Im reihan salam. Im president of the Manhattan Institute. And i wanted to start the evening by explaining exactly why this prize is so important to us. The hayek prize is a celebration of Friedrich Hayek, one of the most consequential thinkers of the modern era, a celebrated who was awarded the nobel prize in 1974. Hayek did more than just make intellectual breakthroughs. He inspired a generation of economic reformers who helped liberate countless millions from poverty around the world. And his message remains vitally important as we look to the future. In his 1944 book, the road to serfdom, hayek drew a connection between economic and freedom more generally, arguing that government control of economic Decision Making paved the way to further encroachments on individual rights and the use of knowledge in society. A groundbreaking article published in 1945, he carefully and methodically dismantled the logic behind economic collectivism at a time when the worlds intellectual elite was convinced that state socialism was the wave of the future. Hayek saw it for what it was a seductive illusion that would cause untold misery. Im proud to say that i played a role in the formation of the Manhattan Institute. One of our founders, sir anthony fisher, a successful entrepreneur, once asked him how to reverse the erosion of freedom. Hayek urged to invest in the battlefield of ideas. And we continue that essential work today, we at the Manhattan Institute are dedicated to building on hayeks legacy and this prize is the crown jewel of those efforts. Each year we award 50,000 to an author who continues in the hierarchy and tradition of rigorous thought, Clear Communication and respect for the liberating power of free markets. Tonight, we will hear from the 2023 hayek prize winner, Edward Chancellor lerner, author of the price of time, will be introduced in just a moment by my distinguished colleague john tierney. Before i turn things over to john, however, there are several people id like to thank for the support and hard work that goes into this prize. None of this would be possible without the support and friendship of Manhattan Institute trustee Thomas W Smith, who first conceived of the prize, and diane smith. Together, they have supported the prize since its inception. Please join me in thanking mr. And mrs. Smith for their generosity and commitment to the cause of freedom. In addition to mr. Smith, we have a number of other Manhattan Institute trustees who have kindly joined us tonight, and charters ravenel, currie, michael kaufman, nico, nell and russell poyer. Were also honored have larry moen, our president emeritus, with us tonight. Thank you for all you do in support of our work. Id now like to recognize the hayek prize jury, the distinguished women and men who carefully read each nominated book before selecting the winner. This years jury included brian anderson, don boudreaux, thomas easton, katherine ward, james pearson, amity shlaes, john taylor. And last but not least, the chair of the jury, john tierney. As many of you know, john is a contributing editor at city journal and one of the nations most renowned science journalists. A author known for his keen ability to make complex ideas, engaging and accessible. He is a highiq ian through and through and the perfect steward for this important prize and its Important Mission without. Please welcome john tierney to the stage. Thanks very much, reihan. And thanks to all of you for braving the unfriendly skies to be here tonight. On behalf of the hayek prize jury, i can promise you that were in for a treat. Were going to hear from an author with an extremely rare gift. You know, theres a common lament in the Book Business that was once nicely summed up by a friend of mine. When youre working on a book, you said you never know whether youll end up being published too early or too late. But it will definitely be one or the other. Now, this has never been a problem for Edward Chancellor. His books come out just in time for the world to say. My god, he was right. In his first book, a history of financial speculation, titled devil take the hindmost, he warned in 1999 that the surge index stocks had all the earmarks of earlier financial manias. And next year, the dot com bubble burst. Later, he published crunch time for credit, warning that the housing and credit bubbles would burst disastrously. And sure enough, they promptly did a leading to the financial crisis in 2007 and then the Great Recession. So early last year, when nobody worried about bank bailouts, when the Federal Reserve was still blithely keeping the Interest Rate at zero, he went to press with his latest book, the price of time the real story of interest. He warned that we would pay a hefty price for the feds irresponsible and unprecedented decade of easy money. And sure enough, you know, here we are with headlines about failing banks. But collapsing Pension Funds and fears of an even worse financial crisis ahead. His book is remarkable not only for its presence, but also for its erudition and its flair. Its another of his rare gifts. He makes interest. Interesting. He even makes it funny. Above all, he makes it relevant. He shows that just as hayek warned manipulating Interest Rates is the most dangerous form of Central Planning because it occurs very subtly, but it distorts the entire economy and it leads to so many problems that are not subtle. From unaffordable housing to worsening income inequality, you know, he clearly explains how the feds policies have fueled the populist anger in both Political Parties right now by rewarding reckless investors, finance gimmickry and giant corporation ends at the expense of Small Businesses and workers and retirees who, as the book, traces a long history of Money Lending channels, are deftly shows how rulers and bankers and investors keep making the same and keep ignoring hayeks wisdom. Now, hayek was one of those authors whose books appeared too early. He did have that one surprise bestseller in the 1940s, the road the road to serfdom. But intellectuals and politicians were so enthralled with socialism and central that it took decades for him to be vindicated. Nationalize industries foundered in the soviet union, eventually collapse, due to what hayek called the fatal conceit. Thats a delusion of central planners that they know enough to direct the economy. Hayek recognized that these that this fatal conceit afflicted the Federal Reserve and also other central bankers. But on this issue, he was really ahead of his time. During 1920s, when central bankers were confident they could keep the economy and the stock market rising, hayek warned that their manipulation of Interest Rates were distorting and would ultimately produce an ugly bust. Now, other economists poohed this possibility, including hayeks famous intellectual sparring partner, john maynard keynes. As chancellor recounts, keynes was so convinced in the late 1920s that experts had figured out how to smooth the economy and avoid that, he just kept on investing the stock market and he lost three quarters of his net worth when the Roaring Twenties to a crashing end. Well, hayek knew better, but his monetary theories are still ignored by most modern economist chancellors reminds us that hayeks ideas are more important today than ever and so do the other five books that were finalist for the prize. The next American Economy by. The eminent political economist samuel draws eloquently hayek in a nation the founders offer a practical and also an inspiring strategy to defend free markets and free trade against the populists in both parties. I wish every president ial candidate would read it, and i like to salute sam, who is with us tonight for just writing a great book. Im not sure. Another finalist, Bruce Caldwell, whos a previous winner of the Manhattan Institutes hayek prize four scholarship, has as teamed with hans, your cousin, to offer a wealth of Surprising New insights about early personal and intellectual struggles. We forward to the concluding volume of what is sure to be the definitive biography of hayek. 40 years ago, hayek championed the economist julian simon and other optimists convinced that the world was not running out of natural resources. Their optimism has been confirmed decisively by the Rigorous Research of merian to be engaged purely in superabundance, a book that joyous refutes doomsayers by showing just how much better life is becoming. People around the world. Another finalist the journalist Matthew Hennessy has written a witty and breezy primer titled the hand. If you want to convert the many young people who doubt the virtues of free markets, give them this delightful introduction to basic economics. And if you want to understand how a city can thrive without the of master planners, take a look at emergent tokyo, this beautifully illustrated book shows how tokyo became so vibrant and livable through the process that hayek called spontaneous order. Our winners comes from he joins us from england, where he was born and raised after earning his degree in modern history at cambridge and a masters degree in enlightenment history at oxford. He went on to work as an investment strategist in london at the lazard Brothers Bank and later at the gmo investment in boston. In between those stints managing money, hes been writing about it during the last financial crisis in 2008. His article and Institutional Investor won the george polk award for financial reporting. Hes edited two very wellreceived books in his financial have been translated into half a dozen languages. Hes currently a columnist for reuters and contributes to wall street journal money week, the new york of books and the financial times. I must add one other biographical detail. When i wrote to him to inform him that the higher jury had chosen his book. Heres what he wrote in response, quote, i was over the moon to be nominated for the hayek prize without expectation of further honors and actually winning the prize brings tears to my eyes only morning i was reading extracts of hayeks road to serfdom to my wife saying that what he says applies exactly to what one can see. Now the same mindset among the expert class imposing. Their priorities on the people, close quote. I ask you, there be a more worthy recipe of this award than in than an author who reads the road to serfdom to his wife at breakfast. Somewhere hayek must be smiling. Ladies and gentlemen, please welcome Edward Chancellor, the winner of the 2023 hayek book prize. And one that is coming my eyes again. I am, as you say, deeply honored to be standing here and delight that the prize im receiving today is named after Friedrich Hayek, a hero of mine. But let me start with way to. Thanks. Id like to thank the Manhattan Institute and john tierney and the other judges for selecting my book for that generous prize. My publisher, morgan entropy, grove atlantic. You cant hear me . Oh, yeah. Sorry. And i like to thank my publisher, morgan at grove atlantic, for taking my book after my former u. S. Publisher Farrar Strauss turned it down on the grounds it was too difficult for a trade audience. And my u. K. Editor, Stuart Proffitt penguin, who wont accept the book, wrote that, quote, neo hijacking conclusion is both powerful and persuasive. And my wife, antonia, whos described in the acknowledgments as my inhouse editor, but is also a lot more the early 19th century banker thought ann thornton author of a classic work on monetary economic makes an inquiry into the nature and effects of paper money wrote to his sister that working on the book had been a hard fagg. I know the feeling and antonio saw me through many years of hard faxing, which in english means enduring hard work and i was thrilled to be short listed for the hayek prize, but didnt think i had much chance since among the other books on the shortlist was the definitive biography of Friedrich Hayek by Bruce Caldwell and are closing as is the case with anyone who is interested himself with hayek in recent years. I owe caldwell a huge debt for his editorship of hayeks works. My introduction to the austrian economist came from reading caldwells intellectual biography. Hayeks challenge some two decades ago. Since we await a second installment of the hayek biography by caldwell in closing, or at least have a second chance, i first became interested in, after i was commissioned to write a report on the ongoing credit boom of the early 2000 and later published. As john mentioned, under the title crunch for credit. It was curious to observe an epic credit bubble forming with associated bubbles in, real estate in the United States and europe which the central bank has studiously ignored. So, so obsessed. Were they at the time with meeting their inflation targets and nothing else appeared the radar. Both keynesian monetarist economists milton was still alive at the time, supported the feds policy under alan greenspan. The easy money policy was inaugurate it and the fed funds rate was to 1 . A postwar low in 2002. As long as inflation remained under control. We were told nothing could go wrong. Bank of england developed a an acronym at the time called a nice noninflationary, consistent expansion to pursuit of price stability. What we now inflation targeting became popular in the 1920s. Many of the worlds leading economists at the time maynard keynes i think fisher of yale, the swede cassell, ralph holt, terry at the British Treasury support, had this policy in 1933. Irving fisher wrote his enormously intelligent general paper, the debt deflation theory of great of Great Depression means, which argued that the debt deflation was the primary cause of the 1930s depression. Friedman and Milton Friedman and Anna Schwartz continued that this argument in their monetary history of the United States and in their short the great contraction. These views are summed up by comment of schwartz in 1995 that, quote, monetarist stability is a prerequisite for price stability and price stability, a prerequisite for financial stability. The young hayek, who studied the Federal Reserves policy at nyu knew when he visited new york in the early 1930s. And as caldwell closing a tell us, was forced to earn his money washing dishes, criticized the monetary authorities attempt to keep the price level stable in an economy with strong productivity growth, as was the case in spades for the u. S. , the 1920s. Prices a natural tendency to decline, he said. In fact, if think about it, the entire nature of a capitalist system is to generate productivity, which Everything Else being equal should bring down the price level. Any attempt to resist this movement required the Central Banks to keep Interest Rates unnaturally low below what economists call the natural rate of interest credit. Newly created by commercial banks. Then took then takes the place of genuine savings. This involved what hayek called force savings and the hidden inflation of the credit boom. Such policies in the short run could could succeed in delivering an unchanging price, but they would doomed to failure eventually. Interest rates would have to rise to inflation and the boom would give way to a bust. I also argued expanding the theory of interest propounded by i von buskirk, the author of the land the three volume work capital of interest, which perhaps kaplan interests, which i perhaps im the only person in the room to read cover to cover taking me several weeks in the process and bernbach who was also a his maternal grandfathers climbing companion argued that manipulate argued that manipulating the rate of interest would change the structure of production in an economy. Lower Interest Rates would lead to investments. Profits lay in the more distant future. When the bust arrived, such investment would prove unviable. They would become what we would now call stranded. In his early days, hayek emphasized that all Economic Activity takes place over time. This is a very important insight of hayeks. He understood that the that interests served to coordinate Economic Activities across time and introduced the notion of into temporal disequilibrium in the pursuit of price stability at a time of a positive supply shock. As hayek wrote in 1928, quote, a ministers an excessive stimulus to the expansion of output as costs of production fall and thus regularly makes a later fall in prices with. A simultaneous contraction of output unavoidable. In other words, by trying to avoid the good deflation produced productivity growth, we bring the bad deflation of a credit bust. That Fisher Friedman and others deplored. We can argue whether hayek anticipated Great Depression called will enclosing suggests that this is a myth or at least an exaggeration. But he understood that all was not well with the stance of the us monetary authorities in the 1920s. What i most remarkable is that hayeks interpretation has been airbrushed from the monetary histories of the period. Theres no mention of it in friedman, schwartz and nor in alan meltzers lengthy three volume history of the Federal Reserve in 2005. I wrote a paper for a collection of essays on monetary theory, commissioned coincidentally by the institute of Economic Affairs assistance, stitution of the all the Manhattan Institute, in which i argued that we were living a great experiment in inflation targeting an experiment which would either have a benign outcome, in which case friedman be vindicated or end in a bust, which would lend support hayeks theory. This paper went out to a peer reviewer whose snide comment was if members of the Austrian Church wish to be heard, it behooves them to relate more to the mainstream. I decided to withdraw my paper at roughly the same time. Bill white, the bank for international, published a paper. Is price stability enough, which contained a similar argument and was laced with references. Hayek. The answer to this question the world would shortly discover, was a resounding no. In my view, the Global Financial crisis proved extremely expensive. Vindication of hayeks monetary theory. Not that youd find that view expressed, far as i know in any of the hundreds of books published in the aftermath of the crisis. And because the monetary authorities didnt learn this lesson from the crisis, they decided that the cure for the Great Recession was more of the same. So they took Interest Rates to, their lowest levels in 5000 years. And into negative territory in. Europe and japan, an Unprecedented Development and blow to the central Balance Sheets with trillions and dollars worth of quantitative easing. The second half of my book, the price of time, examines the unintended consequences of ultralow rates in the post lehman era. My feeling was that modern had developed a narrow, technocratic view of interest, which they saw as a policy lever that could be toggled up and down in order to to control inflation. In my view the use of interest, an inflation as a policy lever is just one of the several rules that interest plays, possibly the least important one. Let me give you a few others. Interest is also the capital rate or discount rate used to value assets. It incorporates the time value of money or investors time preference as mentor ludwig von mises put it. Without a discount, discount rate, an apple in 100 years time would be worth the same as an apple today. An obvious absurdity, as i shown in the books back to bubbles, have proliferated in periods of easy money. From the dutch tulip mania of the night of the 1630s through to the everything that finally burst year interest also influences the allocation of capital high structure production and ultralow rates slowed tempo of production. As jim grant, another winner of the hayek prize. And here today pointed out low, low rates trap capital in Zombie Companies, encouraging investment in in the sky ventures such as billion dollar billion dollar unicorns of silicon valley. As jim wrote several years ago, it is a little known fact about unicorn ants that they feed on Interest Rates. They like low little rates. The tinier, the better. Now, you may have noticed that many of those unicorns were then swallowed up in 2020 by by these special Purpose Acquisition Companies or spacs. One of the most glorious speculative episodes, financial history i a comment early a few months ago by the socalled spac king chamath. Happy tier who said the mathematical truth of higher Interest Rates is that it renders your valueless, but that perhaps didnt really have much value to start with. Interest is. The the price of leverage or the price of anxiety as the 18th century philosopher ferdinand galliani put it. What we would call the price risk without interest, leverage climbs to the sky and risk taking proliferates. John bull can stand things, but he cannot stand percent, wrote walter badgett, the the great victorian financial journalist and modern Research Confirms that when Interest Rates fall to abnormally low levels, investors take on more risk interest as a reward, abstinence and inducement to save. Not only do we save more when rates are higher, but savers higher returns. The low rates of recent years have created a permanent pensions crisis and led the uk Pension Funds to take extraordinary risks, leveraging leveraging up long dated index linked gilts at negative yields interest. The level of interest determines capital flows. Driving capital into markets when theyre low at the center or at financial center. An interest is the lifeblood of banking. As pimcos bill gross pointed a decade ago. A healthy carry is necessary for banks to engage in maturity transformation. Borrowing short and lending long growth at the time compared. Compared. Carry to the oxygen that feeds the blood at zero Interest Rates. He wrote the blood becomes anemic. Oxygen in starved is even leukemic safe carry. He said, was essential to capitalism. So in the last year we have seen the consequences and fallout of rising of the lowest Interest Rates in history. 30 trillion wiped off the global bond and stock markets. Last year, the crypto winter emerging and the collapse of Sam Bankmanfried much lauded fdx Crypto Exchange which an event that called to mind walter badgett dictum that all people are most credulous when they are most happy and when much money has been made, when some people are really making it. When most people think they are making it, there is a happy opportunity for ingenuous mendel. And earlier this year we saw the collapse of the silicon valley. Several other banks who search for carry in supposedly risk free u. S. Treasuries came unstuck when Interest Rates rose. In my view, ultra low Interest Rates have undermined the Balance Sheets at every level. Government corporate and household prices became excessively inflated. Too much leverage was assumed, creating a state of fragility t throughout the Financial System. The misallocation of capital in Zombie Companies, Tech Ventures or simply real estate has contributed to the collapse of productivity growth since 2008. The uk productivity growth has been running at less than one third of that achieved in in the Industrial Revolution in the late 18th century. From a hykeham perspective. Its fair to say that the ultralow rates have pushed the economy into a state of, into temporal disequilibrium, in the road to serfdom. Hayek argued that inequality is generally acceptable when differences of outcome are seen to be fairly earned, or at least a random. He believed that inequality wouldnt be acceptable when it arose because government policy and of specific groups yet ultralow Interest Rates have benefited certain groups and societies. The socalled haves financiers, senior corporate executives, older people. What disadvantage disadvantaging other groups . Ordinary people with most of their savings on deposit those wait those still saving for retirement and the younger generation. Hayek also argued political stability depended the existence of a strong middle class and that capitalism democ, grizzly and democracy depended on economic growth. In my view, the outflow rates are weak and the middle class is pushing up the cost of retirement and housing and over impeded economic growth. Thereby undermining the general Public Acceptance of capitalism. Hayek identified how problems arise when the authorities seek to achieve stability. For instance, by keeping unemployment down at all costs, as he wrote. The more we try to provide full security by interfering with a market system, the greater the insecurity becomes. And what is worse, the greater the contrast between the security of those to whom it is granted as a privilege and the ever increase in security of the underprivileged. As i say, the road to serfdom appears more relevant today than when it was First Published in 1944. How understood that central bankers set themselves an Impossible Task when they tried to gauge the correct rate of interest. After all, as Irving Fisher said, interest is an omnipresent phenomenon. Instead, as, say, as i mentioned, the central bankers rely on short term inflation to guide their Monetary Policy decisions. But as as hayek demonstrated this can turn out to be a dangerous prop to depend upon. My final point is that Central Planning is back, not just to Monetary Policy, but in other areas Public Health and lockdowns planning for energy transition. In certain ways, the are more dangerous today. They were in the 1940s because this time they become they come armed with computers and spreadsheets. Interest rates no longer guide allocation of capital and set aside. Olivier said. Alas, asset allocations at fair prices and restrain risk taking. Central bankers step up to take their place. Hence central banking. In recent years has involved itself in corporate in japan, in credit in europe, and more recently in Green Financing and social justice. Theres no apparent end to the process. This constitutes, to my mind, a new road to serfdom. Hikes. Key point, as i see it, is that when planners interfere excessively in an in a complex, evolving system such as the modern capitalist economy, no good will come of it. That explains why he supported Gold Standard long after it had gone out of fashion. The attraction of the Gold Standard was that it kept the money supply finite rather than created by Central Banks and commercial banks, and allowed more or less to the market to set the rate of interest. Half a century has passed since the collapse of the Bretton Woods system. The last vestige of a gold backed Monetary System and the experience of fiat money in recent years has not been heartening. An apparently endless sequence of financial crises asset price bubbles slowing products, poverty growth, rising inequality, and now rising inflation. I wonder how long the arrangements can last. Possible that a new Monetary System arise . Perhaps one based on Digital Currencies akin to hayeks did nationalize ization of money, or one based on a central bank. Digital whose growth is limited by design. A digital Gold Standard suits pique. If that happens, then the job of setting Interest Rates will no longer be given to a group of qualified men and women sitting around a table in the eccles building in washington, d. C. Their, home of the Federal Reserve. And that, in my view, wont be a bad. Thank you. So. I missed mr. Chance will take some questions now. Yeah. Yeah. Right in front. Um, thank you very much for the lecture. Its wonderful to have someone present an argument so powerful, so clearly. I was going to you about bomberg, if im pronouncing that right. He said a nations Interest Rates reflects culture. I dont want to put you on the spot, but i would be very interested in what you of our culture. Thank you. I mean, not that it is an interest loan, because if one were to take that comment of bambaataa at face value, you would say that we have been the most Civilized Society in the entire history of civilization because weve had the lowest Interest Rates. So the more i thought about that, the more i thought, well, perhaps not. And but the argument, the original argument and this is not just but this is an observation that was seen that was mooted in the 17th century when people looked at, for instance, the dutch dutch republic. And they saw that dutch had the rule of law. They had developed Capital Markets and they and they had large savings and they they had the lowest Interest Rates. Europe. So that was the that was when the idea first came about, i think in recent years as ive been arguing and arguing the book mentioned just now is that the Interest Rates we see are not really the Interest Rates properly reflected of of our civilized nation or what the what the austrian economists would call our time preference. They are artificial low Interest Rates. There a there is another point i mentioned book is that civilizations also go through this sort of ushaped period of interest where when a civilization establish itself, it has high rates and then they fall during course of civilization. Then when the civilization comes to an end, they start rising. So i do i do think one can become overly complacent about the very low Interest Rates one had in recent years. Yes, the mainstream Financial Press pretty much disparaged the idea that cryptocurrency has any place in the world. But is it possible that it grew out of a mistrust of what Central Banks were doing and that in fact conditions exist now more than ever for the creation of a market currency . I mean, yes and no. I would say. I mean, as far as i understand, that the first you know, the bitcoin was launched just after the lehman bust. It was it was launched, you know, the justification at the time was the Central Banks printing a lot of money and and therefore the crypto might be the way forward. I think the problem is that the crypto currencies became the greatest and the bubble in cryptocurrencies was the greatest symptom of the monetary of the monetary disorder of. Last 15 years or so. And without getting into huge debate on the subject, for my mind, the cryptocurrencies dont at least currently constitute looted have sufficient number of the attributes of money to to to to to actually in attach to succeed. And instead of just really being a barometer of speculation. But that isnt say that at some stage a type of Digital Currency couldnt establish itself and and therefore, you know, as i say, remained one of the of the type of complete private currencies or money that that hayek advocated in the de nationalization of money. I mean, ive done a lot of work on specter bubbles, and one tends to sort of laugh at the spec, at the early stages of or the early emanations of something of bubbles. But sometimes the Technology Comes back at a later stage, and the bubble is really just sort of, you know, trying things out and seeing well for what. So well have to see. Could you take us on a world tour and tell us where we would find the most responsible Monetary Policy and the least responsible Monetary Policy policy . Um, yeah, i mean, its a difficult i think the japanese came very late to negative rates and they became, you know, particularly fanatical, having it was only, i think in 2016 the japanese rates were negative and, it was only and i think the japanese are sort of gone further. And as you probably know, they kept that rate, their interest negative for longer and they carried expanding their Balance Sheet. So i would probably award the prize to the most, the prize for the most irresponsible or central bank to the bank of japan. As yeah, there are very many prizes as far as i can see, for the best central bank. I, i, i mean, i like what, what iceland has done in the after, after the Global Financial crisis because really no one, you know, iceland was just too small and no one came to its rescue. So the actually, the icelanders had to have you know, they had to clean out their Financial System and and had high rates. I think some of emerging markets and not china, which but some of the emerging have really been forced to have higher rates and therefore probably, you know, a bit more robust then, you know, there is the normal basket cases of argentina and never ending crisis in in turkey. So theyre the very few, you know, models that you would like to hold up. Im afraid. Any other questions. Can you elaborate on the relationship between Interest Rates, stagnant productivity and . My stagnant on on, yes. So do you extend the i mean, theyre not two ways in which i can answer that question. One is you go back to starting with the argument made by hayeks slightly older austrian contemporary Joseph Schumpeter and schumpeter arguing that, you know, that that the economy is dynamic, make evolving system and the Creative Destruction that was the is most important feature of a capitalist economy. So if you and schumpeter also argues that the rate of interest enters into every calculation and if you arrest the process of Creative Destruction by taking Interest Rates down to very low levels, then, then businesses that would otherwise have failed continue to exist. And what we find, and i read this papers from the oecd suggesting that where these socalled Zombie Companies and Zombie Companies are Unprofitable Companies that cant even pay, they dont even generate enough profit to pay that their interest charges, even at very low rates and the Zombie Companies appear to when they exist any particular sector they they appear to discourage new business entries which is pretty obvious because you know, there are other businesses that discourage investment, discourage jobs, growth and are characterized by low product tivity growth. So i think that if you if you if you if you arrest the the Creative Destruction, what we did see for all this talk of of the Great Recession, what we find is that actually in solvent the seas were were lower after twice in eight than they had been after the two previous recessions. I think there was an arresting of the presence of creative and then the allocation of capital in in business that dont generate productive returns. So the misallocation of capital to use you know the austin to malin investment. So if you if you if you dont if the if the rate of interest serves to guide capital or to ration capital so that used well then you will generate or you might hope to generate productivity growth. But if you set the rate of interest at a level in which capital to all intents purposes, appear free, as free, then actually think you get a misallocation of capital and low productivity growth. But the the the, you know, the central bankers or the conventional Monetary Policy makers would say things compmpmpmpmphe other way round. They say that the low productivity growth is, to use a phrase that Ben Bernankes dovish for Interest Rate. So that was that the the lower productivity growth has driven the lower Interest Rates go until you get this sort of slightly unhealthy vicious cycle front yet. To follow up on your question when you were asked identify central bank that got it right and had difficulty why given the force of your arguments are the Central Banks so uniformly wrong or were they so uniformly wrong . Well, i look, i mean, i im trained as an economist rather than a rather than a sort of trade historian rather than economist. And definitely a monetary economist training my my view is that central banking, Monetary Policymaking has become very abstract, very model driven. And the assumptions behind these within the models embedded in the models. But, you know, rational expectations and a general equilibrium and and then these strange they have these strange represent to agents you know the entire economy and you know represented by a Single Company or a single individual that so abstruse these models so divorced from what we see in the real world that that that i think that theyve led the the the central bankers into a sort of theoretical. That they they cant they dont really see whats happening i, i mean im not saying all of it. I think whats happened in particular in the last, you know, with the fed and other Central Banks is that was, if you remember, the financial crisis a bit a a tussle between the socalled doves, you know, who wanted lower and lower Interest Rates. And the hawks and the hawks really lost the battle. The doves for despite being called doves. They actually ruthlessly exterminated all the hawks. And and then you this has led to suggestions of groupthink. And and then this you know, i like the idea of cognitive dissonance, which is you just cannot see that which is not in your model and i mean, if one was going to reforms central banking, one of the things one would like to see is a a genuinely intellectually diverse set of people. If is if the decisions have to be made in setting Interest Rates and actually more people with practical experience, people whove actually worked in the real world. I think at the time of the of the Global Financial crisis, there was not a Single Member of the fomc who had any practical banking or commercial experience whatsoever. Its extraordinary. Three one last question. Okay. Most most of your comments have been directed. The impact of Interest Rates on private sector. And im you could comment more on their effect government policy. For instance when stephen minchin no fool he was secretary of the treasury during the entirety of the trump administration, he said it didnt matter how much the government borrowed and spent because Interest Rates were near zero. Yes, well, i mean, i did mentioned in passing that i thought that the low Interest Rates had destroyed every Balance Sheet starting with the governments and, you know, when appeared free, then the governments, you know, when went on, you know, spending spree. So Government Debt and same in true britain they roughly doubled that debt to gdp ratios while at the same time the cost of borrowing of funding of debt service actually remain stable or actually slightly declined. And this problem has been. What the potential is exacerbated by this quantitative easing, because quantitative easing involves the Central Banks going out, buying fixed income Government Debt and replaced it with this floating short term debt in the form of Central Bank Reserves that pay interest and what that means now is that the debt that appeared so free and so easy and that our political masters amassed so negligently is now the system is much more sensitive to even small changes in Interest Rates. The british government, for instance, was in effect at via the central bank, via the bank of england, in effect at eight basis points, cost of funding. And now i dont know where the Interest Rates are around three and a half percent or thereabouts, you see that the cost of financing that debt feeds through much more quickly. So and the other thing id say is, you know, if you look at the the lockdown policies, which really has to be one of the most ruinously expensive Government Policies ever instituted, admittedly for good purposes, i would have cannot that that money would have been spent with, you know, as it was unless unless it appeared be free at the time. Its just an illusion because the loss must fall somewhere at some stage, either to the taxpayers or to the government creditors or through inflation, to the public at large. I think thats it for time being. Thank you very for the great lecture lecture. I want to thank again the highiq jurors for reading so many books so well. Id like to thank id like to congratulate again all the finalists for for producing great books and i want to thank you all for coming and. I especially want to thank the Thomas W Smith foundation for making this evening possible and for all that does to make sure that new generations learn hayeks wisdom. Thank you and goodnight