Transcripts For CSPAN2 After Words 20140504

Not just the astronauts but everyone letting people speak for themselves. They knew what the nasa position was but beyond that they never, to my knowledge, controlled the statements, public statements of others and certainly they insisted on it. Up up next on booktv after words with guest host Kevin Williamson of the National Review on line. This weeks Burton Folsom and his latest book uncle sam cant count. The latest collaboration details the best and worst governments investments in bales from the days of George Washington through today. This program lasts about an hour. Host professor full something cute for joining us and welcome. Before we move on to the substance of your very interesting book i wanted to ask you a little about the process of composing it because i noticed you have a koether and colleague with a suspiciously similar surname who turns out to be your wife and someone with a little bit of experience in the subject of being married and writing books im amazed that this ended a book rather than a divorce or a trial separation or Something Like that. How intensely weird is it to write a book in that particular sort of way . Desk of the key is not to write on the same chapter at the same time. One of us will work and do primary work on one chapter and another does the work on the other chapter and then we turn it over for evidence. We were able to do that in finish the book. My wife of 35 years knows this material as well as i do. Often she is researching or at least listening to me talk about it so we discussed the ideas and often she is a definite coauthor in the writing. Host congratulations to you both on the bravery of taking on such a project and making it work. There is a line from the german hans joost which is often attributed to when i hear the word culture i reach for my revolver. I often have roughly the same feeling when i hear the Word Investment in the context of politics. It looks like at best a boondoggle and probably an outright rip off coming down the pike and it should stop before get started but this has become in the 21st century a normal part of our political rhetoric, the idea that government is not only an investor but the chief investor in society in many ways making critical investments and offering industrys guidance in everything from making cars to windmills to such things. But it seems to have started with beaver pelts at least in the formal sense. So i want to start by challenging a little bit your title which is uncle sam cant count. I would argue that uncle sam can and does count but what he is not counting his return on investment. He is counting votes instead so thats a different sort of thing and its not exactly what we normally think of when we say investments. It is hard to give me the broad outline of where this starts and where it goes. Guest uncle sam cant count the implications of the title is that these and investments as you referred who are not successful. Their money razors again and again. The limits of government are very clear in the constitution the Administrative Functions or enforcing contracts, the sort of thing. Then you have National Defense and when the government sticks to those functions it has at least a chance to do well. Most constitutional functions when it moves into the area referred to as investments and Economic Development sparking that the record is absolutely terrible at this starts with the beaver pelts and George Washington who was a great president. I teach at hills dunk College History of american presidency in washington and he was a great president. But this quote investment he made in fur. Was an exam disaster. Often starts as subsidies are investments with the idea that its either going to spark Economic Growth into something that will benefit the country out will protect the country in a pseudoNational Defense and that is what this for trade was. He was concerned the british were going to encroach on american territory during his first term and we havent rid ourselves of a bid but of course that might come down from hudson bay into United States. If we set up a government for company to. Back fur trade the british would not come down. So we subsidized a for company and it was a disaster. The englishman occurs right where the fur company is located because there training is terrible. Part of it the leaders of the company and by the time you get into the 1800s Thomas Mckinney is the one who i write about their work is almost comical. Subsidies are disastrous but there is a comical element that we need to think about too. He gets the idea that we need to sell the indians plows and Farm Equipment when the indians are hunters and gatherers. Or Something Like even pots and pans but mckinney is determined to sell Farm Equipment and that he also says we need to branch out and call to date their tastes so he buys several grosses of harps and also a chinese mandarin dress. He is surprised that the indians dont want to buy the chinese mandarin and the harps and the paraphernalia that he is put into his fur trade operation. Pretty soon the british have come in and the indians prefer to trade with the british. John jacob astor is the First American to fur trade producing competitively comes into the market and in effect moves the british someone out by his competitive practices. He has People Living with the indians in trading with them on the spot. Finally in 1822 congress abolishes the government operation there that was funding the fur trade and that subsidy was defunct. You read about it in the textbooks. We didnt learn from and thats a problem. Host the idea of beaver pelts has been a Critical National resource it brings to mind dr. Strangelove a little bit. It sounds crazy in retrospect. But from the point of view of the late 18th and early 19th century it might not have seemem insane at the time. There were i think at the time good arguments for it in the ways in which the subsidies would have been at the time hard to predict. So could you go into a little bit more detail and ways in which the subsidies produce the opposite of the results that were intended . Guest the intentions are often good. I thought your point was interesting about uncle sam cant count. He can count votes and we see the element but a lot of it is wellintentioned. We believe he can spark Economic Development for example by say funding the Steamship Company to compete with the british. Edward collins it into the steamship business and he receives the federal subsidy volunteers to receive it. He does so and then he is running a terrible bind and the costs go way up he crashes to of the four ships that he had but then the federal government continues to fund him. Even though private steamship operator Cornelius Vanderbilt has come onto the scene and has cut prices, receives no federal subsidies and is operating successfully. Congress funds collins because they say well he needs the money to be able to compete with vanderbilt. Well he runs a poor operation. Eventually he goes bankrupt and congress is very frustrated and cuts them off completely. By the time we have done that we have spent 11 million on steamship subsidies at a time right before the civil war when our total financial debt was 60 million. 20 of the debt is represented in misplace steamship subsidies. Host 11 million back when 11 million meant something. Guest it really meant something. Host to the subsidies mainly cause businesses to make bad Business Decisions because they take away the element of competition or they take away the element of having to go out and deal with ones customers in a direct and normal market way or are there other kinds of miss incentives that they create that cause these industries to perform badly once they are subsidized . Guest focusing on that is very good in both of the points you made are very good. By taking away the competition you take away innovation or an incentive you might have to produce a competitive product at a cheap price. By having the government involved it creates among the person necessity whether its the fur trade operators who receive a washington subsidy or the steamship operators or later the Transcontinental Railroad. It creates within the person receiving the idea that government was the focus here so we need to please the politicians and then more money will come. If our Current Business fails. So that removes you from competition whereas the entrepreneur, the private entrepreneur Cornelius Vanderbilt with the steamship or John Jacob Astor or the wright or others with the airplane all of those people had to be very cost conscious because they were trying to produce a product thatll would have to be marketable and they would have to do it at a Competitive Price so they were watching their cause. It caused him to be very conscious of what they were doing conscious of competition. In the case of the entrepreneurs who succeeded i guess the competitor was federally subsidized. That made the task much more difficult and thats a concern i think today is that we may be knocking people out of the market by subsidizing the wrong people. Host in biological evolution the instrument of evolution is to define a point on it, death. Death of the individual, death of the species, death of a sheet and not too much in the darwinian metaphor in the marketplace that mechanism of evolution is death as well. Its staff of the firm, death of lots of products. You bring out new koch and masses of people decide they dont want to and it dies of my favorite example of this is in the 80s clairol had a product called touch of yogurt shampoo. Go figure nobody wanted to buy this but all of the Product Development people believing it was a great product that people would run over themselves to purchase. And when you have subsidized industries and also some chartered Industries Like the Credit Rating industries which essentially are federally chartered oligopoly you remove that element of business failure from the equation. So the normal instrument in which businesses and industries get more productive, more efficient better able to connect to customers with the goods and services they want is interrupted. So its not just a matter of application. This is where we often go in this debate where people say if we only have the right people and if we only have the right policies in these things would have worked out differently. Its actually something that interrupts the fundamental mechanism of development and innovation. So your thoughts on that. Guest the implications in what you say is for example Cornelius Vanderbilt who receive the steamship would have failed and he would have made different decisions which causes failure. Some entrepreneurs, i think steve jobs being one of the modern examples and we quote cam in the introduction of the book says entrepreneurs are the crazy ones. They believe they can accomplish something. They almost believe theres a market there before there is any evidence that there is a market. They know what you want before you know you want it. That kind of entrepreneurship is essential for the countrys history. The sad possibility is that you would cut that person off when you find somebody else to do something very traditional. You dont get the kind of innovation that you get when you let opera newer entrepreneurs in the marketplace decide and try to compete for consumers interest. Host one of the stores i would like to focus on which i very much enjoyed in the book something i hadnt known about is the story of Samuel Pierpont langley who was the government funded competitor to the Wright Brothers developing the first flying machines as they were known at the time. And you look at langleys biography and his resume and he seems like the his success in creating wealth. Henry ford was not the ideological person to popularize the car. A poor background and his parents didnt last long so ford ends up being the one to make the move. Thats the thing about the marketplace you cant tell who has the good ideas and who is the perseverance. Theres a lot that goes into it that made it successful. And langley the point is exactly correct. The United States had the view in 1900 that because of the germans, the french were all experimenting and even the english with an airplane. The idea is if they could bring an airplane and they happen to be able to invent it in a foreign power would be able to take that airplane and come right over, drop something on your country and then theres nothing you can do about it. Therefore we had to be proactive so you cant wait for the market. The ideas well yeah markets may work better than subsidies but we cant wait for the market as it may be too slow and by the time he gets into year the europeans they are to have the airplane and it would be too late for us for foreign policy. If you subsidize langley in addition to all the credits you just mentioned honorary degrees from oxford and Cambridge Harvard and yale and he has written a book on aerodynamics. He has flown the small model airplane over the potomac. Going from there to doing a manned aircraft seems to be the logical thing and langley says hey i can do it. We give him two shots over the potomac in the first one is a glorious time. It goes up and then it goes right down and a couple of months later they do the second flight and it goes right up in the same thing. According to many sources it said it didnt fly at all. It went right into the air and the power that push it into the air as he believed he needed to have a catapult to launch her airplane. That was his fear so he had a boat in the potomac and applied a sling shot through the airplane and then it just went crashing in. That was his theory of aerodynamics. The Wright Brothers had their own theory. They were testing gliders at kitty hawk North Carolina because it was a windy area and there werent many people around. So they would go out and develop wind currents and how to fly and how to turn and all of this and would try to deal with all of that. And would eventually put an engine on a device. Nine days after langley with his second subsidize failure the Wright Brothers for 2000 of their own money successfully invent the airplane. Theyre the ones to do it. Its a classic example of government stepping in creating the wrong incentives funding the wrong person and somebody else you would never suspect comes in and gets the job done for the United States. Host i thought it was fascinating that the Wright Brothers had experiments with gliders and such largely worked out the engineering challenges of making this work but what they didnt have was an engine. What they needed was an engine that was at least eighthorsepower and had to weigh less than 200 pounds. They go to their Shop Mechanic and say we need an engine that meets the specs and can you do it. The 12horsepower engine weighs way under 1200 pounds you report. He does it all with parts that are basically available within walking distance of their shop and this is in ohio. Guest dayton ohio. Host dayton ohio. As someone whos followed federal contract from time to time specs matter of course but this is a really remarkable thing to accomplish. Guest it is, it isnt it was so startling that the u. S. Government then proceeded to make another bad decision after the Wright Brothers succeeded. It was so unbelievable that the Wright Brothers had been successful while langley the scientific genius had failed. There were attempts to get langley another subsidy so that he could continue because they said langley really has the right path for successful aerodynamics. The Wright Brothers for having to do with that issue and that when they finally had their plane up and ready to fly they offered it to the u. S. Government to sell it for military purposes and after all the purpose of founding langley to invent the airplane of the first places that we would have the airplane so the Wright Brothers offer to sell their lights wired to the u. S. Government and they turned him down. Instead they buy a balloon, a helium balloon because that looks like it might be really the wave of the future to buy a helium balloon. Finally in frustration the Wright Brothers to these international tests. Wilbur goes to france and flies to show the french what he can do and orville is in the United States in military bases in virginia and he does the flight tests. The ideas we are now going to start selling whoever wants to buy, we are loyal americans and we want to sell but its been five years since we invaded this airplane and we are ready for some buyers in ready to get into the commercial side of this as well. Finally the u. S. Government stepped up and bought the airplane. I particularly they describe them as buffers. Of course five minutes later they demonstrate their something else. Mr. Langley of course is the man from langley virginia is named after the town. In terms of overly funded boondoggles associated with the word langley you are still very much in the same period period of time. I note that the rhetoric that accompanied the airplane project is very much brings to mind sputnik a generation later and the missile gap. We cant have an airplane gap. Im sure at some point we cant have a stone ax gap at some time in prehistoric history. Guest thats a problem. That becomes one to accept this idea that you have quote a gap in this case an airplane gap and later you were talking about because the gap that canon famously cited in the debates against Richard Nixon is the idea that we need government to step in. Private enterprise will be unable to respond to the challenge. What we have seen time and again is these inventions are far above and beyond what we ever would have thought. 20 years ago we would have imagined that we would all be using iphones. The reason we have them now is not because we said we want an iphone. We wanted a fisa can do these things. To steve jobs and others thought i think if we can produce as the marker will be there. Henry ford in his own way was the same way. Horses and buggies were satisfactorily getting the job done. Ford had that vision in every garage. He had to deal with road building and was privately done or done by states for a long time so is dealing with those kind of issues. The idea is the entrepreneur has the imagination to think of what you would want before you even know that you want it. Host that is the sort of thing you have to think about. Alexander graham bell couldnt have imagined what telephone was going to look like in 2014. But we expect essentially that Andrew Jackson could and to have the government direct these kinds of investments. The amazing thing about the Wright Brothers of course is that langley was working on basically a political problem in the Wright Brothers were working on an engineering problem and solving an engineering problem is something that has a definite at the end of the day right or wrong answer. The airplane stays up or doesnt end theres a great deal of conflation in our history over what are essentially technical and engineering problems and essentially politics and policy problems. This goes back to the granddaddy of all subsidy boondoggles in the modern era which is of course the reconstruction finance corp. Which brought to us if i remember history correctly and engineer herbert hoover. And of course hoover has a mixed record on matters economic. In many ways he was an admirable character and like a lot of people during the time of the depression he responded poorly. He believed that Government Intervention was the way to deal with the depression and all of this stuff of course happens in response to some ill perceived emergency whether the germans are going to get an airplane of the russians have a satellite and of course im sure you are familiar with work of robert higgs. You could always find an emergency if you are looking for one. The difference here is of course that the depression really was an emergency and to be charitable toward not only hoover but later fdr they were trying things that were not yet yet and we have historical experience now and honored economy explains why these things didnt work. Again from hoover again from hoovers but again from hoovers point of view it didnt sound like a terrible idea so the reconstruction finance corp. Is in my view the point at which the United States stops really having a government and now has a bank. So tell us about how that got started and what it did and its sorry lamentable history. Its trail. The Great Depression is a key event in American History and that is where the reconstruction finance corp. Comes into existence. That is a landmark event in the development of subsidies. Hoover did do a lot of other things that were problems. The income tax on top incomes was hiked from roughly 25 to 63 and thats going to choke off investment so there are a lot of things he was doing that were not so good. The reconstruction finance corp. Perhaps is the thing he did with the worst permanent effect because the idea was banks that are in trouble and corporations that are in trouble. Instead of having congress voted in the subsidy lets create a group the reconstruction finance corp. That has the power in the funds to throw subsidies into various corporations and that will help us get out of the Great Depression. In other words we go from having subsidies funded by the federal government and by congress and at least by the War Department, somebody who is strict on capital. You have a president ial administration that is accountable. Congress is accountable so when steamship subsidies didnt work and the transcon l. Robert subsidies in work than we have a Political Party thats accountable in congress that is accountable and we can correct it. The reconstruction finance corp. Set up in 193200 hoover changes the game because now you have a large amount of money thats going to be everincreasing. Congress will vote on increasing appropriations and they can pick and choose who they want to subsidize. Who to subsidize and who not to. Part of the problem is the subsidies havent worked in u. S. History up to the Economic Development subsidies up to the Great Depression. What makes one think all of a sudden if we have a ward that they will make nonpartisan decisions . Immediately they become partisan so one of the biggest loans goes to Charles Dodds former Vice President of United States under coolidge and head of the reconstruction finance corp. Who resigns one week later to receive a large subsidy for his bank in chicago which fails anyway. So you have the politics of the rfc the reconstruction finance corp. And we have the secretary of the interior gets a loan from his bank and senator goldsborough of maryland gets a loan for his bank. Some democrats tutu but you have a partisan distribution of the funds with the redistribution finance corp. When hoover is out of office russo comes in and becomes the partisan distribution of funds to the democrats. That continues during world war ii and thats going to fund a lot of the war and perhaps at the end of the war would be a time when the emergency would be declared to be over but its not an goes into the 1950s. This is the problem. Once you set up a federal organization is hard ever to get rid of it. Including the Funding Organization like the rfc reconstruction finance corp. Set up to get us out of the depression and now we are in at the depression. Weiss is still existing under truman getting subsidies to cronies and president truman. This was the problem republicans had. Finally when eisenhower gets in to abolish the reconstruction finance corp. And you set up the Small Business administration which is activated to give subsidies to Small Business republicans. It becomes a republican tool so both Political Parties from hoover to roosevelt to truman and eisenhower have a stake in this. A chapter would call the d. C. Subsidy issue and the d. C. Subsidy machine is set up massive subsidies go out in the function of purpose and the effects of the subsidies their effect is disastrous. Host i was particularly interested to know that the Roosevelt Administration tend to use the subsidized loans to bribe newspaper editors to write nice things about them. Im sorry to say my career as a newspaper man ive never been offered such a thing. The other active i thought guest the 30s and 40s. Host there is more scope for my particular talent but in the purchase of we have seems similarly enough last couple of years we have the tarp authority during the housing meltdown which was only supposed to last for a little while. We have only just now gotten ourselves disembowel from the case of General Motors in which the United States government was a large shareholder to the 10 billiondollar loss on that during a time in which what appears to be negligence and malfeasance has left 13 people dead as a consequence of faulty ignition switches in the gm products. There will always be the question about maybe that wasnt investigated as aggressively as it should have by the United States government. A case of the rfc later the sba, what hope is there really for getting the people who established and managed these programs and benefit from them to see the error of their ways . Guest is often why we have to get a new generation of thinking there. President reagan did this to some extent when he got into the 1980s but one thing is city of agencies, if you have major subsidies like this which are a bad idea to begin with if they are funded by congress then there is more accountability. If they are funded by Something Like the rfc then you have diminished accountability because the subsidize yours do not have to write much. The rfc became a hydraheaded monster because not only did you have a Small Business but fannie mae comes out for the reconstruction finance corp. That problem can be traced back to the rfc and also the exportimport ban which also belongs on a list of those that are politicized heavily. In the federal loans granted by the export import ban over half have gone tebowing so General Electric has also been rewarded by the Exportimport Bank and General Electric has connections to Jeffrey Immelt in the obama demonstration so the politics become very unfortunate here starting with hoover and continuing through roosevelt paid the minute you see the subsidies come into play in a big way the political aspect of this becomes absolutely allimportant and the politicians arent top of it using it to count votes using it to report constituents making bad decisions. Very rarely can you cite one of these programs has successfully benefiting the United States Economic Development. Host you look at ge specifically but also obama feed feed owing its difficult to think of them as private companies when you look at where their revenue comes from, what their Profit Centers are and this may be a bit inflammatory to say but what they really remind me of of mussolinis economic model the fascist economic model where you have firms that are nominally private. There are run for private profit by shareholders and those sorts of things but subsidize controlled by the government and the idea that it causes impact in the public interest. Even though the government in a bad job of getting the airplane off the ground the Aerospace Industry to the state essentially has extension about ways to call the War Department had more on his times and now called the department of defense and department of Homeland Security and all the rest of it. Does it make sense to talk about these companies as though they are normal private firms . Guest increasingly now and in the case of owing they have profits and the schedule of their latest airplanes are back loved until 2019 according to the presence of a are hardly in need of subsidies if they have about log that run back that far. When anita and i wrote the book uncle sam cant count we were concerned about the elements of corporatism. American corporatism is becoming like that, a highly regulated country where you almost have been inseparable link between business and government. Where that occurs you do not see consumers winning. Consumers are often the big losers. Prices are hiked. Prices are stabilized. Innovation comes to a virtual hault. Lots of money is wasted. Innovation is hard to achieve. Thinking back to henry ford if you had had a buggy, or horse and buggy, and they would have said well look at all these potential accidents with these cars going as fast and we do done yet the roads to accommodate them. No, we shouldnt allow them on the road. Well regulate road. We will regulate the mall. A free economy gives us a chance to test what works and doesnt work and gives us a way from this idea of corporations and fred will subsidies being linked handinhand. In the a big way that you just described in your last question that starts the reconstruction finance corp. 1932 and we have not backed away from that since then. We need to change the american ideal of what Free Enterprise is all about and what federal intervention is valid and what isnt. Part of the purpose of the book is to show when the federal government gets involved in trying to spark Economic Development away from their constitutional functions, when that occurs that is when the disaster occurs in the federal government hams into something its not capable of mastering. Host i have a friend who is a libertarian activist and an expert on corporate rent seeking subsidies, rigged tory capture and that sort of thing. He also runs a small Investment Fund and the companies he invests in are the villains of the story. So his voice telling me get boeing and lockheedmartin because no matter what happens in the marketplace their margins are well protected and they are not going away. Going out of business is not on the horizon. Here is what is depressing to me about this. There is a lot depressing about this but your book is not depressing. I touched on this a little earlier but its a lesson that we keep refusing to learn. In the Wilson Administration we have what they call war socialism and recommending the economy for the purposes of fighting the great war as it was known. After the war there is a faction in washington that wants to keep these institutions and practices around. The Incoming Congress and president ial administrations thought this was not a very good idea and they said to one side and the ideas would sit there and ferment until the depression or world war ii. And then theres a confusing event in American History which is the economy miraculous economy that emerges after the Second World War and it happens largely because the United States has almost all the worlds surviving on military manufacturing capacity. The United Kingdom all the sophisticated economies are pretty well destroyed. The last player standing are basically india and the United States. The big countries that have emerged from this war unscathed but when people of that those years they draw precisely the wrong lessons. We set up this that and the other program during the depression during the war we had a great deal of federal involvement in the economy and the eisenhower years we have a 91 top tax rate in baby thats why we have so much growth. Not the fact that essentially are Major Industrial competitors are clear from the world stage and predictably by 1973 the rest of the world has recovered or at least begun to recovery. Japan is a thriving economy this point and most of western western europe has repelled in the u. K. Still struggling because it is definitely taken the wrong lessons from the war. Then we start to have this great economic stagnation in the 1970s. Mens incomes in nine states in real terms peaked in 1973 which is right around the time i was warned. Bad news for men of my generation and yet we continue to try to do the same thing. In the 1970s he get the Nixon Administration trying to micromanage the economy through wage and price controls through various other means. You have got various kinds of trade reduction particularly in the field of agriculture but also the automaker saying hey we can possibly be expected to compete with japanese credo of the same rhetoric we hear about china. They are poor and their collectivist and they dont have our standard of living. Of course now tokyo have stronger and yet we still want to say the wave of the future is windmills and solar energy and green energy. The market is just not moving that way so what we need is the white house and the congress and the Commerce Department and the department of energy and these geniuses to push s. Right direction. What we get a cylinder as a talk to me a little bit about windmills and unicorn flatulance i say this as someone who is a great admirer. Their simple arrow oil refinery that runs on wind power because its like kitty hawk, no people, lots of win. If you go to western pennsylvania the gas wells that are pumping natural gas out of the fracks wells out there run on solar power. There are good applications for these things but maybe not this way of thinking. Maybe talk about that in the case of elon musk who is the genius when it comes to rent seeking. Guest the last segment of our book is modern subsidies, what we call political entrepreneurs seeking the subsidies. If what you say is true with world war i and world war ii certainly we learned the wrong lesson. One thing to remember from world war i and world war ii was the federal budget declined at half, 50 in both cases. In the case of world war i the tax rate was cut at the top level from 73 to 25 . We see a massive recovery by the United States so its not a state and director cover it all. And so we come out with the wrong lessons and then we get in the 70s and we have this Energy Crisis. The market system would say through the prices of these various products whether his ethanol and then you get into solar energy and wind energy but the prices of these products as oil rises those become more competitive. Henry ford always thought ethanol would be a possibility for a gas tank. Ethanol as well as gasoline and the idea was he thought the ethanol would eventually prevail but it didnt. Theres something about the economics of putting the gas in their that is more efficient and all he has to do with the corn crop and others to process it and the cost of going to putting that in your gas tank that oil has been more competitive. Richard nixon the 70s and jimmy carter that time was at an and. That is when we really begin to get solar energy begins and of course the ethanol subsidies in a big way come and with Dwayne Andreas becoming one of the biggest recipients of federal subsidies to try to put together the ethanol business. Nixon carter and nixon in their speeches say the amount of fuel that we have in the amount of potential fuel is deadly dwindling. Its finite whereas these crops are renewable. Solar energy, its all renewable and its good. In west texas there are areas where experiments can be done where they may be competitive. So this is good but with the decline in the amount of fuel we need to shift. When you have government doing this and its okay if we have these high prices for oil because its going to dwindle down to nothing anyway and that will keep the dwindling from being so dramatic. We will shift over into these alternate fuels into green energy and we will be a better country for it. Nixon and carter sold a bill of goods and we bought it except for president reagan. His famous line was there is more oil in alaska than there is in saudi arabia. His starting. Is we need to decontrol all the pricefixing going on in the oil industry. Free it up and see what happens. A lot of people are saying its terrible it will decline but we have discovered in the early 1980s the development of fracking occurred. George mitchell and then sit for develops it he perfected in the 1980s right about the time to oil drilling was underway in the markets were being allowed to produce more and oil. So we see dramatic oil and that we see that this development of fracking. Of course fracking needs to be improved in their need to be environmental improvements but what a possibility for the future. They show although oil may indeed be finite its much larger base and what we thought they be lasting for hundreds of more years just with the supplies we have in the United States. With the various discoveries we had in north dakota and texas and pennsylvania that can be developed through fracking. We have for decades and decades into the future enough oil to keep this country going. This changes things. We have any paying High Oil Prices for the last 30 years perhaps much of the time and sincerely. The markets are beginning to solve the problem me at the subsidies for solyndra and various green they may be able to be developed under certain circumstances and its entrepreneurs improve and we get Better Technology who knows . And 100 years there may be ways to make wind and solar power work better. People get subsidies to put windmills on their property and they kill the birds and they destroyed acres and acres of land because you cant farm in those areas with the windmills. Their there are inevitable benefits of this has been an ongoing tragedy. Host i remember reading i believe theres a volkswagen plant in tennessee which has won a largest solar arrays in the United States and when the plant is producing this records setting solar array of produces 12. 5 of the energy necessary. One of the problems i think with these programs is that through their creation of perverse political incentives keep us from having an honest discussion. In the case of fracking there are some member mental concerns purtilo a how to dispose of wastewater and its good that we talk about those and try to deal with this problem but there are enormous environmental albums with ethanol when you look at it water, the way that these corn crops and the farmland and the shortage of water is a problem. Ethanol plants consume this tremendous amount of water. You never hear the discussion in terms of talent in one versus the other and of course there is no so far as we know environmentally here way to produce energy. Even solar power. You use a lot of highly toxic chemicals to make those things work. We never have a real and honest discussion about it very in as we are getting close to winding up here and i have enjoyed the specific historical examples very much. But in the middle of the 20th century but get the grade austrian economist making his argument about what becomes known as the social calculation problem and essentially what he argues in subsequent experience confirms is that in the absence of markets there is no way to make intelligent rational decisions about the allocation of resources. In recent years we have also seen real breakthroughs in the study of what goes under the general heading of complexity of trying to understand very complicated systems in which markets are one and but the complexity theorists have argued in recent years is that rejecting understanding and explaining and preempting the actions in markets not only is difficult than not only something we havent managed to do is something thats not possible even in principle because of the complexity of the underlying information in underlying information into ways underlying information and the waves to ship it did throughout the marketplace. Where science is is fairly far ahead of where politics is. We have the Current Administration that likes to go on and on about its commitments to science as long as its Economic Science and the need to put this sort of informed scholarly opinion at the center of our public debate. That creates a real arne because a lot of these things like the rfc and related programs predicated on the idea that we had a panel of experts who are elected officials that dont have to run for reelection they can be the wise men. What are best wise men are telling us is that they dont normally do the things that you want them to do. One hopes that this might be an opportunity for us as these ideas gain public currency to challenge the disorder thing not just in terms of application about whether we did a good job but did we do a good job and if its possible even in theory. In closing i would like your thoughts on that. Guest as you were working through your question there i thought there was a good parallel between president hoover and president obama which i dont always think think of as to his being alive but there is that sense in both of their presidencies that they scientifically work through problems by appointing groups of experts. The problems is the groups of experts come in with incredible biases on what can be done and what cant be done. Frank frequent they are wrong and if we go by these experts then we go on the wrong path often for decades. I would put the Energy Crisis is a classic example. When Richard Nixon and jimmy carter both said the Energy Crisis is here to stay, is the foremost problem of our generation it is caused by the declining oil supplies. Experts lined up and said yes. They can give you up in the calculation. Theyre so much oil here in so much oil but what they couldnt, as the entrepreneurship of 1980s by George Mitchell and others that developed fracking and thereby we were able to reach sources of oil that we didnt know could be reached in the 1970s. Once those sources are reachable and once we develop ways to remove the environment remove the environmental problems and theyre going a long way toward that then we have the opportunity to increase our Energy Supply by 100 years. Its no longer an Energy Crisis. The experts were virtually unanimous saying that it was. Markets and on to the never said no its not. Thats why i say uncle sam cant count. Entrepreneurs often can or if they cant bear theyre not in business very long. The good ones can and when they do they have changed the lives of americans for the better and they have been the recent United States rose to being a great investor. The freedom they had in the late 1800s, the absence of a lot of these subsidies and the late 1800s once we got through with the Transcontinental Railroad subsidies we have 30 or 40 year period from there to the airplane subsidy. We back off and let rockefeller and oil and carnegie and steel and other industries develop the entrepreneurs that led the u. S. To dominating the world so immigrants came to the United States. The United States became the place of invention and entrepreneurship. I hope we can still maintain that in steve jobs and others give me the sense that her Current Group the government will get off their backs can get the job done. Host finally with his goes to is the problem with the idea of expertise. I mentioned the case of no one in the world knew more about soft drinks developing them in advertising them than cocacola did. No one in the world knew as much as they did. They were the worlds foremost experts experts in their test shows that would work. Everything they did woodwork. All the experts agreed at this problem of expertise is in just in the hoblick sector but also in the private sector which reminds the of the story about bill gates and the hype of microsofts ascendancy. Someone asked him what he worried about in terms of competitors and gates said he wasnt worried about Big Companies like ibm or sony or the people getting into the market and beating them at his own game. What he worried about was some kid in his garage somewhere doing what he had done a generation earlier. Thats the problem i think of predictability. All these subsidies in all these industrial steering projects are forward directed in time. This is a situation where we are and therefore we can make decisions about the future but as you point out about the case of George Mitchell if fracking had been around forever. It had been around for 100 years but its accommodation of fracking and horizontal drilling along with movements in both of those that really produces the end results that were not predictable not by anybody. Exxon didnt know that was going to happen. Chevron was not able to predict this but there was a guy out there with an idea it turns out to change the world. Now if we had the government deciding what sort of technology is best for getting oil out of the ground they would probably be driving corn fueled cars to this day instead of only 10 . Guest 10 . You are absolutely. The horizontal drilling in the fracking would have been diminished. The extras would have said that doesnt work. We have to look at reality and reality as the reserves are dropping and you are using an untested method to try to increase it. What we need to do is deal with reality and the reality is we need to subsidize ethanol and therefore put up to 40 of the corn crop into that to make this work. Its logical and experts agree. The experts were wrong. May never would have picked the Wright Brothers over langley they never would have picked they would have picked microsoft over ibm. We would all be significantly worse off than poorer for it. Guest my coauthor my wife anita likes to talk about steve jobs working in his garage of looking, of an entrepreneurial innate garage three. You dont have to have the highfalutin corporate office. You can sum up an idea and somebody with the perseverance to make that idea work and dream the United States has had its share of dreamers and that is led to the Economic Growth we have experience in this country. Host i think from computers to rock n roll a lot of the best things about our country have come from california. [laughter] guest or lubbock texas. Host my hometown is a candidate for when subsidies because we have a lot of real estate in a lot of wind and not much else out there. Maybe you and i together can. Guest lets try. Host thank you so much. Ive enjoyed the conversation. Guest thank you kevin. 48 hours of nonfiction authors and books every weekend. Here are some programs to look out for