QuickBooks Online 2023. Adjusting entries and reversing entries introduction. Get ready to start moving on up with QuickBooks Online 2023. Here we are in our get great guitars practice file. We started up in a prior presentation using the 30 day free trial. We also have opened the free QuickBooks Online sample company. If you want the two open at the same time we suggest incognito support accounting instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course each course then organized in a logical reasonable fashion making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as excel practice problems pdf files and more like QuickBooks backup files when applicable so once again click the link below for a free month membership to our website and all the content on it or another browser you can open incognito window if using google chrome by selecting the three dots up top incognito window type into the search engine QuickBooks Online test drive we're using the sample company to compare the accounting view the one get great guitars is in and the business view the one the sample company is in you can change between the two by going to the cog up top switch the view down below duplicating some tabs like we do every time right click in the tab up top to duplicate it and then we're going to right click on the tab up top to duplicate it back to the tab to the middle go to the reports on the left hand side and we're looking for the financial statement reports the balance sheet if you're in the business view by the way the business overview that's where the reports are located in that view and then we're going to go to the tab to the right open up the other statement which is going to be in the reports on the left this time the profit and loss the P in the L and close up the hamburger scroll up change the range 010123 to 022823 I'm going to look at it month by month so we can see the two months of data input we've done thus far Jan and Feb and the tote the year to date going to the tab to the left and closing up the hamburgies scrolling up to the top change in the range 010123 to 022823 and then we're going to run that one and let's actually see that on a month by month as well hitting the total change in the total to months and then run it again so we've done two months of data input now we've done the bank reconciliations now we want to think about period and adjustments and the concept the overview why we might do period and adjustments or adjusting entries when we might do them how we might structure doing them and which accounts might need some adjusting entries so the adjusting entry process is typically done at the end of the month or the end of the year and it's done to to make the financial statements be more closely aligned to the accounting method that is use in use that's often going to be when you learn it in like accounting courses the accrual accounting method but in fact in practice you you might be on a tax method or something like that if you're small business and you're primarily doing your bookkeeping in order to do the taxes at the end of the year you might have an attack space method you might have it even on a cash based method and even then you might still have some adjusting entries that need to be done now note adjusting entries if you learn it in a in a book scenario in a classroom you're often going to hear them being applied at the end of a month for example each month but in practice for small businesses you might do the adjusting entries on a yearly basis so that you get your financial statements lined up as best you can for the use that you might have for them which is going to be the taxes in the United States so that's going to be the general idea so what we what we would like to do is think of a delineation in our mind between the bookkeeping or accounting process and the adjusting process that's going to be done at the end of the period they might be done by the same person but it's useful to keep those two things separate and oftentimes they're done by different departments or different people altogether such as the bookkeeping or yourself or the accounting department versus the CPA for example or tax preparer that's going to be doing adjusting entries possibly at the end of the year the adjusting entries are the things that we have been doing to construct the financial statements and those are primarily with the forms we go to the forms we have the cycles that are in place we're entering the financial transactions with these forms that are entering the double entry accounting system and constructing building the financial statements our goal from the bookkeeping or accounting side of things is to try to make this system as as easy as possible and if we can automate the system as much as possible we can automate the system to make it as easy as possible and also be able to communicate with the people we're doing business with well customers vendors and employees that's the general idea so that the business goal in and of itself the overarching goal for the business of revenue generation can then focus on what they do to generate revenue and not so much on on the accounting and bookkeeping process and then of course the goal for the end of the period for the adjusting entries is to take what we have and adjust it to be more perfectly aligned to the accounting method that is being used now let's focus on some of the differences between the adjusting entries and the normal day-to-day input entries the normal day-to-day input entries are usually done not with a journal entry but with the use of the forms the forms being designed to make the data input as easy as possible as well to have the connection of those forms so that we can communicate with the people we're doing business with customers vendors and employees so the general rule for the normal day-to-day stuff is if there's a form that I can do the data input with I'm going to use the form rather than a journal entry if there is no form then I'm going to think is cash affected and I'll use typically a deposit or check or expense form and if that's not the case only then do I default to entering just a journal entry now note that all of these forms except the things that aren't actual entering a transaction like an estimate for example or a purchase order all of the forms enter a journal entry into the system but they do so with the with these data input forms with the period end adjustments we're going to be doing all of them with journal entries so we could do the journal entries using the register if it's a fairly easy with only like two accounts affected adjusting entry but we're going to be using journal entry forms I have to do all of them also obviously all the other data input forms are happening as they happen in real time whereas the adjusting entries are only going to happen at the end of the period in our case we're going to do them just for the end of February here so we're going to imagine we need to do our financials just for the end of February obviously normally you would only you would be doing adjusting entries either on a monthly basis or possibly just at the end of the year December for most small businesses or most companies in order to do taxes or financial reporting on the yearly basis but we have two months of data input so our cutoff date is going to be 228 will be the cutoff date for us so all of the adjusting entries will be entered as of that point in time that means that they're not going to be the financial statements we're not even designing or looking to be perfectly on say the accrual basis method or whatever basis we're looking at for the entire period we're going to recognize that it's not going to be perfect on say 222 or 223 or 225 February 25th for example because we're but we're gonna we're gonna sacrifice that to make the ease of the data input as easy as possible and then get the financial statements correct when we need them for reporting purposes and tax purposes at the end of the period in our case 228 now another difference usually is that a classical adjusting entry will usually not involve cash cash has been dealt with because we entered the cash transactions and we did the bank reconciliations so cash is usually good it's usually a timing issue with the adjusting entries so one cash isn't affected which is a big difference than many other kind of transactions and two there's usually a balance sheet account and an income statement account affected now that's not always going to be the case but a classical adjusting entry that is the case it's a timing difference and therefore there's usually going to be a balance sheet and an income statement account affected so those are the general rules adjusting entries going to be entered with a journal entry instead of a form adjusting entries are going to be entered as of the end of the period and adjusting entries usually have a balance sheet and an income statement account at least one of those two they might have more accounts involved but that's not always the case as we will see here but that's a general rule now then we're also going to have the concept of reversing entries now so the reversing entries are going to be entries that we enter the day after the end of the period in our case February 28th the day after is going to be the first period of the next the first day of the next period which is March 1st in our case or if you're doing December year end December 31st you reverse the reversing entries in January now the only reversing entries we would make are for entries that were temporary and in nature so so if there's a permanent adjusting entry we entered like a depreciation for example we typically wouldn't reverse that but if there's some kind of temporary difference it's a timing difference and we're trying to say hey look the accounting process is doing great the way they have it I don't want to mess up their system such as with payroll for example payroll is complicated enough they're going to use whatever system they have entering payroll every two weeks or every month or every week whatever they do I'm going to have to adjust it to fit into the period end uh for adjusting entries but I don't want to mess up the payroll because whatever system they're on is good so I'm gonna have to reverse it as of the first day of the next period that's the general idea and again the idea being I want the accounting department to do things as smoothly as possible and if there's some kind of timing issue that's messed up because of the accrual method or whatever method we need to use then I don't want to mess them up I want to try to automate the system as much as possible let them do what they need to do and then make periodic adjustments to have the financial statements correct at the point in time that we need the reporting of them so let's just go really quick you can kind of get an idea just looking at the balance sheet accounts and which accounts might need adjusting entries and then we can and then you can kind of hone down your system if you're a bookkeeper you really want to think about this idea you want to be thinking what kind of businesses do I want do I how automated do I want the system do I have a network of people that can do the adjusting entries like tax preparers and CPA firms and whatnot so that I can do what I'm doing on my side and depend on these other people that are in my network possibly to do what they do so that I can scale up my business possibly a lot of people scale up their businesses small bookkeepers possibly by trying to keep their books more in a cash based system trying to use the bank fees to automate the whole process but to do that even if you're working with companies that are on a cash based system you're going to have some accrual things you have to deal with and if you're working with a good CPA firm or something that can do adjusting entries then they can help you to still basically automate your whole system scale up and then and then let them do the adjusting entries periodically okay so cash doesn't usually have an adjusting entry related to it because we did the bank rex and they're good to go accounts receivable you'll remember is an accrual component so if I look at the flowchart that's when we enter the invoice so that's on the customer side of things if you're in a very simplified business like you just get paid from youtube or something then you won't have receivables you'll just record a deposit or if you have cash register sales no invoices so this is an accrual component so by definition if you have to track accounts receivable you've moved away from a cash based system and now you're on an accrual based system because of the the need for you to track the accounts receivable so there could be timing issues with the accounts receivable now one of those issues could be for example that you enter the invoice when you enter the invoice you you actually did the work before the cutoff in our case you did the work in february but maybe you entered the invoice in march for example so it's not a perfect system the fact that the invoice is recording the sale in terms of the timing frame because it's possible due to the billing structure that you actually entered the invoice after you did the work in the period after you did the work in which case you could result in an adjusting entry that might not be as common for small businesses but you know that that's one of the issues that could happen the other issue is that issue with the deposits that we talked about which we'll get into in more detail with the unearned revenue kind of issue where we said it's possible to receive a payment before you do the work like you get a down payment or you get a prepayment from the customer before you do the work that should be recorded as a liability but logistically within QuickBooks it makes sense to make a negative receivable so if i looked at the sub ledger we'd have some negative receivables and we should break that out for financial reporting to a liability so from my perspective this is not a classic adjusting entry and that it doesn't have a balance sheet and income or timing difference account but it works like an adjusting entry in that from the bookkeeping standpoint it makes sense to have a negative receivable because that ties out really well in the sub ledgers because the sub ledgers are tied to accounts receivable as opposed to an unearned revenue but periodically then i can just go in there and make an adjusting entry if i need to so well that's a little bit of confusing one we'll talk about that more later inventory is one another item where by definition if you have to track inventory on your balance sheet you've moved away from a cashed based system so if you have very small inventory maybe you can stay in a cashed based system and just write off the inventory when you buy it because you're going to use it very quickly to make a sale but if you have to put the inventory on the books as an asset once again we've moved away from from a cashed based system to an accrual based system so we'll have to do like physical counts on the inventory and and record the inventory properly so there's not often like a an adjusting entry that really needs to happen there other than you want to of course do a physical count at the end of the period and see if your inventory is actually accurate there then we've got the prepaid insurance and it might be easier first to talk about like the depreciation because that's like the most extreme case of like a prepaid kind of situation so and it's also one that you can't avoid again even if you're a cashed based system so even if you're a cashed based system you're saying hey i'm doing everything cashed based well the tax code is still going to force you with large purchases like equipment buildings even if you paid cash you can't just write them off as an expense and you can see why that would be if you had a hundred thousand dollar building expense down here and then you tried to compare january to february it would be like if you bought the building in january you would have this massive loss in january compared to february which isn't actually accurate in terms of the performance because you bought the building and you're going to use it for 30 years into the future so there's you don't have the comparability and it's so extreme it's so obvious that that's a problem with comparability with property planting equipment that even if you're on a cash based system where you're kind of forced people just recognize that oh yeah i gotta put that on as an asset well why because you're doing an accrual thing you're putting on the books as an asset as opposed to expensing it when you purchased it because it's such an extreme example of the situation and the tax code is going to force you to do that as well so uh notice that the furniture and equipment shouldn't have too many transactions related to it so whenever you make purchases then you can give that usually the sub ledger is going to be done by your tax professional so you're usually going to have to be dependent on the tax professional to give you the depreciation schedules which they can do either on a book basis or a tax basis and then we're going to have to record the adjusting entry of accumulated depreciation that's when we allocate the expense to the time period we actually used it or that's what we're trying to do although it's just an estimate which is why we we don't actually write down the furniture and fixture or fixed asset account but use another account called accumulated depreciation it's a contra asset account so we'll dive into that more detail later but everybody kind of has to deal with that a cruel thing even though even if you're on a cash based system and you're small business and you're just trying to do things for taxes or something like that the same concept is here for any kind of prepayment and insurance is the biggest is the most common example because insurance by definition is something you paid for before you did they they gave you anything right you didn't get the coverage you can't get the coverage and then pay for the insurance you have to pay for the insurance before giving the coverage now if you pay for insurance every month then if you just expense it monthly you're pretty close and that's probably not a problem but if you pay for a whole year's worth of insurance up front which is often cheaper and so therefore many people do it then you're gonna have the same issue where you have this big the insurance expense say in january if you paid for it in january versus february and therefore the typical method from an accrual standpoint is like with the furniture equipment you put it on the books as an asset and then you've got to determine how much of it you have consumed over the life thus far as of the cutoff date and make an adjusting entry this time not making a contra asset account as is done with fixed assets but just writing down the insurance account directly so so we'll dive into that in more detail you could do a prepaid insurance for any kind of expense account if you prepaid it but there's certain type of expense accounts you're more likely to do that with uh accounts payable is another accrual account so if you're using the accounts payable then you're likely uh going to be on an accrual basis and you could have basically timing differences with when you entered the bill it's not as common to have problems with the timing differences on the accounts payable as with uh the accounts receivable the visa account is a credit card account it's kind of like the the checking account in that you should hopefully have entered all the data and reconciled it and so there's not usually going to be any kind of added adjusting entries for the visa or credit card accounts then you've got your this is the taxes that you have to pay so you could you know make sure that your liability is correct and ties out to your liability statements that are owed for your sales tax and then your loans on the loans uh notice that these have some some issues that are that you can think about as a bookkeeper how to most easily do the loans one you've got multiple loans so i would put each loan on the books in their own account possibly as a as a subsidiary account to the parent account instead of having one loan account but when you do the taxes or when you do financial reporting you're probably going to report it as just simply loan payable you also have the short term and long term loan payable situation that you have to deal with which means you i wouldn't break that out every time you do a loan payment but you might have a loan that has a short term and long term component to it and that's when i would like to work with a cpa and be able to say or an accountant or a tax preparer to allow me to do that adjusting entry if i was a bookkeeper and say hey look i'm just going to put it in one loan account you break it out here's the amortization schedules that's your thing right my thing on the bookkeeping or accounting side is to make sure that the loan accounts are accurate and you can even go a step further than that as a bookkeeper if you're trying to automate the system you can say hey i'm going to record one loan account per loan and i'm going to make all the payments go directly to that loan account not breaking out interest according to the amortization schedule because the interest and principal changes each time and i want to automate my system so that i can enter the data on a cashed based system so i'm just going to record everything to the loan account here and then i'll give you the loan statement cpa or an accountant and you can make the adjusting entries breaking out the proper amount of interest for the year or whatever the time frame is and then breaking out the short-term and long-term portion and that way again the bookkeeper is trying to be automated do everything basic with the bank feeds and and then have a good cpa or accountant that knows what's going on that can periodically break out the stuff and do what they do uh and then you have a nice core the same thing is with the payroll if you're doing payroll within the system then then you're gonna have to it's gonna have to check that all your payroll ties out to the w2s the w3s and and and the 941s that matches what's on your uh payroll here and you might also need to do an adjusting entry because the payroll period that you have say you pay people weekly you might have paid someone you know your pay period might have might have three days uh before in february in two days that are outside of february right and so the so then you've got this situation where the pay period doesn't line up to the actual uh to the to the end of the to the end of the of the period and you might have an adjusting entry basically related to that so that's one issue that you can have with the payroll another issue that you can have with the payroll again is you could try to say hey look i'm trying to automate the my system again and payroll just messes everything up because again it forces you if you run payroll within the system to be outside of a cashed-based system because now i have to do this a cruel thing of the withholdings but if you hire you could hire a payroll professional you could say look i'm gonna automate my system on a cashed-based system try to scale up that way i'm gonna try to get my clients to be using a payroll professional they run the payroll and they do their whole payroll thing i just wait till it goes through the bank and i record it as payroll expense and then i give the payroll reports and uh and this in my financial information to the cpa or tax preparer at the end of the year and they properly break out the liabilities versus the expense payroll expense versus tax expense and so on given that information so again that's another way from a bookkeeping standpoint you can think of it a few different ways do i want to do payroll within the system if i do that one of the adjusting entries at the end of the period you're probably going to depend on a cpa or an accountant uh if they need to do those kind of adjusting entries and maybe i want to be on a cashed-based system and i try my best to to have a payroll provider so i can scale up on a cashed-based system and automate all of the systems working with a payroll provider to do all the all the other stuff with payroll with the paystubs and stuff and then give all this stuff the payroll reports and the financials to the bookkeeper at the end of the period to do the adjusting entries and if that all if you have a good network that could work quite well okay so those are those are the general adjusting entries that we'll go through and we'll go through a few of them in more detail one by one in future presentations


During development, you can use DevTools to emulate the user preference media features. Wait a minute, what are user preference media features? Let me make a call to Adam. Yo Jess, what's up? Hey Adam, we need you here. Can you tell us what are user preference media features? Oh totally, let me switch to my computer and I'll show you. So these are system accessibility options for you to make the device experience more yours. Light or dark theme, default font size, animation settings, or other user preferences you set from your operating system or your browser. So here's me in my operating system changing some of those user preferences. Here's me in the browser making some special adjustments just for it. A web page can adjust itself based on some of these preferences making not just the operating system feel like yours, but even web pages. Here's a web page adapting to the preference changes. DevTools has some rad tools to help developers and designers test and discover these opportunities to adapt. They're under a category in DevTools called emulation. It's already tedious to change my entire system preferences or browser preferences just to test my user experience, but add the fact that my device is only one device and can't represent the combinations that my visitors might be in. DevTools is critical here, offering the device mode and many other emulation tools to assist in stepping into the shoes of your users and seeing how your site adapts. This rendering tab is where DevTools allows toggling the user preferences, like the ones we discussed earlier, color scheme, forced colors, contrast, and reduced motion, and there's a few other great rendering-related features to test with too. But let's test a page's ability to adapt to light and dark preferences from here. This is much nicer than watching my entire system switch themes and my page. That was too much. But Jess, there's a new, even easier way to do this now. Do you want to show it off? Definitely. Did you all notice the new emulation icon in the styles pane? Let me zoom in to the styles pane. This is the button. Click on it and you'll have options to switch the themes right away. To turn off the emulation, just click on the same selection again and you are good to go. Very convenient, right? I love that. It put the theme switch right where I'm testing colors. Well, let's test reduced motion and here's that in action, being toggled over here in the rendering pane. Remember, reduced motion doesn't mean no motion. Crossfades and color animations are generally good to go. Here's contrast preferences in action. And here's forced color preferences in action. Lastly, here's reduced data preferences in action. CSS media queries let me code and design a user experience so visitors just get what they like automatically. And it's really fun to design for. Jess got some cool additions you want to add? Sure. You can use DevTools' run command to emulate these user preferences without even opening the rendering tab. Just type emulate, select the option, and you are all set. Ooh, nice one. Well, to learn more about user depth of emulation in general, go to web.dev.new-responsive. But hey Jess, I got to go. Sorry. Thanks, Adam. To learn more about emulating CSS features with DevTools, go to google.dev.devtools.emulate.css. That's all. See you for the next DevTools tips. Ciao.


Hello everybody and welcome to episode number 18 of Patterson in Pursuit. I am your host Steve Patterson and today I am coming to you from the sunny state of California. My interview this week we're talking about democracy, specifically the foundations for democracy. How do democratic governments get their legitimacy? Is there any way for an individual to opt out of a democratic government? And what happens when a minority group disagrees with a majority group? What kind of recourse is there? To help me answer these questions I am talking with Dr. Bruce Kane, who is a professor of political science at Stanford University. He's also the director of the Bill Lane Center for the American West. The author of many titles, most recently the book called Democracy More or Less. Now though you guys might know some of my more radical political beliefs, Dr. Kane and I actually agree on this question. Is more democracy always a good thing? We both resoundingly answer no. However our proposed solutions for getting around more democracy differ quite radically. For the show notes page this week check out steve-patterson.com slash 18 and I'll have a link to all the stuff we're talking about in this interview including his book. And at some point I'll have an interview breakdown. I have lots and lots to say about this interview. You'll know for about the first half hour there's a certain pace where we're taking things and then maybe a half hour or 40 minutes in, things get a little bit more heated as I start asking a little bit more and more foundational questions getting at some real deep disagreements about political theory. So if you guys enjoy talking about political theory I'm sure you're going to enjoy this interview with Dr. Bruce Kane of Stanford University. So first of all thank you very much Dr. Kane for sitting down and talking with me today. Glad to help you out in any way I can. I have several questions that are all kind of focused around what you might call the foundations of political theory. We take for granted I think that we live in a very complex and advanced political structure at least in the United States. But if you just kind of sit back and perceive it's peculiar. We have very strong institutions, people have very strong beliefs about how those institutions are supposed to operate in society. But what I'm interested in is how we get from very basic truths about the state of human existence to something like a political structure and then maybe even to something like a democracy. So the first question would be I think it's fair to say most people want to live in some kind of a society where there's peaceful cooperation. You don't have to worry about your neighbor coming over and knocking you on the head and taking your stuff. Is it the case that that desire for peaceful cooperation is ultimately where we get government from? Is that kind of what the underlying causes this desire for peaceful cooperation? Yes, I think that's right and it's mirrored somewhat in the history of political philosophy. One of the original writers that thought about why people would enter into government was Thomas Hobbes and Hobbes' notion was that people gave up their freedom in order to get security, that the state of nature was nasty, mean and brutish, and that the only way you could get out of that was to hand over your power to a leader or a government. And in Hobbes' notion that government would have full authority. And if you look at the way societies have developed, they often developed around warriors or leaders of armies, et cetera, that were able to secure a particular area. And oddly, we see in the Middle East the history of the early development of democracy being played out in the Iraq strategy that we had to develop in order to take back the country and Iraq with a surge, we had to get power to try believers. Similarly in Afghanistan, we've done the same thing. And so that's just a reminder that when all else falls apart, the one thing that people are most looking for is security of property and security of life. And if a state fails in providing those things, the economy will fail, the trust in government will fail, and you simply will be in a state of chaos much as we see in various parts of the world right now. Okay, so let's unpack that a little bit, because you mentioned that you have these strong authorities that have control of the security of a territory. You mentioned the term territory. So are you comfortable with saying kind of the more modern, I think, political theory conception is that a government is essentially like a monopoly on the use of violence in a given geographic location. Do you like that definition? Well, that's a very standard political science definition. I mean, it's the minimal state and the conceptions of what a democracy should be grow out of that, out of the experience of the minimal authoritarian state and the problems with that. And those problems are basically principal agent problems, a name line that this ruler with complete authority might not aim in a way, may not have purposes which coincide with what the public's interest is and might well extract what we say in modern social science term are rents, extract wealth for him or herself. And so that notion, that minimal notion of a state and what it takes to have a state, a stable state, proved to be not satisfactory as time progressed and people wanted more from the state. They wanted some sense of legitimacy that that state was acting on their behalf. And that gives rise to a state which then has democratic accountability. So, and then even that notion of democratic accountability itself expands over time as we expand the franchise from property owners to male citizens over a certain age and then to women and to minorities. And so our whole notion of what is a democracy has thicker and thinner versions. And so our notion of a state has thicker and thinner version. And the thinnest version was the authoritarian. The thinnest version of a democracy was a very limited franchise. And the thicker version of democracy is what we have today. And so democracy is not a one stable concept. It's an evolving concept. And what we consider to be relatively advanced democracy may be transforming as we talk as a result of new technologies and ways of communicating, levels of education, et cetera. So what we think is a thick democracy now may seem like a thinner democracy and 100 years. Okay, so I like that terminology, the thin democracy, the thick democracy. I think there's a general notion in our society that you could say the thicker the democracy, the better. Now, that might be true, but that also might not be the case. So some examples would come to mind where if the thicker the democracy, the more that perhaps the rights of minorities might not be upheld. So you could imagine a circumstance where 66% of the population didn't like some ethnic group and then 33% of the population, they all vote for kind of a different political structure, but they lose the vote and therefore they get oppressed. So would you say that there's got to be, would you say, number one, that it's not just a linear relationship between the thickness of the democracy and how ideal the political system is. And two, is there some way to kind of curtail that potential problem of democracies running roughshod over minorities? I not only think it's hypothetically true, I think it is in reality too, and I just wrote a book about it called Democracy More or Less, which is precisely about that theme. That the common assumption in the reform community and among a lot of citizens is that the answer to whatever problems we have with democracy is more democracy. So more participation, more transparency, more elections, et cetera. And the reality, unfortunately, is that if you maximize any of these democratic values, you can soon exceed what the capacity of the citizens are. So we have a good example here in California with the next election where we're going to have something like 16 measures on the ballot. Some of them very technical, some of them less so. We're going to have in some counties, in addition, San Francisco County could have up to 30 local measures. So and then you add maybe a half dozen to a dozen, depending upon where you are in the state and local officials. And then on top of that, the federal officials, you're talking about an extremely long ballot that would require and a lot of study and thought before you go into the ballot box because you'll see that the ballot pamphlet we hand out is like a phone book. So that's just one example. I could proliferate for you dozens of examples that happen, even when down to the point of how city councils run, who shows up at city council meetings or I could talk about agencies and how they implement laws under NEPA and CEQA, which are environmental laws that ask for citizen participation. But in reality, you get a skew. So what we've discovered is that, no, you can't do that. But this is a hard concept to sell. And I have found myself being an unpopular person at the picnic, so to speak, when I bring this up. Because when I talk to journalists and reform groups in D.C. about how there have to be some limits on transparency because we have to protect ourselves from enemies and we have to protect the privacy of individuals. And that maybe we have to provide deliberative space for individual officials to have frank discussions. And if we try to make everything transparent, we may be pushing things to a lower level of transparency ironically. I get a very unreceptive response from people because it's so ingrained that more democracy is obviously good. They can't think of it as being a nonlinear relationship that hits a point and then stops. And unfortunately, I think we're going to only learn that the hard way. And possibly this election will give pause to some people. But the real problems often arise at less visible levels of government where people aren't paying attention, but they look at the cumulative biases. And they kind of wonder why are certain organized groups more powerful? Or why can't we get projects approved faster? Or various other complaints that are a result of the cumulative biases that are inherent in our assumptions, our fallacious assumptions about democracy, not some one spectacular event like maybe Mr. Trump getting elected. So I am very sympathetic to this idea that democracy is not necessarily always ideal. But what are the alternatives? Well, no, the argument is not that democracy can be replaced by another form of government. It's that what we've learned over time, and actually was sort of embedded right at the beginning in the notion of a republic, is that democracy has to be built on different elements. So one element is the direct voice of the people, which is what most people talk about. More people weighing in on policy, more participation, broader participation, more transparency. So that's one element. And what I'm saying is there is a trade-off between the democratic values and the effectiveness of the government that you have to weigh off. And if people can't keep up with the amount of responsibility you're putting on them, then you need to stop, OK? So could I phrase this in an unsavory way and see if this is part of the criticism that maybe you get? Are you arguing that what we need is some class of individuals who are less accountable to the public and who are making decisions on behalf of the public without the public's direct consent? Yes. In fact, I write about this.  And so we look for other forms of participation. But what happens is that other people become your unofficial representatives, OK? So for example, in the many studies that show with respect to direct democracy, that it seems as though the people in the grassroots will be putting these measures on the ballot. In reality, that's not the case. It's either funded by groups or it's funded by wealthy individuals, some of them well-meaning, like Tom Steyer, sometimes utility companies, et cetera. And they don't get their way with the representation that they get in the legislature. So they then put the thing on the ballot. And so there are very few measures that are now done by the people in a grassroots way. You have basically delegated this task to a group of policy entrepreneurs and interest groups that hire lawyers and put their measures on the ballot and then ask you to do it. So similarly, if you go to hearings on environmental regulations, what you discover is that there's like 150 groups that will show up representing different interests from birds to wildlife conservation, to manufacturing, to whatever. And so we call this in political science intermediaries that you can't get rid of intermediaries. And the more you try, all you're doing is creating a different set of intermediaries to that might not be as accountable. And so what I say is that you've got to, so that brings you to the second element. The first element of government is popular sovereignty. The second element of government is the representative, representational part of it, which is either parties or interest groups or lobbyists or whatever. And what I say is that we got to pay attention to that because it's inevitable. It's going to arise just because we don't have the capacity as citizens to monitor complex governments. We're going to have to rely on intermediaries, whether they're the press or whether they're the interest groups or the nonprofits or whatever. The lobbyists, we're going to have intermediaries so we should make sure that that playing field of intermediaries is as fair as possible. Can you talk a bit more about that? How do you structure things in such a way with that playing field as level? Well, there are different ways to do it and we need to look at best practices. But one way, and I think the state of California, to be fair, has been quite good about this. They've learned that you have to do outreach to disadvantaged communities. You have to take special steps that they're not as well organized. You have to make sure that there are nonprofit groups that form and get listened to on behalf of poor disadvantaged groups. Because if you look at the population of nonprofit groups, it tends to skew towards upper middle class, liberal or conservative interests. There are some groups that represent tribes or represent poor people, but they're not as numerous as the upper middle class groups or the NIMBY groups. So part of it is making sure that the attendance at hearings is fair and balanced. Part of it is making sure that through the tax code we incentivize or perhaps have public defender model that makes sure that the interests of disadvantaged people are represented. But we've got to think proactively about fairness and I believe that California has been trying to do that. We're starting to study it more to see if the outreach efforts actually work or whether people simply do it pro forma, which we suspect may be happening in many cases. So I think it's a tough problem because our democracy tends to be very responsive to people that are highly educated and have resources. Now there is a third component of any democratic system and that is what I would call the expertise component. And that is where we get our non-partisan civil service or that is where we get our judiciary. And that, in the case of judiciary, in the world of philosophy it's the equivalent of saying utilitarianism is somehow bounded by deontological principles, okay? And so in essence the institutional expression of that is that the court reasons from principles that are set out in the Constitution and puts limits by applying say the First Amendment or the 14th Amendment or the Fifth Amendment to things that could get passed through the Congress or by state legislatures that might violate minority rights. And so right from the beginning in the United States we've always had this balancing between majority and minority tyranny in the Federalist Papers. And the expression of that is found in the courts. But also what I think is uniquely more related to expertise is the development of areas of policy that we take out of the realm of politics because we think it's too important. And the best example of that is the Federal Reserve Bank. But there are other examples too, such as the civil service. I think it's debatable whether or not the Fed is actually out of politics. I understand that. And I understand that you probably never can take the politics even out of the implementation of agencies. But we at least force the courts and agencies to follow precedents and to establish rules. And so they're more constrained in how far they can go politically. So maybe it's a question of the boundaries of discretion that are set up and the expectations that there'd be logical reasons that follow from previous reasons. So maybe saying political versus neutral expertise is just an unfair characterization, but it does put a boundary on how far a democratic society can veer in a certain direction in response to the temporary whims of the majority. Now that definitely sounds sensible, but what happens both theoretically and in practice when those rules are no longer in style? So I can think of circumstances where there might be an established procedure in place politically speaking for 100 years. And then somebody comes along and starts a public revolution saying, look, these are old archaic rules. We have to be modern, we have to update, we have to start a new set of rules. And it just so happens that part of those rules are, let's say, oppressing minorities. So it sounds like the reasonable thing to say is, okay, democracies have inherent danger in them. Let's set up something like a constitution which constrains that democracy. My question is, what happens when the democracy no longer cares about the constraints that's placed on it? Well, the first answer is that we've made it very hard to change the US Constitution. And if we hadn't done that, then your concern would be even greater than it is right now. And so if you look at the state constitutions for example, many of them can be overturned by a simple majority vote. We have modified the California Constitution 535 times. And in several instances, the Constitution's been amended to overturn the courts. And so in the whole issue about gay marriage, we found out that yes, it would have been probably problematic for gay couples if it hadn't been the case that the federal courts retain control over the, if you like, the basement for political rights and basically took over and have said, no, you can't infringe unequally on gay rights by denying them the same privileges and rights that come with marriage for heterosexuals. So answer number one is that a good stable democracy has to make it harder to change the Constitution than normal pieces of legislation, which is why you have a super majority rules. And we have some of the toughest at the federal level because it requires super majority votes at two levels, both the state level and the federal level and both houses of Congress. So we make it very hard for any changes. And we haven't had any changes in the Constitution of significance in the last 20 or 30 years. I mean, the last one we did, I think had to do with pay raises for the Congress. So it's pretty damn hard to change the Constitution. There have been lots of attempts and some of them would have put in balance budget requirements or would have gotten rid of certain rights, but they just can't get it through. But what happens when it's even one step more fundamental than that? So it is true that law might constrain the constraints that are put on changing the law, but what happens when people think, I don't really care what the Constitution says. I don't really care if I'm technically breaking the law. I want, let's say a dictator in office who's gonna say, this goes, this doesn't go, period. Yes, well, what we know in political science is that people's attachment to constitutional principles can be worn away, particularly by crisis and fear. So if we get back to where we started this discussion, which is if the state cannot do its fundamental duty to protect property and life, then adherence to constitutional and democratic principles can easily be thrown aside. So, yeah, so I wanted to say I, you cannot get around the fact that there has to be a cultural societal commitment and trust to operate in a democratic way and that no democracy, including and especially perhaps the United States can take it for granted that we're always going to get better and always gonna get more democratic and we're not vulnerable to the threats that we see around the world in terms of the return to autocracy, the return to dictatorship, the return to tyranny. Let me also say that I think with the younger generation, the impatience that they have with making change in complex societies leads a number of them to take a view very similar to what you said. And I think I saw here at Stanford exam, pretty much Sanders and Trump had a lot of appeal because with the generation of people under the age of 35, they look at what's happened in terms of the economy and the disruption that has been caused by the Steve Jobses and the Wozniaks and others. And they say, well, why can't the regular world be like this? Why can't we just throw over the old system and bring in anew? And so they get very impatient with the fact that the way the system is set up, if you don't have enough consensus right now, our American political system is devised to do nothing until we get there to consensus. And we leave it to the states to do their own thing when we can't decide as a nation what to do. And that, for people that have rightfully a sense of urgency about certain issues like climate change is very frustrating. But the reality is, if you have a commitment to democracy, that is, you're going to make sure that whatever decisions we take have the approval of the majority, then your job is to actually persuade these people that, yeah, climate change is for real. And yeah, we gotta do something about it. You can't just say, okay, well, we gotta throw out the rules because we don't like what policy we're pursuing. That gets us back to the state of nature and we don't do that. So I do think there's, I think the other thing that I will add, and again, I don't wanna pick on your generation, but I think it is important to talk about this, but obviously the technology offers the alluring prospect that we could govern by the internet and daily, we could make decisions and we could be liberating ourselves from the intermediaries. But of course, that is exactly the delegation paradox. Again, because people then come to find intermediaries, you know, heroes of the internet that can describe and distill and to help you think about these things. And so in the end, we come back to this fundamental problem that complex societies are hard to understand unless you've got unlimited amounts of time.  So the bottom line is we have a very complex society that requires a lot of information, it requires specialization and division of labor, but then how you bring it all together into a cohesive whole becomes a challenge the more complex the society becomes. There are two questions that made me think of. When you were describing, I think the term you used is commitment. There's a commitment that people have to make to democracy. This sounds very much ideal in a metaphysical sense. It sounds very much like an idea that people have to actively hold on to in order for the whole system to work. People stop accepting that idea or stop trying to live in accordance with that particular idea, then the whole thing might fall apart. Would you feel comfortable saying something like, if we're gonna try to be precise about what government is, it's something very similar to a lot of people believing an idea. Yeah, I mean. Was that too woo-woo? No, I mean, I think it's true, but I think how people believe in an idea varies very much. So for some people who study it all the time like me, they can think about it in an abstract sense. But I think for a lot of citizens, they learn about the idea by practicing it. And so a lot of political scientists believe that what happens at the local government level or what happens in terms of community organizations or even in the Little League and the League of Women Voters or all the different organizations, if they're practicing principles of collaboration and they're using principles of majority rule and with respect for minority rights and all that, that you learn democratic habits at that level, you get confidence that that's the way to operate that is most inclusive and most likely keeps the society from essentially exploding into a warring faction. So I think it's an acquisition of democratic habits. It's a socialization. It's not always thinking through from first principles and deciding, yeah, this is the best form of government and this is the best way to do it. I think for some people, that's what we have to do. But I think for a lot of people, it's learned through practice and recognizing that this works in a lot of different levels and it needs to work at the highest level as well. So if they didn't have that practice or if, for example, coming from New York State, I have a lot of experience with the DMV there which is just unbelievably slow and incompetent. When I'm at the DMV and I'm doing what I have to do to register my vehicles, the thoughts crop up in my mind. This is very silly. So in a sense, I am practicing that democratic idea. But in another sense, I also think, you know, I bet this could be done better by somebody else. I bet if we just eliminated the entire department and had, let's say, just some private company manage how all these things are supposed to operate, I bet they can do it better. So I have two questions on that note. One, do you think that's mistaken? And two, if that's correct, then does it imply that really, really radical political change can ultimately be started by just people starting to question the particular ideas in their head about how society should be structured? I think, first of all, I would distinguish between administrative operations of the state and policy-making decisions of the state. Now, to be fair, many of our laws are written in such a way that administrators have to make policy decisions. Fortunately for us, the DMV is not one of those, okay? The DMV has fairly strict procedures and a lot of what we experience with both the DMV and with voting administration is that they are at the bottom of the food chain in terms of getting money and high quality help, shall we say. And I believe that disruption there is both fully justified and more easily implemented because there's no question. I've actually seen some advances in both California and in other states that I've lived in where increasingly stuff has migrated to online and I think there's a lot more that can be done. I think the problem is one of how do you introduce technology in the appropriate place in a way that preserves the privacy of people but is more efficient. And so I think with the DMV we can get there but remember, social security numbers and various other things are there. So when we, if we move to these online systems, we gotta make sure they're really secure because this hacking problem is becoming a major, major issue obviously. And your generation, I really think, is gonna have to struggle with the whole privacy question. And so we wanna make sure as we go put more stuff on online and as the government becomes more efficient that way, at the same time individual privacy is protected because there are some serious issues there if social security data gets out there or other kinds of information, it can really disrupt your personal life. And so I think a lot of it has to do with how we implement the new technology, making sure that there's enough money for it. I mean, you look at what happened with Obamacare when they tried to set up the online markets and the problem with that. And for all the advances that we've made in computer technology and software systems and the rest, the reality is that when you switch over to new financial systems or new administrative systems, there are always glitches and problems. And now add to that, we've got a rogue class out there of Chinese, Russian, and our own domestic hackers that seem to regard this as a fair game for ripping people off, which is sad, but not on something you would anticipate if your view of human nature is that people, there's a mixed population out there, there are good people, most of us are in the middle, and there are some very bad people out there that some of them are quite clever and will continually try to. So I'm all in favor of doing something about your DMV problem, but and I'm also in favor of someday being able to have online voting, but until we solve our security issues, we don't wanna be hacked in our personal information or in our democratic outcomes. So that's a good example, I think Obamacare's a good example, because I know my own personal beliefs and I think a lot of people who are in my generation and spend a lot of time online view the debacle that was, you know, the attempting at setting up the Obamacare website not as one that was of a lack of funding or one that was because the problem was just too complex, but surely one of incompetence, that if you have private organizations can build far more detailed, user-friendly, stable websites than the government. And it seems like that's a common theme, not just at the DMV or Obamacare, but pretty much everywhere you have this bureaucratic administration of anything. It appears, at least from my perspective, that you have this unbelievable mismanagement of resources. Well, yes, but I think there's a deeper thing you're missing here. And I see this particularly since I've moved down to Stanford, and that is that a lot of the talent in your generation is private sector oriented. And that has the effect that people with a lot of technical expertise, the best in the brightest computer science majors, the best in the brightest of people who can data scrape, et cetera, they are not going into government service. And so they're going into private companies. And so yeah, fair enough, you're going to give your national security information over to Palantir, and or you're going to hire programmers from the private sector. And the kids are quite explicit about why they're doing that. You can make a lot more money as a consultant to the government than you can if you're working for the government. Now think about this for a second. That means that yes, you may be getting better and more talented people, but the question of net benefit is a little complex because maybe by using better, smarter people, you're getting to the outcome in faster, more efficient way. And that offsets what you're paying in terms of extra wages, but maybe not. After all, as we know, not all these people in the private sector are super competent, not all these companies are super competent. So you could get the worst of both worlds. So I really think in order for the government to make intelligent decisions about which private companies to hire and which kinds of expertise they need, you have to have expertise inside the government to be able to assess the talent outside the government. And so we need to make sure that there's some balance between the two. And I've been spending a lot of time here working on that and trying to get at least some number of the kids here to if not go into government service, at least do it long enough to figure out what's going inside the government. So as people outside, they have a sense of what they need to do for the government. And maybe we need to have programs where people go in and out of the government a little bit more easily. We have to be careful when we do that that we don't create conflicts of interest, but somehow we've got to do something about the imbalance of technical expertise inside the government. Because even your solution of using private consultants won't work if the people inside the government don't know enough to know between good and bad. So that's a good segue because some questions I have will bring us back to kind of foundational political philosophy. So with the example of there are certainly incompetent private organizations out there, definitely. However, there does seem to be one systemic difference between private incompetence and public incompetence.  They have a really strong incentive not to be incompetent. But in the public sector, we don't have that. So we have case after case after case of just people essentially throwing a huge amount of money in a pit and burning it. I mean, you think about how long like Amtrak, for example, has been operating a loss or the postal services operating a loss just years and years, billions of dollars doing fairly basic things. Doesn't that kind of point to a systemic problem or like a systemic incentive problem with governmental systems that even if they do things wrong by virtue of their funding mechanism, they don't go bankrupt? I think the problem of getting the incentives right when you don't have a market mechanism to discipline it is absolutely an important issue. And I think we could do more to change the incentive structure. And I think it's probably the case that we need to do more to make sure that to change civil service laws either to have longer opportunities to find out whether somebody is or is not competent because usually you don't turn it on and off. Usually you can discover, but it takes a while to figure out. These are of course huge struggles. And so because of public sector unions and I don't believe in demonizing public sector unions but I do believe that they have to be more flexible about what you're talking about because otherwise the whole reputation of the public sector continues to sink as it sinks it then makes it harder to get the talented people because if we can't get them competing for salaries, you at least have to have some group of people that really believe in the mission and really believe in the importance of what they're doing. So it's self-defeating to not really raise the reputation of the public sector and to get good people there. So I think that's right, but I am always struck when I work with public officials. We just did a local government summer institute. There are a lot of very good people in the public sector, teachers, nurses, et cetera. They really do go the extra mile but that doesn't mean that we shouldn't be paying attention to the incentives and allowing people to be moved out if they really can't do the job properly. Yes, I don't mean to imply that they're bad people, but I would say is though, so okay, so let's keep going more fundamental. When I get a service from a private sector organization, whether it's I buy health insurance or I buy a burrito or I buy a car, whatever it is, if I don't like their service or they've done a bad job or I think they've overcharged me or hoodwinked me or something, I don't have to patronize them anymore. But that, and that seems like that makes the incentives correct for them to behave themselves and it also seems to give some kind of legitimacy to their organization. Where if I'm giving money over to you, it's because I'm saying I value your service more than this money. But with government, that's not what's going on because the funding mechanism is taxation. You don't really have a choice to opt out of funding it. There's two things that seem peculiar to me. One is the incentives are all wrong or they don't have to be accountable to you because it doesn't really matter. And two, it seems like it also gets at the legitimacy problem. So if I had a government, so if we take a theoretical example where you have this big bureaucratic government and the vast majority of people don't like the services that are being provided or how they're being provided, then doesn't that imply it's not really that legitimate of a government because they're just essentially extorting people for tax money and doing whatever they want with it? Was that too radical? Yeah, I mean, yeah, it's painting with a very broad brush. So you're overlooking the fact that we've built into the system oversight mechanisms that link it up to elected officials that link it up to the approval of voters. And anybody who works for a government is very aware of what the public is thinking at any moment in time. And the problem is that the public can only pay attention to certain things.  And so the problem is not that there's no responsiveness, it's that it takes a crisis to mobilize people to do something about it. And so one of the things that's happened is that both in the Congress and the state legislature, there should be more oversight of agency activity and representatives should be using agency budgets to send signals about whether the performance is good or bad. The problem is that that kind of work is below the radar screen of most voters. And so most politicians say, well, they don't know that whether I'm doing a good job with my oversight activity, so I'm gonna wait until there's a major crisis, I'll jump on that, but otherwise I'm not gonna spend a lot of time going through and figuring out whether the agency's doing a good job. Now, to the rescue, I think, come a lot of nonprofit groups, many of them using the skills that we were talking about earlier. And I think nonprofits can play a really good role in picking up the oversight mechanism that's missing in government because the politicians will respond if you show them a problem and how they can claim credit for fixing it. And so remember in the Madisonian system, it's all about figuring out everybody's interests and how we can play them off against one another to have checks and balances. So I actually think nonprofits have become almost like the fourth or fifth. If we say the fourth estate is the press, I think the fifth estate now is the nonprofit sector. And I think there's some wonderful organizations like the Sunlight Foundation or the Center for Responsive Politics or on and on and on that are really paying attention now to the oversight activities. Maybe we should give them more tax breaks. Maybe we should give them public subsidies and authorize them. Maybe give them more access to data so that they can do this checking activity because I do believe that the democracy mechanism of voice and throwing people out works. And if it's not working, it's usually because the public doesn't know they're getting screwed. So what we need to do is develop better mechanisms for letting them know. So I don't think it's abandoning government because certain functions won't work for the market. There's not enough money to be made. Some of this Amtrak and other, or airlines that go to small cities, that's provided as a public service or people living in rural areas that can't get health care. Yeah, apparently they do need helicopters and maybe the helicopters are damn expensive but it saves lives. So sometimes we make public investments that are not profitable because we're providing for services that otherwise the market wouldn't provide. Okay, so maybe we can piggyback on both of those. One, I think that might be, that is very compelling from an abstract level in terms of the general public will vote out people that what they think they're not being represented properly. But what about on the individual level? So let's say there's even, not necessarily even individual, but sizable minority. So 10% of people, it's a lot of people, say I think this function of government is terrible. I wish it didn't exist. They're doing things, they're doing things with their money that I think is actively bad. And the rest of the majority say no, this is a service that we want to have happen. Isn't there something really distasteful about the idea of an organization existing which has access to taxes, meaning I don't have a choice whether or not I'm gonna pay them. And they're doing something that I think is totally completely wrong, completely wrongheaded.   Because as soon as you, I mean, it's like a marriage, right, you talk about your wife, I doubt that you always win, okay? And if you're lucky you win more than she does, but most of us don't these days. And so the reality is every time you add another person into your collective action problem, you're going to lose on some issues. But those circumstances are all voluntary. This is something which is totally involuntary. That's not clear that they're always voluntary, right? I mean, there are a lot of situations where you have a common problem and you gotta do something about it and you have to work with your neighbors, right? Yes, but it's not, working with neighbors is different than saying, I'm gonna tell my neighbor what to do or he's gonna tell me what to do. No, it's not different because let's say you're trying to solve a problem of crime. Yeah. And, you know, 80% of the neighbors want to do something and 20% don't. Yeah. Well, good luck with trying to make sure that the crime is only concentrated on the 20% and all the 80% who pay get their crime taken care of but the 20% don't, okay? So the reality is that the problem, the reason that we have collective action problems is we have non-excludable public goods, okay? That means that there are things like cleaning the air or providing safety, et cetera, that you can't sort of parcel out to this individual and that individual. And so you have this problem that there's an incentive for people to shirk, to say, hey, I don't have to pay, I wanna get you to pay. And I'm a lot of my relatives fit into this category, by the way. And, you know, that's the shirking problem, is a real problem with collective action. They want the benefit but they don't wanna pay. And so, yes, you have to have coercion because that's not fair, that's not right. If you want protection, you gotta pay for the national defense.  So yeah, every libertarian says, hey, I don't wanna have to pay for that but they're benefiting from it. Same thing with police, same thing with clean air, same thing with clean water. These are classic public goods. Now, are you gonna tell me that there are some things that have been classified as public goods that should be private goods that don't provide these excludable, non-excludable benefits? Yes, should those be contracted out and dealt with with the private sector? Yes, as long as they're providing efficiency as long as there are enough firms in that area because if you're just jumping from one monopoly to another monopoly, you're not any better off. If you've got only one firm that collects that trash and they've got a local monopoly in that area and you get rid of your municipal trash collectors and you go to that one company, you're not any better off. Well, I'm not sure that there would only be one company that would be collecting trash. That's not where you are. This is the problem with Obamacare. Some of the markets are doing fine because they have a bunch of health providers are there but some of them, you don't have enough competition. So you haven't really gotten the benefits of this market system. So there are two questions then. Does that mean in the circumstance with the crime in the neighborhood, you're saying it would be legitimate for the 80% of people to essentially take the 20% money and just say, look, this is a public good. I'm gonna kick down your door and take some of your funds to fund it. Are you saying that's legitimate? Yes, but not of course that way. But basically here's the premise. The premise is if you decide to live in a given community, there's an implied social contract. And that implied social contract is if there are general benefits that are provided to that like protection. What if they disagree? So what if... That's called voting with your feet. So are you saying that the 80% could get together and say, essentially pay up or leave? What I'm saying is that, well, you're assuming that you're imposing it on, so we have democratic mechanisms for that and we would put it on the ballot. They would get a chance to put their arguments forward. And let's say they say, no, this is a bad idea. It's not actually a threat. I think you guys are mistaken. I'm not gonna pay for it. Then what do you do? Then you've opted out of the democratic system. But then what happens? Well, then your problem is that until you convince a super majority of people to get rid of the democratic system, you have two choices. You either accept the system or you either leave or are non-compliant and get jailed. Yes. Is that what you're saying then? For those 20% that have rejected, they went to the town hall and they said, uh-uh, not gonna do it.  Well, that's extreme. What I'm saying is that we have a general principle. If we're talking about local government, okay? Then we have, with respect to municipal services, the opportunity to vote with your feet and- But that's the opportunity meaning I could leave, but I'm saying let's say they're on their property and they're saying, look, this is a family farm that's been in the farm and the family for 150 years. I have all these social connections. And I don't wanna have any police protection at all. On my property, sure. Let's say they say that. Let's go to the extreme. They say, look, I can fend for myself. I don't want the police services. So I'm not gonna pay for them. Yeah. So that comes down to, again, how could a society be organized that way? No. So why not? And the reason is that you would devolve away from optimal organization, because the incentive to shirk would cause more and more people to get down the rat hole of not participating. Because I'm gonna say, hey, if he doesn't have to pay, I'm not gonna pay.  And then everybody's worse off because- Is that okay though?  Yes, but now you've just contradicted the definition of a public good, and I'm not gonna allow you to do that. The definition of a public good is that it's non-excludable. So let's take the classic case. Let's take clean air. Yeah. Okay? So here's what I would say. Yeah. Hypothetically speaking, it could be possible, just like if somebody comes onto your property and pollutes your property. This could be the case with air as well. That if somebody is actively aggressing on your property, or they're polluting, or they're taking money from your wallet, or whatever they're doing against your person or property, then you have some kind of illegal recourse. So then you would have something like, hey, now you've actually broken the rule. So I could accept the idea that you don't pay for it, you don't get it. But if you're either aggressing against somebody, now there's gonna be some kind of force in play. So there's like an exception to the opt-out rule. It's like, you could opt out from these different services if you don't want them. But if you start polluting other people's air, now we got a problem. I don't see the problem with that kind of circumstance. Okay, so I'm not providing pollution, you're saying, and therefore only the people that provide the pollution should pay for the pollution. Now in reality, we do something like that with our cap and trade system. So that's fair enough, and we do that. But it still is the issue that, if you put it all on the polluters, there are still other forms of pollution that arise. If you don't have a car, you'd have to not have a car. You'd have to not be burning certain kinds of fuels. You would have to not have any cattle that put methane out there. I keep down the list, okay? Well, but that implies, so I think where you would have a legitimate, so I don't think aggression would just be putting a little bit of methane in the air. I think there has to be some kind of demonstrable harm. So it would be like, if I'm dumping toxic waste on your land or something like that, I don't think that it follows just because people essentially breathe that therefore there's some kind of legitimate control over what they can choose to opt in and opt out of. So let's take that example. Let's say that somebody says, look, all of the cars that are out there just put all kinds of sulfur in the air and make it all terrible for the rest of us, but I'm on my property. I'm gonna keep to myself. I can fend for myself. Do you think it would be legitimate to let him opt out? No, I don't. Sorry. So what are the options, though, if he votes and you said that jail is too extreme or leave is too extreme, what's the other option? No, no, I mean, look, what I'm saying is that he can move to a different place that doesn't have pollution issues if he doesn't. Let's say it doesn't, though. Let's say this is my property. I've been here for 150 years. Well, okay, I mean, property rights are a communal decision, right? In other words, they didn't come in the state of nature. They were imposed by society. But so, I mean, And so, okay, but the purpose of these democratic rules and of these rights is to produce a more effective and functioning society that maximizes the general happiness of the population. It's a utilitarian calculus. The public calculus is a utilitarian calculus. You're maximizing the greatest good to the greatest number. That's what you're trying to do. For all the fancy language and economics, that's essentially what's underneath it all. So you're asking the question, can our notion of right extend to the point where we have no utilitarian calculus anymore? No. Well, I mean, Okay, but there's two questions. So what do you do with the person? If they say I'm not leaving, I voted and I'm not leaving. Well, we have a good example of this, right? It happened in Oregon most recently, right? And we had ranchers that didn't wanna pay for the grazing of their cattle. They weren't paying the federal government for it. And they were trying to take back lands that had been preserved for the sake of the wildlife in the areas was a wildlife preserve and they wanted to take it back and have it privately owned and operated, okay? So what the Oregon example shows is that yes, there are times when the state has to say these are the rules. If you break the rules, there are consequences. Now, here's the way that works. You as a citizen can then engage in an act of civil disobedience. And a true act of civil disobedience is more, shall we say persuasive, if you allow yourself to be actual pay the consequences of that. I have no admiration for people who don't walk the walk. If you're gonna talk the talk, you gotta walk the walk. And if you think that you've got a good point about why you shouldn't be obliged and you wanna appeal to the conscience of the rest of your citizens, then you should do that. But in the end, I'm a lock in. I believe that when you buy property and when you assume citizenship, you assume certain responsibilities.  You can't decide that you are going to live your own life without adhering to rules. You don't have the right to decide that you're not going to obey traffic signals. Yes, but you could choose and say, I'm not gonna drive on the roads. But can we talk? Or you can't decide that you're not going to murder people or you are gonna murder people, right? Well, anybody can decide that. I mean, that's just the question. Yeah, but the point is these are all rules that are imposed on individual freedom. So where do you draw the line between when it's proper to infringe on freedom and when it doesn't? So the murder example would be an infringement on somebody else's freedom or their personal rights. But the... Pollution is an infringement on everybody's health around you because you're not contributing to helping clean it up. And the pollution has serious physical effects on people. And I agree to the extent that something is demonstrably dangerous like that, then yes, that would be an act of aggression or an act of violation of these rights. But I do wanna get just in summary. I wanna get down to more what do you do concretely? Because you said jail or actually leave is extreme. And then you said you have to pay the price if you don't go in accordance with the law. But concretely speaking, what is paying the price? Well, those are the last resort measures. That's what I meant by extreme. In the case of the pollution, I would work to try to put more the burden of paying things on to the people who actually pollute. And so I think the market solution that we had for that is a good one. And I think you can often do things like that, but you can't always do that. And so at some point you have to accept the majority will.  If you're doing it because you think that you have the right to do anything you want, I disagree. Yes, but you don't have the right to do anything you want if it harms somebody else. So like the local example, you know, there's some kind of local department of education. Some person objects, they say, I am not paying my taxes for this for such and such a reason. It's not that they're harming anybody else. They're just saying I'm not paying my taxes. Why is it only harming anybody else? What of your harming property? So what property of your harm? So what if I say, well, let's say I have the right to paint your house, so whatever color I want. But that would be my property. Yeah, but I'm not hurting you personally. No, no, so it would be person or property. Okay, so then what if I decide that I'm going to chop down all the trees, redwood trees in parts of Marin? Well, who owns the redwood trees? It's owned by, it's a public trust. Well, we can get into the problems with maybe the problems with the tragedy that comes. No, no, but I'm getting into the problem of defining harm as narrowly as you're doing. No, no, but I just want to play out the thought experiment. So something, we're not talking about like aggressing on anybody or murder or painting their property. I'm saying specifically, they don't want to pay taxes for like their local department of education. And they've gone through the democratic process and there's 80% to 20% concretely speaking, what happens if they refuse to pay the taxes? Well, again, then you get to the last resort, then you get to the extreme, yeah. So ultimately it is backed up, right? I would try to mediate and try to find ways to make sure that if indeed the responsibility for harm or resides with a particular group of citizens that they have to pay for it. And so we do have syntaxes, for example, that for people who are smokers and undertake risky behaviors, which are potentially social costs that they're putting on to us, that these taxes are more geared to them to pay for these activities. So I think there's a lot more, a lot we can do to relieve the burden, but you cannot be in a society and not in a democratic society and always win. In fact, it would be bad for democracy if that were the case because then you would be violating principles of legitimacy and you'd have dominance, which is very problematic for legitimacy.  I certainly had to do that during certain administrations and you may have to do it if certain people get elected. So ultimately, would you agree with this statement then that at the very bottom of it, the taxation and the results of taxation is ultimately backed up by force? Yes, yes. Every action in the state is, that's the definition of the state is that it has the monopoly of coercion and obviously a thin state relies heavily on coercion. A thick state relies on mechanisms of negotiation and legitimacy that try to make decisions as inclusive as possible, but decision-making cannot be done by the unanimity principle in a complex society such as ours. I think that is an excellent note to end on. I wanna thank you very much for talking with me today. Okay, very good. All right, that was my interview with Dr. Cain. If you enjoyed this, check out the show notes page steve-patterson.com slash 18 and I'll have a link to Dr. Cain's books as well as some of my own writing on this topic. I got a lot of really awesome interviews coming up including some interviews from Berkeley University while I've been out in California with a guest that I'm so excited about I won't even tell you his name, I'll just keep it a mystery. All right, that's all. I hope you guys have a great day.