Introduction to Microeconomics – 5 of 14 – Minimum Price Controls – Murray N Rothbard

INTRODUCTION TO MICROECONOMICS
Presented by Murray N. Rothbard in 1986 at New York Polytechnic University. Recorded by Hans-Hermann Hoppe.

5. Intro to Micro: Minimum Price Controls

Thou shalt not sell a certain product or service below a certain price, e.g. wheat, cotton, corn, cheese, sugar. This will result in an artificial unsold permanent surplus, as it does in the American farm situation. Initially, resources are attracted into the field, but the artificially high price discourages buyer demand. This kind of interventionary tampering with market signals destroys the market tendency to adjustment and brings about losses and misallocation of resources in satisfying consumer wants. The principles of minimum price controls apply to minimum wage laws, which lead to involuntary mass unemployment.

Part 5 of 14. Presented in 1986 at New York Polytechnic University.

This lecture as a Podcast: http://enemyofthestate.podomatic.com/

Sourced from: https://mises.org/library/introduction-microeconomics

Source: Introduction to Microeconomics – 5 of 14 – Minimum Price Controls – Murray N Rothbard – YouTube

http://www.readrothbard.com/introduction-to-microeconomics-5-of-14-minimum-price-controls-murray-n-rothbard

TRANSCRIPT

00:00
now we get to the final kind of
00:02
government intervention in prices namely
00:04
minimum price control price y axis
00:11
quantity and x axis pulling the man
00:14
curve comply line and the minimum price
00:18
control of government says thou shalt
00:19
not sell a certain product or service
00:22
below a certain price and we’re keeping
00:24
it above the market equilibrium the
00:31
government does that they set up a
00:33
situation where for much less will be so
00:37
land and supply in other words supply is
00:41
much and quantity demanded as much less
00:44
because the price is higher supply is
00:46
greater than the man and as an unsold
00:49
surplus nor the free market situation as
00:52
it unfolds surplus prices full have to
00:56
cut their prices are because the surplus
00:58
piles up you wind up back here with a
01:01
equating equating supplying a man of the
01:05
private market clearing price and you
01:07
eliminate the surplus so the government
01:08
says know that you can’t do that it’s
01:10
illegal to sell a product for less than
01:12
us you then have a permanent surplus and
01:16
the surplus piles up and gets worse over
01:18
time because of anything with a higher
01:21
price they’re happier to have more
01:23
increase production even more than that
01:25
and I have to keep flying that up for
01:27
whatever if you wind up it even more
01:30
surpluses over at current surface gets
01:31
worse and worse as time goes on just
01:33
like a shortage just worse and worse
01:34
with next maximum price control there
01:40
are two big examples the minimum price
01:42
control a relevant example the first one
01:44
we’ll deal with today is the full form
01:46
question which you’ve been totally
01:48
screwed up now for about almost 60 years
01:51
so shows those signs of improving Matt I
01:54
probably getting worse and the other is
01:56
minimum wage law which we’ll get to on
01:58
thursday the basically the way the farm
02:05
farm situation started is that we’re
02:09
back in World War one it goes back
02:10
everything starts for wall one is a
02:12
matter of five
02:13
in the case of a farm question during
02:16
World this was for World War one when
02:17
Europe was at war and we weren’t we
02:20
can’t we came in 1917 they could they
02:24
were blockading each other in other
02:26
words the warring countries were
02:27
blocking each other they couldn’t buy
02:28
any food from each other on the other
02:29
hand the United States was neutral so
02:31
they bought a lot of food from united
02:32
states so what your hand was an
02:36
artificial increase in the main curve
02:38
for farm products wheat cotton corn a
02:41
surf stuff and so forth amines
02:46
tremendous increase in farm prices and
02:48
an expansion of foreign production and
02:52
this continued during during work when
02:54
we got into the war because then we have
02:55
a united states government buying stuff
02:57
and shipping it abroad and took her and
02:59
so on we had in other words before and
03:01
during World War one a non-official
03:04
increase in farm prices and a foreign
03:06
production the former has ever had its
03:08
little good before since in a relative
03:10
sense so after the war was over it’s a
03:16
big drop of course the everybody goes
03:18
back to normal as a drop in European
03:22
demand for american farm production the
03:25
man curve goes back to a for more or
03:28
less at prices full ok and so and since
03:32
production is now here it means you have
03:34
a big agricultural depression United
03:37
States this happens usually after every
03:38
war in a world war one this gave gave
03:44
rise of the farm block just happen where
03:46
first appearance of the farm block an
03:47
organized force and the foreign blog
03:50
ever since then has been trying to live
03:52
the way the farmers would like to have
03:55
become accustomed back before World War
03:56
one in other words they one of the same
03:59
relative income relative price structure
04:01
now is they had a 1910 1914 period and
04:05
what they did is they call this parity
04:08
half a battle in any kind of and
04:10
political struggle to find a good name
04:12
for you one if you call it man if you
04:15
want to get a monopoly privilege you
04:16
don’t call it monopoly doesn’t sound
04:17
that you call it fairness or some other
04:19
crap this case you can call it parody
04:23
who can be against parody right so power
04:26
defined as the same relative price
04:29
perform farm prices relatives all other
04:33
prices as existed in the nineteen ten
04:35
1914 period a peak American history
04:39
before insects in other words you take
04:41
an index or of weak prices or cotton
04:44
prices relative to other prices
04:46
manufactured products labor whatever
04:49
wage rates and they were their peak in
04:52
this period so the former’s ever since
04:54
that have been insisting on going back
04:56
to the good ol days of parity and
04:57
getting of course the government to do
04:59
with four of them the thing about
05:02
agriculture is the general trend in life
05:05
and civilization develops the trend is
05:08
away from the farm in other words with
05:10
in 1789 the American Republic was
05:12
founded everybody was a farmer say
05:17
ninety-five percent of the people were
05:18
farmers and the rest of the people
05:21
essentially were merchant shipping farm
05:23
products in the word exporting farm
05:25
products importing manufactured good
05:27
more or less yeah roughly troops you had
05:30
you start off in the world ninety-five
05:33
percent of people of farmers and as
05:34
civilization develops as industry grows
05:36
services all that sort of stuff people
05:38
leave the farm and go to cities and
05:41
suburbs office of other places and get
05:43
better jobs in other areas so the trend
05:46
of world history is against the farmers
05:48
in a sense not against food because
05:50
economically you leave the farm increase
05:53
agricultural production even as you
05:54
leave a farm if you get better
05:56
technology for machinery lots or stuff
05:59
and ways of producing crops you leave
06:05
your funny do other things so if you’re
06:08
trying to freeze this a piece of turbo
06:09
thing people leaving the farm what
06:11
you’re doing is you’re essentially
06:11
freezing the world try to turn back the
06:14
clock and and and and decrease
06:17
productivity decrease technology go back
06:19
in the good old lady and everybody the
06:20
farmers totally nuts there’s always why
06:23
the taxpayers should subsidize this and
06:25
the consumer to subsidize kind of truly
06:28
reactionary position because the fight
06:30
against modern modern world
06:33
industrialization if everything else but
06:35
it’s still going on of course even
06:37
though right now only six percent of the
06:38
population of farmers six
06:40
sent and then put a little fuss is made
06:42
of any you take the whole world of the
06:43
former’s this is such not only true
06:46
United States by the way almost every
06:47
country outrageously subsidizes their
06:48
own former Europe is a common market
06:50
it’s supposed to be free trade with the
06:52
only European countries though free
06:54
trade because every company protects his
06:56
own zone Farmers of the hill keeping out
06:58
cheaper and better farm products mother
07:00
country so every every country has its
07:02
wall of protection areas around their
07:05
own formers the the American Farm
07:09
situation a farm block begins
07:11
interestingly enough not with a former
07:14
the note was going on mostly begins with
07:16
a few people who are number one farming
07:21
equipment manufacturers for machinery
07:25
manufacturers okay who realized if you
07:29
suffer government subsidized with a
07:31
farmer they too will be subsidized even
07:33
more it will see how on the shearing
07:36
these are guys a manufacturer you know
07:39
tractors and combines a lot source stuff
07:41
I’m as you might expect being born in
07:44
bread New York I’m not exactly expert on
07:45
agriculture so anyway these are for
07:48
machinery manufacturers begin the idea
07:50
of a farm block the first two guys
07:53
George peak and Hugh Johnson wrote a
07:54
book called form equality equality fraga
07:57
culture I think in 1921 these guys were
08:00
both they were chairman of the board and
08:02
president of moline plow company which
08:04
those days were the second largest farm
08:06
equipment they’ve machinery
08:08
manufacturers they said they will about
08:10
a poor Dirt Farmer and love junk the
08:13
other guy Bernard Baruch was their
08:14
mentor the big land speculator other
08:17
words he brought up a lot of farmland
08:19
and then pushed for subsidy performers
08:23
of the land spice of Atlanta go way up
08:25
this is sexually these the guys would
08:28
begin the agitation for of course as
08:30
they keep agitating for the farmers that
08:32
has some great stuff organized farm
08:33
block where I can farm bureau Grange of
08:36
sort of thing so anyway during the 1920s
08:39
they keep pushing for subsidized
08:40
subsidies to pour the four former
08:41
instead of saying alright let’s the
08:42
farmer get out in other words the former
08:44
is producing more than was before cut
08:46
back and leave the farm and what sort of
08:48
stuff and by the way leaving the form of
08:50
me of the age of 60 you have to leave a
08:51
form it almost always happens as the
08:53
sons grow up
08:54
daughter’s grow up the Sun say okay pop
08:57
I’m sorry on my feeling better
08:59
opportunities in New York or California
09:00
or something and they leave the farm
09:02
this is basically what happens new
09:04
generation coming up so has always been
09:08
that way they say it’s been that way
09:09
since 1789 except now 1920s we begin an
09:11
agitation try to stop it 1929 Herbert
09:16
Hoover becomes president herbert hoover
09:18
was committed to the farm block he said
09:20
if he gets pretty present the first
09:21
thing he’ll do with her listen to a farm
09:23
support price support program which he
09:25
did I’m March 9029 the infamous federal
09:29
farm board was created this is the first
09:33
farm block farm farm pie support program
09:36
March 29 done before the depression
09:39
don’t think this is a response for the
09:40
9029 oppression question hit in October
09:43
and it was for that doesn’t consider
09:47
this attended to be a permanent part of
09:49
America and policy which of course
09:50
unfortunately became the idea is this
09:53
yeah how do you raise the prices here’s
09:56
the price of wheat they started with
09:57
wheat it has always been the biggest
09:58
hood of a powerful part of Agriculture
10:01
not now for prom price support program
10:04
especially almost everything with any
10:06
copy to think of us Carlos we Kartal is
10:09
a shin Marketing orders limiting
10:11
production and and and it creates
10:15
control what’s our stuff but any rate
10:17
starts with weed and cotton for
10:18
seriously the idea is he’s created
10:21
federal farm board which so this starts
10:26
the whole policy which is supposed to
10:29
buy up a lot of week if you buy up week
10:31
you raise the price in other words you
10:32
add to the regular demand by consumers
10:34
and so forth he has a federal government
10:36
which inc which buys up stuff and
10:38
increases the price to push the price up
10:40
to whatever whatever the former’s one so
10:43
they did that they did that for him by
10:45
the way the head of the federal forum
10:46
board the federal for more consistent
10:49
much of people representatives organized
10:50
agriculture wheat farmers apple farmers
10:53
New York things like that but the head
10:55
of it was Alexander leggy who was the
10:57
chairman of the board of international
10:59
harvester which of course was the
11:00
world’s foremost farm equipment
11:03
manufacturing company so that sort of
11:08
International Harvester not exactly a
11:10
Dirt Farmer I gonna like you probably
11:12
you’ve never saw up form nothing right
11:14
kind of head of international harvester
11:16
so they buy up wheat but see the problem
11:18
is here’s the wheat federal foam board
11:20
stucco has huge accumulation what are
11:23
they going to do with it it’s hanging
11:24
over the market like a sort of Damocles
11:26
and the markets worried about the fact
11:27
if they ever sell this stuff 20 mil then
11:30
again and so as a result nobody wanted
11:32
to buy a week no no the speculators
11:34
they’re worried because they’re afraid
11:35
of the government sells the lead to be
11:37
Anna luck and so the price goes pushed
11:39
off a little bit no damn again
11:40
immediately it couldn’t do it they
11:43
couldn’t just push up what do they in
11:44
duel with excess of wheat or excess
11:47
cotton and also they fan out the vibe by
11:51
trying to raise the price of wheat they
11:53
stimulate a further wheat production
11:54
which which made a problem even worse so
11:59
around and of course where the
12:01
Depression hit that’s even more so
12:02
because depression kind of the old price
12:04
a ton of alcohol and they try to push up
12:05
wheat prices in the face of all this
12:08
general price collapse so finally by the
12:12
end of the Hoover administration by
12:14
about twenty thirty two they realize the
12:16
only way to try to raise farm prices
12:19
equations I’m permanent manners to
12:20
organize the farmers as a cartel in
12:23
other words they was essentially they
12:26
went Secretary of Agriculture went on
12:28
and told the farmers campaign all over
12:31
the country even his agents and so for
12:32
and they told the farmers that they hold
12:34
meetings of farmers tobacco farmers we
12:36
farmers cotton former local farmers and
12:38
all that they said look explain to them
12:40
economics the situation they said if all
12:42
of you cut production if you voluntarily
12:44
cut production lets say by twenty
12:45
percent prices will go up thirty percent
12:49
of forty percent you will benefit other
12:51
words he’s telling them of the demand
12:53
curve for their product is inelastic it
12:56
probably was I mean though the proof for
12:58
it and for you for you is probably right
12:59
so the may incur for we your cotton or
13:02
oats or whatever was in elastic
13:03
therefore if you old band together and
13:05
cut production by ten percent Isis goal
13:07
of my thirty percent or whatever in
13:08
other words the total revenue increased
13:10
you don’t share the benefits of course
13:13
who loses by this who loses a consumer
13:15
loses because consumer now have to pay
13:18
higher price wrote for a lower product
13:21
the suckers especially during depression
13:24
everybody was poor we now have to pay a
13:25
much higher price for less sweet let’s
13:28
cotton fewer pigs and sort of sort of
13:30
thing pure cattle the farmers was
13:34
benefit consumers would lose on
13:36
taxpayers will lose insofar as we have
13:37
to buy up it spent a lot of money buying
13:39
that stuff up the federal farm boy
13:42
outside so they told a form of this it’s
13:46
okay remember he cut production next
13:49
year by ten percent of fifteen percent
13:50
whatever the thing and prices will go
13:52
double you’ll be much better off each
13:54
farmer then went back to his own home
13:56
and thought to himself farmers not
13:57
stupid especially about their own your
14:00
own pocketbook look if these suckers out
14:03
there they’re going to cut their prices
14:04
we cut production raise prices i’m going
14:06
to double my production and take
14:07
advantage of higher price right of
14:09
course in other words each farmer going
14:11
down his own big curved so to speak and
14:13
result of I of course instead of
14:14
production going up going down it went
14:16
up there we’re softening or reform again
14:20
demonstrating the cartels don’t work I’m
14:22
going to repeat this later on the course
14:24
when i get the monopolies and cartels
14:25
cartels don’t work unless the government
14:26
forces it voluntary cartels don’t work
14:29
with everybody would say to himself on
14:31
ha i want to take advantage and increase
14:32
my production while the other suckers
14:34
cut their a good solid American trait
14:37
yeah so then they started a former
14:40
organized farmers thought of a random
14:42
violence example of tobacco crops speed
14:45
and see if they have with a back alley
14:47
said will increase your you cut your
14:49
production by ten percent to macro price
14:51
at all by twenty percent each guy
14:52
increases the back over dark tobacco
14:53
farmers thought of so Ku Klux Klan
14:55
activities a matter of fact they were
14:57
the Ku Klux Klan usually North Carolina
14:59
and so for they wouldn’t started burning
15:00
tobacco fields they felt a guy increases
15:03
production there was a lot of that anna
15:05
has his core purpose the illegal and
15:07
it’s random if i could yes that’s
15:08
systematic say the least they also did
15:11
that with milk they tried they dumped
15:12
that it’s saw milk trucks name something
15:14
that was going beyond there is formal
15:16
informal milk quota and you went and
15:18
dumped the trucks on the dump the milk
15:20
on that on the road as i say these
15:22
things were random violence me obviously
15:24
not we’re not systematic therefore not
15:26
successful so by the end of the Hoover
15:30
administration the the farm boy and the
15:32
Hoover administration itself came
15:33
conclusion the only thing it would work
15:35
government coercion the way the
15:36
government has to force the former’s
15:38
quote for their own good unquote a cut
15:40
production so it forced them into a
15:43
cartel very much like with dirt Bismarck
15:45
and Germany forced the German industry
15:46
into a card tell so it means an
15:49
individual so once again what’s
15:50
happening then is he forced in the cut
15:51
production means the individual
15:53
performers might do better on their own
15:54
or forced to go along with this general
15:56
process of monopoly and shafting the
16:01
consumer so when Roosevelt came in a
16:03
1933 what exactly what he did he put the
16:06
farm program and systematically employ
16:08
government coercion they try to force
16:10
former to grow less setting out the AAA
16:13
the American agricultural to the
16:16
Agricultural Adjustment administration
16:18
official name of it vast bureaucracy and
16:23
Department of Agriculture that trying to
16:26
force farmers of setting maximum quotas
16:29
the force farms that cut production so
16:32
they can raise price and all benefit by
16:34
the cartel that was the concept now this
16:37
is a pretty outrageous for the famous
16:39
example a force they try to force the
16:42
farmers I cut their pig production by
16:43
one-third number of pigs they raised at
16:46
the middle of the depression months
16:47
people starving in the cities here like
16:48
organizing agriculture the name of a
16:50
quote welfare state which was a new deal
16:52
alleged contribution to American economy
16:55
the cut production raised prices while
16:57
people were starving in the cities I
16:59
don’t call Val welfare and any true
17:01
sense of welfare system this is the
17:03
warfare state in action any rate so they
17:09
figure however they couldn’t it would be
17:11
difficult to cut production directly the
17:12
cut production which they’re doing now
17:14
in a lot of case however tobacco and
17:16
also the role of peanuts the cover
17:18
adduction means you have to police
17:19
everybody’s output if there’s some kind
17:21
of way of policing marketing to make
17:24
sure that the Jones farmer doesn’t
17:25
produce more than his quota they figured
17:27
a way better an easier way to do this
17:29
it’s a cut his acreage because a
17:31
creation is visible in the Department of
17:33
Agriculture County age you can drive
17:35
around the county find out whether how
17:37
many acres each Jones of you know
17:39
cultivating wheat very easy to see so so
17:42
a creators of visible thanks but the
17:43
instead of having production quotas
17:46
cutting production my sternum attic
17:48
fortunately
17:48
cut a courage because there’s easily
17:49
more easy to enforce they put on acreage
17:52
control maximum acreage okay so in other
17:56
words if accidentally edge closes so
18:02
let’s say here’s leak Jones wheat farmer
18:05
in Kansas and he’s say a hundred acres
18:08
the vote of the week they tell them
18:10
everybody’s got to cut that wheat
18:11
acreage by twenty percent you have to
18:12
take 20 acres out of production and only
18:15
have 80 acres where were we by doing
18:17
that they thought they would cut
18:18
production by twenty percent you cut a
18:19
tree edge by twenty percent you cut
18:20
production my driver right wrong not the
18:24
way it worked the former is indeed
18:27
obeyed the law in most cases that cut
18:29
their acreage however farmers are smart
18:31
and so here’s what we’re gonna do there
18:33
they’re forcing us to cut a creole
18:35
dealers will take our twenty lousy of
18:36
acres cuz they turn out all the same one
18:39
acre is not the same as every other
18:40
raker take your rocky soil stuff with no
18:43
damn good anyway take that out kind of
18:45
production and you concentrate all your
18:47
best efforts on the 80 acres take the 80
18:49
best acres and mechanized and then you
18:52
use fertilizer and irrigate it’s exactly
18:55
what it does mean why not producing more
18:56
than there before moreover the 80 acres
18:58
100 acres so this means here’s the
19:02
government trying to push farm prices up
19:05
okay and so clearer here and and then
19:15
and so they kind of make have acreage
19:17
but they want up with all the stuff
19:19
being produced more being produced
19:22
they’re out here now and the
19:24
government’s got to buy up all the stuff
19:25
whose governments committed if pushing
19:27
prices up to here so the government
19:29
department of agriculture buys up it’s
19:31
called loans that it’s really buying up
19:32
buying up all the excess amount to drive
19:34
to push the prices up to here so instead
19:37
of having the Reformers cutting
19:39
production we cudda a creation increase
19:42
production para micra culture to buy up
19:44
even more storing also some useless week
19:47
that’s producing cotton and cheese
19:48
nowadays and a lot sort of stuff storing
19:50
it and bin somewhere and this letting in
19:54
violence they rot refrigerator is
19:55
keeping there for almost forever so this
19:58
is this is essentially what tabatha last
19:59
50 years one in one form or another
20:02
variations it’s more than that though it
20:06
spreads even crazier than that the
20:09
Department of Agriculture one division
20:11
of the part of my culture is trying to
20:13
pay the farmers in other words subsidize
20:16
him to grow less right I know the buying
20:19
up all this stuff I’m trying to forget
20:21
raising the price and getting to grow
20:22
less another division of part of my
20:24
growing at the same time as subsidizing
20:26
the former to grow more subsidize the
20:29
irrigation a huge amount of subsidized
20:31
irrigation now and before even more so
20:35
now but subsidizing fertilizers
20:38
sometimes there are all sorts of
20:40
agricultural techniques and subsidizing
20:42
them with rural electrification to
20:44
electrify every every farm so the one
20:46
hand have the part of Agriculture
20:49
subsidizing farm at the grove more cheap
20:53
subsidizing with cheap electricity cheap
20:55
water at source on the other hand for
20:57
subsidized gonna grow less now economist
21:00
will cause an irrational policy Monday’s
21:02
vanity kind of economic irrational is
21:04
contradictory if you’re looking for a
21:06
realistic point of view it’s not
21:07
irrational from the point of view of two
21:08
people two sets of people but point be
21:11
the former they’re in great shape again
21:12
it getting paid to grow less than also
21:14
getting paid to grow more welcome you
21:15
know what better shaping and being real
21:17
reformer and also from the point of view
21:19
Department of Agriculture they are in
21:20
great shape their bureaucracy is
21:22
expanding like mad night with two huge
21:24
bureaucratic empires one wing down the
21:27
whole subsidizing farmers grow less the
21:28
other way to grow more they’re great
21:29
shape to who’s getting who’s getting
21:32
screwed by the taxpayers and consumers
21:33
plus the economy as a whole of course
21:35
looking at the point of view a kind of
21:37
rational system but it’s not irrational
21:39
from point view the farmers and a part
21:41
of agriculture but those two groups
21:42
benefit at the expense of the rest of us
21:44
is really what this is right now for
21:48
example the water thing might mention
21:50
with the so-called water shortage the
21:51
water system and the west where there’s
21:55
very little amount of water coming in
21:57
with the government’s growing u ji dam
21:59
building huge dams subsidizing farmers
22:02
with chief water it’s a very high course
22:04
for the taxpayer the latest central
22:06
Arizona Project I think it’s costing
22:09
attacks fires three times as much as
22:10
they charge the farmer to water a very
22:12
very cheap water wasting a huge amount
22:14
of water and then
22:16
because water is scarce this they
22:17
artificially making it price of water
22:18
low now forcing the forms to use it as
22:21
fast as possible the farmers then grow a
22:23
lot of crops cotton wheat etc which
22:25
we’re shown the government buys up
22:27
because because they want to raise the
22:28
price I where they subsidize the fire
22:30
that roam more than they can the
22:32
government can buy them uncle they want
22:33
to grow less you totally nuts to the
22:36
point for any point of view except out
22:37
of a farmer and a part of agriculture so
22:42
that’s the that’s the basic policy and
22:45
it happen have been certain variations
22:46
over the years for one thing as with
22:50
energy crushed as with oil the price of
22:55
the farm price went up permanently it
22:58
means that people started importing more
23:00
foreign products magruwen obviously it
23:02
means that now American wieder continent
23:04
peanuts was much more expensive than
23:06
European and South American and then
23:08
they start moving to prohibit X imports
23:10
or tariffs high tariffs or quotas and
23:13
imports or saying Argentinian meters
23:15
disease that’s a big thing by life
23:16
you’re reporting me first you
23:19
artificially jakab meat prices by farm
23:23
price allocation the controls prices of
23:27
pork and beef etc and then people start
23:29
importing more beef let’s say for
23:30
Argentina then you say oh it’s diseased
23:32
create a phony disease scare and ban
23:35
imports of foreign meat so all these
23:37
things then are a way of forcing the
23:40
cartel for foreign products as well as
23:43
American and in the and sometimes when
23:52
the world price goes up in other words
23:54
there’s some sometimes during this you
23:56
know the 60-year period agriculture
23:58
prices are high and then we unload the
23:59
surplus and we’re the surplus then we’re
24:01
able itself stuff abroad but in most
24:03
cases most of the time American price
24:06
has been way above the world market
24:07
price and so we’re stuck with these
24:08
piling out what do we do with a surplus
24:10
well and who knows they get very
24:12
embarrassing as they pile up they cost
24:14
money to the taxpayer end of the
24:16
consumer sometimes they dump abroad one
24:20
of the reasons of the food stamp
24:21
programs they’re able to get rid of the
24:23
surpluses through the food stamp program
24:24
the major lobbyists for food stamps are
24:27
not the welfare of people
24:29
the farm block a phone line once a
24:31
another kind of guaranteed income for
24:33
the farmers and guaranteed way of
24:35
siphoning the stuff for think and a lot
24:36
more surpluses the major lobbyists for
24:40
the farm program or one as I mentioned
24:43
the farm equipment manufacturers or
24:45
machinery manufacturers the big farmer
24:48
the small farmers I’ve rate then don’t
24:49
really care that some many of small
24:51
farmers are hurt by the program because
24:52
the subsidy is per bushel of wheat or
24:55
per panel cotton subsidies per pound and
24:57
rather than income subsidy the small
24:59
farmers usually lose that they have to
25:01
cut their acreage they can’t recognize
25:03
that much and the weak and the weakness
25:06
in big farmers in the week filled week
25:09
situation there’s a so-called wheat
25:11
democracy every three years I think it
25:13
is the farmers can get together and vote
25:15
on whether they should depend on the
25:16
farm price of poor program that’s great
25:18
we can’t vote we don’t allow the
25:20
villainous there’s a referendum for
25:21
wheat farmers should I continue this
25:23
outrageous subsidy of wheat farmers and
25:25
actually they always vote for it except
25:27
the small farmers and I allows of vote
25:28
those will have less than 100 acres or
25:30
less than a thousand acre Beverly bad
25:31
things One Hundred Acre can’t vote
25:33
because they probably will vote against
25:34
the program in other words only large
25:36
farmers can vote and so that actually
25:38
launched farmers and little size farmers
25:40
always vote to continue this but another
25:43
thing that happens is this that when
25:47
they pour in fertilizer and and
25:49
irrigation etc and the Meccan and
25:51
mechanization to the extra 80 acres they
25:53
mechanize more than they would have 100
25:55
acres I mean mechanize more they would
25:57
have especially helps the farm equipment
25:59
manufacturer see how this works in other
26:01
words you’re forced to cut out 20 acres
26:03
so you take the hunt the the other 80
26:04
acres you mechanized enciso Maximizer /
26:07
intensively produce on the 80 acres that
26:09
are left this tremendously helps the
26:11
farm equipment work farmer than by a lot
26:13
of farm machinery this is one of the big
26:15
reasons which is only discovered
26:17
recently by historians one of the big
26:20
reasons for the big migration of blacks
26:23
from the south to the north in the early
26:25
1930s namely most of the blacks in the
26:29
rural areas in the continent South were
26:31
sharecroppers in other words there were
26:33
sort of a kind of tenant on large wheat
26:37
farms and they would get they would pay
26:40
a certain amount of a production to the
26:42
reform of the
26:43
they pay and Pete like some proportion
26:45
of the week that they produce so the
26:47
first thing they did when the farmers
26:48
assigned to have to mechanize acreage
26:51
was cut the kick-out the sharecroppers
26:53
then mechanize something on the retina
26:54
the other 80 acres so all of a sudden a
26:57
lot of these black former cotton farmers
27:00
and south of suddenly unemployed
27:01
certainly torsten and labor market they
27:03
migrated in the north and so a lot of
27:06
them of course we’re a very in desperate
27:07
straits and it starts a lot of the whole
27:09
welfare problem migration north and
27:11
welfare a problem created in other words
27:13
on a new deal agricultural program which
27:14
was to give us bring us the welfare
27:16
state and help all mankind it applause
27:21
there the other big the other big
27:27
lobbyists for this program hi tech
27:32
heating system here the other big Lobby
27:35
asleep from part of the warehouse owners
27:41
the government stores like a little
27:44
surplus stuff in warehouses almost all
27:46
of them private where how they’re not
27:47
government-owned warehouses that
27:48
contract and private warehouses if you
27:51
own a private grain elevator which is
27:52
the term used for wheat warehouse you’re
27:54
in great shape like a steady contract
27:56
for every always always be government
27:57
surpluses if your brother-in-law happens
27:59
to be big shot in the power of
28:00
Agriculture you haven’t made for life
28:02
they’re like a permanent contract the
28:04
two million bushels a week to be stored
28:06
in your damn warehouse Nicole grain
28:09
elevators my way because they they’re
28:10
very tall various reasons so they
28:12
elevator something like a bell to carry
28:15
the wheat up don’t ask me anymore the
28:17
technology investments anyway so the
28:21
warehouse owners lobby intensively in
28:24
their areas for the farm program the big
28:25
farmers and a for machinery manufacture
28:28
between major groups of course when they
28:31
want to talk with testify for Congress
28:33
they always try out the poor Dirt Farmer
28:35
you don’t talk about the warehouse owner
28:37
and large former so what’s happening oh
28:42
the later the next big innovations then
28:45
came in the Eisenhower administration
28:46
like big step forward or backward farm
28:49
program what happened with question see
28:53
what happens to the 20 acres they can’t
28:54
grow a weeder continent they grow
28:56
something else
28:57
soybean I’d say your turnip sort of
28:58
Ritter’s and so eventually this means is
29:03
our substitutability here you have a
29:07
look here’s the week here’s wheat let’s
29:10
say so we fourth up and the acreage is
29:15
forced out or whatever yeah when they
29:17
create control is imposed the 20 acres
29:21
then the vote let’s say to soybean that
29:22
means there’s an increase in soybean too
29:24
much supply of soybeans increases so
29:31
means wheat prices are given up although
29:34
only a created for grilling on
29:35
production and then supply of soybeans
29:38
drugs drop the price of soybeans for so
29:40
the form is not started a bellyache this
29:42
is terrible thing because I think this
29:44
is a full advice of soybeans and turnips
29:45
all these things which are using these
29:48
20 acres for so the eyes I
29:50
administration has one another big
29:52
advance in this whole whole nonsense
29:56
creating a new concept hold of soil bank
29:58
I got a great term so it sounds terrific
30:01
right soil Bank is this you in order to
30:06
prevent these red soybeans or turnips
30:09
from being produced you pay the farmers
30:11
more if they keep this whole lot of
30:13
productions they just keep the land idol
30:15
they don’t grow anything on it let’s
30:17
call the soil Bank keep the soil but
30:19
nothing on and nothing growing in it
30:21
though as you pay the farmers the
30:23
greatest great innovation in the eyes I
30:25
administration you pay the farmers not
30:26
to do anything at all not to grow
30:27
anything and I still do that of course
30:30
this all air edit any time they have an
30:32
innovation permanent part of the
30:34
American soil heritage so this is wes is
30:37
a great deal if you can if you can swing
30:38
it be great if I could be pay a lot of
30:40
money not to teach economics if you guys
30:42
would be paid a lot of money not to be
30:44
engineers and you see how the world
30:48
economy would progress with us and so
30:53
this is I said this is the layer
30:55
meanness the school taking land out of
30:56
production just making it sit there
30:58
because to make sure all prices could be
31:01
pushed off it so just some prices the
31:06
during the Nixon administration was
31:08
talked about eliminating thing upon
31:09
price support all
31:10
they actually have passed a law sort of
31:12
créteil or something a stopgap but
31:15
that’s also spilling because it’s get it
31:16
gets be very complex legal structure you
31:18
all these things get a larger on top of
31:20
each other but anyway for a while there
31:23
they when world agricultural prices are
31:25
fairly high they were talking about
31:27
eliminating truant price support
31:28
products but that’s an eye out the
31:30
window of course the back worse than
31:32
ever what the Reagan administration did
31:36
to their innovation making me even worse
31:41
is called pic called payments and kind
31:44
program Pik where they pay the farmer
31:50
still more if they agree to cut
31:52
production by half or something the word
31:53
they’ll pay them don’t pay them back
31:57
goes like this let’s say the government
31:59
stored up a lot of week okay so they
32:01
tell the far as you could cut cut your
32:03
production from here to here we will pay
32:05
you back in the wheat leaf store it up
32:07
or it’ll pay you the wheat and you can
32:09
then sell it so this way you try and
32:11
unload your surpluses and you cut your
32:14
production in half we will then supply
32:16
you with wheat from our store our
32:17
storage free called payments and con
32:19
program another form of subsidy hasn’t
32:21
worked at all in that fact gently state
32:24
of collapse in a couple of years the
32:25
farmers are worse off what’s happening
32:27
now is the farmers now bellyaching about
32:28
being in the stairs oppression and the
32:31
reason is it’s very similar why the
32:33
railroads our state of permanent
32:34
collapse after eighteen hundred years of
32:35
government regulation in there and the
32:37
airline’s almost collapsed before
32:39
deregulation because after a long time
32:42
of the sort of the whole whole industry
32:44
gets inefficient monopolistic and full
32:47
of the part the farmers in particular
32:50
but sort of a pension when they were in
32:53
a good shape but things are going well
32:54
when prices are going up means that our
32:56
land values are going up they borrow
32:57
heavily speculating an increasing
32:59
increase in their land values important
33:02
they mortgage that form for the hilt and
33:04
mortgage the houses that help because
33:05
things are going up well of course
33:07
prices you know rising force it’s like
33:09
anything else and when the Fox of the
33:11
farm prices go up they borrow plunge
33:12
heavily and board of the hill before
33:14
prices go down they get caught they got
33:16
court short because now i have to pay up
33:18
in places all over they can’t afford
33:20
their mortgage payments
33:22
losing losing at then of course they
33:24
turn to the federal government for aid
33:25
for some reason they are the darlings of
33:28
a mark on life there are the sons of the
33:30
soil they make up a pitch for go on non
33:32
tactic having on the scene a pitchfork
33:34
or gold mechanize anyway and then they
33:38
come running in the government no no we
33:39
look for murrs have to preserve American
33:41
soil American character and like crap
33:43
and so they usually get bail out and so
33:47
it’s an amazing thing because I say the
33:48
race you farmers loves only six the
33:50
sounds of population formers and it
33:53
somehow easy you still think has this
33:54
mystique of a farm and so almost
33:58
invariably they get they get bail out
34:00
but there are resulted in a long run
34:03
after many years that Kaiser that
34:05
they’re worth softening and the sense
34:06
were so of them before they’re heavily
34:07
in debt I can’t pay the debt and of
34:10
course the government says okay bae you
34:11
i’ll give you a long term loan and half
34:15
pay out your mortgage or whatever but it
34:16
says they’re this big campaign of crying
34:19
about the farm problem now so this is
34:23
this happens with this happen i’d last
34:26
60 years so now it’s sort of
34:28
institutionalized it’s almost part of
34:29
the as I say the American heritage the
34:32
case of tobacco is now marketing orders
34:35
there are specific orders for different
34:37
products the case of tobacco it’s even
34:39
weirder it’s very much like the taxi
34:41
medallion which we’ll get to later on a
34:42
course where or like the oil import
34:47
program in case of tobacco not only is
34:50
there these farm price support programs
34:52
an image controlled and all that there’s
34:57
also tremendous cut out supply or
35:00
restriction on land and what you can’t
35:03
you have to own the right to produce the
35:05
background oh but supposing i buy a farm
35:07
i can go to backhoe on for example
35:09
pennsylvania lots of forms can’t can
35:11
grow tobacco let’s say it hasn’t been
35:13
growing at least leia by the fall i
35:14
start going to bank i can’t do that the
35:16
illegal i have to buy the right to
35:18
produce tobacco and the right is
35:20
carefully restricted so in other words i
35:23
have to buy a format now which now
35:25
produces tobacco and can only produce a
35:28
certain amount so it’s over here it’s
35:30
all very restricted the price of course
35:32
becomes the monopoly price which carries
35:34
with it the right to produce
35:36
in other words you have a certain amount
35:38
of land here let’s say the value of the
35:41
land tobacco Lana’s I don’t know I don’t
35:43
know what the let’s say a thousand
35:44
dollars an acre something like that the
35:47
price is a thousand dollars an acre but
35:49
land is so place it that you can’t you
35:53
can’t grow to back on land which doesn’t
35:54
have the right the federal will write to
35:56
grow tobacco stamped on it so to speak
35:58
like a taxi medallion then the price
36:00
goes way up is maybe five thousand
36:02
dollars an acre whatever the price is to
36:04
cover give you the monopoly right to
36:07
produce tobacco which refer to point
36:09
your mother federal government so the
36:11
result does have a huge increase in land
36:13
prices for the back on wed but the back
36:14
of performers are cleaning up in other
36:18
words they get not only the farm price
36:20
support increase they get Sal and
36:21
monopoly very tightly restricting the
36:24
amount of land that can be used to the
36:25
backup it’s like madonna’s I forget to
36:29
lay out later along with a 11,000 747
36:32
taxis in New York values on it has been
36:34
the same way since 1937 50 years with
36:38
absolutely fixed amount of taxis so any
36:42
right this is so result in order to buy
36:44
a lifestyle I’ll get into that later on
36:46
but to buy a license for a cab used to
36:48
be ten dollars when we go down again
36:50
electric you prove you can drive a cab
36:51
you buy your calf whatever the prices
36:54
plus the ten dollars whole Isis I was
36:55
this I was from till nineteen
36:57
thirty-seven 1937 to help out the cab
37:00
industry the depression they decide the
37:03
issue no further licenses there have
37:05
been no fertilizers in that basil this
37:06
50 years of no license in order to buy a
37:09
license therefore drive Academy after
37:11
own a cab you have to buy it from
37:13
somebody else because total is
37:14
restricted very much the same in tobacco
37:17
agriculture crack on land so that means
37:21
there’s a market price for them for the
37:23
license for the medallion because you
37:25
can’t get it from curtain from the new
37:26
york city government have to get it from
37:27
guys willing to sell his taxi and the
37:29
result is now a little over a hundred
37:32
thousand dollars note that in other
37:35
words the price of a taxi license with
37:38
ten dollars 3700 thousand under than 55
37:41
so this needs an order of own attacks
37:44
you have to you have to go deeply into
37:46
hawk or whatever he have a huge capital
37:48
investment
37:50
and there was a it was a mayor Koch a
37:56
few years ago I had a pretty good ideas
37:58
ideas well in order to break this thing
37:59
he would give each taxi owner right now
38:03
another medallion of a license free
38:06
provided he he or somebody else uses it
38:08
within a year or something where the guy
38:09
would have to then sell it that somebody
38:10
else and they still refuse to do it a
38:14
taxi people a fort like how they’re
38:15
afraid of any increase in any creases
38:17
supply and when they keep their monopoly
38:19
price they were worried about even
38:20
getting a free license and worried about
38:22
the demand curve basically in other
38:24
words they might have a loss of total
38:26
revenue so they hung out onto it that’s
38:29
just the taxi association lawyer for the
38:31
taxi Association New York the famous or
38:34
infamous boss actual voice of the box
38:36
democracy family Friedman and virtually
38:41
controls the City Council any attempt by
38:43
any mayor because sort of break the
38:45
monopolies than one of the feet family
38:47
treatment course involvement famous nice
38:49
and parking like this euro scandal he’s
38:52
an elegant looking guy with a goatee any
38:56
rate I guess I got also going to this
38:58
further when get the monopoly because it
39:00
shows you various ramifications of this
39:02
but these various methods that tighten
39:05
up the whole system trying to make sure
39:07
there’s no it’s only crease in supply of
39:10
product the cut knows not only cut a
39:12
create should also cut production make a
39:15
thing even tighter there was a peanut
39:20
shortage about I meant to bring this and
39:23
I have an old clipping from Newsweek
39:24
about six seven years ago there’s a big
39:26
peanut shorter peanuts failure you’re
39:28
not crop failure in Georgia and so
39:32
there’s a big peanut butter shortage run
39:33
on a managed to the answer the big not
39:36
only is their price of poor program for
39:38
peanuts but also a big acreage
39:40
restrictions and marketing restrictions
39:41
production respect everything else you
39:42
can think of very tight control of
39:44
peanut situation of course more less
39:46
triple the price of peanut butter by the
39:48
way so yeah they say they try to yeah
39:51
they tried to sit as a big peanut butter
39:54
shortage make a big drop in production a
39:56
trying to import of course there’s also
39:57
big import quotas because peanut butter
40:00
from I forget who makes it other
40:02
countries that make peanut bar
40:03
big huge difference in price they have
40:06
big restrictions on peanut butter
40:07
imports so poor Skippy which sure could
40:12
be the other peanut butter makers of
40:13
course we’re petitioning the government
40:15
please let us import them cheap peanuts
40:17
we can’t get any peanuts here prop so
40:19
they’re very reluctant to do what they
40:20
allow us a little bit of import for one
40:22
year very temporary of course was so
40:24
Skippy can brew some peanut butter and
40:27
they very logically allow them to do it
40:30
as a very temporary basic I only do this
40:31
for six months for them we cracked down
40:32
again so this way it’s humorvines
40:35
shafted across the board for these
40:37
special interest groups and the new york
40:43
times by the way which is usually a
40:44
favor of all these subsidy programs it’s
40:45
pretty sad on a farm question there’s
40:47
not too not too many farmers reading the
40:50
New York Times here much more urban
40:53
oriented at least I can see this
40:55
craziness of this program so this is a
41:02
there’s no no attempt even though the
41:04
many of the Reagan for most of the
41:05
Reagan economists are against the
41:07
program is almost impossible politically
41:09
to break the hold of us for example
41:10
senator Jesse Helms a very powerful
41:12
senator from North Carolina is the big
41:15
even though allegedly favor the free
41:16
market is the big of proponent of course
41:18
mr. back up monopolies the back called
41:20
price control more bigger bigger higher
41:22
higher by the way another thing about
41:25
tobacco another little bit of nuttiness
41:27
here is that one wing of the government
41:29
the part of agriculture is constantly
41:30
subsidizing more and more higher
41:32
subsidies in the back old farmers
41:33
another wing is putting assisting and
41:36
putting warnings on every page of
41:38
cigarette warnings and dangers the house
41:40
will produce cancer ago and so on so one
41:43
wing of the government is warning you
41:44
against tobacco the other wing is
41:45
subsidizing is of the hill again it’s
41:47
only your rationale for point of view
41:49
consumer and the taxpayer on the economy
41:50
as a whole it’s not a rational point
41:52
view tobacco farmers and whatever their
41:54
department I grew culture and government
41:56
inspectors old home sort of multiplying
41:58
of this in this program so so again what
42:06
we have here is the giant cartel
42:08
organized an agriculture organized by
42:11
the federal government enforced by the
42:13
program and so as prevent any individual
42:15
former
42:16
producer from breaking the cartel from
42:18
you know increasing its production and
42:20
various attempts to get around it once
42:22
again says it’s a constant leaping
42:24
government on the market have a control
42:26
we try to get around it and you tighten
42:28
up the control some more okay if you get
42:29
around the HOH tutorial produce more
42:31
okay with a production control plus for
42:33
the subsidies or subsidies ever ended
42:36
they just added on to the as I say even
42:42
though the r a few farmers left even in
42:43
the Midwest even in places a supposed to
42:45
be farm area is simply no no way to get
42:48
get rid of this thing for one thing is
42:50
there’s log rolling in Congress each
42:53
group what to have our own stick once
42:56
have their own subsidy so the farm
42:57
people say okay I’ll vote for your favo
43:00
for New York subsidy if you have over
43:01
our subsidies and that’s general
43:03
agreement then carry the whole thing
43:04
with them increase the whole pressure
43:08
the I’ve been next time bring some
43:14
examples like how I get let peanut
43:16
butter sabotage you yeah okay dear
43:22
Thursday

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