Let me begin by saying a few basic things about economics Just so we're all on the same page and because since I do a lot of speaking around the country, um, I have come to learn the bitter lesson that whatever passes for economics education in the United States, is right up there with education and nuclear physics. In other words, there isn't much. And most people don't get it, and so they turn away from economics a little bit like people turn away from mathematics and subjects like that That are basically presented so badly that the student feels its his or her fault and doesn't want to go there. So I'm not saying that happened to any of you, but it might've and it might be helpful if we all started on the same page with some basic, uh, economics. Okay. So bear with me. It is simple but it is more important to get it clear than you might imagine. Human beings are a little different from most of the creatures on this planet, because instead of simply looking and hoping to find um what sustains us -- food, shelter, so on -- uh, we make it. We are human beings who use our brains and muscles to shape, to control our environment, and to take care of our selves. And to make a long story short, we work. We use our brains and muscles to transform the things we find in nature to put them in and different form that pleases us, that satisfies us. We take a tree and we make a table. We take a cotton plant and we make a shirt. And so on. Human beings for as long as we have a human record have been doing that. They have been working to produce goods and services out of nature to satisfy and take care of themselves. What has happened in the history of the human race is how we've organized that We're done that very differently. For example, For much of the history of the human race, human beings did this individually and with very small groups; a family. That is, we went to work as individuals or very small groups used our brains and muscles to produce the goods and services we consume. We grew the vegetables. We cared for the animals. We found a way to get clothing by taking the fur of an animal and so on. We built a little house, a shack, a, uh, a [indiscernible], whatever. And that was true for tens of thousands of years of human life. Individuals, small groups. And even if they cooked together in something bigger, Each of the little groups within this 'something bigger', functioned this way. Then at a certain point in human history, something monumental happened. Many reasons And we'll call that nowadays a division of labor. It stopped being that everybody produced all of what he or she needed. [INTENSE SNEEZE] We began to specialize. It's what we all take for granted now. This one becomes the baker of the bread. This one becomes the spinner of the wool. This one becomes the builder of the house. This one becomes the school teacher--you know the rest of it. And that's fine, we specialize. All kinds of reasons. But what I want to focus you on is when we specialize, we have a new problem, which we didn't have when we didn't specialize as human beings, because if you don't specialize, each of produces pretty much what us-- myself, my little family, my little group-- If we produce what we consume, we don't have to worry about what economists call "Distribution." But if I produce only one thing, and you produce something else, and she produces, still, something else then we have to come up with a way to distribute what each of us produces to one another or else I'll be great at making ladders but I'll die tomorrow because I have no food. You will have a lot of food, but you won't be able to get up the tree to harvest the apples above what you can reach because you don't have a ladder. So there has to be a distribution system-- some way to parcel out amongst all of us what we each specialize in producing, and the human race has been very creative in how to do that. What lasted most in human history, was a kind of ritual of doing that. It became a kind of social ritual maybe a religious ritual. For example, terms like, "Harvest," is when we gather the fruits of our different labors You get the corn. You get the eggs. You get the meat, whatever it is, and then we have a featival. All cultures have harvest festivals Where they distribute--where we work out: I'm gonna give you the eggs that I don't need myself and you're gonna give me the carrots you don't need, and you the wheat, and you the rice, and all the rest of it. Other systems will also develop. A group of elders (that's very popular in human history)--older people who've lived around a long time and kind of know what's going on they get together and they parcel out amongst all of us what each of us specializes in producing, and so we get distribution that way. Sometimes it isn't an elder, it's just a kind of rule or custom that develops For example in your family, when you do a certain kind of labor, say around a thanksgiving and you variously do things. Maybe your mother prepares the turkey and you do the mashed potatoes, and your brother does the cranberry sauce or whatever, and the question is, each of you has made something but your thanksgiving is not gonna see you groveling in the cranberry sauce as your activity, you'd like some turkey, and you'd like some potatoes, and so our method works out. Maybe the method is grandma hands it out. maybe your father does. So you can see how it gets worked out family by family who's in the position of deciding. [Indiscernible] remember when you were a kid you had a problem: you wanted two chocolate puddings at the end of your meal and that became a tension as to who would get the extra dessert You, your cousin, your uncle, grandma, grandpa, whoever That has to be worked out That is a distributional problem Okay? Then a few hundred years ago we began to build this distribution in a very peculiar way It had happened before but it had been sporadic But starting three, four hundred years ago, five hundred years ago, depending on when you count, in the western part of the world, Europe and so on a development happened that organized a new way of distributing the goods that were specially made by different people. And that way was called "The Market." The Market is a peculiar arrangement, here's how it works You make a bunch of stuff: bread or shirts or whatever. and you come at a particular place at a particular time-- the edge of a village at 5 o'clock on Thursdays-- and you open the little blanket and you lay out the stuff you've done the eggs you have, the chickens, the shirts, whatever. and along comes people who likewise came to market with whatever they made baskets, or, uh, or chairs or whatever, and a peculiar ritual develops. in which you and the other person "bargain," a new word, I'll give you four of my shirts if you give me six loaves of bread I'll give you two of my oranges if you give me a pound of your coffee or whatever it is. and the distribution happens through lots and lots of individual bargaining That's called a market system. It is a way of distributing goods and services when you have a division of labor. It has not been the way we've divided goods and services for most of the history of the human race. We had other ways: elders did it preists did it, e-, uh, you know, religious rituals accomplished it. The market is relatively new and the market as a system has always been fought over. It was never instituted as some great acclimation of the best thing to do not at all. If you go back, some of you do some reading, you go back and you study Plato and Aristotle. Way back in Ancient Greece, there were market arrangements among, if you know their history a little bit, the different Greek city-states: Athens, Sparta, and the other ones. They would trade with one another-- "Trade" is another word for market--'cause trade is "I'll give you three of these, you'll give me two of those." And so the question rose, "Gee, in a society like Athens, where Plato and Aristotle did their work, what will be the impact on our society, which is mostly people producing for themselves and consuming their own stuff? All of this specialization, the leaders of Athens, the democratically elected leaders, that divide things up, What will happen if we don't have the old system but we have this new distribution system: The Market? And you may be surprised to learn that Plato and Aristotle... ready? [They] hated markets! Denounced them, and why? Because they destroyed the community. When people are at each other constantly fighting, "I'll give you three of these but I want six of those. You just want to give me five. I'm not gonna [indiscernible] I'm gonna find somebody else [indiscernible]. This kind of relationship, this kind of haggling at every moment we interact with one another such that I want to give you the least possible and get the most possible was a disruptive, asocial human activity that should be banned. I always love it when people get up and start with a speech about our "Great forefathers," "Intellectual giants," "the Great Wester Tradition," "Aristotle and Plato," and then work seamlessly into a celebration of the status quo. We live in a market society. They hated market society. And they're not the only ones. It's been disputed every [century] it's being disputed now! I just say that because before you take it, that markets have always existed... they haven't. Human beings have done real well, for a long time, without them. and when they came, they were fought over. To imagine that everybody today could or should or would agree with a market system, simply means you don't know much history. Okay, so we have markets. Next step, how is it all organized? Well we live in a peculiar system that is not only market arranged But we have a very peculiar way of organizing the production of goods and services that are then traded and distributed by means of a market. How do we do it? Well let's see. We have work to produce a shirt, a microphone, a briefcase, a camera, anything. It takes lots of different people, coordinated through various parts of the job to produce a finished good. How do we organize that in our economic system in the history of [the] world. Lots of ways. Sometimes people got together understanding that, "Look I can only do a certain amount myself if I want to do something more complicated then the thing I can I'm gonna have to hook up with other people to be able to get that more complicated thing done. Like a bridge or a house. Hard to build a house with one or two people. You need to kind of a bunch and it takes a lot of time. So how do you organize this? How's it gonna work? And human beings have done it in a variety of ways. Very quickly, one is just you get a group of people together and you agree amongst yourselves, we're going to work together each of us is gonna work for six months each of gonna work, I don't know, five hours a day. And then we're gonna build something like a barn And we're still start with building a barn for you, Harry. And when we're done we'll build a barn for you, Mary. And Mary you'll help building the house for Harry and Harry you'll help build... and so we, we work it out. In that arrangement, we work it all out together. We sit around, have meetings, how are we gonna build the barn? Who's is gonna be built first? How's it gon... and we work out a plan and then we all more or less abide by the plan And if anyone finks out, you know, we use the usual modes of persuasion that people have developed everything from a nice conversation to nasty gossip and whatever else is necessary to get the work done. That's a collective, you might call it. A community way of organizing. Or you might take that other word that comes out of the same root of community and call it, I don't know, Communist!! That'd be one. It's a community. That's one word. Have people done that in the history of the world? Always. Ancient times, medieval times, and last week. I can tell you all around the America states and elsewhere that kind of work gets done in that way. Okay? Second: A completely different way In this second way, some people do all the work and other people don't. Wow. Let's do that again. Some people do all the work and other people don't. I'll give you one example. It's a society that organizes people into two groups just to get it working like this One group is called, "Slaves." And the other group is called, "Masters." And there's a lot of ways this gets- comes into being, that we have lots of examples in history, of a part of society called "The Slaves" and a part of society called "The Master" The Slave is the property of the master, rather like a horse might be or a chair or a house. We allow in those kinds of societies human beings to be the property of other human beings. And then the master, owning the slave, having dominion over the slave as a property can treat that slave pretty much as he sees fit and he says to the slave, "I have an idea. You do all the work. You build the house, you make the shirt, you cook the omelette." And you do not only do that so you yourself can survive, that is you cook an omelette, you eat. You make a shirt, you wear it, that's fine. But you're going to have to do--ready?--more than that. You're gonna have to do more work then is what taking care of you because that's what you're gonna have to give to me! Which would allow me to have an omelette, a shirt, a chair, and I don't need to do nothin'! You do it for me Or else, I'm the master. It's a very peculiar arrangement. Because it means in the production process Instead of us all getting together to work together to produce what we all need, We are introducing a big, new difference. Conflict. Tension. Anger. Resentment. Why? Because some people are doing all the work and producing more than they get.
