Hoover Institution (Stanford, CA) — Stop viewing every inconvenience discovered in the economy as a market failure needing government intervention, Argentine president Javier Milei told a crowd at the Hoover Institution on Wednesday, May 29.

Now finishing his sixth month in office since being inaugurated in December, Milei spoke at Hoover as part of a US tour that saw him visiting several big-name Silicon Valley firms. His appearance was organized by Hoover in conjunction with the Stanford Graduate School of Business through its Classical Liberalism Initiative.

Milei recalled his years as an economist with HSBC Argentina and work advising a large pension fund. He explained how he had to remain adaptable to changing market conditions and new ideas and not make assumptions based on static economic models.

“Reality is complex, but when the model doesn’t match reality, you get rid of it,” he said. “You don’t get angry with reality.”

Milei argued that many twenty-first-century leaders see every failure of an economic model as proof of a market failure warranting government intervention.

He added that the state interventions are slowly strangling our ability to generate economic growth.

“Let us not allow the fatally conceited to destroy our lives with regulations.”

Throughout his speech of more than one hour, Milei brought up luminaries who’ve shaped his worldview, including Adam Smith, Friedrich von Hayek, Milton Friedman, Henry Hazlitt, and Murray N. Rothbard. He described how they influenced his view that everything should flow from the promotion of private enterprise and maximum possible growth, and that state intervention often only exacerbates the problem it was intended to solve.

Milei described himself as a libertarian and a minarchist who believes the role of the state is only to protect individuals and their property from aggression.

While talking about the challenges of governing and the Austrian school of economists who influenced his worldview, he suggested that it may have been his love of conflict that brought him away from work as an economist and television commentator and into the position he finds himself today.

“That’s probably why I got into politics. I love conflict.”

Milei said that his government is working to tame inflation and get public spending under control, and he applauded his economy minister, Luis Caputo, sitting in the audience.

“He’s in charge of the chainsaw operation,” Milei said, alluding to the chainsaw he brought with him to campaign rallies to symbolize his anti-spending agenda. “We are getting rid of a whole lot of things.”

“I am very happy when my economy minister gets applause. He’s making the greatest adjustment not only in the history of Argentina but in the whole history of humanity. We have already adjusted by 13 percent of GDP.”

He then turned to confront those he called “statists” and “regulators” who oppose his efforts in Argentina.

“They’re sitting in an office, and they create regulation just to justify their own existence,” he said. “This has a direct impact on innovation. . . . They regulate just out of ignorance or just to justify the chair [they sit on], and they’re ruining our lives.”

He argued that most people in economics can’t even articulate where the state ends and the market begins.

“The market is ourselves,” he said. “When there’s talk of the market, we are the market.”

He described the market as a “social cooperation process” where “property rights are voluntarily exchanged.” He contrasted this with interaction with the state, where participants are compelled to act in a certain way.

“State intervention is always bad, because it’s based on coercion, on force, and nothing based on coercion can be good.”


Jeff Jones: [00:00:00] Welcome. Thank you for joining us. Would you please take a moment to silence or turn off your cell phones if you haven't already. My name is Jeff Jones, Associate Director of Operations at the Hoover Institution. Before we begin, I would like to share that we as a university recognize and value the rights of individuals to express their views, which is why we do not permit the disruption of the effective carrying out of today's event.

Freedom of speech is a core value at Stanford University. Our goal today is to create a respectful space for the exchange of ideas. Those who engage in the disruption of the effective carrying out of this event will be issued a warning. And if the warning is not respected, may be asked to leave. Today's event is being presented by the Hoover Institution and the Graduate School of Business.

Condoleezza Rice: Good morning. As director of the Hoover [00:01:00] Institution, I have the pleasure of welcoming you to this event. Hoover is an organization committed to producing the highest quality research and disseminating that research and those ideas so that we can contribute to solving some of the country's and the world's most difficult problems.

We are fortunate to be a part of Stanford University and its community here, a place that encourages diversity of thought, free expression, and free exchange of ideas. Today, we have an exceptional opportunity to hear from a leader to our south. From the rugged Andes Mountains to the plains of Patagonia, there are few places on this earth as beautiful as Argentina.

It is a country that is rich in history and tradition, but today, it is trying desperately to overcome a daunting challenge to its national economy. Here to talk to us today is the president of Argentina, Javier Mele. Growing up in Argentina, as a lover of football, I [00:02:00] understand, and the Rolling Stones, President Mele obtained an economics degree from the University of Belgrano before continuing his studies and earning a pair of master's degrees in economics.

After completing his formal education, he began a career in the private sector as an economist, working for HSBC Argentina. One of the country's largest banks and as head of, uh, head economist for Maxima, AFPI, the private pension fund created in the 1990s, which today serves a major component of Argentina's social security system.

For more than 20 years, speaking at a university obviously is right up his alley. He was a university professor of macroeconomics, economics of growth. Microeconomics and Mathematics for Economists. The President has written over 50 academic [00:03:00] papers and has appeared as a national television commentator.

Please join me in welcoming the President of Argentina, Javier Millet. Good morning. very much for allowing me to have the honor of being here with you.

Javier Milei: and to be able to transmit to you some of the ideas that are being very important in what has to do [00:04:00] with the government that we are carrying out in Argentina. Naturally, I say, at no time do I stop being an economist and there are issues that become super important, especially in what has to do with decision making,

And in today's talk I want to focus on, um, on one of the topics that I develop in my recent book, which is called Capitalism, Socialism and the Neoclassical Trap. Basically, I want to go over what is technically called a market failure, which is defined as non convexity, that is, when there are concentrated market structures.

And which are the elements of force that are behind the argument. And obviously once I do this, I will start to elaborate where I consider that the neoclassical structure has a problem, a failure, an error, and that that derives from state intervention and that that is what ends up killing economic growth.

Basically, the first element of the conceptual structure is It is an idea of Mises. Mises pointed out that there were only two [00:06:00] economic systems, in polar forms, right? That is, on the one hand, free enterprise capitalism, and on the other end, real socialism. That idea, combined with a work by Hayek, let's say, very famous, which is the book The Path of Servitude.

The book The Path of Servitude pointed out that every time[00:07:00]

What are the logics and dynamics that also lead to that? The first point, let's say, that has to do with the impossibility of socialism was raised already in 1922 by Mises, in his book Socialism, and what he said is that socialism was unfeasible because it could not be an economic calculation. That is, specifically, if what one is doing in a transaction is to exchange property rights, and that is what generates [00:08:00] Um, registro historico, precio, Mecanism of transmission of signal where the agents coordinate, some will be buyers, others will be sellers and that in the face of the existence of divergences there will be adjustments, that is that the system is a mechanism of transmission of information of coordination and adjustment the event is triggered by the exchange of property rights therefore when the state appears and intervenes what it is doing is interfering on the property right

Yeah. Problems that are generated with the presence of socialism and the intervention of the state is that, in addition, an incompatibility of incentives is generated, because if you are going to be making money, but it is, and you are forced to make money, as Milton Friedman said, let's say, what has to do with the social responsibility of the businessman is to make money, say, because if he does it, he is a hero, right?

Because basically what it is doing is generating goods of better quality at a better [00:10:00] price. Therefore, it is a creator of well being. And if you intervene and with the argument of the distribution of income and inequality and that kind of issues with which socialism attacks, the counterpart is that, why am I going to force myself if they are going to take away the fruit of my work?

And if I can't appropriate the fruit of my work, So it doesn't make sense to work. In fact, the presence of socialism what it does is to abort the process of discovery. And that is not a minor issue. In fact, Hayek pointed out that the market is a process of discovery. Hayek raised this in terms of the discussion about the distribution of income, by saying that there was no such thing as a cake, but that cake was a cake that was being created, that was being discovered.

In the process of the market, it was taking place, but this is [00:11:00] very important because the interference of the state, what it ends up doing is breaking the process of discovery that derives or that is basically innovation. Suppose two individuals who are not connected and one, let's say, generates a product and has a waste and in fact that waste would like to take it

So this third individual is obviously going to do well because he is solving a problem. And if the state appears regulating it, what is going to happen is to interfere in that process. God is going to abort. And if the state advances a lot, it will even abort it directly. And therefore, we are all going to live much worse.

Probably, let's say, the most emblematic case has been during the pandemic.

Barbies. If they had left the forces of the market free, there would have been many more barbies more quickly and much cheaper. And the fact that the state got involved, the only thing it did was generate a big problem. Naturally, in not so intervene economies, it generated damage. In super [00:13:00] intervene economies, such as Argentina's case, it caused Argentina to have 130, 000 deaths from COVID.

When if we had done things like a mediocre country, we would have had 30, 000 dead. That is to say that the present state, the state intervention, cost the Argentines 100, 000 lives in a year. That is to say, the intervention of the state, to the dessert, ends up being a murderous intervention in a direct way.

And this, let's say, is important because there is also this combination of the market as a process of discovery, plus, let's say, the principle of appropriation of LOC, that which indicates that the one who discovers it, keeps it. It is the basis of Israel Kirchner's thinking on these issues.

But let's suppose that I have a general balance system and that initially it is in balance and that suddenly a problem appears, such as the pandemic, and then you have a drastic change in demand.

That drastic change in demand, which is going to cause some products.

I'm going to be very demanded if your short term price is going to be very high. Precisely, that price signal is what is going to attract resources from places where resources do not have to be and go to where people are asking for resources. If you, in the area of talking about income distribution, earnings, inequality and others, [00:15:00] start to intervene in that market, the only thing they are going to have is that the market that had to be destroyed is destroyed.

But the market that has to prosper, does not prosper, and therefore we are all much worse off. Therefore, one of the things that is very important to be clear about is that the intervention of the state is always bad, because it is based on force, and nothing that is based on force can be good. In fact, all, let's say, liberalism is built, I say, respect for the right to life, freedom of property, and so on.

And always as a starting point and base, the principle of non aggression. And if there is a big and institutionalized aggressor, it is the state. Therefore, always the action of the state produces damage and the more In this logic, then, where the intervention [00:16:00] what it generates is damage, this is tremendous, because the analytical, neoclassical instrumental, even with people who feel libertarian, let's say, could end up being functional to socialism.[00:17:00]

What I tell you is that in order to understand these concepts you can get into the model.

That is, you aren't upset with reality. If you get upset with reality in a company and you remain entrapped in the model, you will lose your jobs as well as a lot of money. The first thing one can learn when one is in a fringe is to understand that if the model does not fit reality, it will fly away.


However, in the neoclassical world, when reality does [00:18:00] not match the model, we call it market failure. That is, I would tell you that we are sick of fatal arrogance. I've been teaching microeconomics for 25 years of my life. I've read a lot of microeconomics books, read a lot of new models and papers. And

Rothbard in a book called Monopoly and Competence. And that day my life changed. But, then, what I want to say is that enabling that concept of market failure and intervention, what it does is favor socialism. That is, we end up being functional to socialism. In fact, within what is the strategy of 21st[00:19:00]

century socialism. And the way to advance on the economies and where Latin America is a great example. Let's say, socialism in the 21st century has been very successful in Latin America. It has had a lot of presidents. I say, in Argentina it had four Kirserist periods. In Uruguay it has had Pepe Mujica, it has had Tabaré Vázquez.

In Chile it has had Lago, Vallelet, twice. I.

Lopez Obrador in Mexico. Um, I think I'm not forgetting anyone. And then in [00:20:00] Spain they have Pedro Sánchez, who is something like a guerrilla, and I would no longer say that he is of good manners because he does not have them. Um, now, then it's good. And then what do we do?

Well, one of the things I'm going to do is detect these problems, propose some solutions, but naturally, let's say, I'll let you know that this is part of my next job that I'm writing with Dr. Demian Reidel, who I also have the privilege of having with me and who is one of my chief advisors. [00:21:00] But I'm going to be giving some clues as to where I think the solution is.

So, the first thing is to define what a market is. I mean, it seems fundamental to me. And sometimes I have the feeling that many economists don't know how to define what a market is. In fact, some of the reflections that are made confirm that they don't know what a market is.

And for me, the market, again, I say, is my definition, that is, what I think, let's say, is absolutely under discussion, I don't have any kind of problems with that. And it is that the market is a process of social cooperation where rights of property are exchanged voluntarily.[00:22:00]

But I fix it, but there was no failure in that decision. That is, at that moment that I made the decision, it was what I wanted to do and I did it voluntarily. Nobody forced me to make that transaction. And the only agent within the economy that makes those forced transactions is the state. Therefore, the only one that can generate failures within the economy is the state, not, let's say, the market.

Because, in fact, the market is us.

When they talk about the market, they say, we are the market. We are the market. And [00:23:00] then why do we have to put up with someone fatally arrogant coming to say. I'm making the wrong decision if I don't even know what I'm doing, or why I'm doing it. I mean, surely, let's say, if I were, uh, let's see, uh, uh, Los Angeles Lakers, I mean, surely a Boston Celtics fan would say I'm wrong.

What title? I like Los Angeles Lakers! I saw Magic Johnson play! I mean, what would they explain to me? I'd say I'm wrong. God, I don't

I like it even more. So, this is very interesting. This happens to me regularly in public debate. It's, a problem appears and some statistician tells me, here it is, the world of my law generates these problems. Then I say,

Let's see, let's see if the world of my law generates these problems. I mean, besides, there are powerful ones that I am, and they generate problems themselves. So, I laugh because there are things that go through my head that obviously I can't tell you because I have a restriction that I'm still the head of state.

So when you hear, when you see that I do some, there is like a silence, I ask you please to understand me. So,

One of the things that I say is, if you believe that there is a market failure, in a certain market, the first proof that I propose is that you check if the state is not intervening. Because it is not something that in reality, what you are perceiving as a market failure, in reality, it is precisely the [00:25:00] damage that the action of the state causes.

And if you ran to the state of the medium, surely we would be better. So, the first point is, go and check if

One of the things that happened to me, from doing so much microeconomics and general balance, when all the modern literature on economic growth appeared, I was very friendly, all [00:26:00] micro founded, it was very easy for me, to the point that I started studying economic growth. I ended up specializing in economic growth with and without money.

Something that is also, let's say, motivated by the fact that the most important economist in the history of Argentina, Miguel Sidrowski, was a specialist in economic growth with money. So he already had, let's say, a certain attraction for that. And all the micro foundations had been very useful to me. And having also given classes in mathematical economics.

So I started working on these issues. And at one point I was invited to give a talk at the World [00:27:00] Economic Forum. Not the last time I made so much scandal. When I was a calmer person. I was invited to talk about demographics and growth.

And when I start to look at this, I find Angus Madison's works. I find something that all of you know, I'm going to describe it anyway, but surely all of you know it, which is what is called the Hockey Stick. That is, that series presented by Angus Madison with 2, 000 years of history, that is, from the year 0 of the Christian era until the year 2000.

The Hockey Stick.  And the truth is that it was an absolutely monotonous series.

A series that, let's say, if one stood there in the 1800s and had to choose between staying with Adam Smith or Malthus, it seemed the most reasonable to stay with Malthus. However, let's say, after the Industrial Revolution, let's say, the GDP per capita rose about ten times. And that occurs in a context where the population multiplied at least seven times. So, in the face of that situation, what one sees is that we are in the presence of growing yields. We have more people [00:29:00] entering the market, and yet the productivity goes up. If the GDP per capita went up, that is, what Malthus predicted did not happen. And that, let's say, the presence of growing yields, that is, in the terminology of market failure, they are called non convexities or if you want to put it in another name that there are concentrated market structures the problem is that if you propose it in microeconomic terms that is a supposed market failure or to put it in some way, monopolies are bad then, if monopolies are bad or the concentrated market structures are bad how can we say that it is bad

1800 more than [00:30:00] 95 percent of the population lived below the extreme poverty line and in the year 2000 that number had fallen to less than 10%, that is, as something that generated so much well being.

And not only does it consider the consequences of what is happening today, but it also considers the implications for the future. That is to say, he is talking about an economist, the bad economist is an economist who only does partial equilibrium and of a single period, and the good economist does general intertemporal equilibrium.

That is, that would be the definition. But I say, apart from this, the most important thing, So it's, well, so how do we trace the problem? Where [00:32:00] is the problem? So now I'm going to spoil the answer and then I'm going to give the explanations. From my point of view, the origin of the problem is in the interpretation of the invisible hand, of the idea of the invisible hand, under the logic of Pareto.

And that, and that has, has, has clear analytical consequences. And from that construction, when we put normative issues [00:33:00] into the analysis of balance, is where this conflict between reality and the model begins to appear. Conflict that we, let's say, call market failures.

So, let's say, when the problem of non convexity appears, then, let's say, it has to do with concentrated market structures, with monopolies. We can have the case of public goods. For example, there is something very funny with the subject of public goods. We usually discuss in terms of public goods, in terms of rivalry in consumption and exclusion.

And when you look at, for example, the emblematic case that was used to describe a case where the rivalry in consumption and exclusion were not fulfilled.

So he found very funny solutions, and then they said, well, the emblematic case was the headlights, and the headlights, and the headlights. So what did this economist, this lawyer, who later won the Nobel Prize in Economics, who lived up to 104 years, if I'm not mistaken, who was called Ronald Coase. So what did he do?

He went and analyzed all the headlights of the 19th century. I mean, supposedly it was an emblematic case of market failure, it was the case of public goods, and there the intervention of the state and whatever was required. And guess what he discovered? That they were all private. That is, that economists do not know, let's say, how to describe the problem well, the problem is [00:35:00] not in reality, it is in that we have tools that are wrong.

And this is a topic, the topic of public goods. I'm going to tell you, I think that when I tell you, you are going to believe that this is a joke. You are going to believe it.

But, believe me, in real life it is not, much less in Argentina. It may be that you are affected, let's say, by the case. But let's suppose that you have two communities separated by a river, and then you discover that if you make a bridge,[00:36:00]

It would be good to build a bridge. So, what happens? If you had, if it was just a problem of the private sector, you know what they do? They agree and put together and build the bridge. They look for the return. The problem is when the State is there. So, the State goes, charges taxes to everyone and builds the bridge.

But then there are a lot of people who live in the State. So, what do they do? They start looking, they do the Ministry of the Bridge and they start looking for where to build bridges. That's what it is. There comes a time when they built all the bridges that could be built. Then they create the Ministry of Water to put water [00:37:00] and then build a bridge.

You are laughing. I ask you to review the public function organigram. Luckily, let's say, here I have with me, who is accompanying me, this formidable, wonderful professional, who is my Minister of Economy.

Luis Caputo, who is the one who is carrying out the Motocierra. And from that we are getting a lot of things. I want to tell you that it makes me very happy when you applaud my Minister of Economy, because not only is he making the biggest adjustment in Argentine history, but it is the biggest in the history of humanity, in depth and in

quantity of time. When you put together, let's say, what we are doing in the treasury and in the central bank, in fact, we have more than 13 adjusted PBI points and that, let's [00:38:00] say, if you raised them at another time, let's say, they crucified us both in the middle of July 9, which is where there is an obelisk, a tall, big thing there, and we go and I take them to the presentations and they applaud him.

It's a time change. People are awakening. They are awakening to the ideas of freedom. And the man who is carrying it out is the dear Luis Caputo, who is here. Obviously, there is another, another type of, of, of, of course, market failure that we could analyze. I say, externalities. You, I say, take the case of externalities.


Externalities in consumption. In reality, externalities in consumption is to avoid, that point, is to avoid a problem of circularity in the [00:39:00] resolution of the problem of general balance. But you believe that people are so stupid that they will not be able to decide, there will come a time when they will starve to death, with which, let's say, they will decide in some way not to die.

That is, then I do not need someone to intervene to solve the externality of consumption, because in the end someone will solve it. Thank you. Or, let's say, the cases of, of, of, let's say, production, how many times did you see in the textbooks? the company that pollutes the sea, the water, is in reality a property definition problem.

In fact, one of the brilliant things that COUSS also solved was the issue of solving these problems by assigning property rights. Another issue is that of asymmetric information.

And the [00:40:00] other thing, also extremely arrogant, is the issue of coordination failure as a consequence of a problem in the dilemma of prisoners. I say, if you noticed that there is a strong assumption in the dilemma of prisoners, it is that prisoners cannot interact. I mean, do you realize that this assumption, so simple, has a level of violence?

Institutional Grocero And so, as I grab and put that level of gross institutional violence So now I need a violent body to solve the coordination problem As if the agents were idiots And the agents are not idiots, the agents are intelligent, the problem is that There are a lot of satraps in the middle, called the state And they live from our people Okay.

That's why they generate these problems, to live that, not for us to be better. That is, they self create their own demand. Why? Because they have the coercive power of the State in the middle. That is, [00:41:00] the guy who is in the State, let's say, notices that he can regulate. One thing that is going to happen to regulators, and this is important that they have it.

As they are in that office, they need to justify why they are heating the chair. They create regulations.

We already know that growth, let's say, we're going to have to explain it on the side of growing performance. When you start to regulate and [00:42:00] you look at any regulation model, one of the things that happens is that when you regulate, given the normative framework that implies the competitive model, you regulate those monopolies so that they look as similar as possible to the competitive model.

And if they don't do it, well, it looks like the second best solution, which is the Ramsey. Yeah. In that, in that context, that regulation, what it is going to do is eliminate the quasi income. And if you eliminate the quasi income, you are eliminating the incentives to innovate. And if you, by regulating, assimilating competitive companies and taking away the quasi income, you are eliminating the incentives to innovate.

What you are doing is killing innovation and therefore killing economic growth. Therefore, when you start to regulate, the opposite is going to happen. You are not going to grow. Which is the region of the world that grows the least? For a scandal, [00:43:00] Europa. And why don't they grow? Because they are attested to regulation.

They fantasized so much in generating a model that looks like the competitive model, that they killed the growing returns. That is to say, they killed the quasi rentals. By killing the quasi rentals, they have no incentive to invest. If they don't invest, there is no innovation. Therefore, they were left without economic growth.

Therefore, let's not let these fatally arrogant destroy our lives with regulations. Let's go to a much freer society. If the problem is economic theory, try to see where the error of economic theory is.[00:44:00]

Because in that madness we are going to destroy our lives. In that sense, then, it is, and well, and then now what do we do? Where are we going? So one of the things

I did, I said, well, I'm not going to review the whole story because I don't have time. But, of course, yes, you have to ponder. I say, for something, I say, I mean, I say, having studied the history of economic thought has some advantages, which says, well, let's see, where do I make the cut? So I said, well, let's go to Adam Smith.

So I said, well, let's put Adam Smith as a starting point. Although, let's say, surely you will be aware that I am a liberal libertarian, I say that I adhere to the Austrian school of economics, that in reality, philosophically, I am an anarcho capitalist, and [00:45:00] that in real life I am a minarchist. Unlike my colleagues, I am a

liberal capitalist. I don't have a negative view of Adam Smith. In fact, to me, Adam Smith seems like a kind of genius. For me, Adam Smith is to the economy what, what has been the cause of mathematics. That is, someone who was 200 years ahead of his time and was the one who saw it. That is, we have a very particular way of doing politics.

So, traditional analysts[00:46:00]

The wonderful thing about Adam Smith is that he had implicitly an economic growth model. That is, Adam Smith's model has, in the research on nature and the cause of wealth in nations, for the friends of wealth in nations, what he has is an economic growth model. In fact, the idea of the pinwheel factory is the idea of growing yields, because it was what he said,

If I have a person making pins, a single person, even if it was very good, what was he going to be able to produce? 20 units, and no more than that. Now, what I was saying is that when I divided the work into 15 different activities, the production of per capita pins jumped to 5, 000.

I mean, you had increased the plant by 15 times, [00:47:00] in terms of personnel, and the production had gone from 20 to 5, 000 per capita. And then he says, there is something that is very interesting and that, in light of what has been woven and carved, regarding the interpretations of the future, especially with the wonder that implies artificial intelligence,

And what I'm not saying was in a place where I was in a place where was in a place where was very angry

And, uh, So, the reality is that [00:49:00] what Edison did was wonderful, no? Because that allowed me to have a better quality good, better price, it reached more people, it also generated more work, and I also saved money and was able to spend it on other goods. That is, a well being generating machine, that is, those who generate technological progress can be used to generate more well being.

Let's try to understand what this is about, and not to regulate. That is, freedom can never be bad. The bad thing is not being free. Innovation is never bad. Finally, let's say, we can discuss the values on which innovation is built. And if we build them [00:50:00] on the values of libertarianism, I say, who could be against the unrestricted respect of the project of life of the neighbor?

In defense of the right to life, freedom, property and based on the principle of non aggression. What is the problem with that? Who is against that? God, only you could be successful serving others with better quality, a better price. But there is a limit, the limit is the size of the market. Don't be afraid, don't be afraid to regulate.

Let's say, let's say, technological progress is going to have as a counterpart on the other side of the claim. Or do you believe that you are going to generate technological progress for beings that do not exist? How are you going to do such madness and you are going to be sinking a lot of money in that if in reality that money comes from human beings?

You know, you're okay. But I think our plata.. So I don't know. What's going to say to you? So they can, uh, come up with a portrait. 

If they don't tell me, if it wasn't an advance, I don't know what an advance is. And the other thing that was interesting is in the free markets and in the minimum intervention of the state. And that, let's say, the corollary of that is the invisible hand, that each one, guided by their own interest, leads to general well being.

And in the monetary plan, well, it had a gold standard model. Now, once we have Adam Smith's work,

It is clear that today it is easy, let's say, already knowing the results, we know that Adam Smith was right, but at that time it was not so evident, stopped in 1776, it was not so evident, and that is why you have to, in the year 1801, if I am not mistaken, but let's say around there, going around, 1800 or a similar number [00:53:00] around there, the work of Malthus appeared and the idea of decreasing marginal yields, it was not so evident, and that is why you have to, in the year 1801, if I am not mistaken,

It didn't seem crazy in the light of what had been, for example, the previous 1800s. And also, I mean, before the year 0, it didn't differ much from what it was later, until the 1800s. And that made sense because it said that when someone arrived, he occupied the best plot of land. And when the second one arrived, he occupied a smaller one, and so on.

Then the marginal productivity was decreasing. And that made, let's say, that the real wages, let's say, were getting lower and lower. And that, let's say, then Malthew interacted with it, let's say, with the passion for sex. The Iron Law came to wages. And it led to a lot of aberrant relationships that, let's [00:54:00] say, we're not going to be discussing now.

But, I mean, aberrant relationships that already came from 

I mention them because it is important, because at some point the economic theory will have to go back, in a part of history, after Keynes, and that, let's say, will be relevant, let's say, where they are going to feed. And [00:55:00] in that sense, when we are entering the 20th century, it is beginning to become evident that

Malthus analysis was wrong, that what Adam Smith had raised was right, that there was the problem of growing yields, and that if one wanted to explain economic growth, With the contact performance scale and with the neoclassical tool in that format, it didn't, it didn't work and far less with marginal and decreasing performance.

So, the two first who saw this were

Alfred Marshall and Alvin Young. And they started to see how they could do to put the issue of growing performance within the structure of the models to be able to explain economic growth. And this, this debate was so important and so intense that it is when the discussion about the monopoly [00:56:00] begins.

And you there are going to find the theory of the monopoly. God bless you. Um, Um, Um, very interesting models such as Chamberlain's with the monopolistic competition. That is, there was a whole climate of the time to try to see where the problem of growing yields was and how to put them into what we would call macroeconomic analysis or economic growth to explain economic growth.

That is, there was a specific problem. I mean, but, Keynes appeared. And the problem with the appearance of Keynes is that all the analytical framework that existed before destroyed everything. In other words, the general theory is a masterpiece, but a masterpiece of evil, of terror. I don't want to talk about Keynes because if I do this,[00:57:00]

For me, like, I have a lot of meetings in a day, seven hours. And I have a lot of meetings at which I'm not going to do. I'm going to try to be. Let's see how the model worked, how Pre Keynesian macroeconomic analysis worked It wasn't called macroeconomics, but it doesn't matter, we can think of it that way.

Those were the ones called the pixel models, which were models of intertemporal nature, where the interaction between save and investment determined the interest rate which is called the taxa interesse bixeliana.

Clear, comunidad, uh, interesting mechanism, okay. We're gonna send inter temporal that is supposed to be IOT, but it doesn't matter because I'm going to present the references in the Mercado de dinero ceterma. In [00:58:00] other words, in other as well, so it's a good model the characteristic inter temporal don and the mercado the biggest, so terminal.

US preciosos relativos see if you go pass out of I'll create a intertemporal, however, still the terminal at us interest, you just have to turn it to the loss. Precios relativos, alineados en términos de bienes para que todo coincidirán. Tenían la misma tasa de interés para que no haya arbitraje intertemporales.

Commercial. I'm going to like you like you like your mother. Yeah. You really are. So we're really cool. It's way in the, in the material the inversion. It's interesting. The letters generally particular capital. Are most of it. We're going to go. Come on. Let's go. Inversion, and on the other it says that, well, basically the animal spirits.

I have more rude versions, but I couldn't do it as a head of state. Therefore, now in the market of goods it happens to determine, not, let's say, the interest rate, but it happens to determine the income.

And now, with that income, it determines the labor demand, which in the face of a job [01:00:00] offer, with that determines the salary. And it has a couple of problems, because it lacks to determine the price level if it lacks to determine the interest rate. So it decides to determine, in an absolutely delirious way, to determine the interest rate in the money market.

I say, which is crazy, because the interest rate exists not because there is money, but because there is time.

So he broke everything there. And besides, he needed, I mean, how, how is there going to be interest rate in a period model? Realize that it doesn't make sense, it doesn't make sense. The interest rate is an essentially intertemporal issue. Therefore, obviously, he had no theory of capital or anything like that.

And then, what did he do? Well, he determined that the, that the price level of the economy was a markup on wages. That's all there is to it.[01:01:00]

I mean, it destroyed the whole theory of value. Obviously, such a monster could work? No. And then, when it appeared, let's say, that it was evident that the Keynesian theory did not work, where it began to manifest clearly with the acceleration of inflation, then what happened? Cedir, I mean, I don't know, the multiplier that implied, I don't know, implies, in fact, a violation of the

budget restriction. They said, hey, stop. Let's go back to the basics. But since the Austrian school had been defeated in that, in that historical context, they decided to return to the line of Balrath. They leaned on the work of Abraham Wall, a young mathematician who back in the 1920s, let's say, made a demonstration of existence and balance without having fixed point theorems.

A true genius.[01:02:00]

And with the arrival of the fixed point theorems of Brouwer in 1956 and that of Kakutani in 1957, the first for functions and the second with correspondence, we began to work on the analysis of the general balance. And in the general balance, basically, what do we study? If the balance exists, Yes, unico.

It is, let's say, with the, with the changes of the demand versus the prices, the direct effects exceed the crossings, the matrix is defined as negative, and therefore the balance is stable. That is, with which it solves the problem that the balance exists, is unique and is stable. So far we have no problem, because the continuity, or the, in the case that we work with functions, or the semi continuity above, let's say that we work with correspondence, for your attention.

Wish you a great day.

We can ensure it without the need to have these problems in terms of what we need in terms of existence. And then where does the problem appear? The problem appears when we want to put the optimum of Pareto. That is, when, in addition to that balance, which now we know exists, which is unique and which is stable, we want to add properties in terms of well being.

[01:04:00] When we put that problem in terms of well being, we want to put the optimum of Pareto.

How does it work? The idea is that, let's say, if each one, guided by their own interest, let's call it maximizing their utility, leads to maximum general well being, what we would need is for all the agents to be maximizing. And when we, let's say, raise it in terms of the consumer, it is not a problem. And the problem now, where does it appear?

But if they find it on a border, it would imply that they stay with the whole economy. So when they look and there are several companies, it means that it is not a problem. And when they had a single agent in an economy, when did that happen? In communism, and we already know that it was a failure because it could not compute prices.

Therefore, it does not work. So.

In the book, none. And company 4B is signed, yes. I mean, do you believe that, let's say, the function of the businessman is only to solve a Lagrangian? God, it would be quite, quite easy the work of the businessman. And that, God, was [01:06:00] lost here. And that's what he's doing that we can't believe.

Contemplate a capture are correct. I meant a problem. I love it. I mean, don't create a sentence. Yes, a problem. I'm a dequere. I said it. I know he said, you know, it's time. She will, uh, uh, utilizar malas constructions. Mathematicals. Okay. No, it's a secular color. And he meant those costante's a scholars or marginals.

They create a sentence. He casey. I algo. Cady. Fiela. Reality. He fear it. Con el modelo. Los amo. Fasho. Mercado. Yes. So I believe it. I like intervention. He quantity. I believe it.

We are going to be killing the growing returns. And when we are killing the growing returns, as we are going to be killing the generation of benefits, we are going to kill the incentives to innovate. And if we kill the incentives to innovate, we don't grow anymore. Therefore, I suggest, because I don't have [01:07:00] the time anymore, to actively read a work by Murray Newton Rothbard, the inventor of anarcho capitalism, which is called Monopoly and Competition, which is called Monopoly and Competition.

which is in a wonderful book, which I also recommend you read, the three volumes, which are called The Man, the Economy and the State. The third volume is called Power and Market, but it is part of the same work, which is when Rothbard becomes a narco capitalist, to see, because it will make them open their eyes, and it is that monopolies are not bad.

If I have ten companies and one creates a product, I don't know, a cell phone,

And then [01:08:00] it's not good, but what are you going to do with that money you earn? What do I care? If you save it, it becomes an investment somewhere else. If you reinvest it, your company grows more, you're going to give me even better cell phones, and you're going to pay higher salaries, and I'm going to save more money, and I'm going to do a lot of other things.

Fantastic! I mean, what's the problem? Or, or the other one, look, this guy is so bad, he's so villainous, that you know what he does? All the money he earns, he buries it on the floor, he buries it. I don't [01:09:00] know.

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