59:27.480 --> 00:59:31.798
which by all the antitrust law
precedent up to that point,

00:59:31.798 --> 00:59:32.715
was just flat illegal.

00:59:32.715 --> 00:59:34.320
It was just no
question about it.

00:59:34.320 --> 00:59:36.990
Go to jail-- well, yeah--
go to jail illegal.

00:59:36.990 --> 00:59:38.940
The Supreme Court
managed to find

00:59:38.940 --> 00:59:42.130
it legal in one of the
most bizarre opinions

00:59:42.130 --> 00:59:45.810
you'll ever read
because it was the '30s.

00:59:45.810 --> 00:59:47.460
It was coal miners.

00:59:47.460 --> 00:59:49.690
These people were
in terrible shape.

00:59:49.690 --> 00:59:55.500
So you would say, if it's
such a terrible problem,

00:59:55.500 --> 00:59:58.770
there's clear popular
will, just do it.

00:59:58.770 --> 01:00:02.480
Forget about the forbidden
place, forget about the states.

01:00:02.480 --> 01:00:05.270
OK.

01:00:05.270 --> 01:00:06.770
We got that.

01:00:06.770 --> 01:00:07.520
Rebuttals?

01:00:07.520 --> 01:00:10.310
Team A, you've heard
what they said.

01:00:10.310 --> 01:00:12.815
That the power is as broad
as the need that evokes it.

01:00:12.815 --> 01:00:13.940
You're right in the middle.

01:00:13.940 --> 01:00:15.620
Remind me which team you're on?

01:00:15.620 --> 01:00:16.743
OK.

01:00:16.743 --> 01:00:17.660
You're a right-winger.

01:00:17.660 --> 01:00:18.160
All right.

01:00:18.160 --> 01:00:19.460
AUDIENCE: So I think that--

01:00:19.460 --> 01:00:21.768
like so I personally probably
agree with the statement

01:00:21.768 --> 01:00:23.810
that the coal miners were
in horrible conditions,

01:00:23.810 --> 01:00:27.120
and by putting it to a vote,
you could probably pass it.

01:00:27.120 --> 01:00:29.930
But I think that Sutherland's
position is, yeah, maybe that's

01:00:29.930 --> 01:00:30.560
true.

01:00:30.560 --> 01:00:34.070
But in many Supreme Court
cases, the basis of the decision

01:00:34.070 --> 01:00:36.300
is what has been
said in the past.

01:00:36.300 --> 01:00:38.948
And so if you pass-- if you
made this legal for this case,

01:00:38.948 --> 01:00:40.490
that in future cases,
it would, like,

01:00:40.490 --> 01:00:43.700
baby steps to the
government having

01:00:43.700 --> 01:00:45.310
full control over everything.

01:00:45.310 --> 01:00:48.170
So maybe like it would have
been right in that case,

01:00:48.170 --> 01:00:49.880
but considering the
big picture, you

01:00:49.880 --> 01:00:51.650
might be going down
a road that you

01:00:51.650 --> 01:00:53.042
don't want to take any further.

01:00:53.042 --> 01:00:54.500
RICHARD SCHMALENSEE:
And the reason

01:00:54.500 --> 01:00:57.860
you don't want to take
it is because in 1793,

01:00:57.860 --> 01:01:01.700
the Constitution was
ratified by a bunch of guys

01:01:01.700 --> 01:01:03.920
in breaches and powdered wigs.

01:01:03.920 --> 01:01:06.020
AUDIENCE: And because
you don't want

01:01:06.020 --> 01:01:09.110
to disrespect the
different corporations'

01:01:09.110 --> 01:01:11.810
own entrepreneurial creativity.

01:01:11.810 --> 01:01:13.080
RICHARD SCHMALENSEE: OK.

01:01:13.080 --> 01:01:15.568
And the answer from this side?

01:01:15.568 --> 01:01:16.860
We're a little unbalanced here.

01:01:16.860 --> 01:01:20.130
We've got a lot of market
lovers not a lot of--

01:01:20.130 --> 01:01:26.757
Rory, stand up for the
poor suffering miners.

01:01:26.757 --> 01:01:28.090
AUDIENCE: Well, if you go back--

01:01:28.090 --> 01:01:29.650
RICHARD SCHMALENSEE: You've
got a forbidden place argument

01:01:29.650 --> 01:01:31.990
there, a slippery
slope, take one step,

01:01:31.990 --> 01:01:34.810
got to draw the line someplace,
we're going to draw it here.

01:01:34.810 --> 01:01:37.690
AUDIENCE: From my very poor
knowledge of the Constitution,

01:01:37.690 --> 01:01:40.840
I think it like has
clauses on eminent domain.

01:01:40.840 --> 01:01:43.300
And you could argue that the
government of certain times

01:01:43.300 --> 01:01:45.530
has the right to take
property from you.

01:01:45.530 --> 01:01:48.817
And I think recently, they even
took it from private people

01:01:48.817 --> 01:01:50.150
to give to other private people.

01:01:50.150 --> 01:01:52.722
And the Supreme Court
said that was OK.

01:01:52.722 --> 01:01:54.430
RICHARD SCHMALENSEE:
Things are different

01:01:54.430 --> 01:01:56.595
now than they were in 1935.

01:01:56.595 --> 01:01:58.720
Let me just say-- and, boy,
was that controversial.

01:01:58.720 --> 01:01:59.520
AUDIENCE: Well, OK.

01:01:59.520 --> 01:02:02.230
So another example
would be police laws

01:02:02.230 --> 01:02:04.600
are pretty tyrannical
in their own way.

01:02:04.600 --> 01:02:07.630
But they're appropriate
to the crime.

01:02:07.630 --> 01:02:12.850
And so in the same way, you
could create tyrannical laws

01:02:12.850 --> 01:02:15.553
in business if they're
appropriate to the crime.

01:02:15.553 --> 01:02:17.470
And that would come from
eminent domain, which

01:02:17.470 --> 01:02:19.833
I think is from the early '90s.

01:02:19.833 --> 01:02:22.000
RICHARD SCHMALENSEE: Eminent
domain is a provision--

01:02:22.000 --> 01:02:23.870
I'm not sure it's
in the federal--

01:02:23.870 --> 01:02:26.740
well, I think it comes
out of the common law.

01:02:26.740 --> 01:02:30.670
It's the ability of a government
to take private property

01:02:30.670 --> 01:02:33.670
for public purpose and
pay fair compensation--

01:02:33.670 --> 01:02:37.160
there is a fair
compensation requirement--

01:02:37.160 --> 01:02:39.730
which is the only way you
get power lines built,

01:02:39.730 --> 01:02:42.040
or railroads, or
lots of other things.

01:02:42.040 --> 01:02:44.690
You have to assemble parcels.

01:02:44.690 --> 01:02:46.060
Yeah?

01:02:46.060 --> 01:02:48.280
AUDIENCE: I think-- sorry--

01:02:48.280 --> 01:02:49.450
I'm like getting sick.

01:02:49.450 --> 01:02:52.240
Fundamentally, there is
a trade-off between--

01:02:52.240 --> 01:02:53.390
yeah, it's gross.

01:02:53.390 --> 01:02:54.460
I think I'm getting
better, so I don't

01:02:54.460 --> 01:02:55.668
think I'm contagious anymore.

01:02:55.668 --> 01:02:58.260
RICHARD SCHMALENSEE: OK.

01:02:58.260 --> 01:02:59.380
Everybody now inhales.

01:02:59.380 --> 01:03:00.320
Go ahead-- sorry.

01:03:00.320 --> 01:03:02.320
AUDIENCE: There's always
going to be a trade-off

01:03:02.320 --> 01:03:04.430
between freedom and equality.

01:03:04.430 --> 01:03:07.240
And I think that like
all of this conversation

01:03:07.240 --> 01:03:10.120
is about where do you want
to fall on that scale.

01:03:10.120 --> 01:03:12.860
Personally-- and I think
Sutherland would agree--

01:03:12.860 --> 01:03:15.400
that it's not OK to take
away other people's freedoms

01:03:15.400 --> 01:03:16.778
to make them more equal.

01:03:16.778 --> 01:03:18.820
You know, it would be nice
if in the whole world,

01:03:18.820 --> 01:03:20.945
everyone was fine and had
the same amount of money,

01:03:20.945 --> 01:03:24.040
and it was immaterial
because there was enough food

01:03:24.040 --> 01:03:25.660
and everyone had equal access.

01:03:25.660 --> 01:03:27.183
But that's not the case.

01:03:27.183 --> 01:03:28.600
But that doesn't
mean that you get

01:03:28.600 --> 01:03:30.970
to go around taking
away people's freedoms,

01:03:30.970 --> 01:03:33.610
and freedoms that have been
guaranteed to them, just

01:03:33.610 --> 01:03:36.460
to make other people better off.

01:03:36.460 --> 01:03:40.660
RICHARD SCHMALENSEE: You point
to two different conceptions

01:03:40.660 --> 01:03:41.920
of justice.

01:03:41.920 --> 01:03:45.200
There's justice in
terms of fair outcomes

01:03:45.200 --> 01:03:48.430
and there's justice in
terms of fair process.

01:03:48.430 --> 01:03:53.050
And they're fundamentally
different notions.

01:03:53.050 --> 01:03:57.250
What you're saying is, I don't
want to trample with a process

01:03:57.250 --> 01:04:00.180
that I think is fair in
order to produce, say,

01:04:00.180 --> 01:04:03.100
more equality than that
process would produce.

01:04:03.100 --> 01:04:05.350
Other people might
say, well, I'm

01:04:05.350 --> 01:04:08.050
really concerned
with inequality, say,

01:04:08.050 --> 01:04:10.780
in the United States
today, where inequality has

01:04:10.780 --> 01:04:13.010
been growing by any measure.

01:04:13.010 --> 01:04:16.420
And yeah, maybe
everything's competitive

01:04:16.420 --> 01:04:19.720
and everything's swell, but
I don't like that outcome.

01:04:19.720 --> 01:04:22.120
So I'll fiddle
with it with taxes.

01:04:22.120 --> 01:04:25.060
So I'm just saying there are
these two different views.

01:04:25.060 --> 01:04:27.130
I'm not saying either
one is necessarily right.

01:04:27.130 --> 01:04:29.050
You are more of
a process person.

01:04:29.050 --> 01:04:31.150
You like a fair process.

01:04:31.150 --> 01:04:33.520
And the outcome of a
fair process is fair.

01:04:33.520 --> 01:04:36.730
Others might say, take
executive salaries.

01:04:36.730 --> 01:04:38.530
Nobody's forcing
boards of directors

01:04:38.530 --> 01:04:41.230
to pay high salaries--
they're very high.

01:04:41.230 --> 01:04:42.700
Should we do something about it?

01:04:42.700 --> 01:04:45.130
Process people say no,
outcome people say yes.

01:04:48.180 --> 01:04:49.980
Thank you.

01:04:49.980 --> 01:04:52.160
Other comments?

01:04:52.160 --> 01:04:52.660
Yeah?

01:04:52.660 --> 01:04:53.780
AUDIENCE: I think
going back to what

01:04:53.780 --> 01:04:56.560
Rory said, while I sympathize
with the plight of the miners,

01:04:56.560 --> 01:04:58.990
and I understand that it's
difficult to be impoverished,

01:04:58.990 --> 01:05:02.090
especially in impoverished
states, these tyrannical laws

01:05:02.090 --> 01:05:05.450
that TV is suggesting, are still
just a short-term solution.

01:05:05.450 --> 01:05:07.290
And because the markets
are self-correcting

01:05:07.290 --> 01:05:10.940
and because those participants
are voluntary, in the end,

01:05:10.940 --> 01:05:12.940
in the long-term, maybe
after a few generations,

01:05:12.940 --> 01:05:16.710
everything will solve itself
without these tyrannical laws

01:05:16.710 --> 01:05:19.450
that are just inappropriate
in this situation.

01:05:19.450 --> 01:05:22.000
RICHARD SCHMALENSEE: Minimum
wage law is a tyrannical law.

01:05:22.000 --> 01:05:23.140
Okey-doke.

01:05:23.140 --> 01:05:23.748
I'm with you.

01:05:23.748 --> 01:05:24.290
I'm with you.

01:05:24.290 --> 01:05:24.950
I got it.

01:05:24.950 --> 01:05:25.450
No, no.

01:05:25.450 --> 01:05:26.440
You just play the role.

01:05:26.440 --> 01:05:27.750
Yeah.

01:05:27.750 --> 01:05:29.250
AUDIENCE: I'm kind
of a right-winger

01:05:29.250 --> 01:05:31.750
in enemy territory over here.

01:05:31.750 --> 01:05:33.850
But I'd say, like,
I don't like really

01:05:33.850 --> 01:05:36.160
the idea of the government
ideologically being

01:05:36.160 --> 01:05:39.010
able to step on the toes
of private enterprise,

01:05:39.010 --> 01:05:41.120
just the ideology of it.

01:05:41.120 --> 01:05:42.790
But I don't know
if this is so much

01:05:42.790 --> 01:05:44.560
an opinion on a
hindsight suggestion,

01:05:44.560 --> 01:05:47.380
but as far as the plight
of the workers, I mean,

01:05:47.380 --> 01:05:49.843
they have just as much
right to deny to work.

01:05:49.843 --> 01:05:51.510
And so if you're the
federal government,

01:05:51.510 --> 01:05:54.820
I don't know how much union
labor laws you can pass,

01:05:54.820 --> 01:05:57.840
but I think pro-union labor
laws for coal miners, I think

01:05:57.840 --> 01:05:59.590
would be more effective
way, if you wanted

01:05:59.590 --> 01:06:03.040
to do it without stepping on
the toes in the Constitution

01:06:03.040 --> 01:06:03.957
or anything like that.

01:06:03.957 --> 01:06:05.415
RICHARD SCHMALENSEE:
They, in fact,

01:06:05.415 --> 01:06:07.090
moved in that direction,
the Wagner Act

01:06:07.090 --> 01:06:09.400
and the National Labor
Relations Act I believe

01:06:09.400 --> 01:06:12.010
came after this legislation,
which strengthened

01:06:12.010 --> 01:06:13.710
the ability of unions.

01:06:13.710 --> 01:06:16.450
The only thing-- since the left
wing is being very timid over

01:06:16.450 --> 01:06:17.110
here--

01:06:17.110 --> 01:06:20.020
the only thing I would
say is these little towns

01:06:20.020 --> 01:06:25.270
in West Virginia, if you're a
miner and the mine goes bust,

01:06:25.270 --> 01:06:27.550
and you own a home,
it's worthless.

01:06:27.550 --> 01:06:31.510
So you got no job and you've
got no assets to sell to move.

01:06:31.510 --> 01:06:34.420
Yeah, you could withhold
your labor, but I mean,

01:06:34.420 --> 01:06:36.080
you don't have a lot of options.

01:06:36.080 --> 01:06:41.600
It's not a frictionless--
it's not a frictionless plane.

01:06:41.600 --> 01:06:45.760
I was involved in Washington
in the Northern Spotted Owl

01:06:45.760 --> 01:06:48.640
debate around 1990.

01:06:48.640 --> 01:06:50.620
And the issue there--

01:06:50.620 --> 01:06:53.230
one of the factors
in that debate

01:06:53.230 --> 01:06:56.410
turned on people in
small towns in Oregon

01:06:56.410 --> 01:06:59.140
who made their living
cutting down trees.

01:06:59.140 --> 01:07:04.930
If you regulated
logging sharply,

01:07:04.930 --> 01:07:07.060
they had worthless homes.

01:07:07.060 --> 01:07:09.940
And their skill was
cutting down trees.

01:07:09.940 --> 01:07:12.190
And they got no place to go.

01:07:12.190 --> 01:07:17.270
So unless you did something
to compensate them for that

01:07:17.270 --> 01:07:19.520
situation-- that was a case
where it was a government

01:07:19.520 --> 01:07:22.200
regulation, but it could
easily have been a market--

01:07:22.200 --> 01:07:24.140
they are just stuck.

01:07:24.140 --> 01:07:27.805
And you get alcoholism, and
child abuse, and spousal abuse,

01:07:27.805 --> 01:07:29.180
and all of the
things that happen

01:07:29.180 --> 01:07:30.470
when communities break down.

01:07:30.470 --> 01:07:34.748
So it's not-- it's not pretty.

01:07:34.748 --> 01:07:36.290
I'm trying to help
the left over here

01:07:36.290 --> 01:07:38.750
with a little
tear-jerking argument.

01:07:38.750 --> 01:07:41.890
But-- yeah?

01:07:41.890 --> 01:07:44.377
AUDIENCE: I was going to say
just for the left-wing side,

01:07:44.377 --> 01:07:45.210
I was going to say--

01:07:45.210 --> 01:07:45.680
RICHARD SCHMALENSEE: Please.

01:07:45.680 --> 01:07:47.840
AUDIENCE: --you get
back into the argument

01:07:47.840 --> 01:07:51.630
that electricity does
cross interstate lines.

01:07:51.630 --> 01:07:54.660
So Congress does have the
power to regulate these laws,

01:07:54.660 --> 01:07:59.070
regardless of how ideologically
you feel about it.

01:07:59.070 --> 01:08:01.505
Constitutionally, it
should be allowed.

01:08:01.505 --> 01:08:02.880
RICHARD SCHMALENSEE:
So you'd say

01:08:02.880 --> 01:08:05.820
that this whole direct/indirect
thing that Sutherland

01:08:05.820 --> 01:08:07.480
was writing--

01:08:07.480 --> 01:08:10.350
which he couldn't define
other than to mush around

01:08:10.350 --> 01:08:12.150
for a couple of pages--

01:08:12.150 --> 01:08:14.580
is really not a distinction.

01:08:14.580 --> 01:08:15.660
That if it affects--

01:08:15.660 --> 01:08:19.800
it affects, and there's no
direct/indirect sensible

01:08:19.800 --> 01:08:23.310
distinction, and wages
affect prices of coal.

01:08:23.310 --> 01:08:24.005
Yeah?

01:08:24.005 --> 01:08:24.630
AUDIENCE: Sure.

01:08:24.630 --> 01:08:27.359
I'm like a fair
believer in the markets,

01:08:27.359 --> 01:08:29.580
but I'm sitting on this
side, so I figured I'd--

01:08:29.580 --> 01:08:30.955
RICHARD SCHMALENSEE:
Do your job.

01:08:30.955 --> 01:08:31.830
AUDIENCE: Yeah.

01:08:31.830 --> 01:08:34.590
And it was pertaining to the--

01:08:34.590 --> 01:08:36.090
to having a fair process.

01:08:36.090 --> 01:08:38.970
And I mean, I believe
in a fair process,

01:08:38.970 --> 01:08:44.279
but it's always like the kind
of recursive nature in the sense

01:08:44.279 --> 01:08:47.040
that you have to establish
a fair playground in order

01:08:47.040 --> 01:08:49.770
for the outcome of a
fair process to be fair.

01:08:49.770 --> 01:08:52.890
And perhaps in this case,
when shit's hitting the fan,

01:08:52.890 --> 01:08:56.760
you really need to try and
have the government interfere

01:08:56.760 --> 01:09:01.590
and create somewhat equality so
that the process is then fair.

01:09:01.590 --> 01:09:04.410
And from then on, you can
then say, well, you know,

01:09:04.410 --> 01:09:06.660
we've allowed everyone
with the same--

01:09:06.660 --> 01:09:09.180
we've tried to give everyone
the same kind of benefits

01:09:09.180 --> 01:09:10.710
or the same opportunities.

01:09:10.710 --> 01:09:13.109
And from here, whoever
takes it, well,

01:09:13.109 --> 01:09:15.558
is then a CEO and is making
money and who doesn't isn't.

01:09:15.558 --> 01:09:17.850
RICHARD SCHMALENSEE: And what
do the folks on this side

01:09:17.850 --> 01:09:19.859
say in response to that?

01:09:19.859 --> 01:09:21.910
Somebody who hasn't spoken.

01:09:21.910 --> 01:09:22.410
Max?

01:09:22.410 --> 01:09:24.410
AUDIENCE: I think it's a
big issue with conflict

01:09:24.410 --> 01:09:25.575
of interest.

01:09:25.575 --> 01:09:27.450
In this situation, you'll
have the government

01:09:27.450 --> 01:09:31.830
that may have been trying to
act in the interest of workers,

01:09:31.830 --> 01:09:34.330
in labor rights,
things of that nature.

01:09:34.330 --> 01:09:36.000
But that might not
always be the case.

01:09:36.000 --> 01:09:37.500
We've been looking
at the government

01:09:37.500 --> 01:09:39.870
as kind of this benevolent
power that's trying

01:09:39.870 --> 01:09:41.550
to improve workers rights.

01:09:41.550 --> 01:09:45.450
But in the future, you'll
have all these congressmen

01:09:45.450 --> 01:09:48.779
from different states,
and legislation passed

01:09:48.779 --> 01:09:50.529
might not be in the
interest of one state.

01:09:50.529 --> 01:09:52.237
It might be an interest
to another state.

01:09:52.237 --> 01:09:54.000
And if there's a
majority, you end up

01:09:54.000 --> 01:09:57.370
affecting one state in the
interest of many others.

01:09:57.370 --> 01:09:59.520
And so it's where the--

01:09:59.520 --> 01:10:02.560
if it doesn't affect interstate
commerce-- and in this case,

01:10:02.560 --> 01:10:04.590
the argument was that
production does not

01:10:04.590 --> 01:10:07.320
affect interstate commerce--
the federal government

01:10:07.320 --> 01:10:09.362
shouldn't have the power
to regulate it because

01:10:09.362 --> 01:10:10.570
of that conflict of interest.

01:10:10.570 --> 01:10:12.670
RICHARD SCHMALENSEE:
So you think we draw

01:10:12.670 --> 01:10:15.390
a simple, clear bright line.

01:10:15.390 --> 01:10:17.880
There's a lot of good stuff on
the other side of that line,

01:10:17.880 --> 01:10:20.250
but there's a lot
of bad stuff there.

01:10:20.250 --> 01:10:22.128
Sutherland's forbidden
place is on that side.

01:10:22.128 --> 01:10:23.670
AUDIENCE: I think
one of the comments

01:10:23.670 --> 01:10:27.120
was the necessary evil
of an open market, where

01:10:27.120 --> 01:10:30.690
while the government has
to accept that there are

01:10:30.690 --> 01:10:35.040
some evils, maybe unfair labor
standards that they can't deal,

01:10:35.040 --> 01:10:37.793
with but to have a truly
fair and open market,

01:10:37.793 --> 01:10:39.960
you need to let those evils
exist and let the states

01:10:39.960 --> 01:10:41.823
deal with them if they
think it's proper.

01:10:41.823 --> 01:10:43.740
RICHARD SCHMALENSEE: And
if I were Sutherland,

01:10:43.740 --> 01:10:47.820
I might say, look, today
it's the poor coal miners--

01:10:47.820 --> 01:10:51.060
tomorrow, it's the poor
investment bankers.

01:10:51.060 --> 01:10:53.070
And if we get
votes in Congress--

01:10:53.070 --> 01:10:56.072
God knows how-- that investment
bankers' wages are too low

01:10:56.072 --> 01:10:57.780
and they need to be
increased, and if you

01:10:57.780 --> 01:11:00.000
let me fix a wage
for coal miners,

01:11:00.000 --> 01:11:02.490
I'll fix a weight for
investment bankers tomorrow.

01:11:02.490 --> 01:11:05.110
And we know that's nuts
and we need a wall.

01:11:05.110 --> 01:11:05.610
OK.

01:11:05.610 --> 01:11:07.570
Let me bring it to a close.

01:11:07.570 --> 01:11:08.340
Thank you all.

01:11:08.340 --> 01:11:09.180
This was good.

01:11:09.180 --> 01:11:12.930
You aired a lot of
the main issues.

01:11:12.930 --> 01:11:15.360
Let me just tell
you what happened.

01:11:15.360 --> 01:11:19.410
After this, Roosevelt found
this string of defeats--

01:11:19.410 --> 01:11:22.950
this was just another
defeat for the New Deal--

01:11:22.950 --> 01:11:24.210
very frustrating.

01:11:24.210 --> 01:11:28.650
And in 1937, he
issued a bill which

01:11:28.650 --> 01:11:31.380
would have let him appoint
more justices to the Supreme

01:11:31.380 --> 01:11:33.990
Court, the so-called
court-packing bill.

01:11:38.180 --> 01:11:42.420
Two months later, the
court reversed itself

01:11:42.420 --> 01:11:46.050
on the federal government's
ability to regulate wages.

01:11:46.050 --> 01:11:47.550
One judge switched.

01:11:47.550 --> 01:11:51.270
Carter versus Carter Coal
was a 5 to 4 decision.

01:11:51.270 --> 01:11:53.940
In 1937, they switched.

01:11:53.940 --> 01:11:57.810
This was referred to as the
switch in time that saved

01:11:57.810 --> 01:12:00.510
nine-- nine justices
in the Supreme Court--

01:12:00.510 --> 01:12:02.010
clever language.

01:12:02.010 --> 01:12:06.120
The Court says, however,
they'd taken the vote earlier.

01:12:06.120 --> 01:12:08.670
The bill died in any
case in the Senate

01:12:08.670 --> 01:12:11.250
in July, which is why
we still have nine

01:12:11.250 --> 01:12:15.440
justices on the Supreme Court.

01:12:15.440 --> 01:12:17.960
Who has won historically,
Sutherland or Cardozo?

01:12:22.130 --> 01:12:22.880
AUDIENCE: Cardozo.

01:12:22.880 --> 01:12:23.870
RICHARD SCHMALENSEE: Cardozo.

01:12:23.870 --> 01:12:25.287
Do we have a federal
minimum wage?

01:12:25.287 --> 01:12:26.210
Yes.

01:12:26.210 --> 01:12:27.210
Scott?

01:12:27.210 --> 01:12:29.418
AUDIENCE: I would say that's
different than this case

01:12:29.418 --> 01:12:32.120
because the minimum wage
law isn't just for coal.

01:12:32.120 --> 01:12:32.530
RICHARD SCHMALENSEE:
That's true.

01:12:32.530 --> 01:12:34.580
AUDIENCE: --coal, it
gives it every generation.

01:12:34.580 --> 01:12:37.880
RICHARD SCHMALENSEE: But the
fundamental question of does

01:12:37.880 --> 01:12:40.340
the Commerce Clause stop--

01:12:40.340 --> 01:12:43.910
that fundamental question--
stop the federal government

01:12:43.910 --> 01:12:46.310
from regulating things
that occur inside states,

01:12:46.310 --> 01:12:50.060
like paying wages
or setting safety

01:12:50.060 --> 01:12:54.470
conditions for this room,
or lots of other things?

01:12:54.470 --> 01:12:57.780
Cardozo won.

01:12:57.780 --> 01:13:02.430
The view, at least
until recently,

01:13:02.430 --> 01:13:05.790
was that if you could find an
impact on interstate commerce,

01:13:05.790 --> 01:13:09.160
the federal government
could regulate it.

01:13:09.160 --> 01:13:14.170
That's disputed now, and we
have a Supreme Court that

01:13:14.170 --> 01:13:16.550
is tilting the other direction.

01:13:16.550 --> 01:13:21.910
But the run of
decisions from the '30s

01:13:21.910 --> 01:13:26.020
forward has largely been in
Cardozo's direction, at least

01:13:26.020 --> 01:13:29.890
as regards the Commerce Clause.

01:13:29.890 --> 01:13:34.670
But issues like this don't
get settled permanently.

01:13:34.670 --> 01:13:36.230
The pendulum may swing.

01:13:36.230 --> 01:13:40.670
There's a lot more concern
with states' rights, as I say.

01:13:40.670 --> 01:13:42.590
To actually say the
federal government

01:13:42.590 --> 01:13:45.590
should just fix
the electric system

01:13:45.590 --> 01:13:47.420
is to get laughed out of town.

01:13:47.420 --> 01:13:51.680
It's a state
function, full stop.

01:13:51.680 --> 01:13:53.333
OK.

01:13:53.333 --> 01:13:55.250
I think we've covered
what there was to cover.

01:13:55.250 --> 01:13:56.900
Questions, comments, reactions?

01:14:00.310 --> 01:14:00.810
Thank you.

01:14:00.810 --> 01:14:03.890
I'll see you all tomorrow,
believe it or not.