Event in las vegas because usually las vegas is just about swapping entertainment and so forth. But with our renaissance gathering where we talk philosophy, history, science and technology, healthy living, music and dance. A little bit of everything. Its a little girl arts education. Liberal arts. We have over three and 300 spey authors. Whatever subtitles is great ideas, great books and great thinkers. We are one of the few organizations that as a conference at the center of our exhibit hall is a bookstore. We sell people hundreds of books at freedom fest. We are delighted to have booktv as part of the freedom fest. Host whats the political philosophy behind freedom fest . Guest we are nonpartisan but theres no doubt that we attract more of a libertarian and conservative audience. But we have a lot of wealthy investors here and its hard to pin point politically what investors are. For example, two years ago we had donald trump who came at the last minute. He appeared 711 in 2015, so it was kind of his lucky day because his poll numbers were down. He had been fired fighting alls of things. The Media Coverage for donald trump was just incredible here at freedom fest. And what shocked was the Audience Response to donald trump. Because i expected it to be a pure libertarian audience which would have serious reservations about what he said about immigrants, about mexicans can about the wall. Libertarians tend to be more openminded and building bridges rather than walls. But at least have the audience gave donald trump a standing ovation. I was in shock. So we have an eclectic audience and weve had come would like to do a lot of debates. I mentioned to you paul krugman. We have paul krugman two years ago and steve moore debate. Paul convinced quite a few people to change their mind. I dont like to think of ourselves in a political way. We discourage people from using the terms left and right because i i think these are divisive terms. They are often terms for smearing people you dont like. So we like to take a more objective stance. All our debates are formal debates, so we discourage talking over each other and yelling at each other. Because we are there, its not who is right and what is right. What is the solution to our problems rather than oh, this is the republicans are this is the democrats. Look, we have a Health Care Crisis with several sessions on healthcare. We dont care who proposes it but we had some Serious Problems and we want to resolve them. Host we talked to an economist author yesterday who said that she thinks that paul krugman is a classic liberal economist. Do you agree with that . Guest well, no, because Classical Liberal would be in the atmosphere of the mode, and he is definitely a keynesian, so add a smith advocated for sound money am antiinflation holds data type of policy, very limited government, laissezfaire as the French Center he called it system of natural liberty, balanced budgets, free trade. Now paul krugman would probably be more or less a free trader, most economists are but hes not an advocate of a balanced budget, especially during recessions. So is more of a keynesian in that respect, more of an inflationadjusted and more of an interventionist. So i would be curious what, did she or he or whoever spoke, did they give a reason why krugman host we were talking about Milton Friedman, and i think it was he guest who is written host and the professor said he thought that paul krugman would be more in the Milton Friedman camp than perhaps a libertarian. Guest well, we had him here to debate steve moore, and lanny is kind of an interesting person because his background isnt classical economics and jon stewart mill is a favorite economist, but and hes written a biography of hactivists and friedman hactivists he has good a lot of ways. He lives in santa monica or santa barbara. He teaches her. I think been affected by the purple koolaid a little bit. So he was in favor of a progressive tax, rather high progressive tax and, of course, Milton Friedman and hayek were very skeptic of that. The idea of transferring wealth from the private sector to the public sector, and i cant see of that would be beneficial. I kind of question lanny, his prison of how he is seeing things these days. Host mark skousen, you mentioned the term sound money. What does that mean . Guest i think sound money is you need some kind of a Monetary System that really imposes a discipline on the central planners. Because how much does it cost . Okay, we have paper money, 20 bill with Andrew Jackson on it but it costs three dollars. Host it cost three dollars to make a 20 bill . Guest right. Thats the cost of production, and, or a 100 bill is the same thing, three dollars. Host a one dollar bill . Guest three dollars per unser, three cents. That was the liberty bell by the way. People are bringing it how often they have been to freedom fest. If youve been there ten years they will bring it ten times. Anyway, so its three since the matter what the bill is pixel obviously you would want to print 100dollar bills up. It costs three cents. You get more bang for the buck so we need to provide a a discipline, and the discipline, of course, is, ive got this in my other back pocket, gold. Because it cost host is this real gold . Guest thats a mexican 50 pesos. Host how much is this worth today . Guest probably about 1500. Host i will leave it over here. Guest thats fine. I keep this on me just to spite the donald trump because its mexican. [laughing] host are you not a fan of the current president . Guest i am, no, i think mike pence would be a much better choice. I mean, i like some of the things donald trump has done, shaking up the system and that sort of thing, but is negative comments on immigration, trade, are totally out of the mainstream of what we economists have found to be kind of eternal truths, free trade is good. As ben franklin says, no countries ever ruined by trade. So yes, you of individuals who have lost jobs, but they hopefully discover new jobs, and most have. More open borders. Im more of a believer in building bridges than walls. Host do you think that nafta is a good system . Do you think tpp shouldve been approved . Guest absolutely. Anything that reduces barriers between countries is beneficial, and this myopic view of America First and so forth, economicall economically, may make sense militarily perhaps, but from an economic point of view i think we need to be, again i will quote ben franklin. The policy of america should be commerce with all, and war with none. Its very idealistic, but least on the trade side, open borders in terms of trade is i think a superior policy than the view that by an American Products first. No, you buy the best product at the cheapest price and you let people decide, its all about freedom. Thats what freedom fest is all about, free choice and not imposing your view of what a person should buy. If you want to buy american, thats fine but dont tell other people that i have to buy american. Host so bringing manufacturing back to the united states, is that a freedom proposal, economically viable proposal . Guest i teach economics at Chapman University and always show my students all the Manufacturing Products that america still produces and exports. We are still very much a manufacturing, i mean, you know, when it comes to turbines, automobiles, all kinds of scientific instruments. Its fun to go down the list of all of the things that america produces, and exports. We even export oil. We dont just import oil. We also export oil and oil products. This idea that manufacturing is dying in america i think is a myth. I think theres lots of dynamics going on. Now, its true that our government has imposed a lot on the local, state, and federal level, at all levels, has imposed incredible regulations that it would hurt and put us at a disadvantage from trade. I wouldnt mind seeing those reduce so that we are on more of an even playing field. Host from an economists point of view, what are their rusted out factors in northeast and midwest . Using them as well. Pretty start. Guest theres always a transition, but akron ohio is your classic example of the rust belt that is totally transformed itself, and you do not see the problems that you see in detroit, and other rust belt areas because government policy was her activist in encouraging other information technology, and other new industries to come into akron, ohio. So wasnt just the rubber industry. Its a Great Success story. But the media doesnt really play that up like they should, but i bring it up to my students to let them know yes, there is a transition, but government has to be active to make sure that you dont just sit on your laurels and say well, it will all come together on its own. Host you talk about the transition, did it some point industry near phuket overregulated and so the factory owners, the producers moved out . Guest well, i think there was an element of that, plus there was just new competition they can because we have a fairly free trade of apartment. So for the automobile industry, a textile industry, these cheap labor produced products, with a good technology, were able to find a market in the united states, and it decimated the clothing industry. Lets not sugarcoat the problems that we had. We did lose jobs and so on, but as a coming since again, labor, when you look at labor, capital, land and the factors of production, which is the most flexible . Which can be retrained, a tractor or an oil rig . When the demand drops, what can you do . Whats the alternative other than melting down this machinery . They just sit idle, but labor can become temporarily unemployed but you can get return, get a new education, go back to school. All of us are flexible, heterogeneous as a say in economics, labor is extremely flexible. So unemployment can disappear fairly quickly. If we are quick enough to retrain and educate our people. Host mark skousen, some of the issues we heard about this past campaign, income inequalit inequality, shrinking middle class. Are those serious concerns come in your view . Guest the shrinking middle class that they have moved through the upper middle class, thats not a problem. But if they have dropped and into a poor area that could be a problem. You have to be very careful with income and Wage Statistics here because i focus, focus on quantity, quality and variety. Of goods and services. People say wages have stagnated for 20 years but is that true for quantity quantity and variety of goods and services . No produced an increase in all three of those. Rather dramatically. We have people using products that they didnt have 20 years before and your people doing away with products that they have now. The dynamic thats going on in economy thats very positive, and actually i think our standard of living is rising even as wages may be stagnating. Host [inaudible] he talks about a term called gross output. What is at . Guest im glad you brought that up because this is kind of my big thing, kind of the big thing that has happened. Since the 1940s we had use one statistic to measure the economy, gross domestic product, what used to be called Gross National product. Theres a lot of misconceptions about what that is. It turns out when he decided to use gross domestic product, gdp, as a measure of the economy, that they are only measuring final output. So clothing, suits, drinks, our watches, the pain you have in your hand, thats all counted in gdp. As it should be, yes. But what it doesnt count is the supply chain. What got you the suit, the tie, in other words, all the stages of production in the intermediate stages, the supply chain, whats behind the grocery store, all of the work and effort not count in gdp is left out. So the supply chain, most bbb activity is left out of gdp. This is a real shock to most people that what we have is kind of a narrow view of what the economy is. Turns out the supply chain is bigger than gdp itself because theres a lot of buying and selling as you move the production process long. And it turns out theres a huge sector in the economy. In fact, retail sales, final sales, is only 20 of employment. Most people are employed in the manufacturing stage, and the wholesale stage, in the mining stages and so forth. So gross output is my measure, i wrote a book called the structure production in 1990. Its an academic book. Host recently updated. Guest third edition. The bureau of economics analysis which is part of the Commerce Department on the one to put up quarterly gdp statistics. In 2014 i think under, i would like to see i had some influence present now decided to publish gross output on a quarterly basis just like gdp. I kind of look at as topline and bottomline, and in accounting if youve taken an accounting course or if youre familiar with finance and wall street, when a publicly traded Company Comes out with earnings, its earnings report, theres a topline and their bottom line. The topline is total total sales, revenue and the bottom line is profits or earnings. Every publicly traded company and they release these quarterly reports have the top line and the bottom line. Sales and earnings. Both are critical, no analyst would be worth his salt if you didnt look at both because you dont get the earnings without the sales. They are really integral. So lo and behold, as ive advocated, we need the same topline bottomline for National Income accounting. So what is gross output . It measures spending at all stages of production, all along the way. And they just released its First Quarter 2017 gross output statistic today, and it turned out to be about 41 trillion. Its more than double gdp. Ive had to adjust that statistic a little bit because the government statistic does not include, it leaves out some wholesale and retail trade. So i call it adjusted gross output. Its 41 trillion. Gdp is 19 trillion. Host so gross output is is the top line or the sale, gdp in the sense would be the bottom line or more like the profit . Guest what we call gross profit. It does include some other aspects so i called gross profit. But yes, that the idea. Here in the 21st century, economists have finally caught up with accounting and finance, which have been doing this for years, and now with topline ad bottomline accounting. Unfortunately they dont come out at the same time but theyve indicated that they are planning to issue both rows output and gdp at the same time so that just like the financial firms, the publicly traded Companies Issue every quarter topline and bottomline, so National Income accounting, the federal government will have every quarter topline gross output, bottomline gdp. I think its a real breakthrough. One of the reasons i think this is really an important statistic is because with gdp, using gdp as a measure of the economy, what is the biggest sector, what is the most important sector . We hear all the time consumer spending. It represents 70 of gdp. Its the consumer the tribes of the economy, but ive argued all along no, its a business that drives the economy. Consumer spending is the effect, not the cause of prosperity. The cause of prosperity is innovation. Its odd when worship. Its capital investment. Its the supply chain. Its kind of, gao is a supply side, we have our own statistic now as a supply sider. Gdp is more on demand. Its more than consumer and government demand, and business demand. But the supply chain is, turns out this is spending as percent of gross output is 60 of the economy. So i argue based on my work in the structure production that business spending is the elephant, the big elephant in the room. Consumer spending is 30 of the economy, not 70 . Because gross output measures spending all activity, not just final output. So i hope thats pretty clear. My students get it, especially for business students, when i say topline bottomline. They get it just like that. The economists are a little slow but are finally getting it. Host so in a sentence or two what is the supply sider believe . Guest the supply sider believes that the key to prosperity is innovation, entrepreneurship, savings, thrift, frugality. I actually think ben franklin said it best. I quoted him several times in his interview. Hes one of my favorite founding fathers. So he says theres three virtues that if you adopt these virtues you can be eminently successful in life personally, as a family, as a business, and as a nation, as a government. All right, those three principles are industry, thrift or frugality, and prudence. Prudent behavior. So if you work hard and you are productive, but then you dont waste your money, you are frugal, you are thrifty, live within your means, and if you are prudent with your investments and which are spending patterns, you cant help but be successful as an individual, as a business, as a family, and as a nation. This is kind of an adam smith, ben franklin classical economics concept. But, unfortunately, we lost that supplyside view of the world, now with more consumer spending, demand. And the more consumer spending, the more debt to go into the better off you are. Weve shifted away from these traditional views which i i espouse, which i think is a more, this is not to say changing economics has a provide an important contribution. I think the idea and we learned a lot about how to deal with recessions, but during the recovery, during normal times of economic growth, we need to encourage industry thrift and prudence. And sadly if you look at the last administration of democratic and republican, a lot of irresponsible spending on. When youre at full employment all the comments agree we should have a balanced budget. But even during the bush era which was full employment, he never ran a surplus. He never did except maybe the first year and that was because he inherited it from bill clinton, the democrats. And then obama didnt really improve matters that much either. Weve got to live within our means, government needs to be encouraging entrepreneurship, and you dont do it by doddfrank and obamacare which provides layers and layers and layers of bureaucracy. Its just mindboggling. Did you know not a Single Community bank has been created since doddfrank was passed in 2010 . Not one. They used to be dozens of Community Banks providing benefits to local communities. Not a single one has been created. I mentioned this has to labor secretary perez under obama and he said im not familiar with that statistic. He should be. Host mark skousen, if someone picks up the structure and is not an economist, will you understand this book treasure i think they would understand the introduction. But the book is fairly heavy. An academic work. Its meant to be written to economists. Thats been the strategy all along is you have to convince the heart and soul and the might of economist of your own discipline before you reach out to the general public. On my website, every quarter i do a press release on gross output. So we will have one that will come out soon. Host is it written in layman terms . Guest yes. When i see the topline, total spin activity in the economy rose by the way, this is the other thing thats interesting. When gross output is growing faster than gdp, thats a positive sign the economy is doing really well. When gross output is falling faster than gdp, thats the sign you are in big trouble, headed for a recession. So guess what. In the last couple of years gross output has been growing faster than gdp. Im very upbeat. I write an investment newsletter. Im 100 invested in the markets, even at these levels. Because the economy is recovering and it has been drink the Obama Administration, the entire Obama Administration it was recovering. And gross output was going faster than gdp, but in that time of recession, thats what i look for when gross output starts dropping, or doesnt go as fast as gdp, then were in trouble because thats the supply chain telling us we better be careful, or we can celebrate. So im not, those of said gdp is slowing down here, as they have been saying recently, but look at gross. Its actually going faster slumbering semioptimistic. Host and weve been talking with mark skousen who was the founder of freedom fest, the author of this book, the structure of production. Thank you for your time. Guest thank you, peter. Booktv has covered many authors on economics including the economist julianne malveaux, steve forbes and nobel prizewinning economist joseph stiglitz. If this is a topic that interests you, go to our website at booktv. Org and in the search bar type economics book and youll find a large archive of authors and materials are all of these programs are available to watch online. Heres a look at some upcoming book fairs and festivals happening around the country. Featuring senator al franken