Dr. Fuller is an associate professor economics at Grove City College and a faculty affiliate of the program, economics and privacy at the George Mason Scalia law school. He received his b. A. In economics from Grove City College and a ph. D. In economics from george mason university. He has published in journals such as public choice, the International Review of law and economics, the review of austrian economics and others. I know dr. Fuller as not only a wonderful professor and friend, but also one of a very, very select group who knows how to use powerpoint well. So youre in for a treat today. Please join me in welcoming dr. Fuller. Thanks so much. Good afternoon. Thank you for that very introduction, noah. Its a pleasure to be with all of you this afternoon. I want to thank noah gould, my former student, for inviting. And i want to thank the institute and especially fathers for building such a marvelous institution that continues to do so much good in the world. Theres really no other institution that i know of, like acton and so effective lee combines Classical Liberal with a robust vision of mankind that is rooted ultimately in people as divine image bearers. And so i hope that you can continue this great synthesizing project for years to come. I heard that some of you were, in fact, a little bit relieved to learn to act and was serving lunch today. So though i hear that it wasnt so, you know, no economic laws have been violated and i can continue to to give my talk. So i want you to imagine the following scene. The year is 1946 and the place, the city of light, paris, a young french woman, her twenties is going about some daily errands. Her husband still recovering from what we now call ptsd. Hed been soldier in the war is is at work. You, this young woman, take out a notebook and jot down in it. Then she starts down the street. She has a very definitive purpose in mind. Up ahead of her is an elderly man with a cane and this woman is keeping her distance. But she also has her eyes on this fellow. He enters the cafe and while hes inside, ordering, she takes a seat on a bench pretending to doodle in her notebook. But shes still casting glances at this old man through the window. He exits coffee in hand, and she begins walking in his direction again. Our man is being followed, and by a most unsuspecting perpetrator. This behavior is odd. But what if i told you that this scene was being played out over one of europes great cities . In fact, other young women are also stalking some of pariss oldest residents. Furthermore, what if i told you the economic logic contains the key for explaining their behavior. Well, this lunch. What i would like to do you is to really just share my love of economics with you. And specifically want to argue that the discipline of economics is a powerful framework for seeing through popular lies. That so many people tell about social world we all inhabit inhabit now. I. I started with a story and i promise ill ill finish it. Momentary but i did so because i agree with the nobel prize winner, robert lucas, that economists. Storytellers. Lucas says this about the economist kraft. He says, quote, im not sure you will take this as a confession, a boast, but we that is economists are basically storytellers. So maybe this is a of an economist in the wild. This is what i got when i googled economists. Storyteller. So what does it mean, though, for an economist to be a storyteller . Well, what i mean by this description is that economists bring a universal framework to make sense of to bring meaning to patterns that from individuals real behavior. Economists are going to tell stories about why those emergent patterns are the way that they are and why they arent something else. Instead. And a storytelling approach, it really differs from other that both economists and non economists have used to make sense of the social world for economists oftentimes and very justifiably use abstract thought experience ants such as the famous Robinson Crusoe constructs that you might be familiar with to communicate the economic of view and. That tactic can be powerful, but thats not really what i mean by storytelling in other instances will use sophisticated statistical techniques to ferret correlations and sometimes causation, and again frequently, often powerful, but not my approach in this in this text. Likewise, storytelling differs the analysis that non economists frequently offer. So those analyses they often make ad hoc appeals to peoples preferences tastes to explain emergent patterns or not, economists will appeal constants of human nature like greed or lack of selfcontrol or cognitive biases, to explain the social world. Yet appealing to human constants is a dubious way to explain in variation, which is what we want to do in the economic storytelling approach approach. And so what i mean by the economic storytelling approach is that i wish to explain aggregate phenomena, so theres more than one person generating this phenomena, but in a way that is augmenting it by the disciplining logic that economics brings to the stories we might tell. Now, as ive already hinted, it turns out that everyone, everyone in this room and everyone else is a storyteller about the social world. And so the only question is not whether people will will tell stories about the social world, but rather which stories are the best for making sense of complex reality and economist stories in particular, run contrary to the prevailing conventional wisdom story that the man on the street might tell to make of social phenomena. Furthermore, the stories that economists tell often reflect a surprising degree of consensus, especially relative to what many non economists conception of economists is. In other words, economic stories have an identity viable flavor and texture to them. There are certain components which ill explain soon that make a story economic. And when it lacks those elements, the story is not usually being told by an economist. Now i realize this quotation borders on power paragraph than powerpoint, but i suppose im not as as pithy as robert lucas. I hope i didnt dash your your dreams of knowing how to use powerpoint. No. So as i put in my book no free lunch economics is an equal opportunity offender, conservative or liberal, rich or poor, religious or skeptical. Youll find economics mounting serious challenges to many widely held and cherished beliefs. Of course, i dont intend to suggest unanimity among economists any more than it exists among biologists or theologians, but still consensus on fundamental issues reflects a core economic way of seeing the world. Okay, so thats what mean when i say that economic stories oftentimes reflect a large degree of consensus among economists. So why did i why did i write this book . I actually wrote the book on accident, believe it or not. And you might wonder in the world, someone writes a book on accident. The story is that my had approached me about doing a video series on basic economics for Grove City College, where i worked, where i work, rather, and i suggested a series on economic. And i then began thinking about the fallacies that my very, very bright and, gifted freshman students at grove bring with them through no fault of their own. Of course into my econ one and one course. And these fallacies matter because peoples beliefs inform how they vote. Act as citizens in the world and bad Public Policies in turn undermine the Human Flourishing that organizations such as acton worked so hard to promote promote and that. So when i completed this video series script, i sent it to an economist friend who wrote back that written a short a short book, which is the thought that had not occurred to me that point. So i guess that is as close a free lunch as ive ever gotten. So as i began writing, i envisioned update to classic works like frederick bastiats song isms or Henry Hazlett economics one lesson. So you can see bastiat picture there on your left and has on your right. And those two are the master economic communicators though economics in one lesson has sold well over 1 million copies. And bastiat has its inspiration. So how was i supposed to compete with these legendary . What could i contribute that they already done . Well, thankfully itself tells us that everyone does not have an absolute advantage. If youre familiar with economic terminology, everyone does have a comparative advantage. So i could not hope to compete head, head with bastiat and haslett what i to do was identify an angle that i was really least bad relative to them. The best way to think about comparative advantage and the angle that i settled on was this storytelling approach that ive alluded to because bastiat and haslett, they really rely primarily on colorful and memorable thought experiments. And what i hope to do with storytelling ing was to bring economics down a level of abstraction and the real world of flesh and blood Human Interaction through storytelling storytelling. Okay, so it also occurred to me as i was working on this script that really what economic fallacies is a failure to engage in what my mentor economist pete becky refers to as persistent and consistent opportunity cost reasoning. Hence my books title, no lunch. This opportunity cost reasoning, the framework that i bring to the stories i tell and in my mind, its ultimately what provides a contour. A to economists analysis of the social world. Its makes a story fundamentally economic in nature. So what is it . Well, this framework begins with the definition of cost. As another nobel winning economist, james buchanan, puts it, cost is that which the Decision Maker or gives up when he makes a choice. Okay. So this is important cost. In other words, is is just foregone benefit. I dont know if youve ever thought about treating the word cost that way. That is just a foregone benefit. Cost is also something that only arises in a world of scarcity in which we cannot have everything that we want. And because we live in that world, cost is unavoidable, even for the wealthiest people. So bezos, musk and bill gates are concerned, chained by scarcity, just like you and i are constrained by scarcity. When they choose to spend time on a, theyre forgoing the time to spend on yacht that they could be doing okay or or maybe theyre forgoing the opportunity to spend pulling the strings behind a global some wars. And whichever your worldview thinks more likely. Im not here to adjudicate that for you. But what this opportunity cost way of thinking does is give us a pair of, as it were, to see through superficial stories about these social world by simply keeping our eye on how foregone benefits. Thats just my alternative for costs change. Economists are going to stories that are often at odds with popular about social. And so what id like to do over the course of the next couple of minutes is just provide a few from my book almost all of these examples are drawn from the painstaking research a very large group of economists through through time. And what we want to do is show how these opportunity cost eyeglasses allow us to tell stories which refute popular economic errors. And in doing so im not going to use any other concept besides this idea of opportunity. We have foregone benefits as. Ive defined it here and neither does my book. Its the only thing that my book uses. Okay. So chapter examines the lie that lunch is free. And of course, no one walks around explicitly saying this. Nobody makes this claim. But people do support policies which rest the idea that lunch is free. A great example. A free lunch thinking is support for rent a policy. Landlords are prohibited from charging above certain prices. Housing controlling prices, writes thomas sole, creates the illusion of free lunches. But as i do throughout the book, lets go ahead and use our opportunity cost reasoning coupled with stories to see why rent control not yield a free lunch. Why it is in fact illusion. Now, if youve taken an econ one on one class, the first thing that your professor will point out about rent control is that it creates a shortage. Assuming that rent control stipulates a price below would otherwise prevail. A free Housing Market. The shortage is one of those technical sounding economics words. It means that at current prices, people would like to buy more units of housing than there are units of housing available. And thats all that that means. But notice also that a shortage is not merely a dry blackboard exercise. As it is all too often to you if you are a student in econ one on one. As i tell my students rather than getting lost in supply and demand diagrams, we want to always tell a Human Interest story about the market that were looking at. So heres the Human Interest story that we could tell about rent control. A shortage can involve Young Parisian women stocking old parisian residence as they in my story at the beginning because when there is a shortage, you must be a johnny on the spot, as it were, to get a room. So these women from story that i started out with, they had taking careful notes on the habits and addresses of those whom they were stocking. They would write down little descriptions of the man or woman whom they were following. They would this person back to their apartment, jot down the address, and then they would make a phone to the landlord. When the old resident they were stocking to show up to his cafe. At his usual favorite time, perhaps he passed away and a room now available under. A shortage. We know the room wont be long and hence why we see very creepy, undignified behavior by these women. In 1946. And so time and everyones dignity was the cost. That is the foregone benefit. Remember, thats how i define of rent control in the parisian episode. Lunch isnt free. In other words, now landlords, of course, do not sit idly as governments reduce the rents they can earn their entrepreneurial instead. In this context means they innovate ways to turn a housing shortage, to their advantage. And with a long line of people wanting housing, landlords identify other means of charging these would be tenants. A common strategy is. The implementation of socalled key money. Landlords will will Say Something like. Sure can have legal title to the apartment for 700 a month like the law says. But if youd ever like to. Oh, i dont know. Step inside. Perhaps then youll need to pony an additional 300 a month for key money. Youll the key for 300 a month and after we account for such key money. Were back to the pre rent control price of, say, thousand dollars a month. The economics in this case has not changed. Only the accounting has changed. And so the true opportunity cost, again, im going to keep emphasizing is the foregone benefit sacrificed required obtain an apartment has not changed. Right. Theres no free lunch now you may have heard of this. The second example of key money that i that i just spoke about. But what gets a little bit less play is that rent control lowers the costs. That is the foregone benefits of landlord discrimination. So to understand the logic of this, i want to compare how a free market with that under rent control. So in a free market, prices adjust so that there is no housing shortage. And the reason why this is important for us is because that makes it costly for a bigoted or somehow prejudiced landlord to turn someone away due to their skin color or any other characteristic they have that he dislikes. The reason why it would be costly is because the Apartment Unit would then sit empty in the face of such bigotry. So by behaving as a bigot, landlord is forgoing rental income that could be his. So another forgone benefit that we just detected means that weve spotted a cost. But we want to compare that logic to the situation under rent control. Under rent, there is a shortage. That is a line of people who would like to rent housing. And so now what happens when the landlord decides to indulge his bigoted taste all time . Its low cost to do so. Its low cost when he passes over a prospective tenant for reasons of skin color or gender or religious beliefs or, anything else he can be more confident that theres someone else in line right behind this person who has the preferred characteristics. So at this point, you may be wondering what little child color in the wall is doing. So a good example of this logic comes from the swedish has been right and felt who examined the swedish Housing Market and what right and felt shows is that after sweden imposed rent control it was almost impossible for couples with children to find a landlord willing to rent, to them. And so why is that. Well, children are messy, im told. They write on the wall with crayons. They throw spaghetti from their high chairs and in a free market with no shortage. If youre a landlord, a couple with children might still be your best bet. But when theres a shortage landlords are always looking to pass over couples with children in favor of childless couples or single people who are less likely to do damage to the unit. So in this case, theres theres just no free lunch for the parties that are discriminated against. And the example gave couples with children. Now in other cases municipal governments have been known to throw landlords a bone with what we might call a graduated rent increase scheme, or sometimes its called rent stabilization. Under this provision, landlords are allowed to increase their rent by, say, 10 every time a Unit Acquires a new tenant. And we might wonder, okay, have they managed to thread the needle . Is there a free lunch under these somewhat modified circumstances . But of course, it doesnt take a ph. D. In economics to sort of think through the incentives here. What incentive have you given to landlords . Well, now theyre going to declare war on their tenants. Right. Because this policy increases, the costs, again, for foregone benefits, the end. Youll be tired of me saying of having a low turnover rate at your apartment. So how do how landlords achieve a high turnover rate . Thats what they want, because every time they get a new tenant, they can raise their rents. Let me mention a couple. The most popular techniques. So the first is that landlords may pack leases with lots of fine print, which is of course not in and of itself that unusual but rigorous enforcement of the small print is a bit unusual. Typically, you know, we can sneak a goldfish even if it says no pets in. Right. But when the landlords is to make life more miserable for the tenant, you Better Believe that hes going to enforce those contracts fastidiously. So, for example, the lease might forbid tenants from washing their cars anywhere in the landlords property. Thats common one. And. You can imagine what one of the responses might be. There have been many reports of tenants surreptitiously washing their cars at night by way of flashlight. So evidently here and tenant sleep is a benefit. Its a cost to. Those tenants a second, a second. Popular is for landlords remove apartment amenities. For example, economist cheng reports that kong landlords during. 19 1930s would oftentimes kindly remove the windows from their buildings during monsoon season in an attempt to get tenants leave. So in other words, sometimes, you know, the nominal money price of your lunch does fact stay the same. Its just that your gets made out of moldy bread. And the craziest method of all. The craziest of all. Hopefully there are no landlords. The room taking notes on this. But it is occurs when landlords give what economists call side payments. So a landlord approaches the tenant in room 202 and asks if he plays the drums and he doesnt, but landlord responds, well, would you learn if i knocked 100 bucks off your rent . Each month in return for you learning to play the drums . I just have one stipulation. My only stipulation is that you practice each night between and three in the morning, so sure, we have soon a budding drummer on our hands and its not long before the tenants in rooms 202 and 302 are packing their bags for greener pastures. And then the, you know, the Commission Check is in the mail to our budding drummer. So once again, there is no free lunch. Notice also the stories that ive been telling, the stories that economists are going to tell to make sense of these this sort of litany of bizarre behaviors that we just walked through. Right. The stories that economists tell surely, from the stories that others might tell about these these sorts of phenomena. So the non economist is much more likely to simply tell a story which appeals to say power differentials between landlord and tenant or perhaps to conflict between rich poor. In each of the cases i just mentioned, and its my opinion that the economic storytelling approach a much richer framework and much richer tapestry for making sense of these behaviors. Okay, so thats thats what i discuss in chapter. And surely, of course, it was not policymakers intent to foster a new generation of amateur. So what Chapter Three does is it examines the live it intentions guarantee outcomes. And as with chapter two, of course, its the that nobody goes around proclaiming. Im in this right. But many people behave. They as if they believe that the virtue, their intentions is sufficient to the outcomes that they are seeking. So deploying cost reasoning that once again we see through this error by keeping our eye on how well intentioned policies change, the foregone benefits that is costs that face. So its really this simple when a policy increases the foregone benefits of an activity or the cost that is, people do less of that thing. And a policy decreases the foregone benefits of an activity. They do more of that thing regardless of intentions. So to see how a reason within this this simple framework, consider the following story. In the early 20th century, british had subdued the subcontinent, but they still faced one lethal pocket of resistance. And that was from native cobra population there. Of course, the british were not used to these venomous snakes and their slithering through the streets. And you can imagine the british redcoats are rather unceremoniously time they come across one. And so eventually the british governor decides hes going to do something about this and he a bounty on cobra tails 0. 01 per tail that was redeemed which was actually a pretty payday the time and and for the police and so many of you have already thought and anticipated whats coming next. Natives began establishing cobra farms in response to this new policy because you have to remember that the that the natives are very comfortable with the snake population. In fact some historians will write that the native population was so comfortable to snakes that they wouldnt even mind. They saw a cobra in the corner of one of their their homes. So they had a quite familiar relationship with these snakes. And so they breed. They would then sever their tails and then redeem these tails for payment. And again, costs are just foregone. And so what had this policy done . How can we think about this policy in terms of my framework . Well, this policy had increased the costs of not becoming a cobra breeder and. Thats the way that economists think about that. And a little weird. So therefore, more people become cobra breeders. Of course it was it was a good payday. While it. Eventually the british noticed tail of snakes slithering through delhi and. Theyre not stupid. Right. And so somethings up here and so they disband the program in response. And of course then the cobra breeders they then release their now worthless Financial Instruments into the wild and the cities. Cobra population ballooned and so intentions dont guarantee outcomes. Now, some of you may have heard heard that story. This is a little bit less well known of a story. In 1989, United Airlines flight 232 crashed landed in sioux city, iowa, and incident grabbed a bunch of media attention. For the horrifying footage, this plane really somersaulting down the the the runway there amidst balls of flame you can find this on youtube to this day and miraculously many aboard survived this crash but half of the passengers survived, but 112 souls also perished that day, including, tragically, two infants. And so in response ance to wellmeaning politicians, proposed legislation that would have required all flyers aged two and under to be strapped into a childs safety seat of sorts, much like the one that is pictured here on my slide. Because you see the infants who died become loose from their mothers arms and they had suffered head trauma as the plane was flying down the runway. And so these seats would prevent that outcome from occurring in the future would prevent the infants from coming loose from their seats except such thinking ignores how this legislation changes the foregone benefits that people face. So those considering a mother traveling with an infant like as is pictured on my slide. This law would increased her costs of flying. By 100 because it would require her to purchase two seats instead just one. And her foregone benefits associated with flying. And thus she will fly less often. And when the cost of something rises, people turn to substitutes. Fancy sounding economics were just another good that allows me to achieve my same goals. And in the case of flying, of course, a substitute is driving. So in late 1980s, driving was approximately 35 times more likely to get you killed on a mile per mile basis than flying. And of course, the rates injury were even more lopsided favor of flying. Okay. So that in a nutshell, why economists began raising a racket and they opposed this bill. Not, of course, because economists are sociopaths, but because they recognize the intentions dont guarantee outcomes. If this law had been passed, it have almost certainly have cost infant lives on net. Right. What are the politicians care about do they simply care about infants dying on airplanes . No of course. They want to minimize deaths overall by any means. Right. So empirical evidence for my claim that this law would have increased deaths on net. I comes from a group of economists at cornell who estimate that in the year following 11, there were 2300 additional highway in the united not 2300 and total. What i mean is 2300 over and above the typical baseline that we experience annually. And the reason, of course, was because 911 attacks had increased the costs of flying, especially through the subzero and tsa actions that cause there to be long lines at the airports. So once again intentions do not guarantee outcomes. Lets use this logic one last time. It turns out that oops finicky here, you know, it turns out that the rates of death by electrocution are not constant united states. States where rates of death by electrocution youre most likely to be electrocuted. In North Carolina. Okay, so what story would an economist tell about this . Yes, its good to know. Thats. What story could we tell about this . Would an economist suspect. You know, all the worlds most careless people must have moved to North Carolina at some point. Of course, thats not the story theyre going to tell. Economists are going to assume that people are basically people everywhere and always. Wed want to look for something unique about foregone benefits of hiring a professional attrition in North Carolina. And it turns out that North Carolina has the strictest occupational licensing laws for electricians in the united states. And as a result, the supply of professional electricians is relatively constricted there, which in turn raises their price relative to other states. And so just like potential air travelers, people who need work done on their wiring, they often turn to a substitute, which in this case turns out to be a youtube video. And so tragically, tragically, some people lose their lives as a result of this. And so think about how perverse this outcome is from the perspective of politicians who are supporting occupational licensing, regulation what is their intention . I always like to give politicians the benefit of the doubt. And so lets go ahead and assume that it is to prevent unqualified people messing around with dangerous wires. Lets assume their intention. But what is the outcome here . The outcome is more unqualified people, messing around with dangerous wires. So intentions dont guarantee outcomes, which is a nice segway. To my final topic. Mm hmm. In the absence of licensing or Something Like it, how do we some semblance of order safety and quality to markets . The man on the street believes that free markets are wild, chaotic. Anything sort of places. Thats the story that is often about free markets. So in chapter, i examined the lie that markets are on unlike the errors of chapters two and three. You might have noticed that people do regularly proclaim that free markets or unregulated markets. And my contention in this chapter is that understanding opportunity of reasoning allows you see that free markets are in fact actually highly regulated markets. Because what mean by regulation is, i mean only a set of penalties and or rewards associated with certain actions. Thats all that i mean by this word. And or rewards associated with certain actions. So in chapter six, i focus on just two aspects of how free are regulated markets. First, i want to briefly look at what regulates the temptation to defraud people in markets. And then secondly, ill conclude by looking at discrimination again, examining each with opportune and cost rooted stories. I want you to imagine for a moment that youre at your favorite restaurant and you order an expensive lobster. After a while, the waiter reemerges with. Well, actually let me ask does anybody know what this is . Thats monkfish yeah, of course. The waiter reemerges to put a monkfish. Poor mans lobster. That ugly folds there on the screen. And then he plops the bill down. And you owe 100. So meanwhile, the Restaurant Owner, he went and he just bought a 10 monkfish at some local grocer. And so abstracting from other costs, the Restaurant Owner just made 90 of pure profit on you. So lets think about this for a second. Why is that not. Why is that not your typical experience . You know, if they could just make, you know, 90 of pure profit, everybody who comes in and orders lobster. Right. Is it because the restaurant knows youll sue them if do this . Because obviously thats not it. Because the costs of doing so outweigh the benefits. Right. Youre not going to sue the restaurant. They bring you a flank steak instead of a filet mignon. Youre not going to sue them if they bring you monkfish instead of a lobster. You know this. And the Restaurant Owner knows this to rather what concerns me Restaurant Owners besides those that have a conscience is that behaving way ive just described throws away as it were your future business and your future business is benefit. And so the restaurant those future benefits by bringing the monkfish which means they incur costs because remember costs and benefits are tightly linked in my thinking. They incur costs by defrauding you. And that is ultimately what constrains many of them. Free markets are regulated. In other words. But theres a way to this logic even stronger. I dont know what happened to my screen. There we go. There we go. Were back. Theres a way to make this logic even stronger. Well, bringing it out of the thought experiment into the real world of flesh and blood interaction. Have you ever wondered why companies spend so much on celebrity endorsements . Are you and i actually mean ask this about yourself. Are you more to buy a coke . Just you see an ad with taylor swift drinking one. Arent you aware . Shes only drinking a coke because cocacola paid swift. Let me check my notes here. 26 million to do so. Why would coke spend so much money . Her. All right. Are consumers really that weak willed that theyll just do anything taylor tells them to do. If she told them to jump a bridge, would they do that right . I mean, we could just keep asking about this. Well, heres the story. Tell to make sense of this seemingly strange, seemingly wasteful behavior on the part of coke. It seems like theyre just wasting money when they do this. Heres the story. We all know that getting to swift in your ads is very expensive. Even if we didnt know the 26 million number off the top or hit, why is that important . Well, coca cola, just like our lobster restaurant, has an incentive to cut to dilute their product in order to get some short run gains from doing so. But if they do that, we eventually wont buy from them anymore. And so to show us that they have an incentive to prioritize our long run business over the short run one time payoff of coca cola dilution, coke in the taylor swift ad. Coke will never that investment if they dilute product. And cokes ditch the company by spending tens of millions dollars on taylor. They are, as it were, tying their own hands. Thats economists think about celebrity endorsements. Its now in cokes best interest to maintain the quality of their product. And since we all know that we buy more coke than if we suspected of shenanigans. In other words, markets are once again regulated, orderly. And once again, the story economists tell about celebrity endorsements differs from the story that you would likely from a man on the street street. Okay. Markets also the taste for discrimination, drawing on work done by arman nelson, whos pictured on my screen. We might we might. Why . There were wide disparities between the rates at which jewish men worked Different Industries in the united states. In the first part of the 20th century. Abortion is looking around, and he notices these vastly different rates of representation across industries by race and the surprising answer that abortion gives is that capping a firms profits lowers the costs associated with discrimination. To see this, i suppose again that there is a bigoted employer. Suppose that hes looking to hire someone for a job that will pay 50,000 annually to imagine that hes faced with one nonjewish applicant who will contribute. 55,000 annually in revenue. And then suppose there is slightly more skilled jewish applicant who will contribute 60,000 in revenue in a free market, a racist employer would sacrifice 5,000. Okay, so thats a cost. In other words, foregone benefits. If he indulges his racist. But now that the government confiscate, now that extra 5,000, the employer would earn from hiring the jewish. Why might they confiscate this 5,000 while inserting industries, government has historically capped or limited the profits that producers can earn . So you might think of Industries Like utilities, insurance, finance these are common places. This sort of capping occurs in such a world. Our employer now no longer forgoes 5,000 of benefits by hiring the less productive worker whom he prefers. Regulation lowers the costs of discrimination. In other words, and once again, this opportunity cost framework makes sense of the empirical results that we actually see during the midtwentieth century in the united. There were twice as many working in other industries relative to utilities and insurance, which means that in those other industries, this profit loss system was regulating the temptation to engage in discriminatory behavior. So once again, we see markets are in fact, great regulators. And notice also for the final time that the story an economist would tell differs markedly from the man on the street who would likely, if they were to see these disparities in racial represent asian, they would either appeal to employers say being more racist in some industries opposed to others, which is not compelling to an economist, or they might appeal to the tastes of jewish folks. Once again, not compelling as a story to economists, because this latter explanation makes any sense at all when we consider how jewish people dominated in other times and. But i want to end by talk here with a bold claim. Its view that all economic wise ultimately run aground on the rocky shoals of opportunity, cost reasoning. And so i therefore urge you to test the opportunity cost approach on your pet peeve economic everyone has one. And for those of you that are passio, communicating the basics of economics, i to urge a little opportunity of reasoning on your own approach. You might ask yourself, is my economics communication comparative advantage . Perhaps it is thought experiments. Perhaps it is making sense of large amounts of data. Perhaps it is telling stories as have attempted to do here this afternoon. But the thing that makes it economic is to root your approach in the opportunity cost way of thinking. And with that, id like to thank you for your time. And im happy to take. Any questions . Thank you. Yes. Yes, sir. This gentleman, the front. One. Thank you for your talk. Thank. What would you say is the biggest. You think about the econ 1 to 1 college freshman, sophomores, etc. Whats the biggest economic fallacy that you see. And also maybe whats the most and just it harder . How do we change that . Great questions. Yeah. So i was going to respond by saying it depends a little bit on what you mean by biggest, but then you, i guess, clarified. Im going to take biggest to mean most common and then ill talk destructive. So the most common is actually one that i didnt discuss today with you all. But i do discuss in two different chapters in the book. I devote two chapters to it because it is so pervasive. And that is just idea that theres not a theres theres often not an intuition that voluntary is mutually. So when people engage a in a trade where theres no violence or the threat of violence, the both parties only doing so because they anticipate gaining from that. And so you can see this fallacy out when. People think that, you know, a for example, to go back to my rent control stuff is exploiting them. So you kind of see on that very micro level. But you can where you see it even more commonly is in discussions of, say, international, because economists have emphasized for 250, 300 years that that basic logic of the mutuality of benefit that accrues to exchange doesnt change. When we draw a political boundary, when people are exchanging across that. And so i would say thats probably the most common commonly held one that i see. And, you know, maybe thats something that would change if you to slice it by different generations. Im not sure. In of the most destructive. The most destructive, maybe of the fallacy that i also did not talk about today, which is the broken window fallacy i discuss in in chapter. This is probably the most famous fallacy in the history of of economics and it basically is sort the story that we that we use to explain why it is the opportunity cost reasoning is so important. And the reason i say its the most destructive is because youve encountered the broken window fallacy if youve ever heard someone make the claim that a Natural Disaster such as a hurricane will somehow stimulate an economy right. Or have you heard the somewhat more sophisticated but, still fallacious idea that war will stimulate the economy in most famous example of that is the mistaken idea that World War Two is what ended the great depression. And so to the extent that people these imaginary linings in humankinds most destructive activity is war. All right. Im not sort of not a position on, you know, when its justified, that sort of thing. Right. But from an Economic Perspective is highly destructive. And so thats probably the most destructive. The ideas about trade will also destructive, maybe not quite as but are but are very prevalent among students. And i hit on all of your oh, how do we change the gosh thats the thats the Million Dollar one. Yeah. Well, i mean, thats thats sort of why i ended the way that i did. And know that probably many of the people in this room, im sure this is not representative audience im sure none of you actually held any of these fallacies before you came in right . And hopefully youve got some new examples or maybe new stories to communicate to your friends may who may hold some of these. And so i would just say, yeah, think, think about how you can be a communicator of these ideas if you are passionate about them. Like i am i dont know any better, better way than to be sort of an ambassador for them. Yes. This gentleman here. I thank you so much for that talk. My is dylan. I work here at acton. I was curious to what extent does elasticity affect this analysis. So in. The one of my rent control which i agree bad for all the reasons you outlined theres a supply side as well. And right now example we have a housing shortage and its literally a shortage like we need to build more houses. And until very recently, prices were inflated due to tariffs and some supply chain issues, that sort of thing. But demand for housing to some degree is inelastic to the extent that Everybody Needs a place to live. And so there isnt enough supply. That demand is, you know, so thats what i would see. Maybe, you know, the devils advocate for, you know, defense of, a rent control policy. And how would you, you know, how did that factor into to these sorts of things that yeah, its bad it has all these bad effects. But sometimes the problem is actually coming from the policy. The policy is just maybe, you know, a really bad response it. Yeah. Thank you thank for that question. So there are several parts that i ill try to kind of take them one at a time. You asked elasticity, which is just a sort of fancy economics word for the sensitivity that people have to when a price changes. So you know we all know you know if you go to the grocery tomatoes are twice high as you expected youll youll buy less thats the law of demand and elasticity is just question about how many fewer tomatoes will you buy. Okay. And it turns out that the price elasticity of demand housing is actually higher than might expect. And the reason for that is, because people can make on a whole lot of margins. So, for example, when the price of housing rises, what we see is we see people moving in with their their former College Roommate when they graduate from. We see people moving back in with their parents. We see elderly folks moving in with their adult children. We see all sorts of other arrangements. A new york city many, many years ago there was there were the sort of these, you know, kind of communal, almost kind of hippie arrangements that people were forming as a result of rent control and other things. Okay. Another margin of adjustment that people make is theyll change where it is that they live. So instead of living, you know, close to their workplace, an urban center, theyll move out towards the suburbs. Theyll take the hit from the commute. So i all those points just to say that the price elasticity of demand for housing might be a little bit more that it might be higher than you were thinking from your, you know, good intuition, which is well, of course, everyone you know is trying to find housing to your think. More substantive point there though i would say that you know rent control what it does is it it piles on to the all the other land use regulations that were seeing in place. So some of you may know that over the last several decades the united states, theres been a proliferation of land use regulations, which is basically just, you know, a bunch of red tape surrounding ability to develop a plot of land, either for commercial or for residential purposes. And that constricts supply of housing increases the price of housing. And so i think if i understand your question, youre correctly youre youre saying, well could we use, you know, rent control as a bandaid on these already other underlying housing policies . I would say no, because one of the other things that rent control does i didnt have time to discuss here is that it lowers the rate of return from investing in. And so rent control is typically applied to low Income Housing because those that are are, you know, imposing it operating in sort of the intention is outcomes framework are saying well of course you know its the poor that need affordable housing. Were not going to impose rent on luxury apartments in manhattan. But what you do when you put rent control, low Income Housing is you lower the rate of return to investing in the low Income Housing the rate of return for investing in high luxury apartments, condominiums increased in relative terms. So what you see is some developers shifting of the low Income Housing and into. So one of the things that rent control does is it serves as a subsidy to manhattanites. For example the price of housing is lower than it would be otherwise in the absence of rent control. So, no, i dont see it as i dont see it as somehow, you know, counteracting the impact, these other regulations, i actually see it as piling top of in the long run that stock of low Income Housing just decays further further. I have a question. I know lot of people who behave personally as though they understand and the fallacies of these laws, these principles. But when they go to vote. They they behave in a different. Do you have any stories can help us deal with people that when were talking with people that that exemplify that. Yes actually i think it depends a little bit on what exactly youre looking for what exactly youre shopping for there. But if youre simply asking, are you asking, well, why do they talk such a good game . But when they get in the voting booth, they dont follow up. Is that kind of what youre asking . How do we and how do we understand . Yeah. Okay. So how do we. Great, great question. So thats a very real phenomena. Economists talk about that that and its actually a part of a larger group of phenomenon that. You can also see in politics themselves. Right. So politicians rhetoric is, you know, universally good in terms of the ends theyre trying to and many politicians have rhetoric where the rhetoric pertaining to the means of how to achieve those ends is also very good. And then you know people are perennially disappointed when they actually get in office. And this is something called a principal agent problem that basically they do one thing to get elected and then once theyre there mean we cant punish them for four years or whatever. Right. But to your point about voters, theres a really simple way to think about this, which is just that, you know, when you go a Grocery Store and you are going to buy bananas, you know that the full costs and benefits of those bananas going to accrue to you or, to members of your household, lets say. Okay. So youre very about the bananas that select you dont select the rotten ones. You dont the ones that wont be green for their, you know, wont be right for three years and all this right. Youre very, very particular about which matters. You select because the cost, the benefits of those bananas fall on you. And when you walk into a voting, however, youre not with the same sort of situation that youre faced with at the Grocery Store. You can go in there behind the little pull the lever for whoever. No one actually knows who youre pulling the levers youre not maybe even going to suffer any reputational. You can walk outside and tell everyone you voted for x when you really voted for y inside. Right. You can, you know, vote for more tariffs because that makes you feel warm and fuzzy inside. And the key thing is your vote or lack thereof not going to be the determinant for whether get tariffs, you know, in a country of 325 million people. And so its very, very low cost for you to indulge in of, you know, frivolous behavior, if you like, behind the voting booth curtain. Where does it actually be very costly for you to engage in your Grocery Shopping activity in the same sort of flippant manner . Ill just toss whatever i want into my cart with my eyes closed. Right. Which is essentially what youre doing when you go to the voting booth booth. Yes, sir. Hello. Hi. I i want to ask your opinion about something i think you french for. I find it really funny and interesting that im here. I attended no free lunch talk to do that actually paid 15 for my lunch. Yeah. Which is was, which was great by the way. So i completely with you that there is no free lunch but i want, i want to ask your opinion this ongoing debate about whether there is or no free lunch. Why is it i think Milton Friedman mentioned the first time there was no free lunch 60 years ago and were still here today. And youre writing another book about this topic. So is it because people are confused about the meaning of the word . Because it seems to me that word free can be very confusing, can actually mean two completely different things. So one meaning of free is the way its understood here that act and that you are free, meaning that is no coercion. Okay but when we say free lunch or free health care, free public transportation, that free has exactly the opposite meaning because actually implies that there is coercion, the form of taxation. Somebody elses. So can it be that people are confused about the meaning of the word free and . Can these lead to this ongoing debate . And what do you think . Yeah, absolutely. So there is there is lot of semantic conceptual confusion around ideas like liberty, freedom, these sorts of things. Right. You know, when when economists strictly as economists use this word, youre right, that free is meant to suggest that no other resource is have to be sacrificed in order to achieve some goal that thats what makes something free in the economic sense. So there are some things that are free like air in this room, right . But by pointing that out, i mean i show you just how limited and unusual those sorts of things, Human Experience are. But then, you know, when a political philosopher uses this term, thats when things can get a little bit fuzzier, you know, usually they mean like a negative liberty sort of sense, which the freedom from coercion that you that you meant. But then there are other political and then even some economists say like sen, who tend to use the word in a more positive sense that i freedom to do something and in my view a better word there would be like power or ability. I have the ability do something. I dont feel as if im not free a human because i cant flap my arms and fly of course i lack the ability or like power to do so. But i still think of myself being free, a free agent. So yes, i mean, to kind of circle back your to your first question, there is a lot of conceptual confusion. There is a lot of semantic confusion maybe somebody could write a short little book just kind spell spelling all that out. Maybe it could be you. Thatd be. So. I just have a follow up. If im all right here. I just have a up. Yes, something was just thinking about, but im a teacher and i do teach economics and but one of the things, the way i this issue is that no such thing free is up. Theres no everything cost something and so theres no no free lunch. Theres just a subsidized lunch. And so when we want something for free, were just asking somebody else to pay for what we want. So, yes, absolutely thats a coop here. No, thats is perfectly consistent everything here. And i think its a great place to end as well, though, if i may, was thomas sole says that there no perfect solutions, only tradeoffs. Yes yep. Is that one of your fallacies that is addressed or my or you just address it in a different way over opportunity cost. I dont separate that out as it as its own separate distinct fallacy. I think its sort of implicit ultimately in Everything Else that i talk about in the book. Yeah. Well, thank you so much for you today and. A few brief housekeeping notes. Please turn in your name and comment cards on your way out. Our next installment, the lecture series, is september ninth. Peter greer will be talking about his book, the gift of disillusion mint. So thank you again, dr. Tiller, for joining us. His book is sale on the back. So please, hell be back there to sign it as well. So thank you so much for joining there are a lot of books out there of the performance of the media and the journalism industry. Why do we need another one . And whats different about. Well, i guess hopefully its got jokes in it. Hopefully it is an engaging and i hope engrossing read. I think i as a journalist do not have much in media criticism. Right. And is not. I have a joke about it which is that its like asbestos abatement. Its its