Full Readable Transcript: Keith Knight's Top Ten Problems with Democratic Socialism
Human Action Podcast with Dr. Bob Murphy
[Music Intro]
Bob Murphy: This is the Human Action Podcast where we debunk the economic, political, and even cultural myths of the day. Here's your host, Dr. Bob Murphy.
Hey folks, before we dive into the episode, I wanted to mention that this year would have been Murray Rothbard’s 100th birthday. So we at the Mises Institute are calling it the Year of Rothbard, and we’re giving away one of his books free every month throughout the rest of 2026. July’s pick is The Origins of the Federal Reserve, which is a short, sharp look at how the Fed really came to be and who was behind it. Grab your free copy at mises.org/hapodfree. We’ll also put a link to that URL in the show notes page for this episode. Go ahead and get your free copy of Murray Rothbard’s The Origins of the Federal Reserve if you act now in July.
Okay, let’s now go to the episode. Keith, welcome to the Human Action Podcast.
Keith Knight: Bob, thank you so much for having me on. I appreciate it, man.
Bob Murphy: Well, you’ve released a heroic video detailing 64 problems with democratic socialism. So why don’t we do a little teaser? We’re going to go through 10 of them—we’ll see how it goes. But before we start, can you just explain how you got this idea? What made you want to create such a thing?
Keith Knight: Probably because so many people in my generation see that the Republicans and Democrats do not offer desirable resolutions to any of the issues we face. So they’re looking for an alternative. Now, once you hate something so much like the Democrats or the Republicans, you start to have really low standards for what counts as an alternative. So people are generally looking to democratic socialism.
The mayor of New York, Bill de Blasio, was also a democratic socialist. He had publicly said that ideally every square inch of New York City would have collective decision-making through the democratic process. But now you have someone who explicitly brags about calling himself a democratic socialist, in the case of Zoran Mamdani, and he was celebrating victories in recent elections—I think they were congressional seats. So a number of people are upset with the status quo and want basically anything that they could be offered.
An interesting thing that happened was although there’s been this point of unification between libertarians and democratic socialists where they oppose the warfare state—libertarians oppose it because it violates the non-aggression principle. Democratic socialists, I don’t know if they really oppose the crimes of the Soviet Union or any of the other crimes throughout history, but at least they’re against the mass murder operation in Gaza or the bombing of Iran. So there was a great deal of overlap between us recently in the realm of foreign policy.
And then after the Strait of Hormuz closed, it was so clear when there was a drastic increase in the price of gas. It was so obvious that what happened was the government intervened and forcibly limited the supply of a product or service and the price for that product drastically increased as a causal result of the government limiting the supply. Usually whenever we see high prices the democratic socialists will say obviously things are privatized, people are greedy, and under capitalism you can charge whatever you want. But in this case, it was so clear that the restricted supply led to much higher prices, making it so everyone was paying more dollars at the pump, that the democratic socialist was more or less saying, well, in this case, yes, the government limiting the supply caused a nearly 100% increase in the price.
So I thought, hey, this might be a good opportunity for me to explain a multitude of reasons as to why I think democratic socialism is not the correct alternative for those who care about increasing living standards and behaving morally.
Bob Murphy: Okay, great. And then just one last little caveat before we dive into this. It seems that there’s been a lot of emphasis lately on the “democratic” part. And I assume the point of that is to say, oh, we’re not like Stalinists. Like, yeah, we admit that in some cases there have been some mistakes made under previous regimes, but that’s because they were authoritarian. There wasn’t any problem with socialism. That’s still a great idea. And so as long as it’s like a majority rule, it’s power to the people, people going to the ballot box and elected officials having socialism, then it will be nice, American, fair for everybody and not concentration camps. Is that kind of what that term is doing?
Keith Knight: Yes, that has been my understanding. So the way Bernie Sanders explained it is bringing the voting box into people’s everyday lives. I think he used the term “ballot box into people’s everyday lives.” When he was on The View, he said that democratic socialism means that everyone deserves to be treated with dignity and respect. So those are the kinds of things that they’re gearing towards as opposed to Pol Pot, Chairman Mao, or Joseph Stalin.
That’s why right at the beginning of this video I lay out the definitions. The democracy aspect is so difficult to pin down. When I refer to democracy, I simply mean large-scale decision making within a general population as opposed to there being a monarch who’s in charge of decision-making. But when it comes to the terms, I summarize communism, according to Marx’s 1848 Manifesto, as the abolition of private property, implying the abolition of contracts between consenting adults. Socialism being the institutionalized aggression against private property and contracting agents within a society. And capitalism—I’m using that term interchangeably with the free market—meaning a social system based on the explicit recognition of private property and non-aggressive contractual exchanges between private property owners.
So by getting those definitions down, I think that at least lets us know we’re either going in the same direction because we at least agree on the definitions, or if we don’t, well, then we have a little more digging to do. But so often I hear a lot of disagreements just come down to a different way of defining terms.
Bob Murphy: Okay. So I think we’ve made the people wait long enough. Let’s start diving in here. What are the problems, Keith, with this democratic socialism? If it’s just dignity for everybody, that seems like a good idea.
Keith Knight: One thing that I wanted to mention to you specifically is the problem of diversification. That’s what I call it. This is the 61st problem that I mention. Now the assumption is under democratic socialism instead of having a boss or capitalists or private stock owners who should own the company, Noam Chomsky asks himself, he says obviously the people who work there. So of course you get into the issue of well if I’ve worked there 10 years and I’m very productive do I get as much pay as someone who is on day one on the job or still in training? That’s interesting but it’s not the hard part I’m getting at.
If I work at Amazon, I don’t think it necessarily makes sense that I would want to own stock in Amazon. I would want to diversify my portfolio. I might want to own a little Walmart, a little Discount Tire, a little Apple because in case the company I’m working for goes down, well then all my eggs are in one single basket. So democratic socialism literally means there is no private ownership of production. There is no stock market. This being Mises’ rule of thumb in determining whether a society is capitalist or socialist: Is there a stock market? Is there private ownership in the means of production? If there is not a stock market, then I as the worker am forcibly being deprived of diversifying my portfolio and I am forced to put all my eggs in the basket of where I’m currently working. Only private enterprise and a stock market allow me to actually diversify my portfolio so I can make responsible financial decisions. Democratic socialism by definition in every case means I’m deprived of this. What do you think about that?
Bob Murphy: It’s intriguing. I’ve never heard anyone bring that up. And you’re right. Like I might go at it a different way and just say to the person who’s advocating that the workers of the car factory should own the car plants and the people working at the power plant should own the power plant and blah blah blah and say okay we have that on day one and then like you say down the road what if some of the workers are playing cards or something and reading poetry whatnot and then what if they agree among themselves let’s do a 50-50 swap and just now we each own 50% of the other person’s thing. Just for purposes of diversification, would they be allowed to do that? I don’t know. In other words, if the democratic socialist is conceding that the worker should own the place where they work, can they then voluntarily trade among themselves? I don’t know what the person would say. So that’s interesting. But yeah, I think it’s a great point. I’ve never heard someone bring that up.
Keith Knight: The next one, point 36, is apartheid entitlement. That is how I summarize the issue. So if you imagine a society where only some people can vote once every four years between two politicians and other people can’t and the way the state decides this is partially based on your age, partially based on your income, partially based on your race and your background. They don’t give you the specifics, but you know these things are taken into account and because of things like your age, race, gender, your income level, they will determine whether or not you have a vote once every four years between two politicians. We would obviously say, well, this is an apartheid state where different people have different sets of rights.
However, whether or not you get that vote counted once every four years between two politicians who are probably going to end up lying anyways, what’s more important is how you’re able to acquire resources in your everyday life. So now consider the different rights: you can vote, I can’t. All right, that’s not ideal, but it’s going to be okay. Now consider you—in order for you to put food on the table for your family, you have to go to a job, work; in exchange for doing the work, you get money. With that money, you go to the store and allocate your scarce dollars to the store in exchange for food to feed your family. I have a different set of rights where I have SNAP EBT or food stamps. This means I have a right to acquire, using the mechanism of the state, resources absent the consent of any other party. I don’t have to be productive. I don’t have to be a kind, virtuous person and make sure I’m engaging in mutually beneficial contractual exchanges. I literally have a right that you don’t have and it affects every aspect of your life.
If I can acquire resources this way, you need to find someone voluntarily to interact with. I don’t have to do such a thing. There’s the apartheid aspect. The entitlement aspect is asking why is it that with all the welfare—and democratic socialists are right, the biggest welfare queens are the military-industrial complex, politicians like Lindsey Graham, a lot of banks using the benefit of the Federal Reserve’s discount window. You can say that even the rich are big welfare queens to a very large extent. There seems to be a level of entitlement. I don’t feel the appreciation from police officers, teachers, soldiers. I’m always asked to thank them for their service. And I’ve never once been thanked for being a net taxpayer, even though I’ve been one since I was 14 years old. That would be 16 years as of now.
So it’s not only immoral in creating a sense of apartheid, it creates this level of entitlement where people on the involuntary aspect of the spectrum—the food stamp recipients, the members of the state apparatus—they do not seem like they’re on their heels to please consumers at all. They feel completely entitled. And if you ever talk about cuts, the only motivation you could have for wanting cuts is because you hate the poor, you don’t care about the climate, or you just want the rich to rule over the rest of us. So this sense of entitlement that’s created as a causal result of this apartheid state that’s being ushered in is another reason to oppose democratic socialism.
Bob Murphy: Okay. Let me say what the objection is. Again folks, what I’ll do here is either elaborate on or play devil’s advocate just to get both sides put out here. So I imagine what someone would say and I’ll say this objection Keith or this pushback and then if you have a subsequent one that you were going to cover you can just say we’ll get to that on number two or something. But I could imagine someone saying whoa whoa whoa Keith the way you’re framing this it is all wrong here. What you’re calling coercion and involuntary—that’s the function. That’s why it’s democratic. So yeah maybe if Stalin ran the system down your throat but no we vote on it and so we as a society voluntarily choose this system and it is fair that there’s criteria for if you don’t earn enough then you get food stamps. It’s just that you’re privileged enough that you don’t qualify. But again, it’s not that it’s taken from you against your will and given to this other person. No, we all agreed. If you didn’t like it, then make a pitch for voting for a politician. We’ll change the rules and we’ll all decide next ballot, next election if we want to do that or not. So, it’s voluntary.
Keith Knight: I appreciate the feedback. I will address that in the social contract aspect of our discussion.
Bob Murphy: Great.
Keith Knight: The next number 39 is I call this Böhm-Bawerk’s apartment complex. Imagine you’re a democratic socialist and you say, you know, I don’t really think coming up with the idea of what to sell really adds any value to a company. I don’t think getting the property beforehand and engaging in investment and on-the-job training—that just adds no value. All the value is created by the workers. Okay, if you believe something that ridiculous, there is still the Böhm-Bawerk’s apartment complex issue that you must face.
Here’s how I summarize this from his book Capital and Interest, trying to bring it into the 21st century. We have 30 construction workers who are just walking about and they see a plot of land with a bunch of property and materials and it says “Former capitalist, move to Jamaica. Please homestead these scarce resources and they’re up for grabs.” So the 30 construction workers say, “Perfect. We’re going to homestead this, claim it to be our own, and we the workers will own this, all of this property. We don’t need to come up with the idea. We see the blueprints. We know that it’s going to be a complex. We don’t need to come up with the property. We don’t have to get it financed because all of the property is right here. So now this is democratic socialism and there’s no need for a capitalist.”
To which Böhm-Bawerk says, “Not so fast.” How long is it going to take to put the pipes together? How long is it going to take to decide which construction worker is doing what? How long is it going to take to get from the ground up to just start building the foundations, then putting the roofs on, then waiting for the concrete to dry, and then you have to start marketing the complex to people. Hey, move-in special. Here’s how much you can spend. Once people even move in, we’re talking it’s maybe 6 months, maybe even a year at best. You got to get through all the regulations. And then once people move in, maybe they’re delinquent. Maybe the people who move in break a bunch of stuff and you have to repair it. Now you have to take even more money out. It could very well be multiple years before you ever make money, let alone make a profit off of this apartment complex.
Here lies the third essential aspect of the capitalist. The capitalist can finance a project and give those workers money in a closer time frame than if they would have had to wait for it to be profitable. Also, if the enterprise may or may not be profitable, there is no guarantee that you will get customers. So the capitalist is not only accounting for some risk, he’s also allocating scarce resources toward you in a closer time frame than if you would have had to wait in order for something to be profitable. And I believe that the research I’ve done shows that most businesses, small businesses, are not profitable in a few years and end up going under. So in that case, it makes a hell of a lot more sense. If you like the proletariat, don’t make them take on any unnecessary risk because you might not find the customers. So that is the value of the capitalist—usually seen as they come up with the idea, they provide the property. Those are absolutely essential. But Böhm-Bawerk’s apartment complex, I think, is a decent enough analogy to explain another benefit of having the capitalist as a potential option for the proletariats to contract with.
Bob Murphy: Okay. And just to make sure people get it—the point being the capitalist is advancing, like paying the workers ahead of time. So the worker gets the food and gets the enjoyments up front even though the thing that he worked on technically might not come to fruition for years until years later.
Keith Knight: That’s the insight.
Bob Murphy: Okay, great. Okay, hit us with your next one, Keith.
Keith Knight: The next one is the social contract myth. Imagine you go to Red Robin. You go down. You say, “I want these items off the menu.” They bring you the food. And then they bring you the bill. This could sort of be seen as a social contract. You never explicitly said, “I will pay this price for this item.” But there’s a general understanding between both parties that this is how you operate.
Now, imagine you go into Red Robin. You say, “I’ll have item numbers 1, 2, and 3.” And Red Robin says, “Oh, we went to the kitchen. We actually don’t have the food, but here’s your bill, and you have to pay it.” No one in their right mind would think that you should have to pay that bill if they didn’t bring you the food. And this is the nature of a contract where there’s a sense of consideration. I will give something in exchange for the value of something else.
Now, compare this to what the state laughably calls a social contract. If you don’t pay your taxes or you’re caught disobeying the law, well then you could potentially go to jail for not upholding your end of the social contract. However, what happens if the state does not hold up their end of the social contract and keep the population safe? What if there’s a crime problem, which there is in many American cities? What if the state starts a war based on faulty information which leads to blowback which makes your country less safe? What if they don’t protect you on December 7th of 1941? What if they don’t protect you on September 11th of 2001? This is not a contract because when the state fails to uphold their end, the obligation is still on the population to uphold their end of the contract and there’s no opting out.
So getting back to your earlier point, well we can vote once every two, four and six years between two politicians. I think the best evidence that this is not a justifiable solution is because the assumption is the state has a right to our income and then we get to vote. The best proof that this is a facetious justification would be if it were justifiable, then any institution in society could just allow us to vote for their CEO once every four years and then that company would have the right to tax our income. If anyone should be able to tax our income, it’s probably the grocery stores who provide us food and make sure that we’re alive. Without the food, we’re absolutely dead. Police force probably be privatized afterwards. So the inability to apply their ethics universally with regard to voting is why voting is not a sufficient response to the failure of the social contract myth. What do you think about that one?
Bob Murphy: I like it. One thing that occurred to me too when you’re talking about like December 7th and 9/11 and whatever—one that I like to cite is like the FAA. Every time a plane—I mean fortunately it’s very rare now—but when I was growing up there was some plane that crashed in the Everglades and I think the airline was called ValueJet and they changed their name to something else but in any event it was, you know, as they investigated it there was all these clear violations that the existing regulations were not adequately enforced. The plane had no business taking off that day. And so, of course, what happened is the FAA got more funding and someone wrote an op-ed in my local paper saying how some crazy libertarians want to abolish the FAA, but the rest of us want them to get more funding because they’re understaffed. And so I wrote a thing and it got in the paper saying, you know, what else would have to happen to conclude the FAA did a bad job. In other words, it’s not like we had a laissez-faire unregulated airline market and then a plane crash happened and people say the government should probably get involved here. No, we had the FAA. The day before the crash, why do we have the FAA? Because otherwise planes will be falling out of the sky, the crazy free market. They won’t be doing adequate safety checks. And so then a plane does fall out of the sky, then what does everyone say? Oh, the FAA obviously needs more money. And so that’s kind of a screwy system where when they screw up, they get more money. What would have to happen for us to say let’s try getting rid of that and having competing voluntary associations that sign off on flights and insurance companies vouching for it and if they screw up then it’s their money on the line. So anyway, yeah I like that there’s no way under this system for them to ever be held liable and like okay you had your shot let’s try something else now. Like that’s never an option.
Keith Knight: Exactly. We see it with the case of education all the time. What’s the problem with education? Never enough funding is what they tell us. It’s never a problem of management. And even with increased access to the internet and millions of books now available for free, the problem is still not enough funding. The teachers have the information and they want to give it to the children, but they’re being stopped and they just need money. And then they’re going to give all this wisdom to the students. It’s completely fake. And then the cases of what happened after December 7th of ’41. FDR had more money and more access to power than most previous presidents probably since Lincoln or Woodrow Wilson. After George Bush didn’t keep us safe on 9/11, his approval rating went to 91% and the federal budget continuously increased. Even when we won the Cold War, we now have people coming out and saying we need a $1.5 trillion Pentagon budget and conscription, selective service needs automatic registration. So I think your point is very well taken.
Keith Knight: Next we have the argument from praxeology. This is number 25. There is a book titled Economic Science and the Austrian Method by Hans-Hermann Hoppe and he talks about the fact that you would think looking at the case of East and West Germany where there was so clearly a choice on behalf of East Germans to want to immigrate that Khrushchev in ’61 had to build a wall, erect barbed wire, have soldiers with machine guns using them to stop people from leaving East Germany and going into West Germany. There’s also the obvious case of North and South Korea where there’s a big disparity in the standards of living.
So Hans Hoppe says, looking at this, shouldn’t we easily say, well, obviously the difference between East and West Germany, North and South Korea—there’s a heck of a lot of private property in West Germany and South Korea, and there’s very little private property and freedom to contract and exchange in East Germany and North Korea. He gave the speech in 1989, I believe. How is it that anyone still says there’s an argument for collectivizing the means of production under the rulership of a caretaker class?
His thesis is that it is so difficult to engage in controlled experiments with human beings in societies because there are so many variables. What’s the problem with communism in Cuba? Well, it’s actually the fault of the U.S. government sanctioning them. The problem with North Korea? Well, unfortunately, they took much more of a toll during the Korean War than anyone else. The problem with East Germany? Well, they didn’t get enough Marshall aid. That’s the only reason East Germany was not as successful as West Germany. They can always, always, always come up with an excuse. What’s the problem in Venezuela? Well, the U.S. has the Monroe Doctrine and would never allow democratic socialism to flourish.
So again and again and again whenever we run these extremely costly experiments with giving governments tons of power over the lives of individual human beings and all the decisions they make, there’s never a lesson to be extracted. So Hans Hoppe says instead of using the empiricist approach of saying there’s nothing we can know unless we engage in an experiment and then constantly disregarding the experiments, he says we need to use a process of logical deduction.
So under socialism, the institutionalized aggression against private property means the homesteader and the non-homesteader are treated equally. This raises the cost of homesteading. This means that the more hurdles you have between people homesteading property, acquiring property, producing goods, offering employee contracts, the more hurdles you put in between producers and consumers, the fewer people you will have in those latter roles. This means you will have higher prices than you otherwise would because you have fewer employers. You have lower wages than you otherwise would because there’s fewer employers competing for employees. You would have lower quality of products and services available to the population because there’s not competition amongst producers of those services.
So we attempt to engage in a logical deduction of saying that the more hurdles you put in between producers, consumers and giving people the right to contract, the lower standard of living you’re going to have. And that explains the disparity between East and West Germany, North and South Korea.
But then he says there’s another side to this coin, the sociological effect of socialism. What ends up happening is instead of having a population that focuses on how do I meet consumer demand, how do I be a good employee, how do I provide value in exchange for the money of consumers, you then have people focused on developing political talents. And this creates a more or less low-intensity civil war where instead of people competing to produce, people are competing to consume. That is the actual dog-eat-dog society that the democratic socialists are always warning us about.
Here’s the analogy I use. Imagine you take two groups of 100 people. You tell one group of 100 people, “All of you are being conscripted to run for Congress. You must run for Congress. You have no choice.” Think of the types of personalities those people would develop. Because in order to get money and survive, they’re going to have to get a job in Congress. And then the other group of 100 people, you tell them, you have to go on the show Shark Tank. You have to get money from the investors. You have to come up with a product or service that the investors are going to want to invest in. And the only way you could do that is by making something that they know they could sell to a significant number of consumers. Think of the different types of personalities that would be developed between these two groups of people.
Anyone who is being forced to run for Congress is inevitably going to have to start working on campaign slogans. And it’s not going to be very in-depth because they have to get a majority of votes under democratic socialism. So instead of being complex, they’re going to use bumper sticker lines in order to rally the masses. And compare that to the people in Shark Tank who know they can’t get any money from the investors unless they persuade them. The investors know they can’t get their money back unless they find a consumer base who are willing to part with their scarce dollars in exchange for a new product or service. So the Shark Tank / Congress analogy I think really gets to the heart of the sociological effect that Hans Hoppe brought to light in his book A Theory of Socialism and Capitalism. The first part is from Economic Science and the Austrian Method. So what are your thoughts on that one?
Bob Murphy: Yeah, I think it follows like you say it’s hitting both angles that we can sit there and do it logically in a deductive fashion then someone’s oh yeah but let’s be empirical and it’s you know what more could we offer here in terms of a controlled experiment in the social sciences but like you say those examples are pretty good. One of my favorite anecdotes the spirit of this is definitely right. I think I talked about it in my book Lessons for the Young Economist, but it was listening to some guy who had compiled a bunch of case studies of defectors from North Korea. There was one guy working for the propaganda division. The higher-ups gave them some photos that in South Korea there had been a labor strike. They said take these photos and tell our people you’re so lucky to be living up here in North Korea because look at down there how bad the workers have it. The guy looking at this photo ended up defecting. He said three things stood out: people were in cars, they were allowed to protest, and the guy holding the sign had a ballpoint pen. Up here regular people didn’t have cars or pens. So the higher-ups were so out of touch they had no idea that photo contained evidence of how much better life was across the border.
Keith Knight: I love that story. I have never heard that one.
Bob Murphy: Yeah. The thing that got me was the ballpoint pen one. They got pens down there. You guys have pens. So okay, we might be able to get through all 10 if we keep the pace up.
Keith Knight: Let’s do it. Number 12. This is a line that I had heard from Bryan Caplan. He just simply said the secret to mass consumption is mass production. Now, this is completely contrary to anything that democratic socialists advocate. They say if something is privatized, it doesn’t matter whether there’s one product. There’s no such thing as diminishing marginal utility, whether there’s only one microphone in the world or there’s 10 million. If they’re privatized, it doesn’t matter because the capitalist is just going to charge a super duper high rate that only the 1% are going to be able to afford. This is literally how they explain the current state of healthcare and housing. That there’s no incentive to increase the supply. There’s no incentive to appeal to mass consumers and because they’re privatized and this terrible unregulated market has yielded us our current circumstance.
Ryan McMaken recently came out and displays how roughly 60% of healthcare expenditures are covered by state and federal governments in America today. Not to mention occupational licensing, certificate of need laws, the FDA. So the current problems in healthcare have nothing to do with there being too much freedom to contract. But this is important because if you hear the way democratic socialists describe economics, it would make no sense to hear that companies like Walmart and Amazon are really rich. They’re the monopolies or oligopolies. They just throw out the word monopoly as if it doesn’t mean one seller. So even when there’s competitors, they call big companies monopolies. According to their worldview, these big companies should have the highest prices. But what do we see? We actually see the absolute opposite. The way they’ve gained large market share is as a result of meeting a large number of consumer demands throughout a wide variety of products and services that they offer. Nothing within the democratic socialist framework explains this.
Historically, we also see it with Cornelius Vanderbilt making large amounts of money by increasing the number of people who could travel by steamship. John D. Rockefeller drastically decreased the price of oil not because he was such a nice guy but because he wanted more customers. As Rothbard says in Making Economic Sense, the firms are constantly courting the customer whereas governments are at war with the customers. They literally make demands on the taxpayer and if the taxpayer doesn’t concede to the demands the state will use violence against them. That is a completely different way of analyzing a situation than when you’re in the voluntary sector and you have to meet consumer demand in order to get money out of people’s pockets.
But how does the democratic socialist even explain things within the healthcare realm that are more privatized and you don’t have to get a prescription and the state is not requiring you to have insurance? How are things like Tylenol so cheap? According to democratic socialist theory, Tylenol should be extremely expensive since it’s privatized. Dayquil and Nyquil should be extremely expensive. LASIK eye surgery should be drastically increasing in price. And we shouldn’t expect there to be any increase in quality after all this time. The most beneficial healthcare that I’ve gotten access to has been massage therapy, which is not covered by any insurance, and watching free online videos describing what the ketogenic diet is. That was never some big government plan. Those things were provided to me at an extremely low cost because fortunately there was a free market. Democratic socialists have no explanation in all of their theories as to why such things are widely available at a very low cost.
Bob Murphy: Just two quick ones on that. If people haven’t read it, Burt Folsom’s The Myth of the Robber Barons. It’s just awesome. He goes through market entrepreneurs versus political entrepreneurs to show that like you’re saying Keith that yeah, John D. Rockefeller drastically reduced the price of kerosene. Same thing with Carnegie and so forth. And then the other thing too just on the government agencies looking at their customers as a nuisance whereas private companies, like beer companies, do they say “Hey, don’t drink so much beer.” No, they’re like “Oh, you want more? Okay, here.” Right? So that just showing again it’s not because there’s something so intrinsically different about electricity and water versus beer. It’s that one is privately owned and marketed and has competing companies. The other one doesn’t.
Keith Knight: Precisely the point. Next point is competition protects workers better than the state. So when I had this debate with Ben Burgess who’s a professor at Rutgers, he was advocating democratic socialism. After I gave the examples all the way from Vanderbilt through Rockefeller all the way to Steve Jobs, Tim Cook, Jeff Bezos and all these other things, he basically conceded everything. He goes, “Yeah, yeah, yeah, I agree with all those.” He didn’t even refute the industrial revolution point. He goes, “Yeah, but you’re just talking about things that people buy. Most of people’s lives are spent at work and work is where we need to focus on.”
Okay. So now that they’ve conceded the markets produce better for consumers than a state apparatus would, we have to ask ourselves why is it that such a small percentage of workers get the minimum wage. According to democratic socialist theory, companies do the absolute bare minimum. So if there were any lower they could go, they would. But they’re legally being stopped from going past the floor of standards that the state was kind enough to provide for us. So with this theory, we would expect roughly 99% of people to be getting the minimum wage. And once people started getting the minimum wage, they would just get that wage forever.
The two ways that we can easily refute this is look at the percentage of people who currently earn the federal minimum wage. The numbers I came across are roughly 1.4%. It’s very difficult to account for state minimum wages. Let’s say it’s 5% of people who are earning the minimum wage. How is any of this explained with the concept of democratic socialism which says companies only do the bare minimum? Well, what ends up happening is companies try to incentivize customers to come to their store so they provide products and they try to incentivize employees to work for them. So they offer things like higher wages or more compensation or very entertaining break rooms or time off or fun events at work. In other words, companies competing for customers has given us lower prices and customers competing for employees will yield higher wages.
This is not just some theory. We see it every single day. Second, when Paul Krugman comes out and says wages are stagnating, the way he describes it is by looking at a demographic. He looks at wages within a bracket to see if they’ve increased or decreased. First of all, why would I care if my wage stays the same over time if there’s a competitive marketplace where prices are consistently coming down? He also doesn’t address the concept of time prices. But the ultimate fallacy comes in. If wages are not growing, we would see people at age 16 have similar wages to people at age 46. We see the opposite. We see people getting on-the-job experience and with this experience being able to demand a higher wage at later points in their life. The analogy I use is imagine a guy goes to a college in 1980 and surveys 500 freshmen who are 18 years old. Twenty years later he goes back and they’re still 18. He could conclude that no one at this college ages. Well, the flaw is these are different human beings.
Bob Murphy: Yeah, great stuff. When I was younger I really got into people arguing about the 80s and Reaganomics and trickle down and it was fun to look through the statistics about income mobility. There was a lot of chicanery involved there. Another thing too that this is a basic contradiction in the whole democratic socialist thing—the rich just pay the bare minimum. All these greedy capitalists. These same people will say with a straight face oh, and in the United States women get paid 83 cents on the dollar for the same work as a man. So why don’t the greedy capitalists lay off all the men and just hire all the women? Then if they get the same work, they’re 17% cheaper. And all of a sudden, oh no, their hatred for women is even stronger than their money-grubbing greed. So it’s interesting how that works.
Keith Knight: They must really hate them. Absolutely fascinating.
Keith Knight: Number nine is the monopoly contradiction. So my general thesis is if you want good products and services and employment opportunities, you would want voluntarily funded competing agencies generally tend to provide better service than a coercively funded monopoly. Here’s the contradiction. The democratic socialist tells us to be terrified of the potential of there being a monopoly in the private sector. They say if there is a monopoly, one seller of computers, then we would get higher costs and much lower quality. Well, first of all, they don’t consider the fact that people could use alternatives to that type of product. But let’s say computers are a human right. Everyone must access them. The contradiction comes in when the democratic socialist explicitly says we should have single-payer healthcare. This by definition is a monopoly. They also want the state to have a monopoly on certain firearms. They want the state to monopolize the currency with the central bank. They want the state to monopolize selective service. A number of democratic socialists do advocate military conscription under the justification that if everyone has to be forced into these wars, this will make the rich less likely to advocate provoking wars. As if Tsar Nicholas and Kaiser Wilhelm and Stalin and Hitler didn’t have military conscription. Absolutely absurd. So that is the monopoly contradiction.
Bob Murphy: I love the term that Hans Hoppe uses: the state is an expropriating property protector. That is the monopoly contradiction.
Keith Knight: The Donald Trump test. The claim is by democratic socialists, the public sector serves the public, the private sector serves the private, the capitalist, the bourgeoisie, the 1%. So one of the ways we could see whether or not people serve the public in the public sector or serve the private in the private sector is take someone and have him experience most of his life mostly imperfectly in the private sector and then take that same exact person and then switch him to being in the public sector and then ask not just the libertarians but then ask the democratic socialists was this person more of a danger in the private sector or in the public sector.
In the case of Donald Trump it should make it very clear that he has credibly threatened to end a whole civilization in one night. He starts wars based on lies, murdered 156 innocent civilians... He was not doing those things when he was in the evil greedy private sector. So it’s actually if we take the empirical cases it’s the complete opposite of what the democratic socialists tell us. What did George Bush Jr. own some stock in the Rangers? You should have been relieved when he was elected president because now he has to serve the public. No, the reality is in the private sector they can’t get a penny out of your pocket or a second of your time unless you voluntarily give it to them.
So if we agree that human beings are inherently self-interested, you would want human beings operating with the constraints of the free market where they can be freely disassociated from and where they have to compete in order to access your scarce time and resources. So, the Donald Trump test, I think, is critical to the democratic socialist narrative.
Bob Murphy: I like that. I hadn’t thought of it that way. I imagine what they would say... but the fact that Donald Trump got elected twice, they need to deal with that. And all the awful leaders in history who have been elected. In the private sector the damage is limited. If the wrong person becomes CEO then the people who have skin in the game have an incentive to move him pretty quickly. The worst case outcomes are much more limited in the private sector. Whereas under democratic socialism you better make sure the wrong guy doesn’t win that democratic election.
Keith Knight: There’s a reason why voters are so irrational. It is because they don’t care enough based on the effect they will have on the outcome. So, it is irrational to say that the average person is going to spend a ton of their scarce time in order to make sure they vote for a kind, virtuous, economically literate person when at the end of the day they get a one in maybe 5 million vote. It’s very unrealistic or utopian to think that people would spend so much of their scarce time doing something that yields them so little of an effect on the outcome.
Even if you’re focused on getting the right people in, this is still a very important analogy to take the same human beings, change their incentive structure. This is an empirical example of taking the same person, changing their incentive structure, and then that being the factor. He now has access to the public purse. That is the variable that we’re measuring to see if it’s beneficial or costly to the public. And even according to the democratic socialists, Trump, Bush, any of the politicians that they hate are more of a threat to civilization in this public sector than they are in the private sector. So, I believe that sufficiently addresses it. Even if it doesn’t convince them, hopefully it will increase the amount of insecurity they have when advocating this nonsense.
Bob Murphy: Okay, looking at the clock here. Is it all right if we wrap up or am I cutting you off right with your favorite one?
Keith Knight: Let’s do two more. I’ll keep it absolutely right.
Bob Murphy: Let’s blast it.
Keith Knight: Number four. The welfare state turns human beings from assets to liabilities. In the marketplace, any additional person who’s born or immigrates is someone I can trade with, someone I could be friends with, someone I can employ, someone I could make value-for-value exchanges with. The welfare state means every additional person is a potential liability on me. This means whether I have one kid or 10 kids, the more kids I have, that puts more of an obligation on you. This puts people against each other and creates more of a low-intensity civil war than would otherwise exist. The welfare state turns humans from assets to liabilities.
Bob Murphy: There was something I noticed when I was a student manager in college. This one kid that was obnoxious and people couldn’t stand him. People would get annoyed because a lot of times he would miss his shift. At a party or in class if he showed up people like oh geez. But at work if he didn’t show up that was the reason people got mad at him. Isn’t that interesting that in the productive private sector even the kid that’s real annoying and no one wants him to be around—unless it’s in a job and then they do want him to show up. The market makes everybody valued.
Keith Knight: Very important observation. The number one argument against democratic socialism is their adherence to hyperindividualism. This is something usually thrown at us. We are individualists. We only care about one person, the individual. That person being ourselves. However, the marketplace is a cooperative enterprise where I’m constantly competing to cooperate with other people. I can only get money if I exchange value in exchange for it. This is a harmonious cooperative enterprise. The socialist only thinking about themselves puts massive obligations on millions of strangers without having any idea of what the outcome would be. It’s actually the socialist who says to themselves, “I don’t care what the outcome is. Everyone has to chip in for this healthcare program, this education program, this housing program. Anyone who doesn’t chip in, I support sending the police to their house, putting them in jail, and shooting them if they resist.” That is hyperindividualism. Whereas the market is a collective, cooperative, voluntary enterprise. So if you’re against selfishness, oppose democratic socialism.
Bob Murphy: All right. Last big picture here for you, Keith. Have you gotten any feedback from either democratic socialists or like people on the left in general on this stuff? And like, is this working? Is this helping? Or is it more like we’re all just giving each other high fives?
Keith Knight: Yes. Especially my book, Domestic Imperialism: Nine Reasons I Left Progressivism. You can get a free PDF of that at libertarianinstitute.org or buy it on Amazon. I have had a number of people who came to me and said that they were curious about these ideas because the popularity of Bernie Sanders and AOC at the time was significantly increasing. So, I’ve had a great number of people tell me and I experience it in my everyday life. I see people with 100% confidence in democratic socialism stop bringing politics up altogether. So if I could at least get them to shut up about it, that’s a realistic step in the right direction. Changing people’s minds is hard. Making them so insecure they’re terrified to advocate this completely immoral, economically illiterate nonsense, that’s also a victory we shouldn’t shy away from.
[Laughter]
Bob Murphy: Keith with the shock and awe campaign with the arguments. Okay. So you mentioned your book. If people want to read more of your stuff, where do they go?
Keith Knight: libertarianinstitute.org. My name is right up on the top. You can see my articles. And podcasts—I have 1,100 podcast episodes as of recently. I will sometimes do five minute episodes and still put those out as a podcast just to reach a different audience. This presentation is 3 hours and 58 minutes. So I try to have a wide variety.
Bob Murphy: Sure. Great. Okay. And so folks, yeah, we’ll link to Keith’s archives, the Libertarian Institute, this the video he did that we’re giving you a teaser for the 64 issues or objections to democratic socialism, your book. And I’ll throw in other things too if I can find it. All right. Well, why don’t we wrap it up there? My guest folks has been Keith Knight. Keith, thanks so much for everything you’ve been doing.
Keith Knight: Thank you, Bob.
Bob Murphy: Thanks everybody for tuning in. See you next time.
