The Core of What Economics Teaches | Robert P. Murphy

Presented by Robert P. Murphy at the "Economics for High School Students" seminar. Recorded at the Mises Institute in Auburn, Alabama; 20 November 2009. Sponsored by Jeremy S. Davis.

[@soapbxprod]

Genuinely objective facts are forever- Dr. Murphy is the MAN. This lecture is as classic as "The Wealth of Nations", "On Liberty", or "The Road to Serfdom". Love that Bob! (anyone else out there old enough to get the reference? ahaha!)

[@christianparks766]

This is something I have found very interesting. People like ***** believe in democracy as the will of the masses of people to determine what is right for individuals when a true free market is the voluntary interactions of the masses putting their resources (votes) into those things that they believe have value whether real or perceived. So if they just the general population to do what is best, why not actually let them make the choice, whether it be action or inaction?

[@soapbxprod]

Brilliant, Sir! You are wise beyond your years- bravo. :) There is the real Democratic way, as you have said so clearly explained. Each of us votes with our dollars for the goods and services which benefit us the most, based upon his/her individual assessment of subjective value and marginal utility... how cool is that?

[@JukaDominator]

The free market does not imply a "dollar vote", since it does not impose a standard on anyone, you can have whatever kind of product you'd like as long as a market exists for it, in Democracy you impose one way over the other.

[@christianparks766]

I agree JukaDominator​​​. A "dollar vote" is only one measure/example of a consumer's demand for a product/service. Volunteering free time, promoting ideas or devoting other resources is essentially the same as our currency is just an exchange for your time, energy, or other resources. It's only a representation of their willingness to voluntarily exchange any or all of the above to further an idea, product or service without being imposed upon.

[@garrettpatten6312]

This was hilarious. That may be the longest I've seen someone carry a toilet analogy. I felt great pride in knowing how a toilet works 😂 great content as always!

[@rayyf69]

5) Does not reward correct choices (it has no entrepreneurial f(x)) 6) no profit loss signal. 7) No Exit signal. You are forced to consume the products/services of the state.

[@sleedolfine15]

The fact that he looks and speaks ordinarily--in other words,he's smart,but avoids talking down to his audience is why he's easy to learn from. He avoids jargon and uses examples to make his point. He's a good teacher.

[@JessicaBelle81]

I love watching these speaches. Keep it up Mises.

[@zacher222]

Another excellent video

[@kcumpston]

Other than point number two, you won't find much congruence with that at the Mises Institute. A Misesian economist would abolish central banks, replace central bank money "creation" with private money "production", eliminate attempts to subvert the market rate of interest, promote savings as a prerequisite for rational capital investment, eliminate arbitrary limits on income and property, etc. But you can hardly debate those points in a KZbin comment string with a 500 character limit.

[@stealthswimmer]

The theory of marginal utility explains this. If you're in the desert and don't know when you are gonna get to the nearest town, water might be more valuable to you than the diamond. if you have a diamond in the desert but believe that you'll get to a town soon enough, then you might value the diamond higher than water and simply sell the diamond once you get in the city to buy water and other things. Or maybe the diamond has sentimental value and you never give it up.

[@oscar7557]

thanks for the explanation :)

[@rars0n]

The problem isn't the creation of money by private interests, the problem is the monopolization of it through government. The Federal Reserve, for example, is a private entity that maintains sole ownership of the right to create US dollars. It is monopolized by the government through legal tender laws which require people to use FRNs. Had they not been given a monopoly, and had to compete with other private currencies, then other, more stable currencies would push them out of the market.

[@rars0n]

A bit wordy and repetitive, but when he gets to the point, he explains some key economic ideas really well in layman's terms so that anyone can understand it. Really great talk, just maybe 5 or 6 minutes too long. The only reason I mention that is because I'm the only person I know that has even heard of the Mises Institute and I doubt anyone I share it with is going to sit through a 30-minute video on economics, which is unfortunate because so many people are clueless about most of it.

[@rayyf69]

Don't forget, those area's have regional governments that impact the development of markets in their locations. Governmetns and markets are inextricably linked. Any criticism of Markets without an analysis of the role or incentives states create is critical.

[@rayyf69]

What your observing is called Rent seeking. As long as you have a government and "rationally ignorant " people the politcal class and business lobbies bank on our apathy and use the state to transfer costs to us. The state in this sense emerges as a market but it subverts primary market function.

[@TheObjectiveReality]

Is that Tom Woods in the front on the left? lol

[@nthperson]

The most serious error of fact conveyed by Mr. Murphy to his audience is his assertion that the United States economy was ever built on "free markets." The systems of law and taxation existing during the colonial period were adopted with very few changes after the war of independence from Great Britain. Britain's system of law was based on two principles: (1) landed privilege; and (2) mercantilism, or a closed system of exchange that severely restricted competition. Landed interests in the U.S. have always used their financial and political power to make sure the costs of government were absorbed by others. This is still the case today, as evidenced by the degree of speculation in land that occurs all across the united states. Hamilton argued the case for protective tariffs, and we have always had protective tariffs in place that benefit some while raising the cost of goods and services to others.

[@tewj57]

The author of the study is Sam Peltzman, if that helps.

[@rayyf69]

There are correct decisions when you have to decide what type of cement to use ina bridge that can so much tonnage of support freight traffic. Society idealy must want to minimize costs rather then maximize them. You can't expect production to use 18 units of something when it could use 6 units of the same. Democracy doesn't not advance you additional resources so you can compete with markets.

[@rars0n]

If you made chairs, for instance, and needed butter, then without money, you'd have to find someone with butter that needs a chair, or perform a series of trades to get what you're looking for. Also, money allows fractional trading. One stick of butter is worth less than a chair, but a piece of a chair isn't worth anything. So you sell the chair and buy the butter, and use the rest for something else. Money facilitates trade.

[@arcanekrusader]

@realisoph There are lots right here on the misesmedia channel. Many, many lectures etc.. Very easy to understand, almost to the point of it being common sense and also a very good tool to help explain why current economic policy will fail.

[@stealthswimmer]

as long as that's understood. I got some classes (not economics classes) where we had lectures on it as if it were set in stone or something, like my friend put it "as if people carry it around in their pocket and check it before they act" lol :D

[@rars0n]

"1) international, democratic, debt-free money creation; promoting social (development) projects 3) no private money creation ever" Perhaps I jumped to conclusions of assuming by "international money creation" meant only one currency, but the second point stands. Furthermore, to have a "democratic" money creation process would require allowing private currencies to compete in a free marketplace.

[@kcumpston]

@utubehayter: Perhaps incorrectly, I interpreted point number 2 as opposing the creation of money to support military aggression. (The term "new funds" led me to that interpretation). To that extent, an austrian economist would likely agree. But as you point out, self defense funded by real savings (i.e. "old" funds) is another matter.

[@sisyphean0]

Anyone know were I can I can find the study he is talking about at 15:00?

[@stealthswimmer]

Marginal utility shows why the triangle isn't that great, but it is still a better model than saying things have objective value

[@rayyf69]

This , by the way is how the USSR taxed it's citizens, through higher consumer product costs granted to firms that obtained monoply privlage. the USSR only approximated socialism for about 4 years and it failed miserably when they have to re-institute money. public choice theory attampts to bridge the gap between institutions. One method of my current critique here is based on the vote as money comparison. They both serve respectively identical functions

[@rayyf69]

1) yes it does, waste is a problem as long as resources are finite. Under a democracy Waste isnt' internalized via a profit loss signal. Individaul voters must attemt to outperform the market in this regard and the historic record indicates the market outperforms everybody.

[@rayyf69]

Yes i have and it's the basis of Robert trivers research on reciprocal altruism (71) which has had a fundamental impact on my support for capitalism and rejection of anything the left or progressives have to offer. markets are not egocentric. If anything democracies are more egocentric because they serve the fewist who have the most politcal capital.

[@rayyf69]

Individuals do not work for the betterment of society at large. They work to advance their individual self interests. Markets ensure that society benefits because violence isnt' used as a tranactional method in the social interface. Democracy, dictatorships, collectivism uses increases the degree of violence in transsactions nullifying exit options, This allows individuals to benefit at teh expense of society in the name of representing society. Violence in all transactions should be minimized.

[@Vodka2389]

Tom Woods is on the left side of the screen when they show the audience.

[@rayyf69]

On military expendatures we are in accord so you needn't sell me on supporting the military industrial complex. But under democracy individual will transfer costs to each other regardless of if there are wars or not. Rent seeking doens't only occur from defense firms, but from unions, from non-profits, from massive software cooperations, the healthcare industry. They transfer costs to you to enhance their profits.

[@ftorresgamez]

"There is no commodity in money. You cannot eat it or turn it into something useful other that taking it as a reference." Not with paper money, no. But "money" was and is a commodity, the most marketable (i.e. desired) commodity. As an example, in jail, cigarettes are used as currency, whenever possible, because of their high desirability, their portability and the easiness of trade.

[@rayyf69]

the manhattan project was state funded. What are healthy preferences ?

[@grraadd]

If you have a lot of water it doesn't have the value for you any more (if you are flooded it has a negative value). Did you hear about Maslov's pyramid of needs?

[@rayyf69]

5) it has a beautiful entrepreneurial f(x), providing people with freedom as to their own paths in life, not financially dominated ones." No it doesn't as the vote is EQUAL. therefore soembody who knows what is right is marginalized under many that don't have the same knowledge

[@rayyf69]

Withotu a profit loss signal , as you replace this with the opinions and perceptions of people you will not be able to identify and eliminate waste. Performance, the abiltiy to identify a method that is profitable or is able to rationalize production at the lowest social costs. Costs exist regardless of economic structure. Costs are next highest preferences that must be sacrificed. Democracy doesn't have a means of ID costs liek proft loss signals.

[@rayyf69]

Democracy contains no profit loss signal. This is illustrated in Von Mises economic calculation challenge to socialist about 50 years ago. How would a single voter know if a firm was producing optimally when he has no profit statement to look at ? How does a voter decide if a firm is wasting to much or not? price signals perform this f(x) through direct comparison. Moving production marginally away from price signals toward democracy cannot be accepted to any degree if cost exists.

[@stealthswimmer]

no problem :-)

[@rars0n]

"I find you fundamentally neglecting many, if not the most important, aspects of society where money simply is and should not be the measure of things." I don't think this was directed at me, but I feel compelled to comment. Money isn't a measure of anything. It is simply a convenient means of exchange. Money allows a person to exchange one thing for another without having to barter your way to the final result.

[@rayyf69]

Yes Tewj57 is right Sam Peltzman also known as teh peltzman effect. It has serious implicatons for welfare policy.

[@rayyf69]

I dunno some are some arn't. If you providing decentralized social planning what is teh size of the Phalanx , or society , that engages in demo planning. A market allows 1 individaul to plan and relseaes soemthig to the market. If you attemt to rationalize production amongst many I can exit how ever many individauls there are. Thus a market enhances its' ability to extract knowledge and act on it as 1 person can plan and offer that product. My ability to exit to his offer is a + signal of value.

[@rayyf69]

1 The idea of rational ignorance is based on costs. There are costs to learning information. You must spend time obtaining, reading and internalizing. These actions require something else be sacrificed. Going on a date, watching american idol, learning calculus for an engineering degree. These are costs because they are things that must be sacrificed while you read policy stuff. A rational ignorant

[@rars0n]

The problem of democracy is one of scale: the larger it becomes, the greater the number of oppressed people.

[@ftorresgamez]

Laws come about not by consensus, realisoph, but by reason. It is not hard to come up with "Thou shall not kill, thou shall not steal, thou shall not commit fraud." Read Frederic Bastiat's "The Law." Please do not resort to insults, they just make you look childish.

[@oscar7557]

very true, i guess that's why free market capitalism begs the question. of value to whom?

[@fastphys]

32:21

[@rayyf69]

3a) is not an irrational point. It was based off research performed by Philip Converse "the nature of belief systems and mass publics" which argues that the large majority of voters are Rationally ignorant.. ( notice i didn't say ignorant. Rational ignorance means it's incentivized to be un-informed about something.. For me it's fishing i don't fish, bcs i dont' like to, and i can obtain fish meats in stores. There is a rational reason for me to be ignorant in this regards. same for voters.

[@rayyf69]

How do you do that ? by force? what if i want to leave a democratic syndicate, must i vote for my freedom from them? What hapens when one skilled individaul offers himself to multiple competing syndicates and the winning bidding syndicate gives that skilled indi complete control of the firm. Then yo uhave classical market ownership emerge again if the skilled can outperform other syndicates.

[@JessicaBelle81]

I was refering to the institute silly, not the man.

[@rayyf69]

2 A rational ignorant person recognizes that the value of their vote is miniscule( its probability to be the deciding vote in an election) and thus they prefer to engage in non-policy related activities that advance their interests. Its irrational for me to learn to air condition repair if the costs would require a sacrifice greater the the costs to just have somebody come fix it. And only I can evaluate those costs as they are subjective.

[@totustuus11]

Only Bob Murphy could make a toilet analogy work!

[@rayyf69]

6a by the way it's was assumed that democracy would have a profit loss system under the idea of "retrospective voting". This is the concept that bad instittuions and politicians are purged, as a they would be in a market if they don't perform. This notion was shattered when social scientists witnessed individauls blaming politicans for acts of nature like shark attacks and earthquakes. Democracy is tremendously irrational, that is , unless politicians cause natural disastors.

[@rayyf69]

Free markets turn make the rich canabalize other rich via trade compeition. democracy, and a state allows rich to use the state to not only canabalize other rich competators, but also transfer the costs to consumers. The state and democracy are aberations of our social nature. The more we depart from the model of free voluntary transactions and property ownership the more exploitation we will experience.

[@soapbxprod]

Hey realisoph- how do you come to the conclusion that Democracy is anything other than Rousseauian "Mobocracy"? Are you advocating "majority rule"? If most people are idiots, then how do you propose that they know best whom to elect as their "wise overlords"? Aristotlian logical contradiction.

[@Hashishin13]

They should change the endangered species act so that it simply gives a tax break if the endangered animals live there and no restrictions. They should just come check every year to prove it. That would make people WANT to have the animals live there ONLY.

[@oscar7557]

yes i've heard of it. but that's not my point, you can have a shit load of water, which we do. and it doesnt change the fact that you need water to live, it has a higher philosophic value than a diamond. lipstick vs. a microscope , obviously the microscope has more philosophic value, but a lipstick to a secretary will have more value lol

[@rayyf69]

Why ? bcs the value of my vote is infinitesimally low. There is thus no reason to inform myself regarding policy bcs my vote is likely to have no impact. Now you said you wanted smaller democracies, this might somehwat mitigate this problem but fundamentaly it still exists.

[@arcanekrusader]

@realisoph You've just discovered what Austrian economics is all about.

[@freesk8]

Some core concepts of economics left out: Ricardo's theory of comparative advantage? (The people of both nations are better off when nations specialize according to their comparative advantages and trade freely than they are with protectionism.) When there are no externalities, market pricing mechanisms allocate resources efficiently. Hayek's fatal conceit. Planned economies can't work.

[@oscar7557]

why don't they use a word other than subjective? that really does confuse people. why not socially objective vs. philosophically objective

[@rayyf69]

That goes agaisnt everything i just said. I don't see any reason to do this. Even more frightening is the idea this should be imposed on me? should it?

[@rars0n]

You/'re asking questions on KZbin about Mises. What you need to be doing instead is going to the Mises website and reading for yourself, and stop expecting KZbin commenters to answer all your questions for you. Do some research on Austrian economics so that you understand what is being discussed here.

[@rars0n]

Democracy screws itself up. Many people would argue that a monarchy is actually more favorable than a democracy. The reason you pay interest is because you are paying to use someone else's money. You are paying to tie a resource up in something that could otherwise be placed elsewhere. Duh? Clearly you see no value in providing capital towards new endeavors; under your model, innovation would completely stagnate and no one would lend any money out thanks to a total lack of incentive.

[@rayyf69]

When your vote has no value your not incentivized to inform yourself of politicies or reps. therefore lobbying>voting by a spontaneous emergence of self interst. The self interest of the business who wants to profit and the self interest of the voter who just wants to relax when tehy come home rather then spend hours debating policy.

[@rars0n]

A free market is not democracy. In a free market, nobody is forced to participate. That isn't the case with democracy.

[@grraadd]

Sure, it's just a model - simplification.

[@rayyf69]

Democracy does not give people the say. Why? As Condorcet adn Ken Arrow illustrate there is no way to obtain a global social preference order from a system with two options. Democracy thus leads toa dictatorship of the minority.. But that's not all, The larger the population the lower the value of your vote. Therefore your not RATIONALLY incentivized to inform yourself. This is called "rational ignorance" and is illustrated in phil converses research on belief systems.

[@oscar7557]

lol well things are Objective lol so they have a value. somethings have more philosophical value that others i.e. water vs. a diamond. but i dunno, just sayin.

[@rayyf69]

If you would like an epistomological system that considers shark attacks the fault of the current administrater i will wish you well with it. But i urge you to recognize the structural problems with democracy and keep it for yourself. I don't think everybody should live under a marekt structure. It should be a personal preference. 'We should bulid a world that maximizes subjective preference rather then uses violence to enslave each other.

[@pretorious700]

24:38...hilarious

[@MrAbadabas]

"Somewhere in the world, there is the worst economist in the world; and he is seeing Obama tomorrow." GOLDEN

[@rayyf69]

Democracy has clear structural problems like condorcets paradox. Even if you could impose the system you wanted then graft democracy onto it you have not removed condorcet or arrow's critiques which lead to my 1-7. You cannot create a global social preference order under democracy, It's impossible.

[@ftorresgamez]

Re: Realisoph, Democracy is not a social agreement. "Democracy", the concept, is actually the tyranny of the 50% plus one. Social agreements is what people do spontaneously to create networks of voluntary, mutually beneficial trades and exchanges. The fact that others do not accept something does not make the idea they espouse valid. Ad Popullum arguments are not valid.

[@rayyf69]

by the way if you wish to criticise the current system be my guest and i will join you, but know fundamentally i'm an anarcho capitalist. The idea that we live in a capitlist system is false, i just will not accept it. If your going to engage in a analysis of the political economy your going to ahve to integrate the state as well as the peopel who vote in it under scrutiny. People do not have virtue on the basis of how subjectivly exploited some think they are

[@snoopyflick]

Actually did you even find out why he thinks it's worse than totalitarianism. Or are you arguing by emotions again.

[@ftorresgamez]

Well, the nitpicking on my spelling notwithstanding, the fact is that pure democracy is an auction on stolen goods, the tyranny of the majority over the minority - just ask the Jews, or the Armenians. There is absolutely nothing antisocial about being a free person and acts freely. You may have bought the idea that a Police State has the most socially-balanced people, but I don't.

[@snoopyflick]

Wow hold on an hour, i'm going to explain everything that is wrong with that state. Okay i can only explain a few things, not all that's wrong. IF this were a real likely possibility, then almost of all of Africa and latin America and Asia would be like this. Now how will a group of mercenaries keep finding loyal militants and the funds to do so? How can they make sure everybody gives up their guns? How will the sustain and ruling power if no body sees them as legit? Not as likely a possibility.

[@Visfen]

...and he's seeing obama tomorrow. :D hehe, good one.

[@fusion9619]

Hello from the horror show that's 2022

[@Jaycephus01]

@realisoph You're very loony if you think any of your examples are some kind of valid indictment of free-markets.

[@rayyf69]

What happened to you advocacy for freedom ? What's wrong with peopel sitting around in their house watchign tv rather then reading policy papers all night? Should a person be able to just come home from a hard days work and relax? I know alotta people that cannot stand discussing politics ( they tend to not like me much, cause that's all i do) What's to be done with these people ?

[@rars0n]

Right, that's because you have absolutely no grasp of economics whatsoever, For instance, you think it's somehow logical or useful to force everyone to use the same currency. Not only is this impossible, it's detrimental. You want democratic control of currency, and yet you want to abolish private currencies. Economics aside, your own ideas aren't even logically congruent with themselves. Innovation can't occur without investment capital.