Dec. 17, 2021

409: Government Is The Problem, Not The Solution -with Alex Salter

409: Government Is The Problem, Not The Solution -with Alex Salter

Stop Asking Government to Solve the Problems Caused by Government!


Stop Asking Government to Solve the Problems Caused by Government!

 

That's the theme of today's episode, as Alexander Salter returns to the program to outline how many well-intentioned government solutions end up only adding to the problems they're trying to solve!

 

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Transcript

Brian Nichols  
Instead of focusing on winning arguments, we're teaching the basic fundamentals of sales and marketing and how we can use them to win in the world of politics, teaching you how to meet people where they're at on the issues they care about. Welcome to The Brian Nichols Show.

Well, hey there folks right here on The Brian Nichols Show in thank you for joining us on another fun filled episode. I am as always, you're humbled host and today to talk about our friends on the right. Sometimes they have a little bit of a misconception in terms of how to approach economics, they approach it more from a nationalist conservative perspective, our guests, Alex Salter, says nay, our friends who are on the right, you're in the wrong perspective of how to actually make things better. Alex Salter, thank you for joining the program. And thank you for addressing the topic at hand. How are you my friend?

Alex Salter  
Great to be back, Brian,

Brian Nichols  
I'm doing well. Awesome. Alex, thank you for joining the program. And we're excited to have you on the show today. Because let's talk about it economics, top of mind for a lot of Americans right now, across the board, when they're looking at their paychecks, they're seeing their taxes being taken out. But it doesn't seem that the taxes are going to places that they're getting benefit from. So now they're starting to question those systems. You see people going to the grocery store, filling up their cards and realizing that they're not getting as much as they used to. And people are starting to question inflation. And then you just have people trying to find those those answers. And then you have the other side of people trying to bring their solutions to the table our friends. And as I mentioned in the the teaser here for the intro, our friends in the national conservative camp. And that's where I wanted to focus today because you have a great article over at National Review, and it's called industrial policy is unwise, but not impossible. And it focuses on one of the recurring themes we see across the the program that is where you see a problem. But then you have someone who's offering a solution that is making things worse. And why is it that people aren't paying attention to the solutions we're bringing to the table? So Alex, let's start off here by addressing the problem. We've gotten to this very tough, tumultuous economic uncertainty in terms of where we're going in the future. People are looking for some type of solutions. They're going towards this national conservative approach, where are they missing the mark? And why are people starting to go more towards this national conservative approach versus the one we'd like to see a more free market open, open market approach?

Alex Salter  
That's a great question. If I knew the answer of why they found that compelling, I think that would be a much more effective advocate for the ideas that I think I'm that are right, and that I care about. If I had to if I had to pick a reason, I think it's because many people in the conservative camp who oftentimes are fellow travelers with us when it comes to questions about liberty, when it comes to questions about individual rights, have frankly, gotten tired of the fact that despite the fact that the conservative movement have had 3040 years of strong electoral success, the federal government hasn't really gotten very much smaller, we haven't actually been able to roll back the state into a way that helps most Americans. So I think at this point, their reasoning is as long as we have this big power of full federal government, we might as well use it to go after the people who are making us less free and less prosperous. Now, of course, if you look at that, as a libertarian, you think that's exactly the wrong way to think about it, you're trying to you're still think that you can win the arms race, but nobody was an arms race, the best way to protect yourself against being on the wrong side of government power is to dismantle the power while you have the opportunity.

Brian Nichols  
Yeah, you're talking about incentives. Right. And then this is one of the I was actually just going over here. And we'll go ahead and share the screen here for the YouTube watcher, because this is something I think, you know, people want to go ahead and see as well, we'll make sure to include the links here for the listener. But one of the lines you hear had here yet well, bad incentives are certainly an important part of the industrial policy critique, they take a backseat to an issue raised by older fusions, conservatives the knowledge problem, which is the idea that it's impossible for the government to acquire and use the necessary information to bolster industry in the ways that national conservatives desire, let's dig into this knowledge problem, right. And we libertarians use this critique all the time, especially when we're looking at, you know, foreign policy interventions. I mean, that's that seems to be the easiest place for us to go ahead and make the argument also, the criminal justice system, we find the success and using the knowledge problem, death penalty, Are you certain when you're convicting someone to death absolutely certain that you're making the right decision. Let's apply this to the economics the knowledge problem that you're seeing, and how can we help address this knowledge problem as libertarians? Because here's the reality, people are looking for these solutions, how do we present our solutions and help them understand that yes, they will actually help solve the problems. But we're not trying to say we're going to go ahead and actively, I guess, go ahead and solve your problems. You have to almost take this on yourself. Does that make sense?

Alex Salter  
It does make sense. So this article that I just had published at National Review Today was kind of interesting because I'm actually defending national conservatives a little bit. The whole theme of this article is that while I think that industrial policy is a bad idea for a bunch of reasons, the argument that you sometimes get from people on our side that industrial policy is impossible. I think that argument is wrong. And so what people on our side usually do is they say, Well, all of these knowledge based arguments that were thought up by scholars like Hayek and Mises, they prove that industrial policy is impossible. And at least in terms of what contemporary advocates of American industrial policy are talking about, it's just not true. The knowledge problem refers to the impossibility of centralized or entities like governments efficient, efficiently, allocating economic resources and top down fashion, right, you can't have efficient central planning, it cannot be done. But that's not what advocates of industrial policy are talking about what they want, is more limited targeted policies to raise output and manufacturing sectors and raise employment in manufacturing sectors. This can be done, right. Every semester, I teach 17 and 18 year olds that taxes increase the prices of goods to buyers, and that subsidies, subsidies, lower the prices of goods to buyers, we don't have any knowledge problem reasons why we can't make statements like that using taxes and subsidy policy. So you could envision an argument where national conservatives just say we want to subsidize the living daylights out of manufacturing, because we think having a strong manufacturing sector is in the national interest. So I don't think doing that as impossible. I think that you could use public policy to boost output and employment in the auto industry, if that's what you wanted to do. But I want to be clear, there are a bunch of really strong arguments why you would not want to do that. They're just not the Hayekian impossibility arguments.

Brian Nichols  
So dig into that, what would be the argument because your instinctual libertarian reaction, your your knee, knee jerk reaction is to make those arguments. That's the argument, I started to go down the path, because it seems to be kind of that almost like comfort zone, but maybe it is maybe it is our comfort zone. And that's the arguments we're so comfortable seeing and addressing. So what would be the better approach?

Alex Salter  
There's a number of arguments you can make. The first and most obvious one, as you talked about just a second ago is incentives. Right? We've seen firsthand over decades, as the federal government has gotten more and more actively involved in regulating health care, as the federal government has gotten more actively involved in regulating financial markets, they're not actually doing things that are in the interest of the consumer more often they're not they're reading the game in the interest of the big players that are already in those markets. Why? Because the regulators who are supposed to be looking out for the interests of consumers get captured by the business interests, they're supposed to be competing or contending against and regulating. This is the theory of regulatory capture and economics. And it's one of the most well developed theories in public choice economics, using the tools of economics to explain political decision making. So if you just look at Uncle Sam's track record on federal regulation and ask, Has this made Americans better off? The answer is a resounding no. And there's no reason to think that they're going to do any better when it comes to industrial policy. Furthermore, on the information side, just because industrial policy isn't impossible, doesn't mean that it's not really hard. It is really hard, right? It's not a simple matter, to design a policy that's going to nudge markets and just the way that you want them to, even if you disregard economic efficiency, even if you say, look, all we want is more domestic steel production, or all we want is more domestic manufacturers on the assembly line. Okay, well, how are you actually going to design policies to do that, that don't actually blow up in your face, given the complex interdependencies that exist between market prices, production technologies, scale and scope of production? These are not trivial questions by any stretch of the imagination. I think Industrial Policy Advocates are really deluding themselves when they just say, Oh, it's a matter of political will, rallying a winning political coalition behind the idea of expanding the manufacturing base. No, it isn't. It's not by any means easy. And just because it's not impossible. Just because we shouldn't abuse the impossibility argument doesn't mean that doing this straightforward, you should be very skeptical of these ideas.

Brian Nichols  
So what's the benefit? Then? You know, if we see because we see this argument, right, from our friends on the left, and even again, to some of the national conservative arguments that we need to have some guiding principles, right, then that kind of seems to be the argument of government if it's going to be there, it's going to be the referee enforces the rules. And we see too often than not, that those rules can be arbitrarily dictated by politicians who are working hand in hand with the players of the game. So it really it almost kind of has this this you know, I'll scratch your back you scratch mine quid pro quo kind of feel, and your average player of the game you know, if you're thinking of the game of football, your average wide receiver out there like I'm not playing the game like these guys are but I'm still being lumped in. It's not fair. So I mean, can we make a better decision? situation going forward. Alex, and this is a little bit of a weird question, I guess. But I mean, it is a matter of the existing infrastructure that we have in place in terms of what we've asked government to do over the past hundreds and hundreds of years. That's gotten to the point where government it really is the ultimate status quo. Once something becomes established in government, it's so hard to get rid of. So is that part of the problem here is that we're we're facing not just a status quo, but a legalized status quo.

Alex Salter  
Yes. Next. No, seriously, folks, that is absolutely one of the biggest problems that we confront. Today, we've simply asked the federal government from Washington to do too much, Uncle Sam is too big and scale Uncle Sam is too big in scope. And my view of the reason that I'm a libertarian is because I look at the field of politics right now. And I see that the single biggest problem is caused by the fact that the federal government is massively oversized. I'm not saying that that's the root of every single social or political problem that we currently confront. It's not. But in terms of the single factor that's most responsible for most of them. Yeah. When you have government that's too big and scale and scope, not only does it crowd out other voluntary, productive ways with solving problems, it creates more problems. You're caught in this game where you're constantly playing whack a mole, where the moles are coming up faster than you can whack them. And every single time that we see these problems, we think, Oh, well, we need another government program. Each new government program creates two or three new serious social problems, you're never going to get up to speed. Right. This is the classic Ludwig von Mises dynamics of interventionism argument because of the unintended consequences of these well intentioned, but ultimately counterproductive policies, we're always playing catch up. And by the time we actually understand what's going on, surprise, the federal government is spending trillions and trillions of dollars every single year that it doesn't need, the federal debt has gotten to 130% of GDP. The United States federal government has taken on 200 trillion with a tea $200 trillion in unfunded liabilities that we don't have the money to pay for. And we're left scratching our heads going, what the heck went wrong. You tried to get Uncle Sam to do too much. And this is just how it works.

Brian Nichols  
Well, and now we're really feeling those those implications. I think your average person is feeling it. It used to be one of those things, I'd go on to, you know, social media, the conversation about, you know, inflation, for example, that would be something that would be out there mostly in the political world being discussed, but not by your average person, really. You go home, talk to the in laws, go home, talk to, you know, the family member, and it wasn't really a conversation. Yeah, not much. I would bring it up. But it was like, oh, no, you know, we'll see. And now it's like, this is the topic of conversation I heard at Thanksgiving. I hear it around the office, everybody's talking about things just don't, you know, money doesn't get you as much as much as it used to what's happening why, why are we experiencing this hyperinflation and it is a direct result of to your point, the just amount that government has not only sought to do, but then just the incessant printing of money just out of nowhere, I really want to find where they found the magic money tree that they use at the Fed. Because whatever it is, it's it's propping up this massive bubble that we have right here. But I think your average person and I, I've said this a million times on my show, Alex, they're aware, they feel that something is wrong, that they're there's just something off, and now they're looking for there's alternatives. But let's talk about inflation, because that might be one of the most top of mind discussion points that we can point to right now, that people not when they are discussing, but they're looking for real, tangible solutions. And if we are entering into these conversations with real solutions that are not just you know, good solutions, but are actually practical and can be applicable into their life right now. They're gonna ignore us. So let's kind of walk through how we got here with inflation. Yeah, I know we there's so much to unpack. But let's maybe give the SparkNotes version and then what can we do to help remedy the media inflation that we're feeling right now?

Alex Salter  
That's far? Right. So the Orthodox economist answer to what's going on right now points to to demand side factors. And on the other side of that one supply side factor. On the demand side, we have the combination of massive fiscal stimulus, right, all the spending packages that were passed to try and minimize the economic damage from COVID, as well as the massive and unprecedented monetary injections carried out by the Federal Reserve through their asset purchases for the previous two years. Those two things but to get put together plausibly give a big boost to aggregate demand. On the other side of that you have the supply problems that are lingering around from the sudden stop COVID economy, right, we're sort of learning the hard way that you can't just shut down and then turn on an economy again, when you have people staying home because of social distancing. When you have people that are on lockdown, when you have all these things, all these production plans that are being stopped suddenly, because of the sudden stop. COVID economy we're discovering, unfortunately, the hard way that when we want to start economic activity, again, it's much harder to get started than if we had never stopped in the first place. So those supply side bottlenecks, you hear that word a lot. But I think that there's something to it. The fact that there are these quote unquote inelasticity, or hang ups or bottlenecks on the supply side, means that all that purchasing powers interacting with those supply side constraints and just driving up prices. Now, I want to emphasize that's the Orthodox economist answer. I'm a little bit weird. And so I tend to think that supply side factors are more to blame than the demand side factors, for a couple of reasons. Although it seems like massive government spending should be inflationary when you just go and look at the previous historical data, government budget deficit deficits by themselves tend not to be very inflationary, right, Reagan massively increased the deficit. We didn't see inflation go up. In fact, we saw great disinflation under Reagan, Obama massively increased the deficit, and we didn't see inflation move very much. So I don't think that government budget deficits by themselves have much effect on the overall level of prices. When it comes to monetary policy. I'm a little more sympathetic, but then you have to ask the question, well, we've been printing money like it's going out of style for two years, why did it wait so long for prices to go up? You can't say it's just because people were sitting at home, you can shop online, right, banks can make loans remotely, people can make can buy stuff remotely. If we actually believe what we say about monetary printing and monetary injections. As soon as people got their hands on the new money, they should have realized, look, all this new purchasing power is going to drive up prices pretty soon. So I better spend it now while I can, while my money goes somewhere. But it's precisely everybody thinking that way that drives up prices, right? The hot potato prophecy is sort of self fulfilling. So I don't think that we have a very good explanation for why this is classical monetary induced inflation, why it took almost two years to manifest, I tend to think that supply side factors matter more at the margin, I'm looking at the overall trend and total spending, and we seem to be back to the path that we were on before COVID. So I'm hoping that the magnitude of price increases are going to start settling down in the second half of this upcoming year. But I've been wrong about important economic things before and I could well be wrong about this one.

Brian Nichols  
It's like, if I were to give an analogy, and correct me if I'm wrong, right, you need for a weed to grow, you need the sunlight, but they aren't mutually exclusive. And if you have less sunlight, then the weed won't grow as nice or nice, as nice or as big. But if you have more sunlight than the weed will definitely grow bigger. But you add rain into it, and then it just gonna explode even more you think about what we've had here, the supply side? I mean, yeah, COVID. You know, COVID was a huge issue. It's the weed it right. Or rather, let's inverse that, actually, I would say the the demand side that the Fed the monetary policy, you know, the fiscal policy you've been talking about, that would be the the ray of sun and the or the weed rather. And then the ray of sun was COVID, right? The supply side that also can cause it to exponentially grow. They go hand in hand, but they're not mutually exclusive. Is that fair?

Alex Salter  
It could just be a perfect storm of all those things. And that's, that's the standard answer that you will find. So to the extent that serious economists are talking about it, they're mentioning all those things. Again, I want to emphasize my skepticism of the fiscal policy and monetary policy explanation stems from the fact that I'm a little bit weird compared to most economists.

Brian Nichols  
No, you're not weird. It's that you take things and you make it fun and real and applicable to your average person. I think I sent a little letter to you there outlining that you can hear the lay person can make your monetary policy interesting to your viewers, feel free to pick a synonym for weird

Alex Salter  
sounds much nicer, sophisticated, esoteric. Yeah, yeah, there we go.

Brian Nichols  
I mean, esoteric was a winner too. But I mean, at the end of the day, that the problem I think has been and as we're going towards the tail, part of the conversation here is that your average person has been so unplugged from this conversation. Because who was having the conversation? Alex, it has been Politico's, it has been I'm not trying to bash on you. But it's been academia, it's been professors in it's felt very, like from from the, you know, the ivory towers, it's, you know, from on high, and it really hasn't felt empathetic, authentic, real to what's happening. And, and now, all of a sudden, that it's a real issue. Now, it's starting to feel like okay, who can I look to, I don't want to talk to those people that were being so condescending and so rude. And people are looking for people who are the newer voices they can relate to, they're looking for people like you not, not the people like Paul Krugman. And that's a good thing. I think, you know, we want more Alex Salters out there leading the charge and having conversations about your monetary policy and fiscal policy than Paul Krugman. Because I would dare say we'd be in a much better spot where were we to be following the Alec Salter approach to it? MX but neither here nor there. And by the way, folks, I apologize for being all stuffy today, it's not the vid, I ended up I had another nosebleed issue I had to go get taken care of. But let me tell you what, when they go in, they hit a nerve that is like where your sinuses have the the snot that gets produced. And that thing just gets going, it won't stop. It's so annoying. And this has happened three weeks ago. I can't win, man. So we got to make sure that we get this whole global global warming thing to figure it out. Do we call it global warming anymore? Climate change are now neither here nor there. You're here to talk about economics. So with that being said, let's go towards the tail end of the conversation, my friend, I want people to be able to take away some some action items. And this is sometimes the hard part. They see the problem they see a solution. And they're like, Okay, how do I get from here to there? So Alex, help us get from here to there. What can your average person do right now is Is there anything your average person can do right now?

Alex Salter  
That's a very good question. So in terms of how we can discipline the public sector, I would say that the administration does own this a little bit, not as much as most people think. But the Biden administration sold themselves as the return to normalcy presidency. And then as soon as he got elected, he sort of started buying into the cult of the Messianic presidency and promised that he was going to make everything better for everyone by embracing all of these highly generous federal programs that frankly, we can't afford on our current tax receipts. So the fact that you've had that combination of I can fix everything plus the condescending No, there's no inflation. Oh, wait, well, there's Yes, some inflation. But you're dumb. If you notice it, oh, wait, yes, there is inflation, but you're racist. If you complain about it, these are all takes that we've seen from the administration at various points. So they definitely deserve to own that. And I'm more than happy to tell people that they should tell the Biden administration and the entire Democratic Party, that they need to eat that for dinner on the Met come the midterms, but in terms of what people can do to protect themselves right now. I think the most sensible thing that people can do is try and find some yield, that's going to find a way of insulating some of those price hikes from inflation. There are lots of mutual fund options that are available, even to retail investors that are going to track pretty well in the next couple of months. I'm not going to pick and endorse any particular mutual funds, since I'm not a finance guy. And I'm just, you know, doing my own thing. And I'm not in a position to recommend except to say, given that we know there are significant price pressures, if you want to protect the purchasing power of your earnings, you should be substituting away from things like cash and savings accounts and checking accounts and towards things like broad based mutual funds that track equities markets.

Brian Nichols  
And crypto and crypto.

Alex Salter  
Let me be honest, I know nothing about Korea, I know that there is a thing called crypto and people are excited about it. That is the extent

Brian Nichols  
of my knowledge. They are not only are they excited, they are ecstatic about it, they will tell you all about it as they should because again, I think in our friend Jeremy Todd over on the the show sell Liberty was talking about the future, I think crypto is going to be one of the things we need to focus on. He brought up as my one of my lights dies, he brought up we need to focus on nuclear power as a huge component going forward for meeting the climate change conversation head on. So there's a lot of things that are out there that we need to be paying attention to. So yes, we'll make sure that we're raising them up. And that includes raising up people like you, Alex, who are out there fighting the good fight. Yes, of course. No, thank you. You're you're making economics interesting. You're making monetary policy. Interesting, but you're also making applicable so we want me

Alex Salter  
to do that. I'll let you and Elon Musk make the case for Dogecoin.

Brian Nichols  
Okay, well, we'll let Elon handle that. He is, as a matter of fact, times most important person, most influential person, is that what it is, you know, first of the year, whatever the hell it is, he's it's Elon this year. So congratulations, Elon. But yeah, you might go ahead and learn about Dogecoin. Go check that out there. But don't worry, you know, we have our good friends, Donnie Gabbert and a few others who will go ahead and tell you there's a couple other different Kryptos you should go ahead and check out Bitcoin Aetherium. so on so forth. So with that being said, obviously, let's have folks be able to continue the conversation, Alex. So let's point them your way social media, where can they go ahead and find you. And also, they will go ahead and read some of the awesome stuff you're doing we'll go ahead and include the link to industrial policy is unwise, but not impossible Over at the National Review, but we're gonna go first go ahead and find you.

Alex Salter  
My website is www dot AWS psalter.com. That's where I have all of my writing academic and popular, you can find pretty much everything that I've ever done or said there. And I am on Twitter, my handle is at Alex W. Salter. And I'd be happy to to interact with you on there as well.

Brian Nichols  
Awesome. And folks, we will make it super duper easy for you. What we'll do is go ahead and include all of Alex's link in the show notes plus the transcript of today's entire episode and as a matter of fact, about all 400 Plus episodes of The Brian Nichols Show available for your listening pleasure but without and yeah, by the way, there's a few there from Alex as well, you can go ahead and check out as well. So that being said, Yes, Alex assaulter thank you so much, my friend for joining us on today's episode. Brian

Alex Salter  
My pleasure thank you so much for having me

Transcribed by https://otter.ai

Alexander William Salter Profile Photo

Alexander William Salter

Georgie G. Snyder Associate Professor of Economics

I am the Georgie G. Snyder Associate Professor of Economics in the Rawls College of Business at Texas Tech University, the Comparative Economics Research Fellow at TTU's Free Market Institute, and an associate editor of the Journal of Private Enterprise. Additionally, I am a Sound Money Project senior fellow and a Young Voices senior contributor.

My first book, Money and the Rule of Law: Generality and Predictability in Monetary Institutions​, is published by Cambridge University Press (May 2021).