You can see my title, Vienna versus Chicago, on monetary issues. My original title, that sort of was parallel to an earlier talk I gave, was Hayek and Friedman, Head to Head. And it occurs to me that you've all seen another lecture earlier in the week called Friedman and Mises on Method by Roderick Long. I didn't hear that lecture myself, but I heard it had sort of a philosophical bend to it. Is that right? So here you'll get something a little different. I might edge off in the direction of philosophy, but not too far. Okay, I'm a macroeconomist, so it's mostly economics. Okay, Hayek and Friedman, Head to Head. But it turns out that Keynes is in the mix too. You just have to live with it that if you're going to talk about macroeconomics, Keynes is in the picture, all right? But Keynes will help us understand the basic differences between Friedman and Hayek, as you'll see. What I want to do for starters is look at Keynes, Friedman and Hayek, in a very summary perspective that I hope will help and sort of focus on what's to come. And it goes like this, there he is, Keynes. And so Keynes is often accused of having a high level of aggregation, Hayek accuses him of that, and that's certainly true. So theorizing at a high level of aggregation, Keynes argued that market economies perform perversely, especially the market mechanisms that are supposed to bring saving and investment into balance with one another. He threw out the loanable funds market, he didn't think it worked the way that his classical colleagues thought it did. So seeing unemployment and resource idleness as the norm, he called for counter-cyclical and monetary policies and ultimately for a comprehensive socialization of investment. That quoted phrase down there is lifted from the Swan Song chapter, the chapter 24 of Keynes's general theory. Interpreters of Keynes over the years have spilled a lot of ink trying to figure out just what did Keynes mean by a comprehensive socialization of investment, okay? I think I know and I don't have to write an article about it. I think he meant what he said. Okay, but now the important thing here is to get the contrast, there's Friedman and what we have to note is he has a still higher level of aggregation. So Friedman's monetarism was based on a still higher level of aggregation, the equation of exchange, MV equal PQ, you'll see that crop up in the exposition this morning made an all-inclusive, made use of an all-inclusive output variable Q. Q is economic output, economic output of consumer goods, economic output of producer goods. They're just lumped together and called Q. So that little construction, sort of upping the level of aggregation, just put into eclipse the issues of the allocation of resources between consumption and investment for the future. So that issues off the table with Friedman. Now he thought it was well and good to put it off the table because he didn't think there was anything wrong with the market that performed that allocation. In other words, loanable funds theory works fine. Thank you very much. But we're macroeconomists. We don't deal with allocation of resources within the Q aggregate. We deal with the whole Q aggregate. OK? So seeing no problems emerging from the market itself, Friedman shifted the focus. Really, he focused on the relationship between government-controlled money supply and the overall price level. And boy, he took that issue a long way. And that's what the Austrians give Friedman plenty of credit for, for reviving the notion of that relationship between money and the price level. There's the symbols in the equation of exchange. You can see what they are and we'll come back to that later. And so now if we go to HIAC, capital based macroeconomics, you should have said or could have said Austrian macroeconomics, is distinguished by its propitious disaggregation. I'll make my Auburn sophomores look up the word propitious. Means it's well suited, sort of the right level. Which brings in to view both the problem of intertemporal resource allocation and the potential for a market solution. The potential for a market solution. And that's why in my earlier lecture, I had part of it on sustainable growth and part on unsustainable growth. You get the potential for a market solution. But you don't necessarily get that solution if government's involved and is rigging interest rates. So FA HIAC showed that a coordination of safety and investment decisions could be achieved by market government and governed movements in the interest rate. You also recognize that this aspect of the market economy is especially vulnerable to the manipulation of interest rates by the central bank, all right? So he's got the lowest level of aggregation of the three and still call it macroeconomics. But he's brought into view this critical relationship and shows how it can be perverted by policy. Okay, now I want to look at contrasting methods. We'll see if I sound like Roderick Long. I don't think so. I think I can make it through a discussion of methods without bringing a whole lot of philosophy. And here's where I start with John Maynard Keynes. And I'm drawing here from a book by Alan Meltzer where he's summing up how Keynes went about his business. How did Keynes do macroeconomics? Anyway, so here's what Meltzer says. He says, Keynes was the type of theorist who developed his theory after he developed a sense of relative magnitudes and of the size and frequency of change in each of these magnitudes. So he just looks out the window or looks at the economy as a whole and see what's moving around a lot. And then those are his variables. And if something isn't moving around a lot, well, it gets dropped out of the picture. And something said about it in chapter four, which is his throat clearing remarks about what he's not looking at, okay? It's the things that aren't moving around a lot, all right? So he concentrated on those magnitudes that change most, often assuming the others remain fixed for the relevant period. That's why he had that fixed structure of production, for instance. He didn't see that moving around a lot, okay? But he did see the economy caving into depression. So total output was changing a lot. Investment was changing a lot. That's from Alan Meltzer's book on Keynes' monetary theory, a different interpretation in 1988. Very good book on Keynes, by the way. Now, what did Milton Friedman say? Well, he really didn't have his own judgment. He just accepted Keynes. So he says, I believe that Keynes' theory is right, is the right kind of theory, and its simplicity, its concentration on a few key magnitudes, and its potential fruitfulness, all right? That's from Friedman, an interview with him in 86. A more well-quoted statement of Friedman's is that we're all Keynesians now. He said that in a Time Magazine interview, and eventually complained that he was being quoted out of context. And he was, to the extent that people took him to mean that we want discretionary tax policy and discretionary spending policy in order to stabilize the economy. No, no, no, he didn't mean that. In fact, if you read the interview carefully, you see he didn't mean that, and you see what he did mean. And here's what he says. We all use the Keynesian language in apparatus, all right? Well, what is a Keynesian language in apparatus? It's C plus I plus G, it's the Keynesian cross, it's ISLM analysis. In fact, when he set out back in about 1970, he set out the differences between monetarism and Keynesianism, he set it out in terms of the ISLM analysis. So he argued within the context of Keynesian economics, differing with Keynes only in terms of stability properties of investment demand or money demand, and in terms of the elasticities of the different curve. So we all use the Keynesian language in apparatus. Now that's a little bit too overreaching. We all, who's we all? Well, Keynesians and monetarists, that's we all. Doesn't include the Austrians. They have a different apparatus, okay? And so here we get a distinction between the Austrians on the one hand and Keynesian Friedman on the other. It's quoted in Time magazine. Now, here's what Hayek says to pair off to sort of in contrast with that. He says the role of the economist, Hayek points out in Pure Theory of Capital, is precisely to identify the feature of the market process that are hidden from the untrained eye. That last phrase is the one that's a direct quote, hidden from the untrained eye, right? Any schmuck can look at an economy and tell it has gone into the toilet, okay? You can see GDP falling by a third between 29 and 33, okay? A local news reporter can report that, right? But the job of the economists is to look for features of the economy before that happened and see how the stage was set for that kind of a collapse in the economy, right? Does it go on here? So for Hayek, the cause and effect relationship between central bank policy during the boom and the subsequent economic downturn have a first-order claim on our attention despite the more salient co-movements in macroeconomic magnitudes that characterize a post-crisis spiraling of the economy into deep depression. Excuse me for stumbling over that quote, but. So he can say it's cause and effect that causes to pick out this or that to focus on and it's not the co-movements. One of the things you hear among modern economists is lots of discussion about co-movements. Unless you can show there are co-movements here or co-movements there, you really just haven't shown much of anything. This is what Hayek said when he accepted his Nobel Prize in 74 and he's criticizing, especially the monetarists, but econometricians generally, macro econometricians, there may well exist better scientific evidence that is empirically demonstrated regularities among key macroeconomic magnitudes for a false theory which will be accepted because it is more scientific. You put that in quotes because economists mean scientific. By scientific you've got data and you can put an equation, you can test it and so on. More scientific than for a valid explanation which is rejected because there's no significant quantitative evidence for it, at least not in the eyes of the econometricians. So this is another way of just reinforcing this difference between Friedman and Hayek. Okay, now this is something I want to get across in a way that you won't forget. We'll see if it works. But typically with any two theorists that are at issue with one another about the whole field, they tend to be asking different questions. They have different focuses. They're not even raising the same questions and of course then not giving the same kinds of answers. And that's what we find with Friedman and Hayek. And let's see how that works. Again, I'll bring Keynes into the picture. Keynes doesn't really have an economic explanation of why the crash occurs. He blames it on psychology, all right? So he attributes the downturn to psychological factors affecting the investment community, okay? These are not psychological factors that compound a bad situation. These are psychological factors that end the good situation, that the investors become introspective and they see the economy as a house of cards and they get cold feet and they pull back and sure enough the economy crashes, okay? So his main focus is really not on that. How long can you focus on that? His main focus is the dynamics of the subsequent spiraling downwards. That's where the Keynesian multiplier comes in and on policies aimed at reversing the spiral's direction. That's where the stimulus packages come in. So that's sort of, you know, sophomore level basic Keynesian fiscal spending and tax policy and so on. Let's look at Friedman. And this is something that people seem not to be aware of until you just show them the evidence here. Friedman is dismissive of the whole issue of the cause of the downturn. Referring to it as and I've become sensitive to these adjectives. It's ordinary run of the mill routine garden variety recession. I don't think a macroeconomist should be talking in those terms. The macroeconomist should be explaining why you had a recession at all rather than simply call it garden variety routine ordinary and so on, okay? So to use those kinds of terms is to be dismissive of the issue. We don't need to explain. It was just an ordinary recession, all right? The real question though is why the downturn was so dramatic. So his focus is on policy blunders. It turns out collapse of the money supply that occurred on the heels of the downturn. It didn't. And on the correlation between the decrease in the money supply and the fall in real GDP. So they were back to Keynes. He looked at the things that changed the most. You had the money supply falling dramatically. You had GDP falling dramatically. Those are co-movements. And you can get the numbers and you can show that one's related to the other. And then you're scientific and now you've explained depressions, okay? But what you haven't explained is how did the boom turn into a bust in the first place? Which is what Hayek was interested in, of course. I'm anticipating that. Friedrich Hayek focuses on the policy-infected aspects of the boom. He's the one that's looking at the 20s, not the 30s. And their implications of the boom's sustainability. Recovery from the subsequent bust takes time, but the particular dimensions of the depression, its length and depth are to be explained largely in terms of the policy perversities in each of the particular cyclical episodes, okay? It depends on what the government does to try to fix the problem. If it didn't do anything, like in the case of the 1921 downturn, you get recovery in 18 months or so. If they do a whole lot, like with Roosevelt or with Obama, you don't get recovery, okay? You get the economies tank. But you have to deal with Roosevelt and Obama to find out why the depression is as bad as it is, okay? But here, the main thing I want to show you is that Friedman and Hayek are focusing on different questions. I'll come back to that after I show you a little bit about Friedman's monetarism. And forgive me if you've already been through this in the classroom, but we can set it up in a way that might help. Mv will be accused. M's the money supply V is its rate of circulation through the economy, typically taken to be about eight right now, eight or nine, if you're looking at the number of times each dollar on average gets paid out as income. So the amount of money there is times the rate it gets paid out as income, that's total income, which gets spent one way or another on output, either investment goods or consumer goods at some price level call it P, okay? So Mv will be accused. That's really an accounting identity. It's always true as Friedman clearly recognized. This is with nearly constant velocity of money. Actually velocity while Friedman was writing had a slight upward trend, which he was aware of, but for simplicity, we'll have a constant velocity and output growing slowly. The price level moves with the money supply. So if we could ignore the rate of growth of the real economy, or if it's so small, we'll take it into account but it still doesn't affect much. That price level moves with the money supply. There are the two cove movements, okay? You can, there's the velocity is constant. There's quantity going up a little bit. Money supply goes up a lot. If so, then prices will go up about that much taking away the increase on the quantity variable, okay? And that's pretty much it, except for a timing consideration. It's always been the Achilles, that's not the right, the soft underbelly of monetarism because this relationship that increasing the money supply causes an increase in the price level works with a long lag. Friedman always says a long and variable lag sometimes longer than other times but long as much as 18 to 30 months. One of Friedman's last articles was pondering anew why would the lag be that long? He doesn't have an explanation that satisfies even himself, okay? So that's the monetary story there. Inflation is always an everywhere monetary phenomenon. That's probably the most famous quote from Friedman in a 1968 publication. And it's not that no one knew that before Friedman said it. Mises certainly did. If you read Mises writing, he understood full well that inflation was caused by an increase in the money supply. The equation of exchange is probably one of the oldest equations in all of economics but what Friedman gets credit for is reviving it in the 1950s and beating Keynes over the head with it, okay? And for that, we're grateful. So Friedman's monetary rule is increase the money supply at slow and steady rate to achieve long run price stability. So okay, if you've got some growth in the economy then increase the money supply about that rate and you have price stability as well. He took price stability just as the sign of macroeconomic health and he says there's a long tradition of that judgment but he doesn't actually defend it. In fact, when he gets theoretical about it, when he writes the optimum quantity of money he has expansion of the money supply that actually gives you a slight deflation. But for practical purposes, keep the price level constant. That's his monetary rule. He'll say increase the money supply maybe 2%, 3%, maybe a little more if the velocity of money changes in ways that would require that. And some monetarists think that that's not quite precise enough. Gee, we shouldn't be able to pin down how much to increase the money supply and the suggestion I like comes from Richard Timmerlake at University of Georgia because he wants that precision. So he says the money supply should be increased at 3.65% each year except for leap years, it'd be 3.66, okay? So if you want precision, there it is, okay? But here now, this is my Austrian question about what happens within the Q aggregate as a result of the monetary injection. So you got your increased the money supply with an eye to keeping price levels stable but the money supply comes through the loan market and it affects interest rates. You remember that story, there it is. If you increase the supply of money, drives a wedge between saving and investment and even though it's only keeping the price level constant, it's not increasing it, you don't get price level inflation, it causes problems. And in fact, that's the story of the 1920s. You got very little in the way of price level inflation but you've got loose money in the sense of pumping money through credit markets distorting interest rates and triggering a boom that couldn't be sustained. Friedman though, declares the 1920s as the golden years of the Federal Reserve. In his monetary history, the chapter on the 1920s is the high tide of the Federal Reserve, okay? The high tide. And in other places, he says golden years of the Federal Reserve. He ignores interest rates during the 1920s because they didn't change much, okay? They didn't change much. And so that is, they didn't pass the Keynes criteria. So Friedman is an econometrician. He's an empiricist. He bows before the data. That's the way that Chicago economists like to explain their humility, you know, their humble people. We bow before the data. And the data show that the interest rate didn't change during the 1920s so it didn't make it into their equations.  If you think that there's an independent variable that's important and then notice that it doesn't change, it's not gonna explain anything in your econometrics to the dependent variable. In that right, dependent variable function, independent variable, then you put in the data and that particular independent variable didn't change. Well, there's not gonna explain any change in the dependent variable. So what do you do? You throw it out. You don't need it. And Keynes said, whoop! And Keynes said, I'm glad I didn't like it. Keynes said, you oughta throw it out. It doesn't change. We look at what changes first. So, and then I asked the burning question, taking my cue from Hayek, but what if they should have changed? What if interest rates should have changed? But weren't allowed to. More about that on the next slide. Also, is it true that it takes a big cause to explain a big effect? This is why Robert Lucas dismissed the Austrian theory. He says, you really don't get big enough changes in the interest rate to account for a horrendous depression as if the change is supposed to explain the depth and the length of the Great Depression. How big a change do you need to get? It could be a small change causes a big effect.  And what comes to mind here is Mount Vizubius and Pompeii.  But how about, for instance, a careless smoker and a forest fire? That's a little change in a big effect. Can you imagine somebody arguing that this smoker couldn't have caused that forest fire? Look how small that cigarette was. It's just too small to have caused all that, all right? Okay. Now, why, just why was the interest rate, was it that the interest rate didn't change much during the 20s? Well, it's fairly easy. Here's where Hayek is looking for forces that are hidden from the untrained eye. That if we do sort of a full-bodied history, full-bodied economic history of the 1920s, we see lots of innovations. We see lots of technical advancements. And therefore, we see entrepreneurs increasing their demand for loanable funds to take advantage of those opportunities. Mises would call this the entrepreneurial component of the gross interest rate, right? Be a heavy demand for loanable funds. And they were borrowing. They're borrowing a lot of funds and undertaking these investments. But the interest rate didn't rise. And Hayek would look at that and say, well, why not? And of course, the reason is it wasn't allowed to rise because the Federal Reserve was increasing the supply of credit to match the increase in demand. In fact, doing it according to the statutes that created the Federal Reserve systems called the real bills doctrine. And so they thought it was their job to provide the funds for them to borrow. The statute doesn't say at what interest rate, okay? But what they did, Willie Nellie was accommodate the demands for loanable funds at the given interest rate, at the rate that existed before you had the innovations and the technological advances and so on, okay? Of course, if you're market oriented, you say, well, that's gonna cause an increase in demand for loanable funds. That's gonna cause the interest rate to rise because of that entrepreneurial component. And that's the way it should be. That's the way it should be, okay? But they didn't change much. Okay, it didn't break through some technology, increased the demand for loanable funds and put upward pressure on interest rates. Yes, but the Federal Reserve, guided by the real bill doctrine, met each increase in demand for credit with the increase in supply, thus keeping the interest rate from rising. Now, there was an occasion back in the early 90s, well, early to mid 90s, where I had correspondence with Friedman because he'd written an article called The Plucking Model. I'll talk more about that a little bit later in this lecture. And I wrote a comment. This is in the Western Journal of Economic Inquiry. I wrote a comment on the article. And before my comment went to press, there was some exchange between Friedman and me to see if we had a meeting of the minds that each of us understand the other one. And one of the first letters that Friedman sent me, this was back when letters were sent and not just email. First letter, he had an attachment that was a plot of movements in the interest rate over the whole period of the 20s. And he considered this just, he'd won the argument because look, you're trying to explain this in terms of the interest rate. The interest rate didn't change during the 20s so much for that explanation. And the Austrians are just sort of out of play on that one as far as he's concerned, all right? And yet, if you adopt the Hayekian research agenda, look for forces hidden from the untrained eye, you see that they should have risen and didn't. And I ask a little question here, I think, or do I? Okay, so seeing no change in interest rates, Friedman dismissed interest rates as a potential independent variable and his econometric question. And this is the Austrian view. Seeing no change in interest rate when they should have risen because of technological advances, Hayek was able to identify some critical market forces hidden from the untrained eye. The boom of the 20s was a little more boomy than it should have been, all right? And my query here, which view of Friedman's or Hayek is a more firmly anchored in empirical, that is, historical circumstances of the 1920s? The Chicago economy is always touting their empiricism, how they're anchored to reality as if the Austrian school is sort of free-floating out there, above reality. Not so, it's just that the Austrians want to do a little more full-bodied history to pick out these kinds of arguments. Okay, Friedman's view of monetary contraction. And here, when I first introduced Friedman, it was all about inflation. Macro economists are a product of their times. That was inflation as the problem when Friedman began writing about quantity theory of money. But in retrospect, if you apply it back to the Great Depression, then of course monetary contraction is an issue here. So a sharp monetary contraction puts downward pressure on P and Q. If prices are sticky downwards, or for some reason they don't fall, then Q will fall dramatically, well sure enough. And evidence shows, okay, so here's a bow before the data. Evidence shows that between October 1929 and March of 1933, decreasing M was the essential primary dominant cause of the decrease in Q. But I've heard Friedman present this kind of stuff at the professional meetings when he gets to this sort of bottom line. He talks, like a teacher, talks to students that have been kept in after school, okay? Okay, you people should see that. And he goes on that way. So that's the empirics. But look at what he's doing. He's confining the issue to the depth of the plunge without any attention whatsoever of what started the plunge in the first place. What about that ordinary recession or garden variety or whatever you call it? So M goes down and that's gonna affect Q because P is sticky. Actually, he even overplays the story. If you look at the full history, as you've probably heard from Bob Higgs and others, that prices were falling during that period, but the government was doing everything it could to prop them up. It was Roosevelt's programs that tried to keep prices from falling, which of course made the depression much deeper. Then it otherwise would have been. Okay, and male with another monetarist, Lanny Ebbenstein, you know who he is. He's written a couple of different biographies of Friedman. He's the only person I know who wrote two biographies of the same person. But I wrote him as I was trying to get the point across because when I mentioned this garden variety stuff, he emailed me back and he said, well, it was a garden variety recession. You need to explain why there was a recession. That's the point. The economists need to explain what caused that. So here I'm sending this, the case of the cabbage eating Mississippi monster. Might not seem completely relevant to the depression, but I'll get the point across. Austrian-Chicago methodology in action. Okay, suppose that late in late October, 1929, a thousand pound monster descends on Mississippi soil. It spent the next three and a half years eating all the cabbages and quite a few rabbits between Jackson and Pascagoula, okay? By early March of 1933, the monster weighed 4,000 pounds, okay? So two investigators are sent to Mississippi to handle the situation, one from Vienna and one from Chicago, you see. B&E's investigator asks, where in the world did this hideous thing come from? You know, what caused it? And here, I say, I seem to have stacked the cards against the Austrian, hard even to imagine an insightful answer to this question, unless of course the monster turns out to be an unintended consequence of some ill-conceived government-sponsored by Owning's project, which you could beat. In fact, y'all watch sci-fi, you remember, there was two makings of the blob, early one and late one. One's a Keynesian blob and one's a monetarist blob. You watch both movies. The first blob which just came from the heavens, you know, it was the way the reality is. And the second blob in that second movie was certainly it was misguided, ill-fated conclusion of a project carried on by the government, okay? They call it a monetarist blob, all right? So where did this thing come from? That's the question. At least I got the question right, right? Now, the Chicago show, Chicago show shows the Austrian aside. This is, you know, that's it.  Never mind how this thing got here. The real question is, how did it grow from 1,000 pounds to 4,000 pounds? How did an ordinary run of the mill garden variety monster quadruple in weight in 40 months? All right, Chicago's answer, which could be delivered in the tone of the teacher talking to the students after keeping it in from class. It was all those cabbages. He couldn't get good data on the rabbits. What are you gonna do? The correlation between cabbage consumption and weight gain leaves no doubt about the issue. Okay, first the question is, what's the issue? What's the issue? Okay, get the point. I don't need to read that there.  I'm getting behind here, so it might go pretty quickly on this one. Monitor's conclusions depend on a constant or near constant velocity of money. That's the whole research program of the Chicago school during his high day. The graduate students all measured money supply and price levels in country after country in time period after time period to show that there was very close correlation and that the demand for money was pretty stable. And the point of that course is it means that the instability then came from the supply side of the market for money and that's the Federal Reserve. But to show that you have to have a constant velocity, well, you did up to a point, okay? There's rising price level up above and money supply down below. Those things, those cold movements were pretty close up until the early to mid 80s. And then they went haywire, okay? If you just look at that series, realize they're not gonna correlate very well, which means the velocity of money was changing. In fact, here's Brad DeLong. Velocity's supposed to be about constant. It has a slight upward trend. This gets exaggerated just with the scale. But he shows the purple is the projected velocity of money given behavior before about 1982 or so. And the rest of it shows what's actually happened to velocity, it went wild. Velocity of money balance, money became unstable after the 1980s, okay? Freedman's policy lost its velocity anchor that reserve abandoned monetary policy money stock policy and adopted interest rate targeting. This is what I call the irony of monetarism. Monetary rule that allows the economy to perform in its laissez-faire best presupposes a critical piece of intervention namely regulation Q, which is what got phased out. Before velocity went unstable. That makes a money supply operationally definable. Once money had lost its crisp definition, we even had Alan Greenspan testifying before the joint economic committee is sort of shrugging his shoulders and saying, we don't know what money is anymore, okay? It was a line picked up by Jay Leno, you know? He said, I really don't know what kind of a guy we want running our central bank, but surely it's somebody who knows what money is. It's gotta be. And of course, what happened, I think I've got this in here somewhere, but the regulation Q put a very sharp distinction between deposit money on which you could not draw checks. I'm sorry, deposit money on which you could not draw interest and savings account on which you couldn't write checks.  But once that distinction was removed and you have a blurring of checking account money and saving, then velocity goes haywire no matter what particular money supply you use. Implementation monetary policy requires stable and known commercial operating ratios, commercial bank operating ratios. And here's excess reserves. Have you seen that chart? Excess reserves for years on end. Well on that graph we're pretty close to zero. They were really 50, 60 billion or something like that in reserves or less. And then starting with the financial crisis, reserves, well it's an understatement to say they spiked. You can see where QE2 started. You know there's QE1, QE2, they kept pumping in more reserves. Demand deposits went up some but not nearly as much as what reserves did. In fact we see the M1 money multiplier taking a big nose dive and then going unstable. So when you see that kind of thing going on then you don't have a constant velocity, you don't have constant operating ratios and there's no way you could implement a monetary rule even if you want to. Now here's one part that I think I want to spend a little time on. I've got some time left. Why was Milton Friedman so unreceptive to Austrian theory? And it all turns on the capital theory that underlay the Chicago theorizing about business cycles. Hayek of course had the Austrian theory, that's the stages of production, the time element built in to the notion of production. What did Chicago rely on? They relied on a capital theory associated with Frank Knight. And it's one that took the time element out of the concept of capital. So there was no time element there. Let's see if we can explain this. There's Hayek and Knight, they butted heads in the 30s and if we wanted to do history of thought we could go back about 40 years and find that Clark and Bomba Veric butted heads on the same issue. In fact, they had the same argument. And Majliel reprinted Clark Bomba Veric articles as do the Knight Hayek articles. And let's see how it works. The Clark Knight concept of capital is what I call the black box capital theory.  Where have you heard that term? The airlines, yeah, the airline. And is the box black? I think it's orange, I'll give, it's orange. There's one, okay. And you know what it says, do not open. Black box has a different definition. It really comes from the field of electronics. Complex piece of equipment, typically a unit in an electronic system with a context that are mysterious to the user, okay. Which just means that in the airlines it just means that a subcontractor made that piece of equipment and they just stick it into the airplane. It's really a plug and play unit, that's all. So the airline manufacturer doesn't have to worry about what's in that black box. That's the subcontractor's job. That's what black box means. But Frank Knight and before him Clark had a black box capital theory, okay. And that's the output at the bottom and the input up at the top. And that's the capital stock. And stock it means it exists. There it is, boom, that's capital, all right. Do not open. So you don't know what goes on in there. And it turns out that what's in there either has to be totally nonspecific, it's just a glob, or has no structure to it. Or if it does have a structure, the structure is always right. And it has to be one of the two, but there's no way of knowing which it is, all right. Let's see how it works. This is a steady state economy. Now capital does wear out, Knight was aware of that. That's why we have that input up there. But the input really is just also output of the capital stock. Some of it has to be plowed back in to keep this capital stock from shrinking. And the rest of the output is consumption. And that gets consumed, okay. That's all there is to it. And let's see if we can make it work. There it is, there it is, it goes like that. So it's going at a rate that keeps that capital stock from changing. Now when you read Knight's exposition, he takes that maintenance of capital as part of the stock. In other words, by capital you mean the stock plus whatever it takes to maintain it as it is. So the way he would say it, the capital stock includes maintenance as a technical detail, all right. And because of that, the capital stock is permanent. That was a big debate between Knight and Knight. Knight said capital was permanent. Hayek called it the mythology of capital, referring to Knight, okay. And both Clark, maybe especially Clark, or Clark and Knight had little qualifiers that would sort of immunize them for many criticism. And for instance, they say capital stock is permanent in a sense, okay. And a few pages later, again, they reaffirm capitalism is permanent, as it were, okay. Or capitalism is permanent, so to speak, okay.  And accordingly, the permanent capital stock yields a perpetual income, okay. Well, that follows, doesn't it. And are there any qualifications there? Well, sure there are. It's in a sense, as it were, so to speak, only to the extent that capital is permanent, okay. Now, he goes a step further. And he says, this might be confusing if you call it capital stock and consumption, you might be thinking of consumer goods, like a refrigerator, or something like that. And what he really wants to do is boil it down to a distinction based on dimensions. And so he says, really it's sources that emit services, okay. So sources is a stock and services is a flow. So there are no consumption goods. Any real consumption good would be one of the sources that yield a service. So a refrigerator is a source and service of cooling is the consumable output, okay. So he takes it that far. So he's completely left or abandoned the idea of means and ends and defined that relationship strictly in terms of dimensionality. Source is a stock and the consumption is a flow, right. So he says, there's really only one factor of production is capital in the broad sense of sources. So land, labor and capital is a classical trilogy become all capital in the broad sense. And I put an asterisk on labor because it sounds like a flow. It sounds like people working. So you might have to say the labor force or the work force. So you have capital, you have the work force, you have land that's the stock and they contribute a flow. And as long as you see that stock flow relationship well heck with distinguishing between land labor and capital is all just capital is sources and services. And I emphasize this because I'll show you I think I've got time that when Friedman thinks about the business cycle and tries to understand the Hayekian view he thinks in terms of guess what sources and services. Further, you can have an expanding economy that's almost be lies. So now you've got more input like so, right. This almost belies the notions of technological detail but Frank Knight would realize you could even have a contracting economy. How would that work? You'd probably get in trouble there. It's got sound effects too but we didn't get them up. But anyhow, what about production time? And that's what's important with the Hayekian view. What about production time? It goes like this, Knight and Clark before him says think of a forest and we've got a bunch of trees. These are rows of trees. You can't see the trees behind this first row but a lot of rows of trees here. And they mature, got a steady state is reached and production time is irrelevant. Trees have a linear maturity structure and actually a long linear. In each period, a sapling is set out and a mature tree is harvested. And so there's period one, set out the sapling, harvest the mature tree. Then in period two, those grow back and you've got what you had another year before. So each year you set out a sapling. Each year you harvest a tree and here's what Clark and Knight say and it is setting out the tree that enables the harvesting, it enables it. In quotes, that means as it were, so to speak, so on. And setting out the tree now produces the harvestable tree now. And so they conclude that production and consumption are simultaneous, right? So forget about period of production. You harvest and set out at the same time. Here's a quote from Stigler in his dissertation, 1941, which was written under, guess who, Frank Knight. Stigler defends Clark and dismisses Bulbaverk on the basis of the simultaneous production and consumption. Look at this, he says, we can say that any one row of trees takes 50 years to mature. He's got a different parameter there. But since there is a constant output of timber forever, there's simply no point in saying it, all right? So he's hardcore Knightian. Friedman picked up this same thing, which is kind of an incongruity. I mean, Friedman was a very good price theorist, very good micro economist. Why would he pick up something like this in capital theory? And I think the answer is that he didn't like Hayek's theory for whatever reason, and I can show you some of the reasons. And he took it on Knight's authority that we could safely ignore Hayek. And so it's not that he liked Knight's theory, he just liked Knight giving him permission to ignore Hayek. So maintenance is a technical detail versus maintenance is a matter of choice. Capital is permanent, no capital is ever changing. Capital is the only factor. Capital is unique and heterogeneous. I could elaborate on that, but I want to go on to more different points. Production time is irrelevant and production time is the key variable. The whole purpose of the Hayekian Triangle is to bring production time in as an endogenous variable. It's all about sources and services. It's all about temporal capital structure. That's the contrast. And it's about steady state equilibrium according to Clark Knight view. That's the only way that production consumption can be simultaneous. No, it's all about a dynamic market process according to Hayek. So we've got a huge contrast there. Does the interest rate play any role at all within the output aggregate for freedmen? And here is where I've got a couple of quotes that I've presented before and I've just left audiences cold. They don't understand it. But I think you will understand it now that you know about sources and services. All right? So the first part you could follow without that, freedmen is talking about what happens when there's an increase in the money supply. But he's talking about it starting from the point where the money is already in the hands of the people. All right? Oh gee, what about it coming in through loan markets? Doesn't that lower the interest rate? Well, he overlooks that. In fact, his model is the helicopter model where the money is dropped from the helicopter and gathered up by a bunch of people. And then he's interested in, will this affect the interest rate? So here's what he says. Holders of cash will bid up the prices of assets. If the extra demand is initially directed at a particular class of assets, say government securities or commercial paper or the like, the result will be to pull the prices of such assets out of line with other assets and thus widen the area into which extra cash spills. The increased demand will spread sooner or later, affecting equities, houses, durable producer goods, durable consumer goods and so on, though not necessarily in that order, he's fending off high act. This effect can be described as operating on interest rates. If a more cosmopolitan, I wrote, yeah, Austrian, interpretation of interest rates is adopted, then the one which refers to a small range of marketable securities. So this is the kind of effect he sees, but then he's dismissive of it for this reason. And I put the Clarkian model up there, and I'm tempted to have the audience all read this in unison, but I won't, I won't, okay? So listen to what he said. This is Friedman. He says the key feature of this process during which interest rates are low is that it tends to raise the price of sources of both producer and consumer services relative to the price of the services themselves. It therefore encourages the production of such sources and at the same time, at the same time, it's all simultaneous, the direct acquisition of the services rather than of the source, okay? But these reactions in their turn tend to raise the prices of services relative to the price of sources. That is to undo the initial effect of the interest rate. The final result may be a rise in the expenditure in all directions without any change in interest rates at all. Interest rates and asset prices may simply be the conduct through which the effect of monetary change is transmitted to the expenditure without being altered at all. See, because there's no time element there. So that all happens in a flash and it didn't have any real effect, okay? So I find that revealing, and I find it even revealing that he would try to exposit that in terms of sources and services, okay? He's not talking about Hayek. One point I'll make before I show you the next screen is that I was in a conference, I think it was in the mid-86, I think, in which during a break, Leland Yeager and I and Milton Friedman were discussing Dennis Robertson, who wrote some pretty turgid prose and the discussion was how hard it was to understand what Robertson was trying to get across. And Friedman was talking about that and then in mid-sentence, he interrupted himself and he turned to me and pointing a finger at me and he'll say, I'll tell you another book that you can't understand. He said, Hayek's Prices in Production. He says, I challenge you to read that book and tell me what's in it, okay? So I took him for his word and the reason that he can't understand it is because he steeped in the Frank Knight, John B. Clark tradition in capital theory. Now, another interesting point, how does Friedman account for this lag between rising M and rising P? If you don't have any time in the picture, something's gotta be going on to account for that. And now, now all of a sudden, he starts sounding like Hayek, okay? So here's what he says, how do you account for this lag? He says, well, it may be that the monetary expansion induces someone within two or three months to contemplate building a factory within four or five to draw up plans within six or seven to get construction started. The actual construction may take another six months and much of the effect on the income stream may come still later insofar as initial goods used in construction are withdrawn from inventories and only subsequently lead to increased expenditures in supply. That's very Austrian, okay? So in other words, he brings in the Austrian theory to explain the lag. And then once he's got the lag explained, there goes the Austrian theory and he's back to Frank Knight and the monitors. So if you look at our macro model, we've got that 18 month lag that during which you have the boom and then the descent back to the PPF and then you have the Keynesian spiraling downwards. But of course, it's only the Austrians that kind of detail what's going on during the whole path in terms of a means ends framework and not in terms of Clark Knight or in terms of Keynes. Okay, I think I'll end it there. Thank you.


This is a comprehensive review of new developments in entropic gravity in light of the relativistic transactional interpretation, RTI. A transactional approach to spacetime events can give rise in a natural way to entropic gravity, in the way originally proposed by Eric Verlind, while also overcoming extant objections to that research programme. The theory also naturally gives rise to a cosmological constant and to modified Newtonian dynamics, Mond, and thus provides a physical explanation for the phenomena historically attributed to dark energy and dark matter. This article was authored by Schlatter and E.


All right, happy Monday. What's up everyone? What's up? What's up? We did bump hockey back a couple. We still have 14 spots to go on that So instead of falling behind down to 13 now actually Just push that back a few minutes So we're gonna start today off with some f1 Start with f1. Let me get y'all the link here for hockey There's the link for that I can do the random here in just a minute for the f1 Yeah, I was already full Charles. He hit a who was it Charles a gold wave auto of Charles. Yeah. Yeah, that's who it was Charles Charles. Yeah. That was a crazy cool. I'd open a new case though So oh, yeah, fresh case. You never know what that very well could be. All right Let's get this here Ten names ten teams. All right, let's do the random here What's up everyone Kenzie here doing the random for the six-box f1 mixer? 2022 tops chrome formula f1 hobby and lights number 30 random teams. We got all ten names here Roll our dice eight times names first one two three four five six seven eight Jasper D down to chia see Eight times on the teams. Good luck everyone one two three four five six seven eight Aston Martin MP Motorsport down to Williams, Carlin and Van Amp support. Yeah, Charles Yep, personals will resume after group breaks tonight. We've got Jasper D Aston Martin MP Motorsport John M Alpha Romeo Virtuosi Jasper D Alpha Tarry ART Grand Prix Scott G Ferrari Trident Isaac K Red Bull Campos Alvin S McLaren Sharouse Hung Jin C Hassan Dom's Alvin S Mercedes high-tech Bobby S Alpine Prima and chia see Williams, Carlin and Van Amp support Give me a minute get this posted. We'll get started right at five. Thanks everyone. Yeah, limited limited noise of fun break We've got nice booklets in there. What were the one of the case hits last year? It's like the old like what are they called? I can't remember now It was either you either get like one booklet per case or One of those cards It's been a minute since I've ripped Limited, but yeah, nice looking product there. Is it limited ink or something like that something like that? I can't remember what it's called Contenders basketball All right, there's a link for the random results if you'd like to take a look at that again next break We're looking to Phil's gonna be the upper-deco peachy hockey That one's gonna break. We did push that back again. If you didn't hear there's still 13 spots left in that only 20 bucks a spot on those Only 20 bucks a spot Some teams coming in here After that we've got a couple basketball breaks. We got select H2s or 10 box break in a full 16 box case of court kings Those are the two basketball going and then a bunch of football tonight contenders teams are on sale Obsidian football teams will be marked down here too and then ending the night with a full case of prism Random division style and impeccable full case break. So yeah Got a limited spots remaining for tonight do appreciate everyone for grabbing up spots so far Obsidian 16 17 22 20 we down to two teams left for unpackable nice haven't ripped impeccable in a in a while either Again, just 20 bucks a spot on the Opiechie. That's an eight box break random team style Be my first time ripping that it's gonna be interesting ripping some soccer or soccer. She's hockey Been ripping a lot of that prison EPL was was nice Nice nice stuff out of there. We went through that fast, too That's good stuff Yeah, yeah, I I don't know if we have though out of any of them. That's a hard pull for sure Yeah But again, we'll get started here in just another minute. Hope everyone's off to a great start of their week again limited spots remaining for random team style stuff again, we've got the hockey and some basketball and Prism full case break everything else going tonight.  Yeah, looking forward to tonight. I've ripped any of that H2 select in a while either. I like the disco look on those Texan's gone in 23 and 24 Anton snagging those up We're gonna go ahead and get started good luck everyone Everyone it's your girl Kenzie here from late in sports cards and I'm ripping six box f1 mixer 2022 tops chrome f1 hobby and light number 30 random teams again Here's a look at the random results. You can always find these at late in sports cards calm underneath the results tab links in chat For you as well. All right best of luck everybody Here we go some f1 Nice f1 personals yesterday ripped a ton of f1 stuff From not ripping and not really knowing anything about f1 so ripping a lot and like really enjoying it We're gonna start with the light boxes again light boxes have 16 packs per box. We're looking for the way rave exclusives Here we go light boxes up first Got checkered flag low Logan sergeant Karla Dave is gonna be Fernando Alonzo We also pulled out of a personal box again mind you these are like a hundred about a hundred bucks It's all the short print Photo variation the other day. I was like man out of the light box. That's awesome for staff in Perez green Lou ham a driver of the day for Spain Mercedes Esteban O'Conn refractor oh, yeah the box stopper those are super hard pulls to a Sergio Perez refractor Red Bull such a sick photo on that one Alpine someone was asking if PSA grade so grades those Fernando Alonso remember seeing a post from like pull wax that they pulled a Superfractor one and they tried to send the PSA and they wouldn't great Like you see slabs and you know big random PSA and BGS slabs Wonder why they just could probably do they got the demons demon slaps demon speed demons that'll cheese Doing good doing pretty good.


Hi, my name is Will Cusey and I'm the Small Business Ombudsman at the U.S. Consumer Product Safety Commission. I'm joined today by Arthur Laceak in the CPSC Office of Import Surveillance. And today we're jointly going to talk about certification requirements and the e-filing initiative. Now just a couple of things to mention before we get started. There should be a handout in your system of the slide deck. If you're not seeing that handout of a PDF of the slides, we will let us know and we'll make sure to send that to you in an email after the webinar. Please feel free to submit questions in writing through the Questions tab in your GoToWebinar interface. And one of my colleagues would be on hand to either answer those questions in writing as we move along, or we'll pass them along to Arthur and myself to answer out loud for the entire audience at the end of the webinar. And the session is being recorded. We will put it up on our CPSC YouTube channel. If there's anyone you know of that missed out or wasn't able to join us live today, please feel free to let them know. And we will make that link available within a few days after this webinar. Okay, the presentation agenda for my section of the presentation today, part one on CPSC certification requirements. A background on certificates is going to be where we start first, kind of the legal foundations for certification. And then moving along to who must issue a certificate, who's the responsible party, and then when is the certificate required. Next we'll move on to how often you have to update your certificate, including how often you have to test your products to produce that certificate. And then how do you make your certificates available? How and when is that required? And then I'll end my section with a walkthrough of each required element. There are seven elements required in a certificate. And I will walk through each one and provide some additional explanation. Okay, background of certificates, the foundation for certificates comes from section 14 of the Consumer Product Safety Act. The big takeaway here is that manufacturers and importers of consumer products that are subject to one of CPSC's product safety rules under the CPSA, which is our main statute, or a similar rule enforced by the commission, must certify that their products are compliant in a certificate of conformity. So that would take one of two forms depending on what kind of product or products you're working with. Children's products would need to be certified in a CPC or a children's product certificate, and general use products, or sometimes we call them non-children's products, would want to be certified in a general certificate of conformity or a GCC. So what are the regulatory foundations here? So we started with section 14 of the statute, and then from there, these regulations were issued by the commission. We're going to be focusing primarily on 16 CFR Part 1110 today, where we're talking about all the in-depth information for a certificate of compliance and what is required there. But two other really important regulations to be aware of is 1107 and 1109. So 1107, you have periodic testing requirements, material change testing, all the record keeping requirements, really important to know how long you're supposed to keep this information. That's all in 1107. 1109 is the component part testing and certification rule, which also has a significant section related to composite testing. So if you composite testing for those that you don't know is where you have testing of like materials that might be differently colored, and the lab will test them together, typically in groups of three. This can save you a huge amount of money, especially if you have a lot of colorations to test. Sometimes people have something like 30 or 40 different colors to test. This could shrink your testing costs and make it more efficient for the lab to do that testing for you. Really in-depth information we have on all of these requirements can be found at cpsc.gov.com. And in the handout section, in the handouts, all of these red underlined areas, those are clickable links. And so when you get the handouts and the PDF, all of those links will be clickable for you, so you'll be able to check those out when you get the handout. Okay, just a general overview of certificates. They are required for the importation or distribution or sale of regulated consumer products under cpsc jurisdiction into the United States. It is certifying compliance with those requirements as we already talked about. And the certificates include in a broad sense, the product description, the safety regulations that are being certified, and then some identifying information about where and when the product was made, where and when the product was tested. The certificate must be in English and it must be legible. It can be bilingual or multilingual. You can put it in as many languages as you want, but at a minimum it has to be English first. Okay, so who must issue a certificate? Who is the responsible party? So I put manufacturer in quotes here because manufacturer is actually defined in our statute in the consumer product safety act to include domestic manufacturers as well as importers. So a lot of people come to me and they're confused when they read about manufacturers and they're the importer. When we say manufacturer, usually most of the time we're referring to, if it's a domestic manufacturing situation, or if it's a foreign manufacturing situation, we're referring to the importer. And that is who would be responsible for issuing that certificate. Also really, really important to note as well that it is the responsibility of the manufacturer importer to be the one that is issuing the certificate. You might get help from a testing lab or some other entity to assist you, but it has to be issued by your company, the company that's responsible for these products. So it can't be coming from some other entity. If you're getting certificate information as part of the component part certification, then you have to utilize that as part of your finished product certificate. You're not just submitting someone else's certificate without anything else, you're incorporating that information into your finished product certificate. Okay, products that require a CPC. So we'll start with products that require a CPC and then products that require a GCC. So for CPCs, really the whole slide can actually just be boiled down into the first three words and that first bullet, all children's products. All children's products are required to have a CPC. Even if there is no actual testing required for that children's product, there are scenarios, we'll get into that in a little bit. There are some examples of commonly asked about children's products. But the big takeaway here is that every single children's product under CPCs jurisdiction. So not all children's products in a colloquial sense would be under our jurisdiction, but everything under our purview would require a CPC. And if you're not sure about what rules and requirements would trigger third party testing and certification, this clickable link, you can also Google search that phrase and it'll come right up for you. So that means rules requiring third party testing in a children's product certificate on cpsc.gov gives you the entire list of requirements that need to be accounted for in a CPC. Okay, how often what are we doing with testing for children's products? Just a quick overview here. We're not spending a ton of time going super in depth on testing requirements. We're mostly staying at the certification level, but you really can't talk about certification, especially for children's products without at least touching on testing requirements. In general, all children's products under CPCs jurisdiction must be tested at a CPSC accepted third party laboratory. And you can find those laboratories by going to CPSC.gov forward slash lab search, and that will give you the fullest of laboratories and you can narrow that search by region by testing scope. I might be making a product that doesn't require testing even though it is a children's product. One example that I can cite to you just over the phone here is baby blanket that is just 100% fabric. And there's no adornments, no paint, no snaps, no zip or something like that. It's just plain fabric textile blanket. That product, the only applicable requirement would be for total lead content and under 16 CFR 1500.91, the commission has determined that textile material would not need lead testing. And so then that would be subject to that determination. And so the end result would be a certificate that details the total lead content provision in element two. We'll get to this later. And then the 1500.91 determination in section six, and that would basically be the entirety of the compliance related information for that product. So there are circumstances when no testing is required. I did want to call that out. I also want to call up before I move on small batch manufacturing. There are some instances when small batch manufacturers may be provided third party testing relief. They would still have to produce a certificate though that is not exempt you from the production of a certificate. It doesn't exempt you from the tracking label requirements. Those are common questions we get. Okay, now we did children's. What about generally used products or non children's products. So everything is all these bullets here. These are all the rules requiring a GCC. If it's not on this list. If your product is not, let me rephrase if your product is not subject to a requirement on this list, then it would not need a GCC. It's that simple. Now, we're not just looking at the reason why I say requirements and not products is because there are. There are some listed here that are just products, but there are other categories that are broader than that. You have the CNPPA requirements, you have PPPA requirements. Those are much broader catch all category, which includes a lot of different possible products. So it's better to think about it as rules that are that are requiring a GCC and not products that need a GCC just to clarify that. There are certain products under CPSC's jurisdiction that would not need a GCC by virtue of the type of rule it is or how it's been quantified. And you can see some more information in this blue box here. And I'll get into this and more on the next slide as to what types of requirements are not needed in a certificate. But if you want to see all this information, we have another page here rules requiring a GCC is also available online. Check that out. We update it as new rules are passed. We update both this page and the CPC version with new information. So that's always staying current for you. Okay, so I alluded to this already requirements not needed in a certificate. Permanent tracking information is not required to be accounted for in a CPC. And this is just for children's products. You might have someone review your tracking label for you. If you're not sure if it's compliance, some labs offer that service. It is not required for you to purchase that service that review from a laboratory as part of your overall testing. And as such, you would not need to account for it in your CPC. Same thing with consumer registration cards. It's just a compliance requirements on a testing or certification requirement. So there is sometimes a difference between requirements that are just compliance and requirements where testing and certification are required to prove compliance. There's kind of two different things there. Additionally, precautionary labeling requirements under the FHSA, I believe it's 2P on the FHSA would not be required. More information on the FHSA at our website or helpful information there. On product certification, there are some narrow circumstances, but I didn't want to move forward without addressing it. The best example here is the upholstered furniture requirement under 16 CFR part 1640 where the statute requiring this rule that we passed is specifically carves out and exempts to section 14 certificate requirements that we covered earlier. So in this case, if you're dealing with general use furniture, you may not need a GCC. But if your upholstered furniture is painted, as we can go back one slide here, you can see in the middle there it says paints and similar surface coatings do require a GCC. So if you have painted upholstered furniture that would still need a GCC for the paint, but not for the upholstered furniture. And the same thing is true with children's products. If you're making it an upholstered chair for children, you would still have to produce a CPC for that product as a whole. It just wouldn't, you wouldn't be certifying to upholstered furniture in the CPC. The certification requirement is just a label in this case. Okay, I alluded to testing intervals and updating certificates earlier. There are periodic testing requirements for children's products. Generally speaking, despite what the regulation says, the overwhelming majority of products require annual testing every 12 months on new batches of products that are being produced. So it's really important to keep in mind. And so when you do that interval testing, when you're doing that periodic testing, you would have to update your certificate at that point. I also recommend for folks that are doing general use products, even though it's generally speaking, not required for most instances. There are some specific carbouts where there is interval testing needed. I do still recommend for general use products that you come up with a reasonable testing plan that does include a regular periodic testing intervals that makes sense for what kind of products you're dealing with. It's really important here in this note at the bottom is clear in saying that you must ensure that your consumer product complies with applicable requirements at all times, regardless of the testing intervals. So that's really important that you have to have a high degree of assurance of compliance at all times that's expected of you. So if your product is being inspected at the port upon entry, if your product is being under subject to an investigation, that is the expectation that we will have for your product. The other thing I want to touch on before I move on, I kind of skipped over it is material change testing. And so it is required for children's products and it's recommended for general use products. But for children's products, it could be a situation where let's say it's a children's shirt and it has a button and the button halfway through your year, six months after you did your initial testing, you're like, you know what, we don't like this button anymore. Or maybe you were forced to make a change. And so then you would retest that button. You would reissue your certificate. You would pair that with your existing testing, maybe for flammability. And then that would be a new certificate with all that combined information. Or you might be in a circumstance where you maybe change some integral mechanical component of a children's toy that might necessitate retesting the entire product. So it really depends. Material change testing really depends what type of change has been done as to how much additional testing is needed. Okay, what about the availability of certificates? How does that work? Certificates must be created before importing into U.S. interstate commerce. Certificates must quote unquote accompany each product or shipment of products covered by the same certificate. The reason why I put it in quotes is because there's some issues around, does it need to physically accompany? What about electronic accompaniment? So electronic accompaniment is allowed. And the next slide is going to cover that. Additionally, a copy of the certificate must be quote unquote furnished to each distributor or retailer of the product. You are not required to provide it to the ultimate consumer. That is your choice. If you wish to do that, you're not required to publish it publicly. In any way, that would be your choice to do that. And a copy of the certificate, this is really important. A copy of the certificate must be made available to the CPSC and or U.S. Customs and Border Protection within 24 hours upon its request. So that's really important with the 24 hours because I'm seeing some people that were kind of late maybe tardy and submitting that and they're going to get in trouble for that. So it's really important as soon as you get that request, you submit that information right away. Electronic certification. So electronic certificates do satisfy the company and furniture requirements. And they must be reasonably accessible via website URL or other electronic means such as email. The example in the regulation just list website URL, but that is an example. It is not an exhaustive list of what is allowed. So email is acceptable for that purpose as well. It must be created before the shipment or first distribution. That's really important to stress that again. And it must contain a date of creation or last modification. So you wanted to have creation dates on your certificates. That's really important to be doing that. Okay, the seven elements required in a CPC or a GCC and I'll run through these and then I'll hand you over to Arthur and he'll do his e-filing update for you. I'm not going to read them on this slide. I'm going to go through them one by one here. Element number one is a description of the product products covered by the certificate. You want to be describing it in enough detail so that it's distinguishable from maybe other certificates. Additionally, you can combine products into one certificate. Generally speaking, though, you want to be doing very similar products into one certificate. So you don't want to be combining clothing and toys, which have radically different testing requirements into one certificate. That doesn't really make sense. More like if you have a whole series of children's sleepwear items where the only distinction is the dye is different. It's not really affecting compliance. Listing all of those kind of different sizes in different coloration versions of essentially what is one product is absolutely acceptable and encouraged to minimize paperwork burden. We don't want 100 certificates for every single size and color. That is not what we want. Element two, citation to each CPSC product safety rule to which the product is being certified. I did do an example here, which will also marry up with some information later when I get to it. And this would be for a children's article of clothing with painted metal snaps. These would be the three citations that would be applicable to you. It is possible, though, that you might be subject to an exemption or determination. The textile could be subject to a flammability exemption under 16 CFR 16 10.1 D, which is very commonly cited for folks making clothing. And for your total lead content, while the metal snaps and the substrate of the mail snaps are subject to that total lead content requirement. The textile in a lot of cases would be subject to the determination that the commission's made saying you don't need to test textiles for lead under 16 CFR 1500 point 91. I do include those citations later. So you can see those and how that would work in a real certificate. And then the paint on the snaps would be subject to this other lead testing requirements 16 CFR part 1303. Okay, element three, identification of the importer or domestic manufacturer certifying compliance of the products. The one thing I want to make super crystal clear here is that the importer certifying or issuing the certificate does not need to be physically located or have a physical address located within the United States. So I know for a fact, lots of Canadians are registered to be the official and formal importers of record for their products in the United States. And that they are able to issue the certificate and that is perfectly fine. And so there's been a lot of confusion on that point over the years, just wanted to make that super crystal clear for folks that you do not have to be physically located in the United States as the importer of record to issue that certificate. Contact information for the individual maintaining the records of the test results. This can theoretically be anyone. There's no stipulation as to what has to be. However, if you are subject to an investigation or you're being a part of an intensive examination review at the ports, your test report needs to be as readily available as your certificate that you're passing along. So if the person you listed here is not easily reachable, then that could be a problem for you. So you want to make sure whoever's listed here as the as the owner of the test results that they are responsible and are aware that they have that obligation. If we need to contact them that they submit that information immediately. That's just really important to keep in mind. Tate in place where this product was manufactured. I would say this linking up back to the period our tester requirements we were talking about earlier. What I would recommend is that as you are producing additional batches that are falling under the initial certification this product. You want to read my opinion this is what I would do you reissue the certificate with the additional date of production. And for that new batch that's being covered by that initial testing date up until the point at which you have to retest periodically and reissue a certificate. This is mostly for CPCs at this point, not so much for general use products. But for CPCs, I think it's really important to marry up all those different batches that are coming under that specific test reports. It's clear for investigators it's clear for yourself so you can keep track really important to make sure that's happening. So that's the main point I want to say here is just to make sure those dates and places are clearly indicated. Provide the dates in place places maybe when the product was tested for compliance with the consumer product safety rule so could be multiple testing labs depending on how you do it. Maybe you're partially relying on component part certification partially relying on your own testing that you've had done in that case there might be two or even three dates listed that all marry up with a compliant product. There's no limit on that as long as it all works towards your finished end product. Additionally, this is where you want to place any legal exemptions determinations exceptions to support your overall product compliance. And these are the citations I mentioned earlier 1500.91 and 16 10.1 D. Those are very commonly cited for children's apparel a lot of apparel items are are using those two citations and their certificates. And again that's mostly for CPCs GCCs. Generally you're not you're not dealing with exemptions that frequently. It's mostly just a matter of citing originally in section two and then whatever applicable testing is is being indicated here. Elm and number seven is calling out the laboratory itself so again if you're doing multiple labs to get to a compliant whole your listing every single one here with the information required. Additionally for CPCs only register small batch manufacturers must include their registration number. Provided by CPC this is helpful because if you are relying on testing done at a non CPC accepted laboratory. Then that information is immediately known to the investigator the person reviewing your certificate. Or if you are relying on maybe first party testing or written statement of assurance as a small batch manufacturer. Then all that information is made clear and we can double check that you are in fact a registered small batch manufacturer to be able to take advantage of those things. So that's really important to keep in mind for the for any of the small batch folks. So this is the end of my portion. Of the webinar here just a couple of things before I hand it over to Arthur. This is my name, my title, my contact information. If you have additional questions. If you want to stay up to date on any upcoming SBO webinars or any kind of the we also aggregate all of the commission rule makings and other events happening with CPSC. If you go to CPSC.gov for slash email you can sign up for business education alerts we send them out about once a month. This webinar every other webinar that we produce is available on the CPSC YouTube business education playlist. So if you have that handout handy. You can click that CPSC webinar series link and it will bring you right there and within a few days this one will be up there as well. I didn't call this out earlier but the regulatory robot tool is a phenomenal resource if you're not sure of what requirements apply to your product use that tool. And it will tell you the entire universe of applicable requirements that could be in place for your product. And lastly, the CPSC business education portal within CPSC.gov is has a wealth of information as well we keep adding to it all the time. And so now I'm going to change the slide I'm going to hand it over to Arthur. Alright, thank you will and thank you to everyone joining us today. So the second half of this presentation I will cover e filing which is a new initiative at CPSC. So this initiative is to enable importers of regulated consumer products to file electronically or e file with us customs and border protection certain data elements from certificates via a partner government agency message site. So in short, this is this will be a new requirements in the future. Where you will take your certificate and transmit the data from the certificate with assistance from your broker via CBP. And so it's an addition to the entry documents that you provide us. So for quite the first question, why are we doing this. So currently CPSC staff only asked for a certificate once a product has been identified for exam and cannot use that certificate data in risk assessment and targeting. So once we're making this complete, which we expect to finalize at the end of 2024. So well over a year from now, importers of regulated consumer products will electronically files certain certificate compliance data with CPSC with their entry documents. So brief history in 2008 the consumer product safety act requires importers to test and certify children's and other general use products and provide certificates. This is essentially what will explain to you in his half of the presentation. The same statute, however, gave us the authority to require the electronic filing of certificate data and we've been taking steps to reach that point and which again we're going to finalize by the end of next year. In 2013 we published a proposed rule that would among things require the electronic filing of the certificate data. In 2016 we conducted an alpha pilot with eight imported participants that tested the message set and a product registry, which I'll explain later. So this test made us confident that we could collect the data electronically. The next year we conducted a certificate study to analyze risk of certain data elements and how that relates to substantial hazards of the product and we found significant correlations between a substantial violation of a product and certain certificate data elements or even the absence of a certificate at the time of import. Lastly in 2020 the commission approved of our plan to conduct the beta pilot, which I will be conducting this fall. We're currently in the process IT development and testing and this beta pilot will have up to 50 participants and will be for six months to really test out the e filing system. So this is a more precise deadline for what has occurred in the past year and what will continue until the next year. So starting last fall we began IT development of the e filing system and throughout the winter we received a reiterate feedback from our participants. These are importers and their brokers who provided feedback on the IT system. And in the spring we conducted the development of the PGA message set with help of CBP. In this summer we are conducting initial testing and volunteer onboarding into the e filing system. So for the fall, starting this October, we would begin the beta pilot. And we will run for six months until the spring of 2024. At that point we will finalize the pilot. E filing would become a voluntary process and we will ask for feedback and comments on our rule, which we will finalize at the end of 24. So by that point, e filing will become a requirement. As you can see there's still plenty of time and we will have plenty of resources to help every comporter onboard into the e filing system and teach them how to file electronically. So this beta pilot as I said will begin in the fall of 23 and it will include up to 50 volunteers and allow for more entry lines than the alpha pilot test. So this will give us the opportunities to develop tests and implement processes and procedures for e filing of imported regulated consumer products. So when you e file you have two options. The first option, which is the preferred option is to use a product registry. This will be a database that will be maintained by CPSC. So you as an importer will pre-file your certificate data in the registry and then at the time of import your broker will file the product registry ID into ACE, which is CBP system for collecting the entry data. And that data is transmitted to CPSC, which we use for risk assessment. The advantage of this process is if you bring repeatedly bring in the same product using the same certificate, you could reference that certificate over and over again and file a shorter message. So in the long run it would be quicker to file that data into ACE. The other option is just to submit all certificate data at the time of entry. This has a disadvantage though because you cannot reuse the data that you previously transmitted. So if you bring in the same product you would have to retransmit the certificate data. But this could be most useful for just in time shipments when you don't have time to access the registry or you're just bringing in a one-off shipment and you don't really need to store that data. The next few slides I'm going to give you a preview of how the product registry looks. So as I showed on the previous slide that is the database help be maintained by CPSC and where you as an importer could pre-file your certificate data. The registry is a web-based application that would be very user-friendly. We worked collaboratively with many individuals from industry and they provided feedback step by step. They've seen the same screenshots. They've been able right now to test the system and they're providing us consistent feedback in order to make this registry and the filing system a process that is very user-friendly for any importer. So this first screen it would be your business account for your company which includes your company information, account administrators and product collections at the bottom. So these product collections are where you store your certificate data. You could have multiple product collections where you could organize your certificate data as you wish. And each product collection you could assign different users to each one so you're able to maintain permissions on who has access to which data. This registry will allow you also to invite your broker or other third parties to collaborate on your behalf and there will be extensive permissions capabilities. So as I mentioned you could provide one broker access to one collection, another broker access to a second collection and they won't see the other, the other, each other's collections. To add a product in a collection you see a user interface such as this where you have three screens and you would notice that these are the same fields that Will has mentioned before. So you provide information for product. In this case you would have to provide an ID so we're able to identify the certificate and then a product description on the testing page. You'll be providing the lab information on this. Let me take a step back though on this page. You also provide the manufacturing information and lastly you would attest to the validity of the certificate. And once you submit your certificate, you could go back to your account and see your products listed in this format and so each line is a separate certificate where you can see the product name, version, the trade brand name. And when you select the dropdown, you get to see even more information that you entered for the products such as the testing details and manufacturing details. The product collection, excuse me, the registry will have features where you could edit, copy, certificate. So it's very user friendly for you to be able to manage your certificate data. And as I mentioned before, you can invite other users and provide them different permissions so you can invite users from your company to have full access as you would. Or you can invite other third party users from other third parties and give them in different roles with limited permissions and they have access to only certain certain product collections. So the benefits by providing valid certificate data, you should expect to see a reduction in your risk score, which would mean may result in reduced whole times and fewer exams at the port, which would result, reduce cost to the importer. We are really focused on using the certificate data to go after shipments that have substantial violations so we're going to reduce, so we're going to, which would result in fewer holds to check for certificates. And so we would, the holds would be more likely to perform for substantial violations rather than for certificates. As certificate data will be provided ahead of time. As the process is now, the certificates are provided only upon request, which involves a cargo to be held, and then the request to be made. By reversing that, we're able to confirm the certificate validity beforehand, and only place holds on shipments that we think, which we believe there's a high risk of a substantial violation. And so these fewer holds may result in reduced costs to the importer. So, thank you for participating. I'll hand it back to Will. Thank you, Arthur. Let's see if any questions have come in here. One question coming in you may have already addressed, but I'll just ask it anyways for the for e filing, will there be a way to upload multiple items at once, where they all have to be hand keyed one by one. Yeah, so we are building features for bulk upload and an API connection that I haven't shown a screenshot of that because that's still currently in development, but it will be tested in the pilot and rolled out during the permanent implementation. So, in the end, you have three ways to provide that data on the registry either using the UI, uploading using a CSV file or uploading be an API. Great. Thank you, Arthur. And before I let everyone go today, here is all of our contact information again. Here's Arthur's contact along with his supervised superiors and the office of import surveillance. Here is our information again. We really appreciate you joining us today. If you have any questions about any of this information, anything about how certification works today right now, what you have to do to issue a certificate. Please get in touch with me or get in touch with the small business office. If you have questions about e filing in the future and what might be to come and please send all that information to Arthur, all those questions to Arthur. He does want to engage with you. He does want to interface with you if you have questions. Thank you again. We really appreciate you joining us today and look out for an email in the coming days with the recording and that will be on the YouTube channel as well. Thank you so much. Bye bye.