Welcome to the Heritage Foundation. Im the director for the center for free markets and regulatory reform. The Heritage Foundation. I would ask for those of you in the audience to please make that last little check now of your cell phones, to make sure that they wont interrupt proceedings today. And we will get started right now. The event today is really designed to celebrate the special report called a Government Policies that hurt the poor and how to address them. The United States is a very compassionate country and we have an awful lot of government activities that affect poorer members of our population in one way or the other. We have welfare programs, welfare spending of one kind or another that adds up to well over a trillion dollars tuesdays. That can be in things like health care, direct income supporters of one kind or another. We are not here to talk about those policies today. We want to talk about another set of Government Policies. Those that are put in place offense for what seems to be on the surface very wellmeaning purposes. In fact, they may in some cases be necessary policies of one kind or another for government. But all too often, what they wind up doing if you look at the second or Third Order Effects of the policies is having a negative affect on poor people. The kinds of policies we are taking about here are policies that have two main impacts. The first is an impact on prices. What that means is that the free market is not going to work very well or work at all if government is changing the relative price is of good, labor, capital. Theres lots of programs the government undertakes to have some sort of impact on prices. Unfortunately because consumption is a bigger part of the expenditures, poor people, the policies that raise the prices of consumer goods tend to hurt people more than they hurt rich people. The second set of policies are those that interfere with the opportunities of people to work. These would be restrictions like occupational licensing. I suppose you could put minimum wages in this category, too. Things that interfere with the ability of poor people especially to get into the workforce and take care of themselves. That is going to be the focus of our program today. I think youre going to be surprised at how many policies there are. We identifieidentifie d several dozen in the publication and i think we are just scratching the surface. Fortunately, we have very eminent people to start us off with today. Our keynote speaker for the event is dr. Don boudreaux. Dawn i would have to say is one of the leading economic educators in the United States of america. I am just going to find his actual resonate in my list of papers here because i want to tell you he is a senior fellow with the Friedrich Hayek program for advanced study in philosophy politics and economics at the Mercator Center at george mason university. He is the Mercator Center board member, professor of economics, former chair of the Economics Department at george mason. He holds the martha and nelson gotshal chair for the study of freemarket capitalism. That is not a word you hear very often these days youd react to hear more. Free market capitalism. He specializes in globalization and trade, law and economics in antitrust economics. Hes also the author of one of the very few blogs online that i go to every day. It is called cafe hayek and i recommend it strongly for those of you who want to know what is really going on in the economics world. After he speaks, we are going to have commentary and hopefully a conversational and peers steve marr is a distinguished visiting fellow here at the Heritage Foundation. He ran until the color project for Economic Growth. But a broad range of topics senior economic analyst for cnn. Enjoying the Trump Campaign as a senior Economic Advisor to then candidate donald trump. Steve is the author of several books including his most recent, feeling freedom, exposing the mad war on energy. Please join me in welcoming don boudreaux. Good morning. Thanks, everyone. I am pleased and on her to be here with steve. When people say that im an economic educators, an economist with research. Then use and put a curlicue inside point. I think that is revealed in this state of current public understanding of economics, the contents of the public debate during the most recent National Election for any sign of the state of the publics economic understanding. And its incontestable that the state of that economic understanding is pretty poor. This seems to be the worst in my lifetime, which unfortunately is rather long at this point. Economics at the most basic level is a unique way of thinking about reality. And in a new way of thinking and a willingness to see beyond whats immediately obvious and requires to put those lenses on and use them require some effort once that effort is put forward it is not difficult. You wind up seeing a lot about reality that would otherwise remain on division. It is not and its not appropriate to School People for not understanding economics who live in a world and a great deal and to spend time doing your job, being with your family, taking care of personal matters. And then even basic economics. Maybe somewhat appropriate than even its golden economist for not learning the details of carpentry. But the difference is, the fact i dont know anything about carpentry. That doesnt affect the state of public carpentry and things seem to be working pretty well with carpentry. The problem with economics is if you dont understand economics, you can still vote and make public commentary and the lack of understanding is displayed through the voting process the commentary process. The results are bad economic policy. It doesnt inflict bad carpentry on the rest of the world. Your vote not your come of the peoples lack of understanding of economics slips bad economics on the rest of the world. I dont have a solution to the problem. And i point the finger blaming in conveying an understanding of basic economics to ordinary people. There exceptions to this of course, Milton Friedman being the most notable. A handful of other excellent economist, also very excellent public commanders. We have too few of those. The basic truths are not out there in the public mind. I try to just till the truths of economics and distilled them down to number 12. The state of the public debate of politics and policy would be better. It would be perfect, but it would be better. These are in no particular order except the first one. There is no such thing as a free lunch. I like that phrase could you all know what it means. It means every benefit has a cost. It doesnt mean the benefit is not worthwhile, but its not free. Most of these costs were often these costs are unseen. The flipside of that is a lot of cost of benefits. To the sound economically, you cant just focus on the benefits you see in it for the cost. You have to look beyond the first stage, the first act, you should cephalexin and economics play and it doesnt end after the first act. As a general rule, each of us spend their own money more carefully and only then we spend other peoples money. But this is indisputably obvious, but judging from the Public Policy that comes out of other people. The reigning presumption among other people, mostly people on the political left, but not always if you take money from person a and give it to person b. , theyll spend money better. More productively than other peoples money. Number three, when the cost of taking some action rise, people are less likely to take this action in a moment youll see the relevant this morning. This seems obvious as well. More costly for me to do something unless likely to do it or i will do it less. Probably the most fundamental proposition of scientific economics is the law of demand, the fancy way of saying from the cost of you taking action go up, youre less likely to take the action. You find some alternative way of pursuing your ends. Number four, there is no fixed number of jobs in a country are globally, the socalled lump of labor fallacy is indeed a fallacy. People on the left, on the right, in the middle, up and down often fall through this lump of labor fallacy. If these jobs are destroyed, what will people do . I think this is a grotesque fallacy to allied history. One of my favorite statistics is looking at the u. S. Labor force in u. S. Number of jobs. In 1850, so some 67 years ago, u. S. Labor force is roughly 60 billion people. Today the u. S. Labor force is roughly 155 billion people. About 150 larger than it was 67 years ago. The amount of joblessness today is just a little bit higher. A percentage point or two as it was so the labor force,. So too has a number of jobs. It tracks the number of people in the labor force pretty carefully, does the number of jobs. As women enter the workforce, as a Larger Population enters the workforce, jobs are created as long as the economy is free to employ those people. Number five, just as there is more than one way to skin a cat, theres more than one week to succeed economically. Ive heard this phrase. I would like to have to skin a cat. Im glad to know academically but theres more than one way to do it. I do know not from personal experience im sorry to say but from my reading of economics and economic history in Business History that theres obviously more than one way to succeed economically. If one way of pursuing business, the cost of one way is pursuing business rises, competitive bunch for us find other ways to pursue business. Not just one way and successful dynamic entrepreneurial Business People are on the lookout for ways to conduct their affairs. Number six, consumption is the ultimate goal of economic and tv. The ultimate justification is not to create businesses. The ultimate justification is to create goods and services that make peoples lives better as they judge them. Dont be misled by number six. Economic growth is caused by, driven by increased production. It is not cost contrary by increased consumption. It is a happy result of increased production. Number eight, nothing about a political order changes the nature of trade. Any problems that arise for nebraskans trade with koreans arise for nebraskans trade with kentuckians. Any benefits that arise for nebraskans trade with koreans. Number nine, therefore from number eight, when foreigners excel to estimate he do so only because they wish with pfister musser invested our economy. Foreigners are no more willing than we are to accumulate lots of pictures, monochrome pictures of dead american statesman, but to listen to the trade debate today among people on the right and and the last come to you is where the goal of most foreigners is to harm us by sending us things makes steel and textiles and Consumer Electronics in exchange for ever greater numbers of pictures of George Washington and Abraham Lincoln. As much as i admire George Washington and Abraham Lincoln and jefferson in Benjamin Franklin and ulysses s. Grant, nonetheless engages in Economic Activity to acquire these pictures. We do so because they want to spend most pieces of money or to invest them in the same is true for chinese, germans, mexicans and all other foreigners. Number nine excuse me, number 10. Trade deficit is neither a symptom for domestic economic performance, noise city sewers of poor economic performance. It is usually quite the opposite. I dont think there is any topic now that is more misunderstood, at least across the political spectrum than the topic of the socalled trade imbalance. A trade deficit as many of you i hope note in this room, but he dont, a trade deficit is a term of art. A trade deficit is offset exactly by capital account surplus. Then they run the trade deficit, america is running capital counter surplus. Foreigners are investing more in our country. I fail to see how that could be bad for us and our trade deficit reflects poor economic performance. Usually, when i invest, i invest in companies that i think a promise. If someone tells me that company has a very poor future. I rushed to take money out of it. Number 11, a trade deficit is not necessarily that. People in the right, people on the left and economists are to blame for this because of the language we use. Incessant me describe increase in the trade deficit that increases in americans that. It is not the same thing. It can become deputy trade deficit is not identical with that. Every sense of the trade deficit can be nondebt. An increase is not necessarily mean that americans are going further into debt. It can mean not that it does not necessarily mean that in the description of the trade deficit as a source of increasing american debt is dangerous because the apprehension and misunderstanding about what the major trade deficit is. Number 12, they should especially appeal to steve because it is about his great teacher. The most important resource as julian simon todd the human mind in free markets. Human creativity is what makes our life and standard of living possible. I like saying we talk about Natural Resources all the time. Theres no such thing as Natural Resources. Resources are made to lay human creativity figure not how to use them in transferring them into goods and services to make our lives better. These 12 simple points what they were understood to assess away from policies that while they may be meant to help people especially to help the poor, they in fact hurt the poor especially. I will talk quickly about two and one was mentioned briefly by minimum wage. Minimum wage legislation is the poster child for such misguided policies. It seems so right, this person is paid less money than we think this person should be paid. Lets ordered the employer to pay that person more. The trouble with that is the cost of taking action rises, people are less likely to take that action has to play most skilled workers goes up, fewer are in troy. Because thats not the only effect it has. Minimum wage can change the nature of jobs. The employer becomes less willing to allow the workers to tax or use work time and there are a lot of ways to adjust for the employer standpoint. One of those ways unquestionably is to employ fewer low skilled workers. And getting paid zero per hour is worse than getting whenever you would be paid if you had a job in the absence of minimum wage. Even worse, not the loss of current income. That is bad enough, but the loss of the job experience in the job skills you get when youre particularly a young person or an unskilled person. The distribution of the minimum wage is notable. I have a teenage son he was born and raised a nice suburb, good schools. Hes never had job at the minimum wage. He knew nothing of those he thought he knew a lot. So what the minimum wage does is not only strip some low skilled workers have jobs, the low skilled workers who are disproportionately harmed by this are minorities in the innercity. They are the teenagers who dont have their own personal means of transportation. They are more likely to stay home to help babysit their siblings. They are the teenagers who have gone to failing government schools and so the employer for understandable reasons, and players steer more from those workers ended because although more costly to hire even kids like my son, the risk of hiring innercity teens is even greater than hiring teens from Fairfax County are montgomery county. And so it is to teens from the innercity that are harmed the greatest by the minimum wage. There is a raging debate in economics today. A solid pair of coal to destroy jobs or does it not. The bulk of the evidence still shows that the minimum wage destroys jobs and that the both of the job losses are among innercity, especially poor families. There are people who dispute this and the appearance of evidence. It is not conclusive of matter. If you read the New York Times he was spared it is inclusive because it has mysteriously no effect on the number of jobs. You can find if you want evidence in the literature that low Skilled Labor among all goods and services in the world is the one good service that is immune to the law of demand, that when the government pushes up the cost of using it, employers go okay, we will not attempt to protect their bottom line by adjusting in the way of economizing on low skilled workers. The second policy, these are the two policies that access me in my daily lives. First is minimum wage and the second is trade restrictions. It is another example of unseen harm. It is trite to say, but it deserves recognition typically given the kind of debate we had in the last election that you can protect certain jobs with higher tariffs or other import barriers. No question about it. Meaning at americans spend less money come to fore on products that do not have a lot of steel input in the. Jobs are lost in the other sectors. Its difficult to find evidence of this in the empirical record. If youre looking for specific jobs. Because its difficult, its easy to, difficult to find evidence, its easy to demagogue trade as a sort of economic decline. The evidence on the prices that people pay for trade restrictions is pretty clear that trade restrictions raise prices and the bulk of those price increases fault on poor and middle class families. Rich people pay them but the high prices are a percentage of a families income, the higher prices caused by trade restrictions fall as a Family Income rises. If you raise the price of imports with trade restrictions, the percentage of the income that for families will pay for Consumer Products and consumer durables will be much higher as a percentage of income than will the percentage of my income or really rich peoples incomes. My time is, i think i will pass my time actually, but just