Lies, Damned Lies & the Inflation Reduction Act
2022-09-12 · Guest: Thomas DiLorenzo (Mises Institute) · 52:45
Politically Incorrect Economics and the Inflation Reduction Act
Bob Zadek interviews economist Thomas DiLorenzo about his book, The Politically Incorrect Guide to Economics. They discuss the history of economic thought, the failure of central planning, and why the “Inflation Reduction Act” is a misnamed expansion of government power and regulation.
Topics: Economics, Inflation Reduction Act, Keynesianism, Austrian School, Public Choice, Hayek, Mises, IRS, Green New Deal
Speakers: Bob Zadek, Thomas DiLorenzo
Introduction [00:00]
Bob Zadek: Hello everyone, this is Bob Zadek, welcoming you to the country’s longest-running libertarian broadcast, available 8:00 AM Pacific Sunday mornings on selected AM stations and streamed nationally at that time through 860 AM The Answer. A decade of prior shows are on the Bob Zadek Show podcast, and BobZadek.com has related resource material, a book list, and other podcasts of interest. We offer in-depth and focused content on political, social, and economic issues, always with the ideal guest, accessible and entertaining. In short, ideas, not attitude.
Today’s show embodies that standard. Tom DiLorenzo taught economics at Loyola University Maryland and is presently on the faculty of the Mises Institute. His published books include Problems with Socialism—that must be a fat book—and How Capitalism Saved America—an even fatter book, I predict—and has just published The Politically Incorrect Guide to Economics. Tom’s recent blog posting explaining how the misnamed Inflation Reduction Act is nothing other than a Trojan horse for Green New Deal socialist policies made it clear to me that he’s the perfect guest at the perfect time to help us understand the legislative disaster that lies before us. Tom, welcome to the show.
Thomas DiLorenzo: I’m pleased to be with you.
Political Correctness in Economics [01:47]
Bob Zadek: Now Tom, your book, The Politically Incorrect Guide to Economics, explain how those two concepts found their way in the same book title. What is politically incorrect or correct about economics, and what point were you trying to make in the book?
Thomas DiLorenzo: Political correctness infected economics from the very beginning, and a lot of—not everybody, but a lot of the economists, academic economists, have always been essentially propagandists for the state first and foremost. And Doug Casey, the well-known Wall Street investor, wrote an article in which he called most economists that you see on TV or write for the New York Times, he called them “economic witch doctors.” And they’re basically making an argument in favor of the political establishment one way or another, and it often contradicts economic common sense and the things that economists like myself have been learning and teaching about for years.
I was an economics professor for 41 years. And so that’s what’s politically incorrect about it. Even the American Economic Association, the trade association of academic economists, when it was created in the 1880s, the founding document condemned laissez-faire capitalism as unsound in morals and unsafe in practice. And it said we need more government intervention, and they wanted to tie the government intervention to the church, to religion. They apparently wanted to make people think that government intervention and some version of socialism was God’s will. That’s how things started out.
But there always was a remnant of free-market economists associated with the Austrian School of economics and later the so-called Chicago School. And even there’s a school of thought called the Public Choice school, which some professors of mine—James Buchanan, who won the Nobel Prize, was a professor of mine—and it uses economics to analyze political decision-making. And there’s a whole big theory of government failure attached to this school of thought, Public Choice. And so my book talks about these schools of thought that I call a remnant of sort of free-market, libertarian-oriented economists, and it goes over a lot of the myths that have been created over the years by the interventionist economists. It’s a myth-buster book. It’s not a textbook.
Economics and the Constitution [04:22]
Bob Zadek: There’s a question that comes to mind, triggered in my head by the very title of your book. You have in the title two words: political and economics. And here’s my question, Tom. There is almost nothing, almost nothing in the Constitution about economics. There’s no rules, there’s no rules that Congress shall create the Federal Reserve. There’s no rule about people should be free to interact with each other as long as there’s no fraud or coercion. There’s none of these free-market rules, nor is there anything about the need for a top-down economic system. So where do politics and economics come together? Is the study of economics the study of how to govern, or is it simply the result of observations the way other scientific endeavors are, where scientists observe and then draw conclusions based upon observations? So put us together as your title does, join together economics and politics. What does one have to do with the other, and where do we find the rules?
Economists as Central Planners [05:41]
Thomas DiLorenzo: Well, the study of economics, you’re right, doesn’t necessarily have anything at all to do with politics. It’s an attempt to understand how the world works, and not just the economic world. It’s all about human action and human incentives, and it can help you understand a lot about life in general, not just money, finance, things like that.
But politics has always infected economics. And economists, especially beginning around the 1930s, economists started seeing themselves as advisors to politicians first and foremost. And they started rewriting their textbooks in a way that didn’t just explain how the economic world works, but as giving advice on how to plan the economy. And this was a result of the so-called Keynesian revolution of the 1930s, named after John Maynard Keynes, the famous British economist. And he wrote this famous book called The General Theory of Employment, Interest and Money, and it created this whole new field of macroeconomics.
And so beginning around that time, there was sort of a perversion of economics away from just understanding, using the laws of economics to understand how the world works, to economists looking at themselves as advisors to politicians and central planners. And as far as the Fed goes, the Constitution gives the federal government the ability to coin money, but not to print money. It’s only the coinage that is mentioned in the Constitution. But of course, the politicians started ignoring the Constitution as soon as the ink was dry. And so it took them until 1913 to get the Fed, and there were many battles over that, over whether we should have a national bank or not. There were several versions of a national bank run by politicians before the Fed. Andrew Jackson vetoed one of them out of existence in the early 1840s. And we didn’t really resurrect it until 1913 when we got the Fed. But then, beginning at that time, the economics profession did change, and economists started looking at themselves as sort of fortune tellers and advisors to governments.
Freedom vs. Prosperity [08:07]
Bob Zadek: I’d like to repeat something you just said because I found it quite helpful to me in how you answered my question. The link between economics and politics is that economists, like other scientists—think Anthony Fauci, for I pick one at random—scientists observe and then present themselves to the world as scientists who have discovered secrets of behavior, of physics, of chemistry. They have discovered it through the scientific method. And they then present themselves to the government, and they say, “If you want to accomplish a certain goal—let’s say economic growth, prosperity—if you want to promote economic growth, just like if you want to cure the coronavirus, if you want to accomplish a goal, then we, through our understanding of the science, in this case the science of economics, we will tell you what you have to do to accomplish that.”
And the government then picks the scientists. Of course, more than one economist or economists have different points of view—Keynesian, which is top-down central planning type government, and free-marketeers, the opposite kind. The government will select the scientist to believe. So I think what you have said—and I want to see that I have it right—is that the way that economists get to make the rules is by persuading those who do make the rules to follow the science. In this case, the science is Keynesian economics, or the science is Austrian School economics, or somewhere in between. Is that a pretty good answer? Have I summarized your answer to my question accurately?
Thomas DiLorenzo: Yeah, that’s about 90% accurate as far as what I think. And that, you know, there’s this symbiotic relationship between a lot of economists and politicians. And a lot of economists work diligently at basically just providing plausible rationales for bigger and bigger government, more taxes, more interventionism, more control, and more socialism. And they sort of twist and turn.
A good example recently is Larry Summers, the former Treasury Secretary who taught economics at Harvard for many years. He was the president of Harvard for several years. He goes on CNN, and they asked him, “What is the cause of the inflation that we’re now suffering from?” And he said it was the January 6th protests in Washington, D.C. And so that was just, you know—and he knows better. He’s a smart guy. He taught economics at Harvard for years, for goodness sake. He had two uncles who were Nobel Prize winners in economics. And so that’s sort of the poster boy for sort of an economic prostitute.
Paul Krugman would be another one. He taught economics at Princeton for many years. And he used textbooks that probably were very similar to the ones I used, and they all defined a recession the same way for the past several generations. It’s sort of an arbitrary definition, but it’s the one all the economists use. It says basically when the economy shrinks for six months in a row, it gets smaller. That’s a recession. It’s in all the textbooks; it has been for generations. Paul Krugman goes on CNN, and they ask him, “Are we in a recession?” and he says no, even though the Commerce Department just came out and said yes, we fit the definition of real GDP falling for six months in a row. And he knows better also. And so those are sort of two of the most egregious examples of what I’m talking about. It’s not always so blatant as that. But beginning in the 1930s, economists began to understand that there was more money to be made, it was more fun and more prestige to be in charge of a government agency or the advisor to a governor or a president or the head of a government agency than standing before a classroom of undergraduates at some college somewhere. And so they became much more interventionist-minded out of their own self-interest.
Bob Zadek: So then it seems to me that—and I’m going to move on from this concept after I just make this very short comment—that we’ve just gone through with COVID two years of “follow the science.” And no matter what you were advocating as far as the best governmental response to COVID, you defended, if you were in government, you defended your conclusion by saying, “That’s what the scientists have taught me.” It sounds like in economics, those who follow Keynesian economists, Krugmans of the world, would say, “I’m just following the science. Don’t yell at me. It’s big government, I’m advocate for big government because the scientists who advise me tell me that.” Or government can follow the free-marketeer scientist and still follow the science. So it is a battle between competing opinions of different scientists, each defending their opinion not on a political observation, but on how they interpret the data. It’s the same thing whether it’s COVID or inflation, COVID or money supply.
Now, going beyond that, free-market economics as compared with—and they aren’t really opposites, but they’re very different—free-market economics, which you explain so beautifully in your book, free-market economics as compared with Keynesian economics. Are you partial to or passionate about—you can supply your own label—free-market economics simply because it’s pro-freedom, that is, the word “free” is the most important word? Or is your persuasion towards free-market economics because it produces a certain result, prosperity, better than alternative economic systems? What is the standard by which you have concluded that one is better than the other?
The Division of Labor and the Pizza Example [10:34]
Thomas DiLorenzo: Well, I would say both. Certainly freedom, and of course what holds human civilization together is the international division of labor. When I was teaching in my introductory class in economics, around the first or second week, I would walk into class and tell them it would be humanly impossible for the 30 of us in the classroom here to produce a pizza from scratch. And they would sort of snicker at it because they were thinking, “Well, certainly I could. I could just go buy a pizza shell at the grocery store, buy a jar of tomato sauce, and I’ve got a pizza, stick it in the oven.” And I would say, “Oh no, from scratch. You would have to start out with a wheat farm, and then you would have to have all the technology that goes into a wheat farm. And then you would need the petroleum industry to provide the gasoline and the diesel fuel for everything to run everything. You would need electric power and so forth. And that’s just the wheat farm. And then you need a flour mill and all the technology that goes along with the flour mill.”
And then as the story goes, you end up saying that well, to get something as simple as a slice of pizza for lunch requires the efforts of hundreds of strangers all over the world, probably, to cooperate to produce this thing cheaply and easily. And they’re all pursuing their own self-interest to produce this thing. And then that’s what holds human civilization together. And it’s also why Darwinism is wrong, you know, the survival of the fittest. The poorest people in the country in a capitalist country can do okay. They can survive and they can have hope to do much better tomorrow because they don’t need to produce their own food and their own automobile and their own clothing. They can rely on the division of labor and have other people do these things very cheaply. Go to Walmart if you want to see proof of that and shop there. And so I would say both: it gives people freedom to live their lives the way they want, to do the things they want and to support their family as well as they can. And also it provides prosperity. And without prosperity, we become slaves to the state in one way or another. And so I don’t think you can separate the two things: freedom and prosperity and capitalism.
Bob Zadek: Your reference to pizza, it sounds like that’s done with a nod to Lawrence Reed, I, Pencil.
Thomas DiLorenzo: Yeah, that’s my version of the I, Pencil story because I think college kids can relate to pizza better than pencils. Most—a lot of them don’t even know what a pencil is because they’ve been punching a cell phone or a computer their entire lives to communicate.
The Knowledge and Calculation Problems [13:16]
Bob Zadek: Hayek explains to us in his writing that the largest conceit, the biggest failure of Keynesian top-down economics, which is the direction in which we are moving as you point out in your book, is as simple as an absence of enough knowledge. That the knowledge of millions of people acting independently, creating the market, buying and selling and making decisions, the collective result of those millions of people cannot and will never be duplicated by, no matter how large it is, a system of people at the top making those decisions. I think you point that out in your book, how many consumer goods the Russian economists were trying to manage at the heyday of the USSR. So just share with us a few thoughts, and then we’ll move on, about the role of the collective knowledge of the individual versus government, and how that is, in my mind, the most persuasive argument in favor of the free market.
Thomas DiLorenzo: That’s what Friedrich Hayek called the “pretence of knowledge,” the idea that a group of politicians could somehow have superior knowledge than the thousands of individuals who actually make the economic world work and do a better job of it. And I tell the story in my book of how in the ’90s I was teaching an MBA class at Loyola University in Baltimore where I taught. And I was asked about this question by one of the students. And I asked them if they could think of any product produced by the Soviet Union under socialism that was competitive in world markets. And there was one guy in the class who was an army officer—there’s a military base nearby and he was working on an MBA degree while he was in the army—and he said, “AK-47s.”
But I had to remind him that since they had no private property and they did not have free-market prices in the Soviet Union under socialism, that as far as we know, they might have spent $10,000 producing every AK-47 that would sell for $1,000 because there were no profit and loss statements under socialism. So yes, they produced an AK-47, but they probably—it’s a sure thing that they used far more resources to make it than what they could get for it selling it on the world market.
And another student piped in and said, “Caviar.” And I had just published an article about how pollution was so bad in the Soviet Union that they almost eliminated the sturgeon population, which is where caviar comes from, the sturgeon fish. And so they almost destroyed the natural caviar industry as far as that goes. But that’s it. And so they never produced a single product, despite all the efforts, that was competitive in world markets with capitalism.
And Hayek’s pretence of knowledge is one reason. And another reason, though, is the absence of free-market prices determined by supply and demand or the interaction of buyers and sellers that reflect real information about how scarce or not so scarce things are and the intensity of demand for them by the people, by the consumers. That’s what prices tell us. They’re like street signs in a city. And without free-market prices, you really have no idea how to produce things. For example, there’s something like 2,000 separate parts to an automobile. And just the windshield alone, you might have 20 different types of glass. How do you decide which type to use in your automobile factory? Well, you compare price, just like you and I do when we go shopping for blue jeans. We compare price and we try to get comparable quality at a lower price. But you have to have the price. You have to be able to decide how to minimize the cost of producing that thing and then selling it in competition in the marketplace. And we need prices to do that. And without prices, it’s an impossibility. And that’s I think an even more important reason why socialism failed and will always fail than Hayek’s pretence of knowledge. Ludwig von Mises called this the “calculation problem.” Hayek called his theory the “knowledge problem.”
Bob Zadek: Your explanation of USSR and the AK-47 is so telling, and it offers, if our audience is able to just think it through, it explains so much about what’s going on in our economic life here in the United States. And the point that you make indirectly is those who want to defend a top-down economic system, it is easy. There will always be something that is produced that other people will want at the price. There will always be. But the question is, what’s behind the curtain? What was lost in producing this one victory, this one solar factory in the desert? What was lost? What would the money have been used for had it not been used for that? So we get seduced by government defending governmental allocation of resources. We get seduced by government pointing to a, maybe minuscule, a good thing. But that’s a distraction. The point is the economy as a whole. Was it better off with top-down or bottom-up? And your AK-47 story nails that down perfectly. And it helps all of us when we process what we are being told by those who would persuade us. We now can process it and not be distracted by an alleged proof that top-down economic systems work by asking the question, “At what cost, and who suffered?” And it’s the same thing as wealth transfers. If you do wealth transfers and only point to the recipient, how much better off they are, and ignore the one from whom the wealth was transferred, it looks like heaven. But that’s because you only see half the story.
The Inflation Reduction Act [21:11]
Bob Zadek: Now, we’re now going to go from pure science to applied science. And the applied science, we’re going to apply the lessons in your book and the lessons which your students would have gotten from your class and apply that to the Inflation Reduction Act. Oh my god, what a misnomer. What about truth in advertising? If a private business would take the same liberties in naming a product, they’d be in prison. So tell us first the big picture, and then we’ll drill down. Tell us what’s going on—and never mind, I don’t care so much about how it got there, the back office and the trade-offs—just we’ll talk about the result. That monster piece of legislation, what is enraging about it? Tell us about it by applying the principles in your book to that standout piece of legislation.
The Green New Deal Trojan Horse [23:31]
Thomas DiLorenzo: Well, the first principle, there was a Democratic congresswoman yesterday who came out and said well, the primary thing about the so-called Inflation Reduction Act is that it’s really the Green New Deal. It’s really a massive amount of additional environmental regulation. And the opinion polls that the Democratic Party pays for tell them that people are concerned about inflation more than almost anything else right now. And so they said, “Well, yeah, this is—it’s all about strangling capitalism with more environmental regulation. So let’s not call it anything related to that. Let’s call it Inflation Reduction Act to make people think it’s addressing their main concern.” And so that’s a big lie there.
But the even bigger lie is that they’re going to spend an additional several hundred billion dollars, which will pump up demand in the economy. The Fed will print up extra money to finance this. That will increase inflation. At the same time, they are taxing production even more than it is already taxed. There are higher corporate taxes, and there are higher—especially on energy. They want to destroy the energy industry altogether, the current administration does. And that will also push up prices of just about everything because we need energy to produce just about everything. We need energy to sit at a computer and produce a book, let alone manufacture an automobile. And so the effect of the so-called Inflation Reduction Act is unequivocally to increase inflation with all this additional spending. So that’s the big lie about it. And it’s starting to come out; they’re starting to admit that they lied about it.
Bob Zadek: I just like to jump in for one second. You had mentioned the massive increase in energy costs, and of course you are right, especially fossil fuel but not limited. So you’re right. You then said, “which will destroy the energy industry.” Isn’t it the case that it won’t destroy the energy industry, it’ll just cause them to increase their costs, which means all the costs downstream go up, everything goes up? And ultimately, it’s the two of us plus a lot of other people out there who ultimately bear the burden. So the energy industry can literally absorb most costs, and it’s a pass-through. They’ll make a profit anyway. So it almost—when you say “destroy the energy industry,” that almost—some people would say they deserve to be destroyed. But once it’s explained to them that no, not quite, you’re really going to harm everybody and unselectively, everybody takes it in the shorts. Then everybody will understand that it is in nobody’s best interest to increase the cost of production. Is that an appropriate qualification on what you had observed about that part of the bill?
Thomas DiLorenzo: Yeah, what I said was they want to destroy the energy industry. But yes, when the Biden administration first came in, his energy secretary appeared on one of the TV news shows and the naive commentator asked her, “Well, what can the administration do to bring down the price of gasoline?” And she laughed. She laughed her head off. She giggled uncontrollably. And I knew exactly what she was thinking. This was a hardcore leftist, and here they are, they had just vetoed the Keystone Pipeline from Canada, they’re talking about how they want to ban offshore drilling and eliminate the ability on government lands, government property to drill for oil. They wanted to increase the price of oil and gas. They want gasoline prices to be $100 a gallon to force us into electric cars. That’s their agenda. And so that’s why she was laughing. And she didn’t give him an answer. She didn’t say one thing about what they had in mind doing to bring down the price of gas because they don’t want to bring down the price of gas; they want gas to get more expensive, not less expensive, as long as they can get away with it politically. And so that’s what they’re up to and that’s what they’ve done.
And so the energy companies can’t pass on those costs indefinitely because I don’t know about you, but I don’t have a bottomless bank account. There’s only so much money I can afford to pay for transportation. And when I first visited the country of Turkey—I have friends in Turkey and an academic conference I went to every year in southern Turkey—and at that time, the price of gas there was the equivalent of $18 a gallon. And a young man that I met there had an MBA degree, he worked for a large corporation, had a good job, and he drove a scooter. He couldn’t afford a car because they had 100% taxes on automobiles. So if Toyota shipped a $30,000 Camry there, there’d be a $30,000 tax on that Toyota. And so that’s—I mean, that’s one thing that—I’m not saying we’re headed there, but there is a limit to the ability of the energy companies and the car companies for that matter to pass on these taxes and these environmental regulatory costs to the people.
Armed IRS Agents and the Whiskey Rebellion [27:31]
Bob Zadek: What are the other headlines of what enraged you? I mean, that’s like an open-ended question; we’ll be on until Christmas time. But what are the other headline-grabbing elements in the Inflation Reduction Act that as an economist just made you roll your eyes or whatever you do when you get that feeling in the pit of your stomach?
Thomas DiLorenzo: Well, the most atrocious thing was they want to hire 87,000 new IRS agents, and reportedly 70,000 of them are to be armed. And so it reminds—you know, Americans once fought a revolution over such a thing. In the Declaration of Independence, Jefferson wrote that this train of abuses by King George III, and one of them is that he has sent swarms of officers into our homes to eat out our substance. And these were armed tax collectors who barged into people’s homes with guns to enforce the Stamp Tax and other taxes. And we got rid of that by fighting a revolution.
And then actually, there’s an interesting story about that. Then after the revolution, it was Alexander Hamilton who wanted to bring that back. There was a Whiskey Tax rebellion. They imposed a tax on whiskey, and Western Pennsylvania farmers protested, refused to pay it, and they even tarred and feathered federal tax collectors when they came around. And Hamilton talked George Washington into taking some 13,000 soldiers into Western Pennsylvania to try to enforce the Whiskey Tax. It all turned into a bust. Washington went home, and there were two of the protesters who were convicted of tax evasion, I guess, but George Washington pardoned them both. But that was the first attempt to resurrect an army of tax—armed tax collectors. Fast forward all these years, and here’s Joe Biden proposing bringing this back, the same thing that we fought the American Revolution against, or one of the things anyway that the revolution was fought against. So it’s atrocious. And the income tax and the IRS need to be abolished altogether and not given guns at our expense.
Why Socialism is a “Hard Sell” [33:18]
Bob Zadek: One of the most dishonest statements about the 87,000 new tax collectors—although some of them will be doing something other than tax collecting, but most of them will be doing tax collecting—is this is nothing other than a tax increase. Now, the words “tax increase,” the public has been deceived to think those words mean what percentage tax rate is in the statute. That’s false. Who cares? What people care about is how much taxes they pay. What the statute says is irrelevant. And the whole claim, “Let’s have 87,000 tax collectors just so everybody pays their fair share.” Well, any way you slice it, people will be paying more than they pay now. Does it matter if you’re the one making the payment, whether you’re paying more because they disallowed some deduction you thought you had versus they raised your rate? You’re still writing a check, and you didn’t write a check before. So any way you slice it, this is a tax increase dressed up as “we’re getting people to pay their fair share.”
And what in the world does this have to do with inflation reduction is beyond me because all it’s doing is it’s transferring wealth—and I’d like you to address this point because it’s an important one in your book—it’s transferring wealth from the private sector to the government. Any way you slice it, if Biden is correct, there’ll be more money flowing to the government later than now. Well, that means that as an economist, you ask yourself, “Who would you rather make a decision how a dollar is spent? Who will make a decision that’s in the collective betterment of all of society? Government, which makes decisions based upon the politics of it all, or 300 million Americans making private decisions, very small but collectively dictating how the economy goes?” So speak to, if you would, because you do in your book, the differing results of government making a decision—the results on the collective well-being, collective, not groups that get lucky—collective well-being of government making decisions on how to spend more of the money or individuals acting privately making the same decision.
Thomas DiLorenzo: Yeah, well first of all, another big lie that Biden’s economic advisor has been telling about this is—I saw him on TV, his top economic advisor saying, “Well, if we do collect more taxes, that’ll be less spending by ordinary people, and that will reduce inflation.” That’s what he said. But of course, that same money, like you said, goes to the government and there will be more spending by the government. And that will increase inflation. And so it’s just total nonsense. They’re hoping that people are dumb enough to fall for this when they say that, when you get this guy in a nice suit with 17 American flags behind him in the White House behind him, they think people are going to believe that.
But in my book, I point out the simple truth that in the market, in the private sector, if a business serves its customers better, it makes money, it profits. And vice versa, if it serves its customers poorly, it loses money. In the government, failure is financial success. In the private sector, you have to serve your fellow man to be successful. But in the government, the worse you do in whatever it is you’re supposed to be doing—educating the kids in government schools or getting people out of poverty or whatever—the worse you do, the more tax dollars they take from us because they always say, “Well, the reason why we failed was we didn’t have enough money.” You blow up the space shuttle years ago, NASA got a 50% budget increase after blowing up a rocket ship. And so failure is success in government.
And so it’s a totally different ballgame. That’s why if you take a million dollars out of the private sector with a supposedly a jobs program to create government jobs, well for every government job that might pay somebody 30,000 a year, it’s not unusual that they would spend ten times that in bureaucracy and paperwork to provide the one $30,000 a year job. As an anecdote on that, I once had a student in Baltimore who worked on her spare time with a charity. And the charity got a grant from the state of Maryland to provide employment for Russian refugees. This was many years ago, people who came here from Russia and needed to find a job and start a life new in a new country. And they got a $100,000 grant. And she invited me to give a talk to these people at a luncheon talk. And they brought the one woman that they found a job for. And this young woman had found a part-time 20-hour-a-week secretary job. And that was it. $100,000. But we had a very nice lunch at a very expensive restaurant, and there were about 30 people there sitting around the table enjoying the very nice lunch at the expense of the taxpayers of the state of Maryland. And that’s just one little anecdote to show you how transferring money from the private sector to the government sector impoverishes us always and in every way.
Bob Zadek: It seems to me from what I have read that selling free-market economics to high school and college students is a hard sell. Now, when you present this point of view to this hands-folded-in-front-of-them hard-sell audience, what helps you the most make the sale?
Thomas DiLorenzo: Well, college students, like everybody else, very often resent learning that they’ve been lied to or fooled about things. And so if you can explain how markets work with real-world examples and they contradict what their socialist professors have been telling them all these years, it turns them around and a lot of them get angry that they’ve been sort of bamboozled by their other professors. I had one student who was a very memorable student, he came into my class and he bragged to me that he was a faithful donor to PBS, the public television. At the end of the semester, he told me, “I’ll never give them another dime.” And so I’ve had many conversions like that when I stick to the logic and also reality. I always have my students read about real-world markets and economic reality. Of course, it’s easy to sell socialism if all you talk about is a socialist dream world and not the real world. But I also taught them about the reality of what happened under socialism, and I even used Hayek’s Road to Serfdom as one of the textbooks in one of my classes. And so that—and I was pretty successful in having them open their eyes to economic reality.
Backdoor Socialism through Regulation [38:36]
Bob Zadek: As a for many, many years a college professor teaching economics, you have to have had days when you felt kind of cynical and kind of “wow, what an uphill battle.” What do you think, have you formed an opinion on how life in this country will be altered once the—I hate to say the words—Inflation Reduction Act kicks in? What will we start to observe? What will change, if anything? Or is it, while it’s a profoundly ill-conceived piece of legislation, is the economy just too big so we’ve survived worse and we’ll survive that, or is there likely to be noticeable adverse effects? How will somebody who looks see a difference once the statute kicks in?
Thomas DiLorenzo: Well, one thing that could conceivably happen is that the Republicans could gain control of the Congress and defund this act. I’m not that optimistic that that will happen, but it is a possibility, especially if it becomes extremely unpopular because a big part of it is a massive additional government intervention in the name of environmentalism. And in my writings, I quoted the late Robert Heilbroner, who was a socialist economist. In 1990, he wrote an article in the Atlantic magazine that was sort of a mea culpa. He said, “The intellectual battle between capitalism and socialism is over; capitalism has won.” But then at the end, he says, “But there is still hope, fellow socialists.” He said, “We can have socialism after all through government regulation in the name of saving the planet. That’s how we can go in the back door, sort of back-door socialism.” And so regulatory socialism. And that’s what we’re seeing, and that’s what a big part of this so-called Inflation Reduction Act does by piling on thousands of additional environmental regulations, everything from what kind of windows you put in your home or your business office and everything else to more taxes on energy.
Bob Zadek: And that’s a perfect way as we wind down to sort of end our discussion. We’re kind of ending where we started, where even if, even if—but we know of course it’s not going to happen—but even if there is any kind of an improvement, whatever the heck that word means, in the climate, whatever that means, even if, the question must be asked: at what cost? Because let’s understand, if you take all of the resources of the country and apply those resources to one singular goal, you’ll probably accomplish the goal and leave behind a country in shambles. It’s nothing other than a war. You win the war, but then you ask yourself, “At what cost?”
Thank you so much, Tom, for sharing your thoughts with us. Most importantly, for writing the book, which is a valuable addition to anybody’s paper or digital library. It is an easy read; it will help you so much understand what’s going on in Washington, in Albany, in Sacramento, how they’re out to get us and what you can do about it. Thanks a lot to Tom, and thank you of course to my loyal listeners and friends out there. I hope you have enjoyed the past hour and found it to be worthwhile. Have a nice rest of the day, in fact, rest of your life.