Date: 1950-01-01T07:00:00+00:00
Keywords: liberty
Description: The Foundation for Economic Education The Freeman 1974

The Freeman 1974

Foundation for Economic Education
the Freeman VOL. 24, NO.1. JANUARY 1974 The GullibleSociety W. A. Paton 3 A careful review of the economic folly rampant today and some of the contributing factors, with a view toward correction. The Voluntarist'sRole Ridgway K. Foley, Jr. 10 A call for action, ot-the reflective type that denotes self-responsibility. The MultinationalCorporation Mark Peterson 18 The critics of the multinational firms seem unaware of the benefits they would destroy. On "Using"the Government Ralph Bradford 24 When special interests start using the govE~rnment for their purposes, look to your defenses. Libertyvs. Coercion:The ,Burden of Proof Tibor R. Machan 35 Let the proponent of coercion explain why he should force us to help with his plan. The Future of the Dollar Henry Hazlitt 39 A review of the U.S. and internationtal departures from gold and of the prospects for a return to sound monetary policy. "Free Parking"- Space Not Ava.ilable If it is scarce and valuable, is should carry ji price.

Gary North 50 .Book Reviews: "Children of Darkness: Some Heretical Refl,ections on the Kid Cult" by Richard S. Wheeler "Abraham lincoln - Theologian of American Anguish" by Elton Trueblood "Understanding the Dollar Crisis" by Percy L Greaves, Jr. "Two Concepts of the Rule of Law" by Gottfried Dietze Anyone wishing to communicatle with authors may send first-class mail in care of THE FREEMAN for forwarding. 53 the Freeman A MONTHLY JOURNAL OF IDEAS ON LIBERT~ IRVINGTON·ON·HUDSON, N. Y. 10533 TEL.: (914) 591·723C LEONARD E. READ PAUL L. POIROT President, Foundation for Economic Education Managing Editor THE F R E E MAN is published monthly by thf Foundation for Economic Education, Inc., a non· political, nonprofit, educational champion of privatE property, the free market, the profit and loss system and limited government. Any interested person may receive its publicationf for the asking. The costs of Foundation projects ant services, including THE FREEMAN, are met throug} voluntary donations. Total expenses average $12.00 ~ year per person on the mailing list. Donations are in· vited in any amount-$5.00 to $10,OOO-as the mean: of maintaining and extending the Foundation's work Copyright, 1974, The Foundation for Economic Education, Inc. Printe in U.S.A. Additional copies, postpaid, to one address: Single copy, 5 cents; 3 for $1.00; 10 for $2.50; 25 or more, 20 cents each.

THE FREEMAN is available on microfilm from Xerox University Microfilm! Ann Arbor, Michigan 48106. Some articles available as reprints at cost; state quantity desired. Pel mission granted to reprint any article from this issue.

THERE IS some justification for saying that this is an age of rea son in the physical sciences and engineering, but in the realm of economics it is a time of well-nigh unpreceden ted folly. Currently many Americans appear to have thrown their stock of common sense to the winds. It is true, of course, that man has suffered acutely throughout most of what we know of his history from su perstition, religious quackery, tyr anny, and fallacious notions about his physical environment. Al though the only form of life on the planet capable of careful scru ~,tiny and pondering with respect w. A. Paton is Professor Emeritus of Account ing and of Economics, University of Michigan. He is author (or co-author) of a score of books and many articles, largely in the field of ac counting. Since his retirement at Michigan, he has continued his writing and lecturing activ ities and has done part-time teaching at a dozen colleges and universities, in ten states.

to himself and his surroundings, llomo sapiens has often proved to be an easy mark for the witch doctor, the soothsayer, the spell binder, and other nonsense ped dlers. But I doubt if at any earlier period were people generally so susceptible to economic pipe dreams and pie-in-the-sky pro posals as we are today. If we don't go beyond American history the case is clear. Our forefathers, at no stage, vV'ould have widely accepted the view that the road to prosperity, the abundant life for all, is by ,vay of blocking early entry to the working ranks, an enforced 4lO-hour - or less - work week, 'with the trimmings of minimum vvage laws, paid vacations, feather bedding and soldiering, and retire rnent with a handsome pension 3 4 THE FREEMAN January after thirty years of service, cou pled with a program of govern ment handouts on a vast scale to those .unemployed for almost any reason or excuse. They were ad dicted to hard work, recognized that we can't consume what we don't produce, and were skeptical of all schemes to pick ourselves up by our bootstraps. And they would be shocked by today's widespread tide of vandalism, violence, and disorder, which is becoming a se riousobstacle to efficient utiliza tion of available resources and increasing - or even maintaining - the level of economic output.

It should also be noted that the astrologers, fortunetellers, seers, gurus, ESP experts, and assorted cult leaders - as well as the eco nomic con men - are flourishing these days. In short, as an adjective to de scribe present-day attitudes, aims, and' popular proposals for dealing with current economic problems, real or pseudo, the term "gullible" is a much more appropriate label for our society than "good" or "great." Contributing Changes There are explanations and ex cuses for the current state of eco nomic confusion aside from the persistent streak of susceptibility to humbug to be observed in man kind. To refer again to the American scene, the fantastic changes in economic conditions and meth ods that have occurred in a few generations - often pointed out and also often forgotten - have undoubtedly contributed heavily to present-day misunderstanding and blindness regarding funda mental principles and require ments. The tremendous increase in production and standard of liv ing resulting from the pioneering spirit, an excellent endowment of natural resources, and the tech nological surge, has beguiled many into thinking that the sky is the limit, that the well will never run dry, that all that is necessary to secure an abundance for every body is taking from the haves and giving to the havenots, that hard work and slow saving are out moded.

A partial explanation of thE willingness to accept economic programs that are largely poppy cock is also found in the growing complexity of the economic struc ture, with its network of markets, elaborate fabric of banking anc related facilities, multitude oj business organizations, corporatE and otherwise, and so on. Even ir my boyhood days the state of thE economy was so simple, with thE family farm still a dominant fea ture, that there was less eXCUSE for becoming befuddled as to th4 basics of economic behavior. II 1971,- THE GULLIBLE SOCIETY 5 those days we all knew that we had to work and produce to live. A sidelight that perhaps should be noticed is the availability of improved communication facili ties. One of the great wonders of our time, surely, is the develop ment of means making possible virtually instant communication to everybody, everywhere. But our radios and TV sets can be used for spreading folly as well as en lightenment, and the proponents of economic nostrums have not neglected to take advantage of this fact. Back in 1896, when William Jennings Bryan first ran for president, he made a great impact with his wonderful voice and oratorical skill, although his "free-silver" monetary program was sheer tommyrot. If he had had the radio at his command - as did Franklin Delano Roosevelt in presenting his "fireside chats,"

likewise largely nonsense - he might well have won the election. These few comments, obviously, are an inadequate account of the factors which have resulted in the shift in points of view and the growth of economic illiteracy in the past sixty to seventy years. They leave largely unanswered the crucial question: why have the majority of our citizens become willing to support and accept an array of socialist programs, while still giving lip service to the coneept of an economy featuring pri vate enterprise and a system of free markets? I have a few sug gestions to offer that have a bear ing on this phenomenon. The Great Delusion The outstanding delusion with 'which Americans have become af lflicted, and which also plagues a host of our contemporaries in other countries, is the belief that economic problems can be dealt 'with most effectively by turning them over to the machinery of government. Indeed this belief in the power of government has be eome so embedded in many minds, throughout our population, as to eonstitute an article of faith, so to speak, to be taken for granted, ilmmune to critical examination.

.A..nd this delusion is· also our tap root folly, the fountainhead of unsound views and policies. Upon elose scrutiny it will be found that most of our misconceptions in the economic field, and the specific proposals and programs that promise what they can't deliver, are rooted in the almost mystic view that resort to the apparatus of government is the ultimate so lution for all economic difficulties and ailments. I The hold that this delusion has upon us is rather amazing in view of the historical record, and the very obvious limitations inherent 6 THE FREEMAN January in government. Any form or level of government is implemented. by one or more human beings who has either seized power, by one means or another, or been granted power by some process in which at least some of the folks to be governed have participated. There is nothing mysterious or super natural involved. The person or persons functioning as an arm of government-the people that make up any bureau, commission, de partment, court, cabinet, city council, and the like or fill seats in such bodies as our national and state legislatures - don't take on heroic proportions, don't become supermen, simply by putting on the .governmenta.l mantle. At the best they are conscientious indi viduals trying to carry out the duties that presumably go with their positions. At the worst they are tyrants and crooks interested only in power for what they can get out of it, or fanatics and mes siahs obsessed with the notion that they have the right to rule and know all the answers.

A Sorry History The history of all forms of gov ernment to date is a sorry one. Governments generally have been inefficient, bloody, lacking high moral standards, and not dedi cated to the best interests of the governed group. But a common human failing is the tendency to put on dark glasses when it comes to the lessons that history might teach us. Having power is a ticklish as signment, in any activity, and restraints are required if those with power are to be kept within bounds. Our founding fathers un derstood this, and fashioned a re markable governmental structure, designed to keep both kings and mobs at bay, and to be restricted to a limited set of controls and functions. They would certainly be appalled if they could take a look at the sprawling octopus of co ercion that has developed, with tentacles of authority reaching in all directions. The central concept that is so widely overlooked is that govern ment, like other institutional ar rangements, should be regarded as a specialized instrument, not a do-everything mechanism. The in trinsic function of government is to serve as the domestic policeman and to resist aggression from out siders. ·And if the world were peopled exclusively by individuals wholehea.rtedly committed to re specting the rights of their fellow men, coercive government might well fade away to the vanishing point. In the prevailing state of affairs I grant the need for some government, but it would be a blessing if this necessary appa1974 THE GULLIBLE SOCIETY 7 ratus would tend to its knitting, not butt into the business of rais ing potatoes or building automo biles - to say nothing of going to the length of becoming guardian and guide over all our personal activities and welfare from the cradle to the grave.

Moreover, as government be comes overextended, takes on the role of Jack-of-all-trades, it tends to become increasingly inefficient. Anyone who has had any consid erable experience in governmental control and operation of business knows very well that this is the case. No government agency is free from the political influences that tend to thwart attempts to improve methods and procedures. Lack of planning, inflexibility, waste, delay, are familiar features throughout government, at all levels. There is also an inherent tend ency for those in government busi ness, even if well intentioned at the start, to become increasingly indifferent to their clients or cus tomers. The history of the U. s. Post Office affords a notorious ex ample. And as citizens become accustomed to the faults of gov ernment service, and to "the obsta cles in the way of making com plaints felt, they gradually learn to put up with bad treatment, to take their lot for gran ted, to lose their inclination to resist.

It should also be noted that ,government interference in busi ness operation, even if stopping short of a complete takeover, has the unfortunate effect of putting a damper on the initiative and ingenuity of owners and manag ers, and their technical staffs. An outstanding illustration is afforded by the long history of blundering in the regulation of our railway system. Our Socialist Trend - Why? But in spite of the plain evi dence of government incompetence all about us, and the chilling im pact of government interference and regulation on private initia tive, many Americans - including a lot of folks who should know better - clamor for more of the same. Why have we become so benighted? Why do we believe we can have our cake and eat it too? Why is there so much fence strad dling, often without awareness? I'll attempt a brief answer to this query. First, let's take note of the efforts of the dedicated and per sistent Fabians and Marxists who have long been in our midst. When I began systematic study of eco nomics back in 1912 at the Uni versity of Michigan, there were a few avowed socialists on the fac ulty, and a sprinkling of their like in the student body. These 8 THE FREEMAN January people were not taken very seri 0usly' however, by most of the campus population, and were cer tainly not regarded with great anxiety, as a possible menace to our way of life. But these advo cates of the socialist state were indefatigable in efforts to spread their brand of gospel, and may have had some impact, at least as seed sowers. And perhaps they laid a groundwork that later on facili tated the growth of a swarm of procommunists, fellow travelers, and assorted "anticapitalists,"

bent on destroying the American system of government and private business enterprise. Although capitalism has often been accused of fostering armed conflict between nations, the fact is that a condition of war is in compatible with a free-market economy. War inevitably expands the authority of central govern ment and puts a brake on individ ual initiative and decision-making. It seems very clear that our par ticipation in World Wars I and II, and subsequent serious military involvement in the Far East, plus the overhanging fear of armed conflict and resulting vast "de fense" expenditures, is the major explanation of the growing sub servience to government power that we have been experiencing. And in between the two great war efforts, and in part induced by postwar turmoil and adjustment, came the "Great Depression" of the early 1930s, and the resulting programs for relieving distress, of which President Roosevelt was the master architect - programs that failed so miserably as to en courage said architect to push us into a second tremendous military adventure.

In view of this history, indeed, the great expansion of the mecha nism of government, and the en croachment of government into the processes of both production and distribution throughout the economic pipe line, is hardly sur;.. prising. Perhaps the wonder is that we still have some vestiges left of a free society. A Weak Defense The defense of economic liberty, too, has been feeble and ineffec tive. Especially from the depres sion days on, the teaching of economics has been increasingly socialistic in most colleges and universities, taking the form of either downright condemnation of business and the market system or damning capitalism with faint praise. Religious leaders general ly~ never too well-disposed to pri vate enterprise, have also becomE more aggressive with their half baked attacks on American busi· ness. And many journalists and writers, growing up in war anc 1974 THE GULLIBLE SOCIETY 9 depression days, have joined in the chorus of criticism. Even busi ness executives, nominally sup porters of economic freedom, have made a sorry showing. I' find it hard to forget the way business leaders generally rushed to get on the bandwagon in the days when the effort was made to establish synthetic socialism, almost over night, through adoption of the NIRA codes. Happily this effort failed because of a decisive ruling of the U.S. Supreme Court of that time. But many business leaders, with a seeming lack of clear com:"

prehension of the essentials of a market economy, still participate in sawing off the limb they are sitting on while continuing to prate about "our system of free enterprise." Perhaps it should also be noted that the socialist trend in Amer ica in the last few decades has been disguised as a great human itarian movement. We have been making the trek into socialism under the banner of assorted wel fare programs, caring for the ailing and unfortunate and the needs of "senior citizens," guard ing the interests of consumers, conserving natural resources, cleaning up the environment, and :so on. Even at this stage an avowed socialist or Marxist couldn't be elected president in the United States, but a clever chap who promises that govern lment will control the bad boys in business, and see that we are all 'well-housed, well-fed, and have an adequate standard of living in other respects, and be our pro tector, counselor, and guide in all our activities, may well make it.

The current outlook is rather bleak from the standpoint of those w'ho believe that individual initia tive and responsibility are charac teristics worth preserving in our society. But it's still important to keep the leaven of that point of view alive in the loaf. , IDEAS ON ~ LIBERTY Reprints of this article available, 10 cents each. The Constitution of Liberty THERE can be little doubt that man owes some of his greatest suc cesses in the past to the fact that he has not been able to control social life. His continued advance may well depend on his deliber ately refraining from exercising controls which are now in his power. FRIEDRICH A. HAYEK The Voluntarists Role RIDGWAY K. FOLEY, JR. THE COMMITTED LIBERTARIAN abides on at least two levels. Ini tially, a practitioner of freedom must understand that which he practices. We never cease being students of liberty. Noone can truly say that he has fully mas tered the art, for the process ap pears to be an ongoing endeavor.

Self-understanding of freedom represents an obligation which cannot be fulfilled, even with a lifetime of effort. The role of the free market, the concept of limited government, the ideal of individual freedom and initiative in a volun tary society, all command attention to their myriad applications in day-to-day living. Nevertheless, seminal mastery of the idea of liberty impels recog nition of a second-level enterprise: implementation of the freedom Mr. Foley, a partner in Souther, Spaulding, Kinsey, Williamson & Schwabe, practices law in Portland, Oregon. 10 ethic. At this level of development, the voluntarist l has gained suffi cient maturity and knowledge to enj oy a partial command of his subject; he now quests for ways and means of branching forth, of inculcating like beliefs in other individuals in the hope that prac tice will replace theory in our world. An immediate problem confronts each of us as we emerge from the cocoon of internal analysis to the incipient butterfly. of action - we are outnumbered, we are out flanked, and we face a plethora of brush fires scorching what preci· ous little freedom remains to us, Too often the tendency is to throw up our hands in horror, bemoan the lack of full-time "freedom fighters," and drop out of the fray, 1 I use "libertarian" and "voluntarist' in terchangeably to mean one committee to the precepts of individual libert~ briefly noted in the opening paragraph.

1974 THE VOLUNTARIST'S ROLE 11 Such a reaction should not sur prise anyone, for we perceive at tacks on liberty on all fronts. Re flect briefly on a few. The Bank Secrecy Act of 1970 commandeers the allegedly private but actually publicly controlled banking system into full-time espionage by requir ing all bankg to microfilm and pre serve copies of all of our checks for governmental inspection and use. Now, if a private citizen or entity undertook such a project to build a dossier on every citizen in the nation, or if the FBI pursued such a course of conduct without court authority, the hue and cry of "police state" would ring in our ears; yet, when a benevolent gov ernment deals thus with its citi zens in the economic realm, scarcely a bleat is heard above the din of approval. Nevertheless, one cannot imagine a more virulent ex cursion into personal rights; whose business is it if I write checks to FEE, or to the IRS, or to the local massage parlor? Not the state's business, to be sure!

Laws Against Gold Again, consider the legislative norms and executive decrees which coalesce and prohibit American citizens from owning gold. 2 Per2 See Holzer, Henry Marsh, "How Americans Lost Their Right to Own Gold -and Became Criminals in the Process," 39 Brooklyn Law Review 517-557 (1973). haps a case might be made for inhibiting certain individuals with proven dangerous propensities from possessing instruments of de struction, like hydrogen bombs, plastic explosives or M-1 rifles. No such case exists for depriving any one from converting the value he hag created into any form he de sires: gold, tobacco, wampum, or Hershey bars. Some befuddled economist named Keynes once labeled gold a "barbarous relic"; that act provides no reason to pro hibit me from seeking refuge in a metal which I believe constitutes a store of value in these perilous economic times. The voluntarist believes that the creator of value ought to be able to spend, save, or 'waste that value in any way he sees fit, so long as he does no harm to others exercising an equal and re ciprocal freedom. Only the posses sor can assimilate and reflectively act upon the myriad bits of infor mation which integrate into mak ing the decision of the best choice for the actor under the circum stances.

Protectors of Consumers Another petty coercion appears in the self-styled knights-errant who pose in the garb of protectors of the consumer. The Nader-like "public interest research groups" (PIRG's), which proliferate like rabbits, offer an apt example. Now, 12 THE FREEMAN January I normally feel competent, as a consumer, to decide what I wish to purchase; at the very least, I pos sess adequate acumen that if I try a bar of Grandma's Lye Soap and discover that it is not up to snuff, I usually have little difficulty in dissuading myself from identical future purchases. A like-minded citizenry , operating on choice rather than coercion, will see to it that Grandma's Lye Soap goes out of business if it fails to produce desirable results. This vote - the dollar vote - represents the true key to economic democracy. Only producers who offer something of value desired by purchasers will continue to operate. The inefficient or incompetent producer will ex hibit only a warehouse of unsold lye soap for his effort.

PIRG's arouse my animosity not because of their .ends, some of which are laudable, but because of the means used to achieve those ends. 3 PIRG's seek to warn con sumers of frauds and deceptions. While doubting that such unoffi cial alarm systems operate very effectively and efficiently, few men of good will condone force or fraud 3 Remember Emerson's caveat: "The ends preexist in the means." See Read, Leonard E., "The Bloom PreExists in the Seed," Let Freedom Reign (The Foundation For Economic Education, Inc., Irvington-On-Hudson, New York 1969) 78-86. Nowhere does this warning appear more starkly than in the instant setting. in any guise, and all cheer efforts to allay such practices. But PIRG's invite rational attack because their very means are coercive and de ceptive: most are funded by monies extorted from other individuals (often nonconsenting students merely seeking an education at state-supported institutions of higher learning) or taxpayers who do not agree with the ends sought, the means employed, or who simply want to exercise their own right of free choice. No libertarian can consistently deny the right of others to band together for protec tion against fraud; he can take umbrage at being mulcted to sup port their activities.

Safety Glasses Can our sensitivities stand yet another example? The Safety Op tics Act represents Congressional and bureaucratic usurpation of private rights to the nth degree. All eyeglasses (save a very few) must conform to rigid standards better fit for construction workers or jackhammer operators than for lawyers or housewives. These al most impossible requirements, en acted in the guise of public safety, increase the cost of prescription lenses (needlessly for the aged who generally can ill afford the charge and who seldom engage in hazardous activities), not to men tion the time one must forego 1974 THE VOLUNTAl:tIST'S ROLE 13 needed lenses while his new glasses undergo endless testing. Noone challenges the propriety of a party bargaining for strong, glare treated, shatterproof, crack-resist ant eyeglasses on a voluntary basis, but no one should compel another individual to accept only those lenses some person or group thinks "desirable." Risk is a pa.rt of ,living and, contrary to a pecu liar statist notion, no one can leg islate the risk out of life and pro duce an entirely wholesome and antiseptic world. Eliminate risk (assuming the possibility), and you have eliminated one element which forms the very verve and vi tality of life.

Unwarranted Interferences Other petty coercions appear hourly on -the modern scene. While too numerous to catalog, the aspir ing voluntarist can learn to rec ognize them and to accept these irritations for their true nature. Any time the state, the organized force of society, aids one individ ual or group at the expense of an other individual or group, or in hibits free a.ction of any citizen not engaged in coercive practices, it has overstepped its proper bounds and trampled freedom in the process. Every subsidy, every restraint of free trade, every inhi hition on personal voluntary ac tion, every censorship, and all other rules of that ilk, demand eondemnation precisely because they represent irrational and im moral interferences with the 8acred life given to each human being. The existence and proliferation of these mighty and petty ravages of freedom typically impel the second-stage volunteer to one of two courses of conduct. Either he laments his case as hopeless and hides himself into seclusion (the passive reaction), or he "rails against follY,"4 peripatetically flailing about at real and imagined targets (the active reaction).

The passive reaction mourns the Jlack of full-time "freedom fight ers" to wage battle on behalf of all 'who love liberty. Yet each of us should commit himself to the fray. 'We cannot combat by proxy and exhibit the effectiveness necessary to carry the day. Success requires a.nalysis, input and action from diverse individuals and groups, not a canned, one-dimensional, sterile approach. The active reaction: action. Re fuse to comply! Circumvent the law! To jail, if necessary, all to rnake a point! But to whom would the point be made ?To the count less pre-reflective individuals, both 'IVithin and without the political ~lpparatus ? Not likely, for they 4 See Read, Leonard E., "Railing Against Folly" (unpublished eassay).

14 THE FREEMAN January cannot comprehend the meaning connected with the act. A few, if they knew, might understand. The actor, too, would understand and would rest easily with his con science for he would know that he performed morally by refusing to become a willing participant in coercion. A free man in an unfree world. The Reflective Reaction An alternative exists: the reflec tive reaction: persuasion first of self, then of those roundabout who voluntarily listen, whose thirst for understanding brings them within the a.mbit of your light. Isn't this more sensible than "rail ing against folly," than running off in six different directions at once, waiving at poltergeists and tilting at windmills? A cool, calcula.ted and objective approach merits con sideration, and, probably, assures a greater measure of success and satisfaction. By this methodology I do not advocate some mere passive re sistance, retiring to a virgin mountaintop where one can think great thoughts. Whilst I remain of philosophical bent, I advocate action, but reflective, effective ac tion. The time is now, the need acute, the task tremendous. We must summon all of our strength, our intelligence, our prayers to the endeavor; but this means convening our energies and employing them in a calculated and rational manner. The engaging little stat· ists who tear about our society can be effectively defanged if individ· ualists keep the faith, improve their own understanding, eschew preaching, exhibit a joyful demea· nor, live their lives consistently in accordance with their philosophy, and light a few brush fires of their own along the way. Let us briefly examine these guidelines.

Keep the faith First, we must keep the faith. Withdrawal admits defeat. It hides our light from the rest of the world, for the faithless exude poor candlepower. We must believe: truly believe, in our basic preceptE and act upon that belief. Second, each of us must improve his understanding of the nature and philosophy of the freedom doc trine. As noted at the outset, this never-end.ing task will consume our whole life and dominate our whole being, for no one of us can accom plish perfect freedom even with a lifetime of effort. Reading, think ing, conversing with others of botlJ like and unlike minds will propel us on our way in this regard Growth represents our goal, fOl man is a "becoming" creature. Third, we must avoid the tend· ency to preach to others, for nc one listens much to a "know-it· 1974 THE VOLUNTARIST'S ROLE 15 a11."5 Like the converted sinner filled to the brim with the miracle of his conversion, the libertarian after long periods of study often appears so full of exuberance that he feels he must spray forth his beliefs or burst. Yet we know from common experience that the ener getic young preacher detracts from his message when he intrudes so deeply into the conversation that he dominates all others. Each of us wants very much to be heard, to have other beings place value on his utterances. The libertarian must learn to listen as well as to speak, to offer his light in small bits, easy to assimilate. Electricity provides wonderful gifts, but none of our appliances can effectively use this source as it arrives from the powerhouse; the energy must be broken down into usable quan tities and forces .by means of a series of complicated distribution systems and transformers. The freedom devotee must provide his own transformer. Patience and perseverance represent ultimate values in this regard.

Compassion and Joy Fourth, forget not the need for calmness, compassion and joy. Treat each human being as a hu5 See Read, Leonard E., Who's Listen ing? (The Foundation For Economic Education, Inc., Irvington-on-Hudson, New York 1973) especially 1-10. man being, not as an object to be :mauled and manipulated. Statists view mankind as so much putty to be molded by the social architect; libertarians conceive of man as possessed of a soul, of dignity, of intrinsic worth qua person. Far too often, gloom and darkness pervade the setting of the voluntarist and :seem to follow him about like a dark cloud. Perhaps this state is eaused by the gravity of the situa tion where statism seems to be 'winning on every side, or by the serious questions we constantly eonsideI'. But such an attitude ignores the solace of our own be lliefs and the essential nature of our endeavor. The freedom philos ophy offers a lilting rhapsody to lman in this world; the tenets of our faith recognize that individ uals, while imperfect, are. capable of great creative and productive strides. Long faces have no place here, for life for the free man offers an exciting challenge and an exhilarating road to follow. Above all, we must retain a sense of humor ere we lose our stability and our effectiveness in the process. An ability to laugh, even at ourselves, in the face of overwhelming chaos, bodes well for the future success.

Fifth, we must live our lives consistently and in accordance with our philosophy. Consistency represents a maj or virtue. All too often purported believers in the 16 THE FREEMAN Januar'y freedom ethic act altogether irra tionally when they move from their chosen discipline into a related arena. Nothing can quell a quest ing audience more quickly than an actor who belies his words by in consistent deeds. The liberta.rian who accepts government subsidies or competitive advantages deviates as much from his beliefs as the hypocri tical Christian who cheats his fellow man on Monday morn ing. No one will be attracted to voluntarism by cant or deceit. No one can truly express libertarian thought without living his life in harmony with those principles. Signal Fires Sixth, after an of .the foregoing we must light a few brush fires along the way, to illuminate the path we call right and just. Liber tarians assume a defensive posture in many instances: they a.re la beled "against" social security, wage and price and rent controls, the Federal Reserve System, crimi nalization of sexual conduct be tween consenting adults, and my riad other sanctions. Our role in cludes patient explanation of the fundamental principles underlying these positions: it also includes much more. Each of us must ex plain the affirmative of the indi vidualist faith: belief in the dig nity of individual man and his power to "chooserationally between alternatives, in th~ right of each human being to live his life strictly, solely, and uniquely in ac cordance with the dictates of his own conscience without interfer ence from others save in the event that he acts coercively or fraudu lently.

The signal fires .I suggest can take many forms far beyond my limited imagination - so long as they truly reflect these basic prin ciples. For example, libertarians living in a state which permits di rect legislative action (initiative, referendum, recall) can refer odi ous legislation, initiate laws which repeal subsidies, recall venal pub lic officials, and the like. Commit ted libertarians can seek elective office if such a course does not con flict with their concern with power. 6 Yet reflective people must sound a caveat, for political power is power - force - and such tools must be carefully used lest we vio late the 1!oncoercive principles -un der lying the freedom ethic. Respect Differences My advocacy of brush fires ex emplifies a concomitant thought: 6 Like Dr. Ludwig von Mises, H granted power, I would abdicate; that position does not mean that all volun tarists share such a view. Certainly, WE need lawmakers and judges to administeI common justice, adjudicate disputes, de fine crimes, prepare and provision armies!

and administer those relatively few laws necessary to a free and ordered society • 1974 THE VOLUNTAE~IST1S ROL~ 17 I do not join the throng which de cries the so-called fragmentation of the "right," the tendency of libertarians to heed distinct toc sins. Some of us exhibit more con cern with an ordered civilization; some of us carry the label "tradi tionalist'" others "libertarian," still others "conservative"; some of us consider defense posture im portant, while others denounce local interferences with our lives in one of the many real and touch ing guises. Yet our very real strength lies in our diversity, our individuality, not in our being a "cohesive political force"; save the latter for the modern-day liberal who enjoys one-mindedness! We Free To Discriminate rnay exhibit minor philosophical differences between each other after all, men are individuals, not carbon copies of one another but we possess many more values in common with other voluntarists than we do with the statists.

Finally, let us display optimism in the ultimate success of our ven ture. It is quite easy to harken to the many and varied lootings of valu'e which occur daily and to fall into despondency, but such an atti tude serves no one well. See the light a.gainst the dark morning sky: ea.ch evil little scheme pre sents one or more of us with a grand opportunity to light his candle for freedom. ~ IDEAS ON L$ LIBERTY IF MAN IS TO CONTINUE his self-improvement, he must be free to exercise the powers of choice with which he has been endowed. When discrimination is not allowed according to one's wisdom and conscience, both discrinlination and conscience will atrophy in the same manner as an unused muscle. Since man was given these faculties, it necessarily follows that he should use them and be personally responsible for the consequences of his choices. This means that he must be free to either enjoy or endure the conse quences of each decision, beeause the lesson it teaches is the sole purpose of experience - the best of all teachers.

F. A. HARPER, Blessings of Discrimination The MultinationalCorporation MARK PETERSOl\ Is the AFL-CIO right when it warns of the "dimming of Amer ica" ensuing from the "export" of American jobs by multinational corporations? And are many non industrial or underdeveloped coun tries, such as Mexico, right in clamping curbs and controls on multinationals? I think not. The multinational corporation, one that undertakes a significant portion of its produc tion outside its original home ", country, is actually a very natural phenomenon, like the weather, which recognizes no national boundaries. The multinational cor poration (MNC) is simply a re sponse to certain economic facts of life: Consumer markets for prod ucts are often international, and natural resource deposits bear little relation to Rand McNally's maps. Thus, Swiss Nestle, an MNC, produces chocolate here be cause the market is here. GM proMr. Peterson is a recent graduate of Princeton and a freelance writer.

18 duces Opels in Germany becausE the market is there. And Standard Oil (N.J.) is a MNC because na· ture favored Venezuela and thE Middle East. Accordingly, I believe the MNC is a natural, common sense re sponse to the major law of eco nomics: be efficient, or don't waste scarce resources. I hope to show that organized labor is wrong, since jobs are not really being "exported," and that underdevel oped countries are equally wrong, since the MN C helps, not hinders, economic growth. Notwithstanding the seemingly universal criticism, the MN C is an example of Adam Smith's "invisible hand" at work, of private enterprise in the pub lic interest. The stakes involved are huge. Perhaps $350 billion worth of goods and services annually, or one-eighth of the free world's out put, pours out from MNC fac tories located outside the MNC home countries. American MNCs 1974 THE MULTINATIONAL CORPORATION 19 account for roughly $210 billion or three-fifths of the total MNC output. 1 Organized labor looks askance at that $210 billion, wondering whether American workers wouldn't be better off if there were no foreign investment by MNCs.

The AFL-CIO appears to contend that if MNCs were restricted, the investment money would be spent here, and our growth rate might rocket. Jobs "Exported" As it is, jobs have been "ex ported," according to George Meany. He's vexed by the "run away plant," which boards up in New Jersey only to pop up in Taiwan, where wages are much lower. He claims the loss of such plants has cost hundreds of thous ands of jobs. If the product is destined for foreign markets, why can't it be produced here and ex ported? Or if we Americans are the consumers (we import. Opels, for example), isn't it more logical to produce the product here? (Ac tually, according to Commerce Department data, only 7 per cent of U.S. MNC production abroad comes back to the U.S.) The AFL-CIO argument is as full of holes as Swiss cheese, since 1 The Diebold Institute, Business and Developing Countries, Praeger, New York, 1973, p. 5.

it fails to recognize the compelling reasons of economic efficiency be hind MNC production abroad. For example, when the customers are :foreign (usually the case), U.S. firms often can't easily export to them, due to transportation costs and tariffs. With regard to the :former, GM, for example, put up assembly plants in Europe during the 1920's, because it could ship nine unassembled Chevrolets from :New York at the same cost as two assembled ones. If there were no assembly plants overseas, GM 'would have sold fewer cars in :Europe, with fewer jobs for its American employees building parts. In the case of tariffs, or taxes by foreign countries on U.S. ex ports, again American firms have trouble competing in foreign mar kets. Production inside the tariff 'walls of those countries enables them to compete. Still another efficiency consider ation is labor cost. Meany is irked by plants which have "run away"

to low-wage countries. But why does this happen? In the words of a Harvard Business School pro :Eessor:2 2 Robert B. Stobaugh, "U.S. Multina tional Enterprises and the U.S. Econ omy," in U.S. Department of Commerce, The Multinational Corporation, Studies on U.S. Foreign Investment, Vol. 1, U.S. Gov't. Printing Office, Washington, March 1972, p. 28.

20 THE FREEMAN January Although U.S. firms have a prefer ence for operating in the United States, in most cases of U.S. foreign ... investment, U.S. firms do not have the alternative of continuing to serve the relevant market - either in the U.S. or abroad - from their U.S. plants. If U.S. firms tried to continue operating only in the U.S., they would lose their markets to foreign firms, usually large enterprises from Eur ope and Japan. Thus, the U.S. electronics firm which has "run away" to Taiwan does so only to survive in the face of Japanese competition; the jobs lost when the domestic plant shut down would have been lost any way. No jobs have been "ex ported." But why is foreign competition such a threat in the first place? Here the unions themselves are to blame. Normally (that is, in a free market), American firms would shun foreign sites because, though wages are higher here, produc tivity (or output per worker) is correspondingly higher, due to larger amounts of invested capi tal per worker. (Another factor for higher productivity is greater "human capital," i.e., better train ing and education of American workers.) But the unions, with monopoly power over labor, have pressured wages above produc tivity levels. To recoup this added expense and to survive in the face of less unionized foreign competi tion, the MNC has arisen.

American workers benefit in many ways from the MNC's quest for efficiency - despite, or rather because of, the MNC's move to out flank the unions. 3 First, workers benefit through the added profits from foreign operations. It's an economic axiom that capital goes where its return is highest; a firm would never go abroad unless it expected a heightening of profits thereby. These profits return to the U.S.; part are paid out in divi dends, and the rest swell the sup ply of savings. These savings are then often invested in the domes tic operations of the company, thereby creating more jobs here. Thus, in the long run there may be more investment in American factories than there would be if firms were ordered to confine their investment to the U.S. True, for eign investment consumes a grow ing slice of the pie of total busi ness capital, but, thanks to foreign investment, the pie is growing.

Some data bear out this asser tion. MNCs do appear more prof itable than other large firms. 4 3 For an explanation that the workers are the real victims of the unions, see w. H. Hutt, The Strike-Threat System, The Economic Consequences of Collective Bargaining, Arlington House, New Ro chelle, N.Y., 1973. 4 Raymond Vernon, Sovereignty at Bay: The Multinational Spread of u.S. Enterprise, Basic Books, New York, 1972.

1974 THE MULTINATIONAL CORPORATION 21 And apparently these profits have fueled domestic expansion, for MNC domestic employment grew by 2.7 per cent a year during the late 1960's compared to only 1.8 per cent for the overall U.S. pri vate sector (Commerce Depart ment data). However, I'm not claiming this evidence is conclu sive, since other, hidden factors may be at work. A second way American work ers benefit is through the domestic activity generated by foreign pro duction. For example, American capital equipment may be installed in an overseas plant. Furthermore, an overseas plant can help the for eign sales of domestically pro duced goods by creating a "full" product line. For example, the ad dition of a low-priced item manu factured abroad may complement the high-priced export from America and thereby aid the whole sales effort. Third, American workers bene fit as consumers in the relatively rare case of foreign production for domestic consumption. If the MN C can economize on labor costs, it will pass the savings on through lower prices, thanks to competi tion. Thus U.S. purchasers of portable radios benefit from the plant which has "run away" to Taiwan.

Fourth, American workers bene fit from the foreign prosperity created by MNC investment, through a kind of "feedback." MNC foreign investment tends to expand the economy of a foreign nation; that nation then becomes a better market for U.S. exports. In addition, U.S. owned foreign fac tories are often better managed than locally owned foreign busi nesses. Foreign businessmen learn better management techniques by watching U.S. firms in action and by working for U.S. firms. 5 Through a feedback, we benefit as well, since those more proficient foreigners can sell their goods to us at lower prices and feel more confident about investing here. For these reasons, I conclude the AFL-CIO's warning of the "dimming of America" is pushing the panic button. The MNC con tributes solidly to the national in terest. What of the international interest - in particular, that of underdeveloped countries?

The MNC offers nonindustrial nations an opportunity to break out of poverty. One manner in which the MN C promotes growth is the provision of capital. Even liberal economist Paul Samuelson agrees on the need for capital. G The MNC's capital provides jobs 5 John H. Dunning, The Role of A.mer ican Investment in the British Economy, available from the Committee for Eco nomic Development, New York, 1969. 6 Economics, McGraw-Hill, New York, 1973, 9th edition, pp. 775-81.

22 THE FREEMAN January for many. Thus, to take one ex ample, United Fruit enormously expanded the living standards of the peoples of Central America. 7 Not only does the MNC pay good wages, but sometimes it offers training in skills, semiskills, and basic literacy and arithmetic, as well as more advanced subjects, in order to foster "human capital." In the case of GE Brazil, the workers had to contribute half the time for such training, while GE Brazil paid them for the other half and met all expenses of the courses. 8 Improved Management Another way underdeveloped countries benefit is through the learning of better management techniques. Sears Roebuck, for in stance, sent consultants to its local suppliers to aid their operations. 9 GE Brazil contacted local firms, encouraged them to enter new fields and supply GE, and loaned them funds; GE also sent a few engineers from the U.S. to give advice. Furthermore, GE Brazil 7 Stacy May and Galo Plaza, The United Fruit Company in Latin America, National Planning Association, Washing ton, D. C., 1958.

8 Theodore Geiger and Liesel Goode, The General Electric Company 'in Bra zil, National Planning Association, Wash ington, D. C., 1961. 9 Sears Roebuck de Mexico, S.A., Na tional Planning Association, Washing ton, D. C., 1953. opened its executive suite to Bra zilian nationals; of the 51 highest managerial posts, 35 were held by Brazilians in 1961. These native executives soon found themselves in demand throughout Brazil, and some left GE Brazil to work in other firms. The MNC helps underdeveloped countries in still another way. It provides local consumers with the goods they want at prices lower than the competition's - the tradi tional way business helps con sumer welfare and economic growth in all countries. Thus, Sears Roebuck introduced Mexico to the supermarket and its dis count prices; in addition, it initi ated a credit system for poorer customers. And GE Brazil built locomotives and electric genera tors, both helpful to growth, along with products much in demand by individual consumers, such as lamps and radios. When a busi nessman is able to reduce the price a consumer pays for a product, he helps economic growth, since the consumer has more money to save or spend on other products.

In view of these favorable effects of MNC investment, it is not surprising that the fastest growing underdeveloped countries have been those which have taken a lenient attitude toward foreign investment: Brazil, South Korea, Thailand, Iran, Jordan, Taiwan, 1974 THE MULTINATIONAL CORPORATION 23 Hong Kong.I° Meanwhile, India's people have experienced hardly any improvement in living stand ards since their government im posed stringent controls on MNCs, though part of the blame must be shared by India's central planning. In view of this record, why the hostility to MNCs, such as Mexi can President Echeverria's hard line policy and Libya's expropria tions or nationalizations (thefts) of oil wells? One root of the prob lem is leftist ideology, the Leninist concept of imperialism. Another root is the sheer size of some MNCs, which are frequently big, inviting targets, hard to miss, and convenient scapegoats.

Still another root is the com petition of MNCs with local busi nessmen; often a U.S. subsidiary may drive out less efficient local producers. So the government steps in to protect these business men (hurting the consumer in the process). Or the government may force the MNC to hire more na tionals in top management and allow· more shareholding by na tionals (local ownership of the subsidiary). These policies mani fest a desire to help the rich, the local businessmen, not the poor, the workers and consumers. The hard line taken by under developed countries is responsible 10 Diebold report, supra note 1, p. 86. for the relatively declining inter est shown by MNCs. For example, MNC investment in Latin America has declined from 39 per cent of the world total in 1950 to 19 per cent in 1970, while Europe's share increased (Commerce Department data). However, Latin American investment increased in absolute terms.

I believe the hard line policy and the reliance on central plan ning by nonindustrial nations are responsible for a disturbing trend: the income gap'between rich and poor nations seems to be widen ing, not only absolutely, but rela tively.11 In essence, both unions and most underdeveloped countries are blind to the virtues of the free market and fail to perceive how private enterprise serves the pub lic interest. As the late Ludwig von Mises, the distinguished econ omist, noted, we live in an age of interventionism, and the "anti capitalistic mentality" increas ingly predominates. The critics of multinationals in particular and of capitalism in' general should keep in mind Albany's point in King Lear: "Striving to better, oft we mar what's well." 11 Peter G. Peterson, The United States in the Changing World Economy, U. S. Gov't. Printing Office, Washington, 1971.RALPH BRADFORD On My OLD FRIEND was remInIscing about the Roosevelt years. In his youth he had been a Republican, but when the New Deal battalions took over Washington he found himself marching to their drum.

He has mellowed considerably. As we exchanged ideas recently he was distressed about the na tion's deteriorating financial situ ation. Rather surprisingly, he in veighed against "spending billions as though they were millions"; and he expressed great concern about the inevitably disastrous re sults of long-continued deficit financing. But he still looks back nostal gically to the events of the Nine teen Thirties; and I suspect he secretly feels that he participated in a kind of sanctified crusade. Suddenly, after a thoughtful siMr. Bradford is well known as a writer, speak er, and business organization consultant. He now lives in Ocala, Florida. 24 " theGovernment lence, he made a casual remark (or made it casually) that slowly dawned on me as significant, and led finally to the writing of these paragraphs. "We were terribly excited in those days," he said, "about mak ing America great. We thought nothing of long hours or hard work. We welcomed ideas, and we used government as I think it ought to be used."

They used government as they thought it ought to be used! He was not being facetious, and certainly no irony was intended. It was a simple statement of an operating principle or method that required no justification, and that apparently aroused no question in his mind. He and many of his political as sociates of the New Deal era were men and women of humanity and good intention. They had lived through several years of economic 1974 ON "USING" THg 'GOVERNMENT 25 depression. It was not limited to America but was a world. catas trophe. It was not as bad as they liked to paint it, but it was bad enough in all conscience, and there was hardship and suffering along with business failures and bank ruptcies. Something was wrong, they felt, with a politico-economic system in which such a disaster could occur. They wanted to do something about it. They wanted to see a better and more stable society, in which people could all be safe and happy.

And so they decided to have the government take charge of all their good intentions. They would "use" the government in the way they thought it ought to be used which, though some oJ them. did not realize it, was as a coercive agency to compel everybody to ac cept, be governed by, and pay for their particular ideas for insuring economic stability, spreading wealth, curbing greed, abolishing poverty, and generally improving the lot of mankind. Many Demands That all this could be done by "using the government as it ought to be used" they never doubted. That others were intent on "us ing" the government for different and often opposing ends did not deter them. The idea was strong and constant in the Washington of that era. I once heard one of their number, who happened also to be a noted labor leader, express the same idea with respect to his program. "I look upon govern ment," he said, "simply as a mech anism for getting things done."

While he was generally sympa thetic to the wide-ranging pro gram of theN ew Dealers, the things he especially wanted to get done by force of governmental ac tion were primarily pieces of leg islation that favored the aspira tions of union leaders. And he was not alone in his self-centered "use" of government. There were others in Washington who wanted to use the government as they thought it ought to be used namely, for their own interest and benefit and that of their friends or constituents. They included rep resentatives of particular lines of business or industry, various trade associations, community develop ment federations, certain kinds of state and regional organizations a small army of special pleaders, as there always had been. But for the time being the administration forces were in control. Because of a kind of nationwide intellectual paralysis, they had first call on the "use" of government.

And so the country entered the long period of political and eco nomic tinkering that came to be known as the New Deal in capital 26 THE FREEMAN January letters - so named because of a poker player's phrase in the ac ceptance speech of their Presiden tial nominee, in which he called for a "new deal" for the Ameri can people. The New DealBy Men of "Vision" Soon Washington was thronged with those who were intent on "saving the country." Many of them, like myoId friend, were also concerned, as they expressed it, with making America "great" - a purpose that ignored the fact that our country was already great, very great indeed, in the eyes of the whole world, and in the fervent belief of most Ameri cans. Experts crowded the corri dors-economists, sociologists, spe cialists on urban problems, ditto on rural conditions,'financial ana lysts, tax·· counselors, market men - you name it. The Academy, especially, was heavily represented. Theory was at a premium; experience was dis counted. Men of experience, it was alleged, had "got us into this mess." It was up to men of theory and academic standing (and of course "social vision") to get us out of it. New ideas were, indeed, welcomed, as myoId friend as serted, though most of them turned out to be not new at all, but very old. Most anybody could get a hearing, especially if he had something radical to propose.

Very shortly, beginning with the famed One Hundred Days, a spate of legislation was ground out by a Congress that had virtually abdi cated its power to originate law. Some of it was regulatory legis lation that was long overdue. Much of it was costly experimen tal tinkering. There was an Act to help Agriculture. Quite simply, it subsidized farm operations at the expense of the rest of society, with the two basic provisions that the government would guarantee the farmers a certain price for their produce, and that it would actually pay them for holding a portion of their land out of culti vation in order to create artificial shortages and keep up prices. Per haps the climactic absurdity was reached when farmers were re quired to kill a certain percentage of their little pigs, or plow under a specified number of cotton rows. (Quite recently we have wit nessed a throwback to those days in the spectacle of poultry raisers destroying thousands of baby chicks because a governmentally controlled grain market and ceil ings on retail prices made it im possible to bring the chicks to table size without actual loss to the grower.) There was also an industrial re covery Act, so called. It was sup1974 ON "USING" TH:E GOVERNMENT 27 posed to restore health to a falter ing economy. Among other meas ures, it. pifQvided a program under which peop~e: engaged in the same line of business or industry could organize under government sanc tion". and by the adoption of what were called "Codes'" could agree on prices, credit, production and other matters, all in defiance of long-established law, and certain ly in contravention of the public interest.

To catalogue and examine all that was undertaken would fill a book. Indeed, it has filled many books already. Some of it has gone by the board because it was de clared unconstitutional. Some of it has been merged into later pro grams. But much remains, not ably parts of the farm subsidy program, and an elaborate system of old age pensions and medical benefits. These latter have sur vived and been expanded under the semantically "good" name of Social Security. It is not my purpose to attempt a detailed analysis of all this vast program. Two points, however, should be made: First, that this was not the first time (nor will it, in all probability, be the last) that men have "used government as they thought it ought to be used." And second, that such well-meant efforts result in the creation of self-perpetuating bureaucracies, and in keeping expensive and re strictive programs going long after the need for them, real or ::fancied, is past, or their failure has been demonstrated.

Some Ancient Recipes As for newness or modernity, the "codification" of industry is at least as old as the European Guild system of the Middle Ages. The compulsory old-age pension system was instituted in Prussia by Bismarck about a hundred years ago, but the idea was not new, even then. And controlling or attempting to control agricul tural production and prices by the destruction of growing crops goes back at least as far as the Roman Emperor Domitian during the first century after Christ. As for bureaucratic self-per petuation, Washington is full (and so, I suppose, are most State capi tals) of agencies whose original purp.ose has been well-nigh for gotten. But try to get one of them discontinued! Woe betide the con scientious official who would at tempt such sacrilege! At once an indignant howl ascends to heaven. A pressure group is formed, clear back to the grass roots. Congress men are besieged with letters, tel egrams, phone calls and delega tions. The heat is applied to their important supporters back home.

The deprivation syndrome also 28 THE FREEMAN January comes into play. If the bureau was originally started to provide some sort of "benefit" (financial or otherwise) to segments of the pop ulation, then no matter how waste ful, inefficient, or no-Ionger-need ed it may prove to be - hands off! It has become a sacred cow - not only to its scattered beneficiaries, but to its small army of employ ees. To abolish it would be to de prive worthy people of their rights, and their employment. Shame on you for trying to do such a cruel thing! And this sort of reaction is not limited to small-fry recipients of governmental aid or employment. It is practiced equally by the scheming housewife who skips from job to job in order to collect so-called unemployment benefits during the idle periods, and the big corporation executive who uses more sophisticated methods of see ing to it that his company retains its full share of the Washington favors. Colleges, universities, states, regions, big business, little business, labor, merchants, bank ers, manufacturers, teachers powerful and influential sections of the society are equally vocal, energetic, resourceful andpersua sive in protecting their slice of the Federal pie. They are convinced and dedicated disciples of using the government - as they think it ought to be used.

A Social Disease So. much for what may be called the pragmatic or practical or bread-and-butter aspects of "us ing" the government. But the mat ter goes far deeper. These atti tudes are surface things - symp toms of the inner malaise that can affect a government and its people when it has ceased to be a govern ment and become a mere collec tion and disbursement agency for the enhancement of privilege and the distribution of largesse. When such a state is reached, the gov ernment, if it survives at all, emerges either as a tyranny or as a collectivist regime. In either case, the general economy ulti mately stagnates, initiative is stifled, and freedom, as men have known it and died for it, perishes. In either case, it is a dream gone bankrupt. What, after all, is government? It is a device created or evolved by men to protect them in their in herent or acquired rights, and to insure their liberty. A good state ment of the purpose of any gov ernment in an advanced stage of society is to be found in the Pre amble to the Constitution of the United States. "To form a more perfect union, establish justice, in sure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to our1974 ON "USING" TH:E~ 'GOVERNMENT 29 selves and our posterity." In a more primitive society it might have been expressed in simpler terms: "We must organize to keep our several jealous tribes in order, see that everybody gets a fair deal in his relations with others, take care that criminally-minded peo ple can't rob us and destroy our property, have some men specially trained to repel our enemies if they attack us, see to it tha t everybody has a fair chance to make a Iiving and get ahead in the world, and fix things so that our children will be free."

In post-Colonial America more than a decade of experience and experiment had demonstrated the need for a strong central govern ment. The old Articles of Con federation simply would not suf fice.Thirteen separate, jealous, and often mutually antagonistic States loosely federated was not the answer .to the question of American survival. The problem was, how to attain the degree of unification· that would insure sta bility· ,and freedom without get ting eaught in the toils ofa cen tralism that would invite tyranny. Hence the long thirteen years of delay; hence the protracted de bate; hence the elaborate precau tions ·aga'instconcentrated .. power; :hence the three great divisions of government; hence the so-called ,checks .and balances. There was a notable intellectual content in the political leadership of that time. They were well grounded in a kind of empirical idealism. Those who hammered out the Constitution were men of education and vision, heavily se'a soned with uncommon common sense. To think of them as un tutored colonials is to misunder stand completely the kind of life and experience that had molded them. Most of them were highly sophisticated, well educated men, thoroughly grounded in Latin and Greek, careful students of classi cal literature, and especially familiar with the writings of such philo$ophers as the Baron Charles de Montesquieu .and John Locke, and such legal savants as the great b William Blackstone.

On the Shoulders of Giants From Blackstone they derived an understanding of the nature and purpose of government and law. From Montesquieu they learned the principle of a separa tion of governmental powers, re membering that the wise French man, himself a magistrate, ·had written: "When the legislative and executive powers are united in the same person, or in the same body of magistrates, there can ,be no liberty." From Locke they in herited the idea of "natural rights" (which he said consisted 30 THE FREEMAN January of life, liberty and property) and the concept of the "social con tract" - i.e., government. From all of them and others, as well as from their own abundant common sense, they had developed the con viction that the state was the ser vant of the people, and not the other way around. They also were committed to the idea of a duality, or diffusion, of power; and so they were careful to provide for, and reserve certain rights and powers to the governments of the several states. Through all their delibera tions and decisions ran a salutary fear of too much, too powerful, and too concentrated government.

They were careful, therefore, to hedge each branch of government about with definite restrictions upon the nature and extent of the power it should exercise. The purpose was to provide the authority and strength needed to protect the nation against aggres sion from without, to guard against civil disorders within, and to make citizens secure in their civil and property rights. And the ideal constantly aimed at was to do this with the minimum of ma chinery - in short, to avoid the burden, and the danger, of too much government. So what happened? Perhaps the best answer to that question is to be found in one simple but appal ling statistic: The number of civilians now employed by our govern ment is TWO MILLION, EIGHT HU~DRED AND NINETEEN THOUSAND, SIX HUNDRED AND SIXTY ONE! I have put the word "civilian" in italics to empha~ize that we are not now talking about soldiers, sailors, marines and air force per sonnel. They are something else, and a problem in themselves. We are here considering only those employees who are hired to run the innumerable departments, bu reaus, commissions, committees, boards and other agencies that have resulted from the determina tion of the American people to "use" the government.

The Executive Branch This fantastic bureaucratic army, .it should be noted, is almost entirely attached to the Executive branch of the government - nat urally enough, because that is where the action is. The Legisla tive branch merely orders things done by passing a law and voting an appropriation. The Judicial branch merely says whether you can or can't do it under the Con stitution. It is up to the Execu tive, or Administrative, branch to do the job. And so we find that the Legislative branch (both houses of Congress) employs only 33,688 people aside from Congress men and Senators. The Judicial 1974 ON "USING" TH]~ GOVERNMENT 31 branch is still more modest in its demands for help. It employs a relatively insignificant army of only 8,243. (Only! That slight quake you felt just then was John Marshall turning over in his grave.) So that leaves the snug little total for the Executive branch of 2,769,848 employees.

In any overview of the govern ment one starts out, of course, with the great Departments, such as State, Defense, Commerce, Jus tice and the rest, numbering now eleven, with Defense being actu ally a kind of umbrella department covering the operations of the Army, Navy and Air Force. Each Department has its duties, defined by law originally and enlarged by the zeal and ingenuity of its de voted bureaucrat~. 'And this is not said critically of them. Many are ,devoted public servants, doing the job expected of them; but they would be less than human if they did not work to expand the area of action in which their lot is cast.) The names of these great Departments indicate generally the job each was created to do: Commerce - obvious; Labor ditto; Treasury - our finances; and so on. But then we come to the so called Independent Agencies. These have been set up from time to time, occasionally to meet a recognizable need, often as a resuIt of pressure-group activities.

They are all, of course, lodged in the Executive branch. What are they? I' can't possibly even list them in an article of this compass; and besides, if I did you probably wouldn't believe me! I suggest, instead, that you get a copy of the United States Government Organ ization Manual for 1972-73. It is published by the government itself and is available for $3.00 from the Superintendent of I!ocuments, Government Printing Office, Washington. It is a well organized documentation; and it has 710 pages; so in sheer bulk you will get your money's worth. The section on Independent Agencies begins o'n page 372 and runs through page 538-166 pages of rather small type just to nime and describe these Agencies, of which there are now 61. One of them is the General Services Ad ministration, whose job is to pro vide a system for the manage ment of government property and records, including the construc tion and operation of buildings, procurement and distribution of supplies, utilization and disposal of property, stockpiling of stra tegic materials, and so on. In addi tion to its Washington establish ment, it h{ts ten regional offices and operates Information Centers in 35 cities; and it requires five pages of the book just to list the 32 THE FREEMAN January Administrators, Deputy Adminis trators, Directors of Proj ects, and other officials.

So what? Is this written to be little or discredit the General Ser vices? Not at all. For all I know it is manned by very fine men and women. So' far as I am aware, it is a necessary agency, in view of all those Federal buildings and other property. Given the existing set-up, it probably could not be dispensed with. And if that be true, it simply serves to support the theme and purpose of this article, which is not to attack agencies or individuals, but to point out the size, complexity and enormous cost that have resulted from the determination of people to "use. the government as they believe it ought to be used." A Case in Point On my desk as I write is a re cent issue of my home town news paper. In the "Letters" section, Mr. Brent Hall, Athletic Director of one of our high schools, writes: "I am angry and more than a Iittle scared." Why? Well, he says he is angry "because the U. S. Senate will soon vote on S-2365, a bill which, if passed, would create a Federal Board with practically un limited power over high school and college athletics."

He ~oes on to assert that high school and college athletics are two of the most self-policed and regulated institutions in our so ciety, and he adds: "It is a crime that our political system has be come so overloaded with people who think they know what is best for society without consulting those whom they wish to regulate. The whole point of 'competition in a free society is that it is by choice and not by edict of govern ment." He is scared, he adds, be cause he fears the Bill may pass by default. His fear and his anger are both justified; but he should not have been surprised - and I am sure he was not. An effort to put high school and college athletics under Federal control and reguiation is a logical extension of what has been going on in other areas for many years. I have not seen the Senate Bill in question, and can only guess at all its provisions; but if it passes we can be sure of two things: First, the Washing ton Bureaucracy will be enlarged to include another Bureau or Agency or Commission. Just how big it will be is anybody's guess; but there are over 2600 colleges in this country, and about 14,700 high schools with athletic activi ties; so with some 17,300 athletic programs to monitor and direct, an extensive and costly Bureau will be required. But second, and more important, volunteerism, the 1974 ON "USING" THE GOVERNMENT 33 principle of local self-regulation, will have been dealt another blow.

And the blow will have been ad ministered at the vulnerable high school and college level, where the minds and attitudes of young peo ple are being formed. Good Intentions It is a merry whirl, but a dis astrous one, this business of "using" the government. And per haps its grimmest irony is that it is seldom evil in purpose. On the contrary, it usually springs from good social and humani tar ian motives. The intent is not to weaken or destroy the govern ment, but to help some element of society - the poor, the handi capped, the under-educated; the small industry so it can thrive and get to be large; the large indus try so it can meet foreign com petition, pay dividends, and fur nish employment; young people so they may have a better chance in life; old people so they may face age without penury; farmers so they may be on a par with other industry; education so people may better cope with life ... and so on and on. Nobody wants to inj ure the government. They just want to "use" it - for the greater glory.

And so, in addition to the 11 great Departments, we have the 61 Independent Agencies and 70 Selected Boards, Committees and Commissions. And at latest count, and not including the Armed Ser vices, we have, as we have seen, nearly three million people work ing in those departments and agencies. When you add to these the number of people working for State and local governments, in clude those in the armed services, and count in the more than thirty one million who are now on Social Security, we find that there are in round numbers sixty-two million Americans who are now receiving regular monthly checks from gov ernment. One result of all this is that for years now we have had annual budget deficits of from ten to twenty billion dollars; tpat our na tional debt has been jswollen to over $400 billion; that, nobody in authority has made any serious effort to pay anything on that debt; and that-inevi-tablywe have experienced a constant and ruin ous destruction of the value of our money. Not only has this created an intolerable living-cost burden for the average citizen; on the in ternational plane it has weakened the prestige and influence of our country among the powers of the world.

The other result, which is even more disastrous in terms of real welfare and security, is this: that as a people we seem to have reached the point where we no 34 THE FREEMAN January longer see any alternative. We ac cept the "use" of government, and demand more; so much so that in all the clamor of recent months about the cost of food and other life necessities, almost nobody ever mentions the debt and its effects, or seems to see the need for gov ernmental economy. Instead, the well-nigh universal cry has been for more government action: more cost-of-living studies, more wage and price freezes, more controls on the market - in short, for the application of additional expensive and ineffectual adhesive plas ters instead of the surgery that is needed! The simple remedy that nobody mentions can be briefly stated: stop the annual deficits; reduce the size of government; abandon in flationary monetary policies; free the market and let prices find their level.

Will this ever be tried? Or will well-meaning zealots continue to demand that the government be used as they think it ought to be used? ~ IDEAS ON ~ LIBERTY Power Abused How MANY times throughout history this same mistake has been made: Power given to someone who is trusted; then another, to whom the people would never have given power, inherits that which was given to a trusted one. You can guess what happened. Joseph died. An Egyptian in herited the power that had been Joseph's. He didn't assume any power that had not been in the hands of the kind and compassion ate Joseph. The only difference was that he used it differently. He used it to make of the Israelites the abject slaves described in the Bible. Today we have empowered people in our own government to do things for us without realizing the fearful extent of that power. We don't yet realize it because the pe9ple who now hold it have generally not chosen to exercise it in all the awfulness implicit in it. When they do, we will wonder how we could ever have been foolish enough to have given that power to anyone.

From the article "Two Ways to Slavery" by James M. Rogers in Essays on Liberty, Vol. Ill, Foundation for Economic Education, lrvington-on-Hudson, N. Y.

TIBOR R. MACHAN f r f WHENEVER I become aware of some new means by which some of my fellow citizens aim to encroach upon other people's liberty, I tend to oppose such measures. Some time ago a local television editorial advocated the establishment of a new Federal agency to protect the interest of consumers. Later I discussed this with some acquaint ances. When they heard my pro tests, they immediately raised their eyebrows: "Why not?" they asked. "Why should the govern ment stay out of the business of protecting the consumer?" I tried to explain, starting from the principle of caveat emptor and going on to the impossibility of protecting consumers against their would-be protectors. I even argued for some alternative system, such as an insurance program, where by the consumer can protect him self without involving everyone in this mission. Dr. Machan teaches Philosophy at State Uni versity College, Fredonia, New York. He has collected and edited a book of essays by con temporary individualists, The Libertarian Al ternative, to be published later this year by Nelson-Hall Company, Chicago.

None of this seemed to help my case. At each turn I was simply told, "Well, such an agency might still help; it might be able to do something to avoid difficulties with business firms that make shoddy products and cause all sorts of trouble for the consumer." And in a way this is right; such an agency might very well do some good for somebody. But this seems hardly sufficient to justify its establish ment. Each time I emerge from such a discussion I make several reso lutions. Most frequently I resolve that it does little good to talk about such matters in brief en counters - hardly anyone is pre pared to investigate the issues carefully enough to learn anything. It seems inconceivable to most peo ple that agencies of the Federal government should not get in volved with such activities as consumer protection, that is, pro tecting people against their own carelessness. This, despite what Herbert Spencer discovered some time ago: "The ultimate result of 35 36 THE FREEMAN January shielding men from the effects of folly is to fill the world with fools."

It becomes evident in these dis. cussions that people nowadays rarely think in terms of principles. Who wants to apply an old fashioned principle to a modern practice? Regulating business firms seems to many people to be light-years away from regulating the work of newspaper and televi sion writers; consumer protection and censorship are thought to have nothing to do with each other. Fi nally, there is always a problem in protesting some new infringement on human liberty because so many exist already. What point is there in protesting at this juncture; after all, we live with so much co ercion and force already! Thus, the matter is purely academic, or so these people seem to believe. For a Better Way How, then, does one combat this prevailing tendency to run to gov ernment to achieve every goal that seems desirable? "Why not?" "It might work despite the record of failures." Let me share some of my thoughts on the matter.

When a program is advocated by someone, others are entitled to know his reason if the program involves them in some unavoid able manner. If I decided tomor row that I will try, from now on, to help America's consumers by writing letters to business execu tives, accompanying buyers on their trips to the store, publishing books about the quality and va riety of products available, or the like, no one else need be worried about why I am doing this. I may be someone with altruistic mo tives, a guilt complex, or a plan to strike it rich through a consumer protection business. Other people are free to ignore my efforts, or to join in them if they so choose. But they have no right to demand that I furnish them with a justi fication for my actions. (They could conclude, even rightly, that I am w~sting my time, that I will go broke, or something of that sort - just as they could judge my plans to be very valuable. But they cannot justifiably demand that I account to them as to why I am embarking on my mission.) The case is different when my plans must necessarily' involve others. Take, for example, the .edi torialwhich urged a Federal con sumer-protection agency. Others will be involved - including tax payers, business employees who must comply with regulations, and so on. At this juncture, it seems reasonahle to demand that propon ents of such a scheme fuUyexplain and justify why Dther persons should be involved and obliged to join in their mlssion.

But this is not as &;implearle1974 LIBERTY VS. COERCION: THE BURDEN OF PROOF 37 mand as it seems. There are times that we believe, without the slight est doubt, that we are entitled to something; and when it is not de livered, we believe we may take measures to remedy the situation. There is no wide-scale agreement in such matters ; people differ drastically as to what each believes to be his rights. One person be lieves that he is entitled to some help with his medical problems whenever he cannot handle them, whereas another may believe that he alone is responsible for such matters as his health, welfare and education. To the first person, it will seem self-evident that others ought to help with .his troubles, whether or not they choose to do so; he would think it our natural duty, an obligation we have toward each other and whose performance must, at times, be enforced lest his needs be neglected. The second person, however, would consider the duties we have toward each other to be an outgrowth of our own choices; even if some of us have natural obligations toward others, we ought not be forced to perform them. Indeed, if force were to be justified, it would be to see that we are left free to lead our own lives and to be charitable in our own way.

Needed is a philosophical justi fication of the limits we ought to draw around our actions to help identify what we are entitled to do, what range of actions we can perform without limiting the lib erty of others. This in turn might help explain why we would demand j ustifica tion before we would allow another to involve us in his schemes. The person who believes that his medical problems should be alleviated through help from others may so believe in all honesty and sincerity. If so, at least he may be invited to consider a philosophical system under which various claims might be justified. Perhaps then he will see that to get the help he wants, he must justify his claim that we should give it to him and also justify any force he would use toward that end. Sincerity 01 Purpose But such a philosophical theory is not a simple matter to develop. Nor can it be communicated in dis cussion of such an isolated issue as the proposed Federal consumer protection agency. Such discussion will get nowhere unless the parties have the sincerity of purpose, time, and knowledge to cover the entire range of related ideas back to the theory of liberty.

Some have sought to shorten the discussion, saying that each indi vid ual' s person or body sets the limit of other people's au thority. But clearly this will not suffice, for it does not cover such 38 THE FREEMAN January things as our house, books, auto mobile, or musical composition. The theory must relate all such properties to us in some way that will justify our keeping them for ourselves if we choose. Opponents of liberty notoriously complain that Americans have stolen their present land holdings from the Indians. And if this is so, do we have any defense against those who would steal from us in turn these lands and their fruits? Do thieves or recipients of stolen goods have any justifiable com plaint if the goods are stolen again? Even with a sound theory of property rights, the argument for liberty may be lost in the mists of democracy. How often we hear that living in a democracy i'nvolves giving up certain rights to pri vacy, property, and the like. And if that be so, may the individual logically claim anything at all that is not allowed by the majority - or its representatives? What, in short, justifies the view that the exercise of majority rule is limited by certain principles defining hu man liberty - certain inalienable, universal, and absolute human rights?

So what is one to do in the face of such widely entrenched coer cion and political intervention? It seems that education in broad political principles and their philosophical justification must be the general approach. If there is a rea sonable case for such coercive in tervention, let the burden of proof be on those who are doing the at tacking. Let them try to justify coercion, even in one or two iso,.. lated cases. Let them prove to our satisfaction why consumer protec tion j ustifies that millions of others will be deprived of their income without their consent. Let them try to demonstrate the virtue of coercion, for they are the ones who are embarking on the course of action that will necessarily in volve the lives of others. Without a demonstration of the validity of the explicit or implicit claim that others should be forced to comply with .the .aggressor's plans - however noble these may be - we are entitled to treat his proposal as something entirely arbitrary, without support in truth and justice.

Nor is all this merely an aca demic exercise. When they are thus challenged, amazingly little attempted justification is forth coming from most of those who insist that coercion is a valid means for solving human prob lems. They simply hadn't thought about it that way. And such a pro vocative challenge may well be their first short lesson toward an education in the nature of human liberty. , BEFORE we consider the future the American dollar it may be wis to cast a glance at the glories 0 its past and examine t ai causes that have brought ·t present humiliating state. The logical starting poin examination is Bretton When the representatives of som forty nations met there in 1944 heretical monetary notions were floating in the air. Lord Keynes, who was there, was their chief spokesman. The most definite of these notions was that the gold standard was a barbarous relic, and neither could nor should be re stored. It put every national econ omy in a strait jacket. It prevented full employment; it strangled eco nomic growth; it tied the hands of national monetary managers. And all for no good reason except an outworn mystique. Besides, there wasn't enough gold in the world to sustain convertibility.

Mr. Hazlitt is the well-known economist, col umnist, editor, lecturer and author of numer ous books, including What You Should Know About Inflation which is available in paper back from the Foundation for Economic Edu cation at 95 cents. This article is from a paper delivered at a regional meeting of the Mont Pelerin Society in Guatemala, September 4, 1973. HENRY HAZLITT Dollar ut because some American essmen and some par lia iWere thought to have a prejudice in favor of seemed prudent to com and to set up something oked almost like a gold ard - a thinly gold-plated s andard. So, through ~n Interna tional Monetary Fund .(IMF), a sort of world central bank, every other currency was to be pegged at a fixed rate to the Almighty Dollar. Each nation, after fixing an official parity for its currency unit, pledged itself to maintain that parity by buying or selling dollars. The dollar alone was to be convertible into gold, at the fixed rate of $35 an ounce. But unlike as in the past, not everybody who held dollars was to be allowed to convert them on demand into gold; that privilege was reserved to na tional central banks or other of ficial institutions.

Thus, everything seemed to be neatly taken care of. When every other currency was tied to the dol lar at a fixed rate, they were all necessarily tied to each other at fixed rates. Only one currency was 39 40 THE FREEMAN January tied to the dreadful discipline of gold, and even that in a very limited way. Gold was "econo mized" as never hefore. It was now the servant, no longer the master. Automatic Credit In addition, the Bretton Woods agreements provided that if any nation or central bank got into trouble, it was entitled to auto matic credit from the Fund, no questions asked. Thus, not only released from a strict gold standard, but tempted to imprudence, individual nations felt free to expand their _paper money and credit supply to meet their own so-called domestic "needs." The politicians and the monetary mana'gers in practically every country were infected with a Keynesian or inflationary ideol ogy. They rationalized budget defi cits and continuous monetary and credi t expansion as necessary to maintain "full employment" and "economic growth." As a conse quence, there were soon wholesale devaluations. The IMF has pub lished hundreds of thousands of statistics; but the single figure of how many devaluations there were between the opening of the Fund and August 15, 1971, when the dollar itself became officially in convertible into gold, the IMF has never published.

There were certainly hundreds of devaluations. To my knowledge, practically every currency in the Fund, with the exception of the dollar, was devalued at least once. The record of the British pound was much better than that, say, of the French franc, but the pound itself, which had already been de valued from $4.86 to $4.03 when it entered the IMF, was devalued again from $4.03 to $2.80 in Sep tember 1949 (an action that touched off 25 more devaluations of other currencies within a single week), and devalued still again from $2.80 to $2.40 in November, 1967. Devaluation, let us remember, is an act of national bankruptcy. It is a partial repudiation, a gov ernment welching on part of its domestic and foreign obligations. Yet, by repetition by all the best countries, devaluation acquired a sort of respectability .. It became not a swindle, but a "monetary technique." Until the dollar went off gold in August 1971 and was devalued in December, we heard incessantly how "successful" the Bretton Woods system had proved.

During the early part of this pe riod, however, the world suffered from what everybody called a "shortage of dollars." The London Economist, among others, even solemnly argued that there was now a permanent "shortage of dol1974 THE FUTURE OF THE DOLLAR 41 lars." Americans thought so too. Our monetary managers seemed completely unaware of the tre mendous responsibility we had as sumed when we allowed the dollar to become the standard and the anchor for all the other currencies of the world. Our money managers never dreamed that it was possible to create an excess of dollars. They issued and poured out dollars and sent them abroad in foreign aid. Total disbursements to foreign na tions, in the fiscal years 1946 through 1971, came to $138 bil lion. The total net interest paid on what the United States borrowed to give away these funds amounted in the same period to $74 billion, bringing the grand total through the 26-year period to $213 billion.

This amount was sufficient in it self to account for the total of our Federal deficits in the 1946-1972 period. The $213 billion foreign aid total exceeds by $73 billion even the $140 billion increase in our gross national debt during the same years. Foreign aid was also sufficient in itself to account for all our balance-oi-payments defi cits up to 1970. 'nternal'nllation We created a good deal of this money through internal inflation. From January 1946 to August 8, 1973, the money supply, as meas ured by currency in the hands of the public plus demand bank deposits, increased from $102 bil lion to $264 billion, an increase of $162 billion, or of 159 per cent. In the same period the money supply as measured by currency plus both demand and time deposits in creased from $132 billion to $549 billion, an increase of $417 billion, or 316 per cent. Because of what our monetary authorities believed was the neces sity of keeping this enormous in flation going, they adopted one ex pedient after another. In 1963, blaming the deficit in our balance of payments on private American investment abroad, they put a penalty tax on purchases of for eign securities. In 1965 they re moved the legal requirement to keep a gold reserve of 25 per cent against Federal Reserve notes.

They resorted to a "two-tier" gold system. Next they invented Spe cial Drawing Rights, or "paper gold." But all to no avail. On Aug ust 15, 1971, they officially aban doned gold convertibility. They de valued the dollar by about 8 per cent in December, 1971. They de valued it again, by 10 per cent more, on February 15, 1973. Exported Inflation Before we bring this dismal his tory any further down to date, let us pause to examine some of the chief fallacies prevailing among 42 THE FREEMAN January the world's journalists, politicians, and monetary managers that have brought us to our present crisis. Because we were sending so many of our dollars abroad, the real seriousness of our own infla tion was hidden both from our of ficials and from the American pub lic. We contended that foreign in flations were greater than our own, because their official price in dexes were going up more than ours were. What we overlooked what most Americans still over look - is that we were exporting part of our inflation and that for eign countries were importing it.

This happened in two ways. One was through our foreign aid. We were shipping billions of dollars abroad. Part of these were being spent in the countries that re ceived them, raising the'ir price level but not ours. The other way in which we exported inflation was through the IMF system. Under that system, foreign central banks bought our dollars to use them as part of their reserves. But in addi tion, under the rules of the IMF system, central banks were obliged to buy dollars, whether they wanted them or not, to keep their own currencies from going above parity in the foreign exchange market. The result is that foreign central banks and official institu tions today hold some 71 billion of our dollars. These dollars will eventually come home to buy our goods or make investments here. When they do, their return will have an in flationary effect in the United States. Our domestic money supply will be increased even if our Fed eral Reserve authorities do noth ing to increase it.

Balance of Payments The meaning of the "deficit" in our balance of payments has been grossly misunderstood. It has not been in itself the real· disease, but a symptom of that disease. The real question Americans should have asked themselves is not what consequences the deficits in the balance of payments caused, but what caused the deficits. I have just given part of the answer - our huge foreign aid over the last 27 years, and the obligation of for eign central banks under the Bret ton Woods agreements to buy dol lars. But the foreign central banks had to buy dollars because dollars had become overvalued at their official rate. Th~.y became over valued because the U.S. was inflat ing faster than some other coun tries. After the United States formally suspended gold payments, and after the dollar was twice de valued, foreign banks no longer felt an obligation to buy dollars. The dollar fell to its market rate, 1974 THE FUTURE OF THE DOLLAR 43 and as one consequence we again have a monthly excess of exports.

The economists who had all along been demanding the restoration of free ...market exchange rates were right. Now that the dollar is no longer even nominally convertible into gold there is no longer any excuse for governments to try to peg their paper currency units to each other at arbitrarily fixed rates. The IMF system ought to be abandoned. The International Monetary Fund itself ought to be liquidated. Paper currencies should be allowed to "float" - that is, peo ple should be allowed to exchange them at their market rates. But it is profoundly wrong to assume, as many economists and laymen unfortunately now do, that daily and hourly fluctuating mar ket rates for currencies will be alone sufficient to solve the multi tudinous problems of foreign com merce. On the contrary, these wildly fluctuating rates create a serious impediment to interna tional trade, travel and investment. They force importers,exporters, travelers, bankers, and investors either to become unwilling specu lators or to resort to bothersome and costly hedging operations.

With 125 national currencies rep resented in the IMF, there are some 7,750 changing cross-rates to keep track of, and twice as many if you state each cross-rate both ways. With a gold standard gone, with the dollar standard gone, there is no longer a single ac cepted unit in which all of these rates can be stated. Some Gain - Some Loss It is a great gain when curren cies can be exchanged at their true market rates. Since this has happened the American trade bal ance has improved. In the second quarter of 1973, for example, there was again a surplus of exports. In July, 1973, American exports in dollar terms were the highest for any single month on record. But it is one thing to allow trade to improve by abandoning arbitrary pegs on foreign-exchange rates; it is quite another thing for a coun try to seek to increase its exports at the expense of its neighbors by deliberate devaluation. Yet this is what the United States govern ment has very foolishly done.

In early August, 1973, Freder ick B. Dent, the U. S. Secretary of Commerce, assured the Ameri can public that the devaluations of the dollar had provided the nation with a "bright opportunity." "Without question," he added, "the most important factor in the im proving trade trend is the com bination of the two devaluations." In fact, the U. S. Department of Commerce placed an advertisement in the issue of Time of July 2, and 44 THE FREEMAN January in other magazines, declaring that to the .U. S. exporter the devalued dollar means "vastly improved prospects," that it would help him to capture "a bigger share of over sea markets," and that it was up to him to "start putting the de valued dollar to work." The basic fallacy in this eu phoric picture is that it looks only at the short-run consequences of devaluation and even at these only as they affect a small segment of the population.

It is true that the first effect of a devaluation, if it is confined to a single country, is to stimulate that country's exports. Foreigners can buy that country's products cheaper in terms of their own money. Thus, as the Department of Commerce's ad correctly pointed out: "For instance, an American product for which a West German importer paid 1000 deutsche mark only 18 months ago would now cost him as little as 770 marks. Or about 23 per cent less than before." So the American exporter stands to sell more goods abroad at the same price in dollars, or the same volume of goods in higher prices in dollars, or something in be tween, depending on whether his product is competitive or a quasi monopoly. So far, so good. But U. S. ex ports amount to only 41j2 per cent of the gross national product. Now let us enlarge our view. If the dollar is devalued, say, by a weighted average of 25 per cent in terms of other currencies, some thing else happens ~ven on the first day after devaluation. The prices of all American imports go up by that percentage (or more pre cisely, by its converse). Every American consumer has to pay more, directly or indirectly, for meat, coffee, cocoa, sugar, metals, newsprint, petroleum, foreign cars, or whatever. Even the American exporter, as a consumer, has to pay more, and also more for his im ported raw _materials. So the im mediate effect of a devaluation is to force the consumers of the de valuing nation to work harder to obtain a smaller consumption than otherwise of imported goods and services. Is it really a national gain for the American people to sell their own goods for less and buy foreign goods for more?

The belief that devaluation is a blessing, because it temporarily en ables us to sell more and forces us to buy less, stems' from the old mercantilist fallacy that looked at international trade only from the standpoint of sellers. It was one of the primary achievements of the classical economists to explode this fallacy. As John Stuart Mill said: The only direct advantage of foreign commerce consists in the imports. A 1974 THE FUTURE OF THE DOLLAR 45 country obtains things which it either could not have produced at all, or which it must have produced at a greater expense of capital and labor than .the cost of the thing which it exports to pay for them ... The vulgar theory disregards this benefit, and deems the advantage of commerce to reside in the exports: as if not what a country obtains, but what it parts with, by its .. foreign trade, was supposed to constitute the gain to it. Long-Run Effects So far I have considered only the immediate effects of a devaluation.

Now let us look at the longer effects. The devaluation or depre ciation of a currency soon leads to a rise of the internal price level. The prices of imported goods, as I have just pointed out, have a cor responding rise immediately. The demand for exports rises, and therefore the prices of export goods rise. This rise of prices leads to increased borrowing by manu facturers and others to stock the same volume of raw materials and other inventories. This leads to an expansion of money and credit which soon makes other prices rise. (Often, of course, the causa tion is the other way round: an expansion of a country's currency and a consequent rise of its inter nal price level will soon be reflected in a fall of its currency quotation in the foreign exchange market.) In brief, internal prices soon ad just to the foreign-exchange quo tation of the currency, or vice versa. We can see more clearly how this must take place if we look at a freely transportable international commodity like wheat, copper, or silver. Let us say, for example, that copper is 50 cents a pound in New York when the deutsche mark in the foreign exchange market is 25 cents. Then purchases, sales, and arbitrage transactions will have brought it about that the price of copper in Munich is four times as high in marks as in dol lars plus costs of transportation.

Suppose the dollar is devalued or depreciated so that the mark now exchanges for 40 cents. Then, assuming that the price of copper in terms of marks does not change (and though I have been specifically mentioning marks, dollars, and copper I intend this as a hypo thetical and not a realistic illus tration), purchases, sales, and arbitrage transactions will now bring it about that the price of copper in New York will have to rise 60 per cent in terms of dol lars. To bring this new adjustment about, more copper will flow from the U. S. to Germany. But after this temporary stimulus to Amer ican export, the new price adj ust ment will bring it about that, other 46 THE FREEMAN January things being equal, the relative amount of copper exported may be no different than before the deval uation. A Brief Period of Transition I have been speaking of interna tional commodities, traded on the speculative exchanges, and easily and quickly transportable. In these commodities the international price adjustments will take place in a few days or weeks. The price adjustments of most other goods will, of course, take place more slowly. The main point to keep in mind is that there is a constant tendency for the internal purchas ing power of a currency to adj ust to its foreign-exchange value and vice versa. In other words, there is a constant tendency for the internal prices in a country to adjust to the changing foreign exchange value of its currency and vice versa. Though our mod ern monetary managers and sec retaries of commerce seem to know nothing about this, the purchasing power theory of the exchanges was first explained a century and a half ago by Ricardo.

In other words, the alleged for eign trade "advantages" of .a de valuation last for merely a brief transitional period. Depending on specific conditions, that period may stretch over more than a year or less than twenty-four hours. It tends to become shorter and shorter for any given country as depreciation of its currency con tinues or devaluations are re peated. Internal currency depreci ation usually lags behind external depreciation, but the lag tends to diminish. Statistical studies have been made of the relationships of the internal and external purchasing power of a currency under extreme conditions - for instance, the Ger man mark during the 1919-1923 inflation. (See The Economics of Inflation, by Constantino Bresci ani-Turroni, 1937.) It would not be too hard for any competent statistician, with the help of a copy of International Financial Statistics, published monthly by the IMF, to put together revealing comparisons of foreign-exchange rates and internal prices for any country that publishes reasonably honest wholesale or consumers price indexes.

It is instructive to recall, inci dentally, that at the height of the German hyperinflation, which eventually brought the mark to one-trillionth of its former value, monthly exports, measured in ton nages, fell to less than half of what they had previously been, while the tonnage of imports doubled or tripled. In brief, the pursuit of a more "favorable" balance of payments, 1974 THE FUTURE OF THE DOLLAR 47 or a trade "advantage," through depreciation or devaluation of one's own currency, is the pursuit of a will-o-the-wisp. Any gain of exports it brings to the devaluat ing nation is temporary and tran sient, and is paid for at an exces sive cost - an internal price rise and all the economic distortions and social discontent and unrest this brings about. The usual criticism of currency devaluati.on is that it will provoke reprisals; that other countries will try the same thing, and the world may be plunged into competitive devaluations and trade wars. This objection is, of course, both a valid and a major one. But what I have been trying to emphasize here is a point that few of our monetary managers have grasped - that even if there is no retaliation, devalu ation as a deliberate policy pur sued for the sake of a foreign trade gain is self-defeating and stupid.

The two American devaluations, for example, were monumental blunders. If the world's monetary managers can be brought to learn this one lesson, the economic and political gain will be immense. Remedial Measures What steps should be taken to halt the present world inflation and return the world to sound money? The immediate steps are simple and can be briefly stated. The United States - and for that matter every country - should forthwith allow its citizens to buy, sell, and make contracts in gold. This would be immediately fol lowed by free. gold markets, which would daily measure the real de preciation in each paper currency. Gold would immediately become a de facto world currency, whether "monetized" or not. The metal it self would not necessarily change hands with each transaction, but gold would become the unit of ac count in which prices would be stated. Exporters would be insured against the depreciation of the currencies in which they were being paid.

The second (and preferably simultaneous) step can· be stated more briefly still. Every nation should refrain from further in crease in its paper money and bank credit supply. For the United States a special measure would also be needed. A hundred billion dollars or more are held by foreign central banks and foreign citizens. Most of these are no longer wanted. They danger ously overhang the market, and constantly threaten to bring sud den and sharp declines in the dollar. The U. S. government must do two things. It must follow mone tary policies that will assure for eign dollar holders that they are 48 THE FREEMAN Januar'y not holding an asset that is likely. to depreciate still further but, on the contrary, one that is likely to keep its value or even to appre ciate a little. Secondly, the U. S. government should volunteer to fund the dollar overhang. It could do this by offering foreign central banks interest-bearing long-term obligations for their liquid dollar holdings - say, bonds that would .be repayable and retirable, princi pal and interest, in equal install ments over a period of twenty-five or thirty years. It should prefer ably negotiate with each country separately, and should guarantee its bonds by making principal and interest repayable, at the option of the central bank holding them, in either the face value of the dol lars or in the currency of the country holding them, at the same ratio to the dollar as of the market rate on the day the agreement was reached. Thus, the Bank of Japan would be paid off, at its option on any payment date, either in dollars or in yen; the Bundesbank either in dollars or in marks; and so on.

Ricardo's Recommendations of a Full Gold Standard Of course, the world should eventually return to a full gold standard. A gold standard is needed now for the same reason that David Ricardo gave for it in 1817: Though it (paper money) has no in· trinsic value, yet, by limiting its quantity, its value in exchange is as great as an equal denomination of coin, or of bullion in that coin .... Experience, however, shows that neither a State nor a bank ever have had the unrestricted power of issu ing paper money without abusing that power; in all States, therefore, the issue of paper money ought to be under some check and control; and none seems so proper for that purpose as that of subjecting the issuers of paper money to the obli gation of paying their notes either in gold coin or bullion. A return to gold will involve some difficult but not insuperable problems, which we shall not at tempt to discuss in detail here.

The main immediate requirement is that individual countries stop increasing their paper money supplies .. But my topic here is the future of the dollar - not what it ought to be, but what it is likely to be. And I am obliged to say that the outlook for the dollar - or, for that matter, of national currencies any where - is hardly bright. The world's currencies will be what the world's politicians and b.ureaucrats make them. And the world's polit cians and bureaucrats are still dominated everywhere by an in flationary ideology. Whatever they say publicly, whatever fair assur ances they give, they still have a 1974 THE FUTURE OF' THE DOLLAR 49 mania for inflation, domestic and international. They are convinced that inflation is necessary to main tain "full employment" and to con tinue "economic growth." They will probably continue to "fight" inflation only with false remedies, like "income policies" and price controls.

The International Monetary Fund is the central world factory of inflation. Nearly all the national bureaucrats in charge of it are de termined to continue it. Having destroyed the remnants of the gold standard by printing too much paper money, they now propose to substitute Special Drawing Rights, or SDR's, for gold - in other words, they propose to print more international paper money to serve as the "reserves" behind still more issues of national paper monies. The first international step toward sound money, to repeat, would be to abolish the IMF entirely. In August, 1973, the present American Secretary of the Trea sury, George P. Schultz, named fourteen men as members of a new advisory committee on reform of the international monetary system. These included three former Trea sury secretaries, all of whom pur sued the very monetary policies that brought the United States and the world to its present crisis. The whole list of men in this committee included only two professional economists. I don't want to attack individuals, but to my knowledge not a single man appointed to the new panel believes in the gold standard, has ever advocated its restoration, or has ever spoken out in clear and unequivocal terms even against the chronic increase in paper money issues. But the climate of opinion is now such in the United States that I must con fess I would find myself hard put to it to name as many as fourteen qualified Americans who could be counted on to recommend a sound international monetary reform.

The truth is that everybody is afraid of a return to sound money. Nobody in power wants to give up inflation altogether because he fears its abandonment would be followed by a recession. It's true that if we stopped inflation forth with we might have a recession, for much the same reasons as a heroin addict, deprived of his drug, might suffer agonizing with drawal symptoms. But such a re cession, even if it came, would be a very minor and transient evil compared with the catastrophe toward which the world is now ~un~n~ , FREE PARKING... GARY NORTH SpaceNot Available "You can't get something for noth ing," is about as safe a slogan as one could invent. Sometimes we get what turns out to be nothing for something, although we hadn't ori ginally planned it that way. But sometimes "nothing" turns out to be something, and all kinds of problems appear if we fail to put a price tag on it. One of these "nothings" is space.

People want to get a piece of noth ing in order to put something into it. This is a far greater problem in productive capitalistic societies than it is in underdeveloped na tions. We have so many items around that we need space to house them. So the price of "noth ing" - empty space - goes up. One place where this space probDr. North, economist, lecturer, author, cur rently is an associate of Chalcedon, an edu cational organization dedicated to Christian research and writing. His latest book is An Introduction to Christian Economics, Craig Press, 1973. 50 lem occurs is on the Hollywood Freeway at 5 p.m. Another is the Long Island Expressway, or as it is also known, the world's longest parking lot. Lots of drivers try to insert their cars into the available freeway space. And the "freer" the freeway, the worse the jam. Men are told that it costs them nothing extra to use the available space on the freeways; they find subsequently that there is greater demand for "nothing" than sup ply at zero price at 5 p.m. Even on the Eastern toll roads, the same problem occurs, since it always costs the same, day or night, to use the available space. There is no incentive to allocate the space economically. It costs three cents (or whatever) per mile at 5 p.m.

or 7 p.m. Parking space is another prob lem. Private firms have plenty of incentive to purchase space down197-'f "FREE PARKING" - SPACE NOT AVAILABLE 51 town and allocate it according to the most efficient uses. It costs more to parkin the heavily used business districts than in a sub urban flrea. Men therefore have an incentive to plan wisely. If they want to pay less, they can go to work earlier, park farther away, and walk the extra distance, or ride the bus. No Man's Lane But some sections of a business district may be outside the pri vate sphere's ability to allocate space~rationally. I refer to the curb lanes of the city's streets. These are the property of the city gov ernment, not private citizens. There was a time in the past when the doctrine of "free" space led to the same sort of difficulties that the doctrine of "freeways" creates today. It was only when urban comm uni ties took a lesson from the free market that the problems diminished. Arnold Shapiro de scribes what happened: Parking a car downtown in most cities in 1935 made grown men cry - and curse. Practically all the spaces were occupied by the ears of store owners, their employees and several other all-day parking hogs. The shop pers fought over whatever was left and chaos prevailed.

In Oklahoma City, the Chamber of Commerce turned for help to news paper editor Carl McGee, who had achieved fame in the 1920's for un eovering the Teapot Dome scandal. He solved his city's parking problem by inventing one of America's most helpful but irksome gadgets: the parking meter. On a July morning in 1935, Okla homa City drivers were confronted with 174 of McGee's Park-O-Meters. As an experiment, these four-foot high mechanical cops were placed on one side of a few downtown streets. The contrast spelled success. On the unmetered sides, there continued to be confusion - cars j anlmed together and pushed in front of fire hydrants, fenders bent, and traffic stopped by motorists backing into cramped parking spaces. On the metered sides, there was order and room for every car to be parked. The price tag for this lux ury? Five cents for an hour. [Which was plenty in 1935 Oklahoma City, Shapiro fails to mention.] When merchants on the unmetered sides realized that the meters helped busi ness by keeping the flow of customers moving, they requested meters in front of their stores. 1 Prices set by governments are only vague estimates. Other con siderations besides profit must be considered, such as the political re action to increased meter costs.

The public streets are a monopoly, so it is not possible to measure economic value of the spaces di1 Shapiro, "Meter Maids Show Their Mettle," Westways (October, 1973).

52 THE FREEMAN January rectly, since outside agencies are not allowed to enter the market to buy up the spaces. Thus, even at best, the meters are inefficient space-allocators. But when com pared to the effects of ufree goods" for one and all, there is no ques tion which approach allocates more rationally. Didn't the merchants in Okla homa City realize that by parking their own cars on the streets they would reduce local business? Prob ably they did, or at least some in dividuals did. But if anyone man does find other spaces for his car and his employees' cars, he only leaves a "free" space for the mer chant across the street. It is very hard to organize all the local mer chants, impose sanctions, and then keep out all-day nonshoppers (e.g., movie viewers) from taking the available spaces. But the simple addition of an allocating device, the parking meter, reduced the disorder. A Pricing Prob'em Today we are returning to the pre-1935 parking problem. Meter fares are probably too cheap in some areas. The allocation action is provided primarily by the in convenience of having to return to the meter to deposit a fresh coin. Other devices must be added, such as chalk-marking of tires (in those regions that only allow one hour of parking, even with the nickel meter). Even the "no park ing" signs, however, are really little more than expensive parking spaces: a $5 or $10 fine is imposed, which in downtown New York City may be ,cheaper than a local parking lot, especially if the city planners impose ceilings to the legal parking fees in private lots, or establish "quality-oriented"

guild monopolies among the opera tors of the lots. 2 If "nothing" is really something, but political authorities insist on charging nothing for it, there will be endless confusion, disruption, and waste. The fallacy of "nothing" for nothing is just another case of something for nothing. To avoid paying money for something valu able, we wind up paying plenty in frayed nerves, bent bumpers, missed appointments, and so forth. In a culture. that already drains us emotionally and physiologically, it seems far cheaper to pay enough money to get the things we need. It might even be a form of preventive medicine. ~ 2 See Henry Manne's classic descrip tion, "The Parable of the Parking Lots," The Public Interest, No. 23 (8.pring, 1971).

A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN EVERY YEAR the Northfield, Illi nois, publishers of Who's Who Among American High School Students issue a detailed response to a questionnaire which they circulate to a few thousand "high achievers" in the eleventh and twelfth secondary school grades. The 1972-73 annual survey is ex tremely encouraging; our seven teen-year-olders are now refusing to associate themselves with any of the hippie attitudes of the late Nineteen Sixties. The vast major ity of the boys and girls who replied to the questionnaire indi cated a good rapport with their families, said "no" to sexual pro miscuity, and presented an over whelming opposition not only to hard drugs but also to the mari juana cult. If and when they carry their attitudes on into col lege, we are likely to see an end to campus trashing, the forcible seizure of deans' offices, and the endless demonstrating and violent politicking that keeps serious stu dents from paying attention to their books.

This is the more hopeful read ing of the future. Surely Richard S. Wheeler, a former chief edi torial writer for the Oakland Tribune, would like to endorse the idea that American adolescents are returning with some real con viction to our older and saner traditions. But, as Mr. Wheeler says in an epilogue to his The Children of Darkness: Some He reti.cal Reflections on the Kid Cult (Arlington House, $7.95), he can't quite believe there has been any 53 54 THE FREEMAN January fundamental change in the ide ology governing the youth move ment. The new calm, he says, is tactical. He very much fears that our so-called counterculture "re mains stubbornly alienated." It would, he thinks, take a real re ligious movement among the young to change things much, but he doubts that such a movement is in the making. "Too many of the kids," he concludes ominously, "have a compact with the devil."

Permissive Adults The truly interesting thing about Mr. Wheeler's book is that he blames the adult world for the kid "revolution" of the Sixties. What happened was that the chil dren who were born in the years after World War II tumbled to the fact that their permissive par ents didn't give a damn about much of anything~ The parents were still living on the moral cap ital built up by their forebears who still held to the values of an individualism tempered by tradi tional Christianity. Underneath the correct behavior of the adult world the young sensed a complete lack of moral convictions. The hypocrisy of the adults provoked the counterculture. What the kids did in the Sixties was to act out the secret beliefs, or lack of be liefs, of their elders. The hidden nihilism of our world suddenly took on active and violent form. The irony of the protest against regimentation by the "Establish ment" is that it happened in the freest society the world has ever seen. What the kid culture failed to understand was that there was nothing to prevent each and every individual from achieving a per sonal salvation that might have transformed society without any "revolution." Here Mr. Wheeler zeroes in on the picture of the world presented to people who get their news from the TV screen. In Mr. Wheeler's opinion it was no accident that our "first television generation has turned out to be revolutionary."

A Negative Image The image of America that comes over the tube is heavily negative. On TV, society is ex ploitative. Our capitalists have "raped" the continent (never mind that wood from our forests built millions of homes that have been adequately warmed by our oil and coal). Our blacks "are cannon fod der, and rich men sit upon the pile of their corpses." Nader's picture of our economic system is taken by the young TV-viewers as gospel: the consumer is repre sented as being cheated at every turn. With calamity the daily TV fare, how could the first television 1974 THE CHILDREN OF DARKNESS 55 generation know that the worka day American world goes smooth ly enough even though our society has been failing in philosophic and religious conviction? The kids, untrained in the reading arts in a school system that does not know how to teach grammar, rhe toric and logic, are unable to catch a hint from the routine dividend reports on the financial pages, or the story about a golden wedding anniversary on the society page.

Muckraking journalism, taking over the big broadcasting studios, sees the world as a seamless web of "problems," each more devas tating than the one before. Mr. Wheeler observes that, "thanks to the media," there is "no longer any spatial isolation or localization of interest" in what the young receive from our "de mocratized" reporting. Evil is everywhere, whether in Biafra, Vietnam or the American Appala chians. The TV camera turns everything into instant crisis. And so we have an obsession with pol itics: if Christianity has failed to solve our crises, the State must do what individuals, working in vol untary groupings, have been un able to accomplish. Sell-Betrayal The kids, according to Mr. Wheeler, don't really believe that State action will change things. But if there is no God, some secu lar surrogate for the Deity must be found. So the kids play at a revolution which, if it should ever succeed, would hand things over to the socialistic modern liberals.

Retreating to their communes or copping out by succumbing to the drug culture, the Flower Children don't make good material even for a Party of the Left. But in going along with the Leftist criticism of capitalism, the Flower Children have betrayed themselves. Liberal reform may have failed, but it is still thought of by the young as the only alternative to "repres sion." The real trouble with the young, as Mr. Wheeler sees it, is that they are terrified by the "vast lib erty of a permissive society." They are vaguely aware that they might become anything they choose, but it takes character to persist in learning a skill or acquiring the patience to wait for promotion in any hierarchical arrangement of society. Having been reared in an overprotective environment, the young have not had any chance of developing resilience and tough ness. Terrified Leaders The gurus of the Sixties were all terrified crea tures on their own. "Liberty," says Mr. Wheeler, "terrifies Herbert Marcuse ... it 56 THE FREEMAN January appalls Tom Hayden .and Mark Rudd ... for those unprepared for it, liberty is the most frightful bomb ever to explode on the hu man psyche." The kids, in their rebellion, have actually hoped to encounter some frontiers of re sistance from their elders. But they have had no such luck; soci ety has become a spongy mass.

There will be no basic change in our situation without a spir itual revi va1. Mr. Wheeler thinks our Christian churches must "gar rison themselves" to fight our secular liberalism that tries to turn responsibilities over to the State. The time may be soon at hand, he says, "when Christianity must retreat into the monastic life." But what if the kids con tinue to "have a compact with the devil" ? Mr. Wheeler remains a pessimist: "the great rockfests are over," he says, "but the music lingers on." ~ ABRAHAM LINCOLN - THEO LOGIAN OF AMERICAN AN GUISH by Elton Trueblood (New York: Harper & Row, 1973) 149 pp., $4.95 cloth. Reviewed by W. Marshall Curtiss DR. ELTON TRUEBLOOD, renowned Quaker theologian and professor at Earlham College, has written "another" book on Lincoln. He makes no apology for adding to the vast storehouse of writings about this great personage. He re minds us that Lord Tweedsm uir, in justification of another biogra phy of Oliver Cromwell said: "Ev ery student of the seventeenth century in England, must desire sooner or later to have his say about its greatest figure."

Of the American Experiment, Dr. Trueblood says: "We know who the greatest figure is and we cannot leave him alone. The next best thing to being great is to walk with the great." Dr. Trueblood feels tha.t in these troubled times, a walk with Lin coln is especially appropriate. Most particularly, he discusses Lincoln's religion. In his analysis of these complex aspects of Lincoln, the author, while awa.re of the volu minous writings about the man, relies largely on what Lincoln him self wrote. He did draw substan tially on the writing of the late Reinhold Niebuhr.

1974 OTHER BOOKS 57 A few writers, recently, have at tempted to pin the label "racist" on Lincoln. During the Lincoln Douglas debates, it is said that Douglas suggested Lincoln's posi tion would lead to intermarriage and the mixing of the races. Lin coln said: "There are white men enough to marry all the white women, and enough black men to marry all the black women, and in God's name, let them be so mar ried." Those who would call this racism should read further, espe cially the Emancipation Proclama tion. Politically, Lincoln was a staunch believer that politics is the science of the possible. As a careful stu dent of the American revolution ary times, he knew that the repub lic was founded in compromise. His mission, as he conceived it, was to preserve the republic - the Ameri can Experiment - at all cost. He saw slavery as one aspect of a greater problem. "My paramount object in this struggle is to save the Union and it is not either to save or destroy slavery. If I could save the Union without freeing any slave I would do it; and if I could save it by freeing some and leaving others alone, I would also do that."

This position, of course, did not endear Lincoln to extremists of either side. It led, no doubt, to the belief that a deeply religious man !Could not hold such views. But Lin !CoIn believed that some degree of consens us was necessary if the Union was to be p~eserved. He em phasized this in his "House Di vided" speech: "I believe this gov ernment cannot endure, perman ,ently half slave and half free." As the war wore on, Lincoln saw that if the Union was to be pre :served, slavery must go. His Eman eipation Proclamation was the cul :mination of his thinking in this area. Trueblood's development of Lin eoln's religious thinking is largely to show how it developed from early boyhood to mature adult hood. The fact that Lincoln never became a member of an organized ehurch has led some to think of him as nonreligious. But True blood points out that only 23 per cent of the population were church members in 1860 compared with 60 per cent a century later.

An interesting sidelight on Lin coln's reaction to those who would have one big church instead of the divided condition of Protestantism and the fragmentation which then existed, is his reply to a visitor 'who lamented this situation. "The 'more sects we have the better. They are all getting somebody in, tha t others could not: and even 'with the numerous divisions we are all doing tolerably well." This might well be pondered by those 58 THE FREEMAN January who today advocate "one big con servative organization." It will be recalled that Lincoln's education was based in large part on his early reading of the Bible. He could quote from it at length and it had great influence on his later speaking and writing. His was a religion of the Bible rather than of an organized church. Per haps the most important aspect of his religion was that he was more concerned with knowing God's will than in seeking personal salvation.

Trueblood says: "He could not abide the kind of a religion which made a man interested only in the salvation of his own soul without any reference to human injustice such as that of slavery." He was free of the self-righteousness that seemed to trouble the extreme idealists. "He differed from the fanatical moralists primarily in that he was always perplexed." Or, as we would say today, he didn't have all the answers. In seeking to know God's will, Lincoln was aware that in the war, somebody was mistaken. He knew that Jefferson Davis was, like him self, a man of prayer. He knew that both sides prayed to the same God. Grounds for skepticism over Lincoln's religion may have come from his youth when he delighted in debate and took either side of any argument. This may have led to the often quoted Herndon say ing that Lincoln was an infidel. But to study his development, with deep religious experiences, makes it reasonably clear that Lincoln was a religious and compassionate man. His early years were light hearted and his speech full of hu mor. Referring to his storytelling during a troublesome time in later years, he said: "If I couldn't tell these stories I would die." True blood tells us that the death of his four-year-old son Eddie in 1850 "sufficed to eliminate forever the lighthearted irreverence of his youth." "During his forty-nine months in the presidency, Abra ham Lincoln issued nine separate calls to' public penitence, fasting, prayer, and thanksgiving. Seen to gether they reveal with remark able clarity both the growth and the depth of the man's inner life."

Students of freedom, limited government, and the voluntary so ciety will be interested in True blood's reference to John Bright and his influence on Lincoln. It will be recalled that .Bright joined Richard Cobden in 1841 in the Anti-Corn-Law League. Bright was an English Quaker, opposed to slavery and a strong opponent to England's recognition of the Con federacy. There was much South ern and Anti-Union sentiment in England at the time andJ ohn Bright was almost the only major 1974 OTHER BOOKS 59 statesman who supported Lincoln's firm policy. Bright did have the support of Queen Victoria and Prince Albert, all of which was of great importance to Lincoln. As expected, Trueblood would include mention of important Quaker influences on Lincoln. John Bright was one; and another, per haps even more influential in his later life, was Eliza P. Gurney. Mrs. Gurney was the widow of the famous English banker and Quaker minister, Joseph John Gurney.

Trueblood says that the Lincoln Gurney letters - together with Lincoln's "Meditation on the Di vine Will" - "provide a genuine in troduction to the theme completed in the Second Inaugural." This ad dress often has been called the greatest state paper of the nine teenth century and a theological classic. Evidence of Lincoln's spiritual growth was a statement by Horace Greeley, editor of the New York Tribune. Greeley had been most critical and impatient with Lincoln in the early years of the war, but later wrote: "Never before, did one so constantly and visibly grow un der the discipline of incessant cares, anxieties, and trials. The Lincoln of '62 was plainly a larger, broader, better man than he had been in '61; while '63 and '64 worked his continued and unabated growth in mental and moral stature." Trueblood's little book is truly a refresher for those whose study of Lincoln has dimmed a bit over the years, as wen as an introduction for those just starting their "walk 'with the great."

~ UNDERSTANDING THE DOL LAR CRISIS by Percy L.. Greaves, Jr. (Belmont, Mass. 02178: West ern Islands) 302 pages, $7. Reviewed by Henry Hazlitt 'THIS BOOK consists of a series of seven lectures given by Professor Greaves in the Argentine in 1969. 'Yet it forms, in effect, a rounded economic text. The titles of the lectures sufficiently indicate their !Contents: 1. What Is Economics?, :2. The Role of Value in Human .Action, 3. How Prices Are Deter mined, 4. The Effect of Wage Rate Interventions, 5. The Theory of Money, 6. The Cause of the 1929 Depression, and 7. The Evolution of the Present World Monetary Crisis. There is a Foreword by the late Professor Ludwig von Mises. Percy Greaves has been for years a. devoted student of Mises and does not profess to be doing much :more than apply the principles of "Misesian" economics to some of the outstanding problems of our time. Yet, through his long years 60 THE FREEMAN January of study and thinking he has made these ideas his own.

In an autobiographical passage in his preface, he tells us how deeply he and his family suffered from the collapse and depression of 1929, how the gnawing question of what caused this depression set him off on a life-long quest for an acceptable answer, and how, at last, becoming aware of Ludwig von Mises and his teachings, he finally found answers that fully satisfied him as to the real causes of inflation, mass unemployment, and modern economic depressions. The first four lectures are al most purely theoretical. They lay the groundwork for the last three, which deal largely with recent eco nomic developments and future prospects. In this arrangement Mr. Greaves follows the practice of Bohm-Bawerk, the teacher of Mises, who once said: "I cannot profitably discuss the 'practical' side of the subject until there is complete clarity with respect to the theoretical side." Readers of Mises and Bohm Bawerk will find few surprises in the early chapters on the nature of economics, the role of value, and the determination of prices. They will, however, find the exposition simple, clear, and condensed. Mr.

Greaves opens what he calls Part Two with his chapter on "The Theory of Money." In his Preface he has told us that "The study of money is at the apex of that moun tain of human knowledge known as economics." His chapter justi fies that description. The theory he expounds is essen tially that of Mises, but his pre sentation is lucid and concise with out being oversimplified. It is a quantity theory of money, in the sense that it recognizes that when ever the quantity of money is in creased, other things being equal, the value of each unit tends to fall (as with any other economic good). But this is not the crude mechanical quantity theory of money (espoused today by the so called monetarists) which holds that a given increase in the quan tity of money will produce the same proportional increase in "average prices." Greaves point's out that the increases in com modity prices brought about by increases in the quantity of money are neither proportional nor uni form, nor do they occur all at the same time.

He exposes the fallacies in the idea that the value of money can somehow be kept constant by po litical manipulation. It is impos sible in the nature of the case to maintain inflation indefinitely at a uniform rate. Inflation - the injec tion of new paper money into a society - can never provide more than, at best, a merely transitory 1974 OTHERBOOKS 61 stimulation. It adds no new wealth ; it merely redistributes purchasing power, and can help some groups only at the expense of others. In flation is never necessary: "The quantity of money available in any society is always sufficient to per form for everybody aU the func tions that money can perform." "A free market economy cannot permanently operate on a politi cally manipulated paper money standard. Free men need a market selected money. Under present con ditions, this means a .gold stan dard." The present writer is often asked by correspondents in what book or books they can learn most about economics. I have told them that the Mt. Everest of modern texts is Ludwig von Mises' Human Action, but I have had to warn them of the difficulties of the-as cent, particularly for tyros. The problem has been to recommend a book or books that would most quickly prepare them to under stand the Mises opus. I have often suggested Faustino Ballve's little Essentials of Economics, which is excellent, but not long enough (126 pages). What has been lacking is a book of intermediate length to introduce readers to a full appre ciation of the Misesian principles and insights. Professor Greaves' book, among its other merits, ad mirably meets this need.

_~ TWO CONCEPTS OF THE RULE OF LAW by Gottfried Dietze. (3520 Washington Boulevard, Indianapo lis, Liberty Fund, Inc., 1973) 108 pages, Cloth, $5.00. Reviewed by Ridgway K. Foley, Jr. WHAT CONSTITUTES the essence and appropriate role of the state? How does man define justice? What is law; what is order; what is liberty; and, how do these con cepts interrelate? Under what system or governmental structure can we secure maximum individual freedom and yet preserve the order necessary to avoid anarchy? What forces threaten liberty and order liness today? These and related inquiries have intrigued political philosophers and students of jurisprudence from the time of Plato. Now Gott fried Dietze, the distinguished scholar from Johns Hopkins Uni versity best known for his In De fense of Property published a dec ade ago, turns the light of his analysis and talents upon such heady questions in Two Conc1epts of the Rule of Law.

Encouraged and published by Liberty Fund, Inc., Professor Dietze's latest book consists, in the main, of two long essays: "The Just State and State J us tice", composed in 1966, and "State ,Justice and the Just State", writ':' ten from a vantage point five years later . Despite similarity of 62 THE FREEMAN January title, the two chapters examine similar poblems from divergent points of view, points of view in duced if not impelled by events transpiring in the United States in the intervening years. The author cogently observes "In today's Germany, consti tu tionalism is probably endangered as much by state impotence as by state omnipotence." (pages 92 93). While he directs a warning to the Bonn regime, his analysis, writ large, should be heeded by all nationalities. Indeed, this sen tence summarizes the entire book: constitutional government, the nineteenth century structural hope for securing personal liberty, faces a dual threat, an ever-expanding welfare state and an omnipotent permissive state.

The Encroaching State In Chapter I, "The Just State and State Justice," Professor Dietze lays bare the threat of the enveloping state, ever intruding more deeply into the lives of its citizens. Although he displays no particular commitment to liberta rianism (and indeed seems a cap tive of Germanic traditionalism), we know from his magnificent In Defense of Property where his in stincts rest. Yet in this chapter, the writer seems to seek an orderly balance in which essential law will preserve and protect the individual without despotism. If, by this, Professor Dietze means that gov ernment should maintain and en force rules which inhibit and de ter individuals from coercing and defra uding other members of so ciety, and should .provide for the orderly settlement of disputes, I would certainly agree .. If he sug gests some greater range to the appropriate state power, particu larly in his disturbing use of non contential phrases such as "liberal bill of rights" and a "social bill of rights" (see page 44), I must re spectfully disagree.

Perhaps the lack of clarity ema nates from Professor Dietze's pos ture as a scholar and a scientist. He treats difficult questions objec tively, acting as a value-free in vestigator for the most part. This we must cheer after myriad liberal "social scientists" assault our senses with unscientific and loaded conclusions. In any event, the first chapter considers the seed of tyranny ex istent in a liberal Law State, trac ing the alteration of Germany from its nineteenth century tradi tion through the Weimar Republic and the rise of the Third Reich. Although the lesson is not a new one, the author offers valuable in sight into the theoretical under pinnings which made possible such a development. Ideas have conse quences, and it becomes impera1974 OTHER BOOKS 63 tive to learn what malevolent or benevolent ideas contributed to the rise of an Adolf Hitler so that, hopefully, such a cataclysmic event might be avoided in the future.

After the Riots Professor Dietze wrote Chapter II, "State Justice and the Just State," in 1971, after viewing the riots, the violent demonstrations, the confrontations, the hijackings, and the general licentiousness of the later 1960's. These events ob viously took their toll and colored his thinking, for in this essay the author expresses concern about the survival of constitutional gov ernment (in the original liberal tradition) in an age dominated by the permissive state. He bleakly forecasts the future when he re marks: As long as there are human com munities and states, there will be State Law. On the other hand, the future of the Just State is less clear. As a result of its formalization, that state can be inverted and annihilated by State Law. Considering the sub stantive evolution of that law as the concretization of political decisions, the survival of constitutional gov ernment appears to be doubtful. It is true that, by means of State Law, constitutionalist idealists, with vary ing success, again and again have tried to create, even under the most adverse conditions, institutions which approach their ideal. However, welcome as these attempts may have been for combating the threat to con stitutional government from the pow tar of the state, their all too permis :sive conception often brought with them a laxity which overlooked the importance of the law for constitu tional government and thus endan gered the latter through state im potence. (page 92) Chapter II deals with a very real threat, one which perplexes lmany of us who live in this un 8ettled age. On the one hand, all lmanner of .regulations impede the release of creative energy by the individual: the Law State. On the other hand, government, for all of jlts monopoly of organized force, 8eems wholly unable to cope with bandits and terrorists in our midst 'who deprive their neighbors of life and property and who abso lutely defy any rules of law or common morality: the Permissive State. The murders at Munich, the behavior of the Chicago Seven, the Soledad Brothers affair, the Black Panther police snipings, all reveal on utter indifference to an orderly society, a vital threat to creative citizens, and an almost complete inability of organized government to cope with persons ~iVho operate outside of a moral consensus.

Two Conc1epts of the Rule of Law makes one hunger for a more intense analysis of the interrela64 THE FREEMAN Janua,ry tionship of freedom and order. Can we anticip'ate a natural con catenation of the creative energies of the millions of individuals who make up the modern state, or are collisions between personal desires and drives which can only be de termined by the state inevitable? I rather believe the former but would welcome Professor Dietze's consideration of the subject to gether with a specific look at some of the apparent person-to-person conflicts "solved" by the modern state. In summary, the author says a· great deal in a short span but, by virtue of the nature of his sub ject, he leaves much unsaid. A word of warning to the un wary reader: do not expect a fast and easy track. Thi s man writes for the person who thinks about knotty problems. The author as sumes a knowledge of history, of law, and of philosophy on the part of his reader. More than that, he demands that his reader think and participate in the scholarly en deavor. One who bears with Pro fessor Dietze and who brings his own insights along on the journey will be amply rewarded. tl HANDSOME BLUE LEATHERLEX FREEMAN BINDERS $2.50 each ORDER FROM: THE FOUNDATION FOR ECONOMIC EDUCATION IRVINGTON-ON-HUDSON, NEW YORK 10533 tt1e Freeman VOL. 24, NO.2. FEBRUARY 1974 How Not to Cure an Energy Crisis Gary North 67 The results of destroying the market are not corrected by further government intervention.

Our Lives and Goods Ralph Bradford 74 Our liberty and freedom consist in having those laws by which our lives and goods may be most our own. APrescriptionto Soothe One's Wounds Practice it in the family and in one's own business. John C. Sparks 79 The Public Interestof Private Enterpriseand the Private Interestof Public Policy William H. Peterson 82 An attempt to define the limits of government which are consistent with competitive private enterprise and consumer choice. 88R. W. DemersFrom Whence Comes the Wind We need occasionally to climb a hill and take a broader view. Competition,Monopoly,and the Role of Government SylvesterPetro 91 Why government should quit trying to promote competition by means of the antitrust laws. The False God of Politics Allan C. Brownfeld 101 Man cannot find in Washington, D.C., answers to questions each must answer for himself. Back Door Press Control Melvin D. IBarger 105 Government regulation and control of business eventually threatens freedom of the press.

Th'e Invisible Hand Leonard E. Read 114 How intelligent pursuit of self-interest promotes freedom and progress in society. AMatter of Self-Responsibility Paul L. Poirot 118 In the case of economic "shortages" the issue is not so much self-subsistence as it is self-responsibility. Book Reviews: 123 "Fascism" by Paul Hayes "As We Go Marching" by John T. Flynn "Education in a Free Society" edited by Anne Husted Burleigh "Labor Legislation from an Economic Point of View" by Gustavo R. Velasco Anyone wishing to communicatle with authors may send first-class mail in care of THE FREEMAN for forwarding.

tile Freeman A MONTHLY JOURNAL OF IDEAS ON LIBERT' IRVINGTON·ON·HUDSON, N. Y. 1053·3 TEL.: (914) 591·72~ LEONARD E. READ PAUL L. POIROT President, Foundation for Economic Education Managing Editor THE F R E E MAN is published monthly by th Foundation for Economic Education, Inc., a nor political, nonprofit, educational champion of privat property, the free market, the profit and loss systen and limited government. Any interested person may receive its publication for the asking. The costs of Foundation projects an services, including THE FREEMAN, are met throug voluntary donations. Total expenses average $12.00 ; year per person on the mailing list. Donations are in vited in any amount-$5.00 to $10,OOO-as the mean of maintaining and extending the Foundation's wor~ Copyright, 1974, The Foundation for Economic Education, Inc. Printe in U.S.A. Additional copies, postpaid, to one address: Single copy, 5 cents; 3 for $1.00; 10 for $2.50; 25 or more, 20 cents each.

THE FREEMAN is available on microfilm from Xerox University Microfilm: Ann Arbor, Michigan 48106. Some articles available as reprints at cost; state quantity desired. Pel mission granted to reprint any article from this issue.

How Not to Cure an EnergyCrisis GARY NORTH PRESIDENTNIXON went on national television on November 7, 1973, to announce to the nation that we are in the midst of an energy crisis. He said that citizens and industry should be willing to work in 68-degree semi-comfort, thus cutting fuel use by 10 per cent. We should also drive at 50 miles per hour, thus increasing our gas oline milea.ge. Since the mid-1950's, when the construction of Federal highway projects was seen as the eighth wonder of the world, we ha.ve now come full circle. Highways are bad; now we need rapid transit. Southern California, which once had a quite serviceable electric trolley car network - the Pacific Electric - now must spend billions of dollars of taxpayers' money in order to achieve as good a system as we had in 1950, before the days when government-financed "free ways" were built. We have the best possible highDr. North, economist, lecturer, author, cur rently is an associate of Chalcedon, an edu cational organization dedicated to Christian re search and writing. His latest book is An In troduction to Christian Economics, Craig Press, 1973.

"rays - safe at 70 -miles per hour on some stretches, safe at 65 vir bllally everywhere. Now we are told that we should only drive 50. Of course, during the rush hours "rhen most of the driving is done, no one really worries about driv ing 50; if you're lucky, you'll aver age 35. Freeways, being "free" to any motorist at all hours of the day, provide little economic in centive to 'drive at less crowded hours of the day. But you can always drive 65 miles per hour during the hours when you aren't actually on the highway. As I said, we have the best highways tax nloney can buy (less kickbacks in certain unmentioned states, of course) . So now Mr. Nixon says we should drive 50. Unfortunately, as General Motors President Edward l'f. Cole has pointed out in a letter to Sen. Jennings Randolph (N0 vember 8, 1973 release), most of our driving is done under 50 any \vay - around town or on country roads. United States Department of Transportation data indicate that only about 42 per cent of the driving is done at speeds of over 67 68 THE FREEMAN Februar~ 50 - and I wonder if this takes into account the driving done at under 50 during traffic jams on the superhighways. So the new speed restrictions, even if imposed in all states, even if obeyed by drivers used to 70 miles per hour driving, even if enforced by overtaxed highway patrols, would only save the nation 45 million barrels of crude oil annually, or about two and a half days' worth of con sumption. Terrific!

Effect of New Speed Limits on the Trucking Industry Then, of course, there is the effec~ the new speed limits will have on the trucking industry. Shipments will be delayed, since ttuckers will not be able to drive at the higher speeds. This is not a pleasant prospect, given the po tential danger of a breakdown in train transport in the northeast section of the nation. Government regulations over rail transport, coupled with near-monopoly status of the "favored" railroads, now offer us another crisis. Some cities face both power shortages and shortages of other goods and ser vices. Government regulations are like stones tossed into pools of water; they create ripple effects that not even the most sophisti cated computer predictions can foresee. Government agencies toss in great handfuls daily. So we return to the first half 0: the proposed crisis cure: restric tions, voluntarily imposed, on en ergy use. We turn off all neOl signs, for example, as they havl done in Oregon cities. A spokes man for the Outdoor AdvertisinJ Association of America inform us that this will save about 1 pe cent of all electricity used in th country. With all gasoline sign off in the evening, it's a gooe thing that our faithful motoris is holding his speed to a fuel conserving 50; he's going to neel those extra miles for his searcl for an open gas station. Most won' be open anyway,' I presume, sinc, the gasoline shortage encourage them to shut down after 6 p.m.

but without brightly lighted sign~ motorists will be hard-pressed t tell the open from the closed sta tions. This will, no doubt, encour age people to do their driving be fore evening, thus clogging th "freeways" even more during th peak hours. Washington's response? Anothe handful of stones. What about voluntary restrain on heating homes and businesses Perhaps it may be healthier. I may encourage higher output. Bu why should a firm or a housewif keep the temperature down? B; their own demonstrated prefer ence, people like warmer climati conditions in the winter, cooler il 1974 HOW NOT TO CURE AN ENERGY CRISIS 69 the summer. Each man will always have that nagging doubt: I'm liv ing less comfortably, but what about everyone else? What good does one uncomfortable family· (or work crew) count in a nation of millions? Not Much Difference Indeed, the problem is very much like the smog problem or the traffic jam problem. How much pollution or how much used-up space will one additional automo bile cause? An infinitesimal quan tity, obviously. Literally unmea surable by macro-economic tools.

Each family or each driver or each business concludes that his pres ence or his use of power won't make that much difference. Each person is absolutely correct; it won't make much difference. All those micro decisions, however, prod uce macro crises in today's world. Yet, in other areas of our lives, the micro decisions do not produce macro crises. The newspaper boy fails to deliver a paper one day. This is an inconvenience, but not a disaster. You can call up the local distributor, and a man will send out the paper. If this happens too often, there is an economic in centive for you to take another newspaper. The newspaper man agers know this, so they take care to organize their staffs so that the paper does get delivered most of the time. It pays them to have built-in self-correction devices that operate against micro-economic errors. A person can take an unan nounced day off from work once in a while. This is a bad policy nlorally - a person is not fulfilling the terms of his contract. But if the practice continues, the com pany will impose counterpres sures. The public's position is pro tected by internal company poli cies. Service is more constant, rnore predictable, which is what the public expects and pays for.

There is an economic incentive for companies to see to it that micro failures do not become macro fail ures. And they have a reliable indi cator to remind them of their task: the profit and loss statement. It vvorks so long as there is the right to exchange property (including labor) on a market of freely changing prices. These are outright micro fail ures. But what about micro de cisions that should not be, in and of themselves, detrimental? Sup pose pizza eaters who have for years ordered their pizzas with rnushrooms should decide to order them with pepperoni. All of a sud den, pizza shops have to order rnore pepperonis and fewer mush rooms. As always, customers set prices. Their increased demand for 70 THE FREEMAN Februarl pepperonis increases the price of the available supplies of pepper onis, for the customers are bidding (as always) against each other. Meanwhile, the price of mush rooms tends to drop, since fewer customers want to consume the available supplies of mushrooms.

In a long chain of economic reac tions, the costs associated with pepperoni production rise (labor, machinery, the costs of breeding more and more little pepperonis, and so on). Then entrepreneurs will concentrate their attention on increasing the supply of pepper onis more efficiently - more inex pensively - in order to reap prof its. Up goes the supply of pepper onis, which is precisely what the public has demanded, while the mushroom producers are forced to cut production, freeing economic resources (such as capital) for more important uses. No "crisis" emerges - no television speeches by the President, no Congressional hearings, no paperbacks from Nader's summer vacation student lawyers - unless someone tries to impose price controls on the pep peroni industry. Breaking the Chain With price controls, however, the complex chain of economic events is disrupted: no one is quite sure just how much pepperoni should be produced or which pizza shops should get priority consider ation in receiving the now shor1 supplies - short in relation to pub lic demand at the artificially 10'"

price of pepperoni. Soon the Italo· American Society will be picketin~ on the Capitol steps, the Pizza anc Staw Hat Amalgamated Brother· hood will be petitioning Earl Butz and the FDA will send out pre· liminary warnings against debase( pepperoni quality to all the pep· peroni producers of the nation We will then have a full-blowr crisis. The public will be asked tc order at least one mushroom pizz~ for every three pepperonis, wit! rationing of pepperoni pizzal threatened if "voluntary" re straints - one's patriotic duty ir the war against spiraling pepper oni prices - should fail. Then the Cost of Living Council will add ~ new department: the Pepperon Control Division. A chain of un derground black market pepperon pizza parlors will spring up. Al over America, certain unpatriotic citizens will be whispering int< door-slits, "Luigi sent me." A sim, pIe shift in taste at the individua level, when coupled with price con troIs, can produce a national macrc catastrophe. (In the midst of thi: crisis, no one even notices tha Congress has passed, and the Pres ident has signed, an omnibus bil onto which - in section 84b - ~ $17,234,187.57 appropriation fo: 1974 HOW NOT TO CURE AN ENERGY CRISIS 71 the floundering mushroom indus try has been attached.) Therefore, we can adopt a sim ple (though not infallible) princi pIe: where micro decisions produce macro crises on a regular basis, someone - probably the civil gov ernment's officials - is probably in terfering with the right to ex change property (including labor) on a market of freely changing prices.

Who's to Blame? Are the Arabs cutting off our oil-variously estimated from 6 per cent of our total supplies to 12 per cent, which tells us some thing of the accuracy of statistical reporting - thus producing a cris is? Why didn't we have a reserve, such as the north-slope Alaskan oil? Because ecology advocates prohibited the construction of the pipe to transport it; they got gov ernment agencies to stop construc tion. Because ecologists stopped drilling for new oil in places like the Santa Barbara channel-again, by state interference. (This eco logical activity was necessaTy, at least in part, because laws of property are not enforced by the courts and legislatures, thereby failing to make oil firms complete ly responsible financially for their own errors of judgment in not protecting the environment against oil spills.) Because interference in capital markets by governments rnakes it more difficult for newer, smaller, innovative firms to gain needed capital to develop alterna tive power sources. 1 Because gov ernment bureaucrats interfere ,;vith licensing of alternative power sources (yes, even non-polluting 8ystems) already developed. In other words, because of a massive list of statist "becauses."

Are persons using too much energy, that is, more than this 'week's crisis mentality in Wash ington would prefer? Well, why not? The governments have sub sidized cheap power for years. ~rhey have not permitted public utilities - themselves the monopo listic creations of governments to raise prices on their various products. So the public has ac cepted as valid economically the one indicator they have to measure the value of the energy source, that is, the cost-per-unit con sumed. The government has de liberately subsidized the public by keeping prices lower than the com panies have insisted was neces sary. So the companies have not been able to afford to hire the best people available. In some cases, they have found it necessary to keep older, less efficient equipment, having it repaired by less skillful 1 James Mofsky, "Blue Sky Restric tions on New Business Promotions," Duke Law Review (July, 1969) 72 THE FREEMAN Februa,rJ:, repairmen on their staffs. They have found it difficult to raise cap ital on the free market, for their bonds are rated low (and there fore the interest they must offer to pay must be higher) because some local public utilities commis sions have had their eyes on the ballot box instead of the scarcity of capital.

Shielded from Competition Then, of course, there is the in efficiency of managements that are shielded from free competition. For years they have faced political battles with the public utilities commissions instead of economic battles with competitors that might otherwise have been able to enter the market. Who can say what alternatives might have been developed? Who can estimate the loss of efficiency that has corne about because newer, more cre ative, innovative firms have been kept out of monopolistic, govern ment-created closed markets? The public supposedly has been protected by these various power monopolies. Now the government finds that the public must co operate in order to make the jerry built government monopolies work more or less successfully. But the public is not given an economic incentive to cooperate. Are elec tricity rates boosted sufficiently to cut down the consumption of electricity? No, indeed; that might bE politically dangerous! So we go tc voluntary controls in the name oj the national emergency. They arE too much like the "voluntary priCE guidelines" that were scrapped or August 15, 1971. We cooperate voluntarily, or else ... rationing Nice, inefficient, unpleasant, jerry built, creaking, black-market cre· ating, bureaucratic power-enhanc· ing rationing. All in the name oj consumer protection.

There is another consequence of "voluntary" . controls to consider, Citizens are asked to cut back O!J their consumption of power. They are asked to do this in the name oj patriotism in order to deal with 2 national emergency. Before thi~ crisis, individuals were free to USE up as much power as they chose: so long as they were willing to pay for it. No one worried about wha1 his neighbor might think about thE "morality" of a horne heated to 7f. degrees. With free pricing, the ex· penses associated with such phys· ical comfort would have to be bornE by the user. But today men an warned that those who keep theiJ homes warmed are unpatriotic even immoral. They are encouragec to regard their neighbors with sus· picion. They are made to feel guil· ty. Exceedingly ugly circumstance~ may arise - indeed, are now aris· ing - when someone in a neighbor· hood wants to put up the tradi1974 HOW NOT TO CURE AN ENERGY CRISIS 73 tional Christmas lights or flood lights for home protection.

The macro-crisis has been na tionalized officially; micro-de cisions are now a part of the public morality, and hence the pressures of public opinion are brought to bear on "deviants." And as Tocqueville wrote in the 1830's, few things in social life count as highly or are as uncompromising as public opin ion, especially in the United States. Displays of the public morality can be irrational and very insensitive to the subtle questions of personal choice. Mobs are not easy to reason with. Hysterical neighbors are not inclined to listen to marginal util ity analysis. Yet the daily press reports an endless stream of sta te ments from public officials that is creating a vigilante mentality among the public. The colder the temperature, the hotter the un leashed emotions. So now, instead of producers competing in order to give the cus tomers what they want, we see the incredible spectacle of gasoline companies telling customers to walk more or to ride the bus! They spend millions of dollars to buy television advertising to ask us not to use their products! And because of the threat of direct rationing and the creation of a "temporary emergency control board," this advertising may be well spent by the oil companies.

The competition we see now is not between the gas company and the electric company, but between the ecologists' political bloc and the energy-crisis political bloc. This, it should be noted, is precisely w'hat Soviet Russia has developed: the only competition is that be tween government bureaucratic agencies. The consumer simply hopes and prays that the system 1Nill operate after the political dust has cleared, or at least has settled into another province's back yard. The answer to the macro-eco nomic crises lies in the reestab lishment of the free mobility of risk-capital, the free bargaining of private citizens with each other, the free mobility of prices, and the eradication of "free" goods and the fallacious philosophy 'which undergirds them, whether in this country, Libya, Venezuela" or Japan. Let the free market do the micro-economic rationing effi eiently, and we will not need to be burdened with the ghastly ineffi eiency of statewide or Federal economic planning. Micro-economic decision-making is the primary device for keeping crises on a lmicro level. At least, under micro economic crises, someone gives me a direct incentive for sitting in 138-degree semi-comfort: I don't 'wind up with a monthly bill that prod uces 72-degree financial diseornfort. ~ RALPH BRADFORD CHARLES THE FIRST of England was in many respects a bad king and an uninspiring man. Certainly he can not be held up as a shining example, either of ethical under standing or princely conduct.

But every man has his moment of truth, and Charles achieved his one grim day in 1649, on a scaf fold at Whitehall. There he spoke briefly as he faced his execution ers, making his profession of in nocence and his confession of faith. And there was another mat ter on his mind. "For the people," he said, "truly I desire their liberty and freedom as much as anybody whatsoever; but I must tell you that their liberty and freedom consists in having those laws by which their Iives and goods may be most their own." Those laws by which their lives and goods may be most their own! What better statement could be Mr. Bradford is well known as a writer, speaker, and business organization consultant. He now lives in Ocala, Florida. 74 made concerning the proper end and aim of law and government? What happier expression could be found as to the nature of liberty? True, it is not couched in elevated language. There is no oratorical effect. After all, in just a few mo ments the weary prince was to kneel before the headsman's axe.

It was not a time for the careful choice of language. But as a for mulation of freedom's essence those words are hard to improve upon or equal. In the current j ar gon, Charles had put it all to gether. "Oh Liberty! How many crimes are committed in thy name!" So spoke Madame Roland, also from the scaffold - or rather from the guillotine, for the scene was Paris. The doomed lady was no doubt correct in her bitter and much quoted apostrophe - and the crimes committed in Liberty's name have been rhetorical and literary as well as extra-legal and inhumane.

1974 OUR LIVES AND GOODS 75 freedom Personified A great deal of very high-flown rhetoric has been expended on the theme of liberty and freedom. Milton envisaged liberty as a beautiful mountain nymph. Pope sighed for "a hollow tree, a crust of bread and liberty." Thomas Campbell imagined that "Freedom shrieked as Kosciusko fell," and William Cowper insisted that Freedom "has a thousand charms to show." Freedom indeed has been personified in countless can vas and marble representations, usually as a beauteous and rather buxom female of ample charms. In New York harbor, and in a smaller rendering beside the Siene, Bartholdi's heroic sculpture presents Liberty Enlightening the World, with the Law in one hand and the torch of Freedom in the other. And this is all to the good! The spirit of liberty, the urge to be free, has been a moving force in the life of man. He has struggled for it, dreamed about it, fought for it - and died for it. It is fitting that a thing so central and pre cious should be expressed oft times in ideal, artistic and sym bolic terms.

But such expression, it must also be confessed, sometimes sets Liberty upon too tenuous a pedes tal. It glorifies Freedom now and then beyond the recognition of lTIen who live, after all, on a very lTIundane level and who, along 'with a keen interest in the bless ing of personal freedom, are also eoncerned necessarily with such prosaic matters as the level of taxes and the price of beans! ~4 Condition of Life Freedom is indeed a noble ab straction; but it is also a condi tion of life - a condition that may be curtailed or denied altogether by the governmental concepts and practices under which men live. It is for this reason that these last thoughts of Charles on the scaffold are pertinent to the present scene. :He was about to lose the greatest freedom of all - the freedom to live! And in that grim moment he saw with prophetic clarity that what the people of England really 'wanted was not alone the abstract blessings of political freedom.

What they wanted, then as now, like all men everywhere, was the condition of law under which their lives and goods might be most their own. It is an affectation of our times to pretend a lofty disdain for things material. Ardent advocates of achieving the good life for everybody through national bank ruptcy speak much of "human values"; and they postulate that these are somehow superior to and at variance with material values.

76 THE FREEMAN February This rather etherial cliche can, of course, be easily reduced to an absurdity. For aside from the priceless benefits of political and personal liberty, the much-talked of human values are simply mat ters of food, clothing, shelter, and the satisfactions of comfortable Iiving. They are the physical con veniences of life - modern plumb ing, central heat, air conditioning, radio, television, labor-saving ap pliances, motor cars. They are education and health. They are vacation trips and visits to the zoo. They are books and pictures. In short, they are largely things to be physically enjoyed. Charles understood this, as did most people of his day. He was not doing any specially "advanced" thinking when he equated the pos session of goods with freedom. In those times, and for long there after, men were not reticent about the value they placed upon what Charles called "goods" meaning material possessions. In deed, the very name he used for such possessions derived then as it does today from the esteem in which they have always been held.

They were looked upon as good things to have; they were there fore "goods." And the right to possess and enj oy them was a basic right, essential to liberty and the full life. What Thomas Jefferson eventually expressed as man's unalien able rights, Le., life, liberty and the pursuit of happiness, had been rendered long before by John Locke as "life, liberty and prop erty." And during the decades when the American revolt against England was slowly brewing, the same idea found expression very often in a popular newspaper slo gan: "Liberty, Property - and No Stamps." The stamps, of course, were simply an annoying infringement of the property rights which the Colonials held so dear. Eventually those bits of sticky paper came to have a symbolism and mystique of their own, especially those that were senselessly and punitively applied to tea. But at the begin ning they were merely an impedi ment to the free exchange of goods, imposed without the con sent or approval of the colonists; and as such they were roundly and properly damned.

The Principle of Ownership A point to remember is that all this represented an unabashed de votion to the principle of owner ship - a devotion that man has evinced all through his history. He worked; he made things; he bartered them for other things he needed or wanted more, or for a medi urn of exchange (a shell, a bead, a minted coin) which he 1974 OUR LIVES AND GOODS 77 could use in future exchanges of like nature. And he wanted no in terference with this simple and useful process of making, selling, bartering, buying and using the things he called "goods." So it did no violence to reality for Charles to lump "goods" and life itself together as the two things men wanted to be "most their own" - by which he meant, of course, least interfered with, least minimized, least withheld and diluted by the State. For life, after all, is in itself a species of possession - the quintessential good thing that a man can call his own. To be sure, it h~s a mystical quality that transcends all materi ality, even as it passes all under standing and defies all explanation.

That a few pounds of elemental substance should by some strange alchemy coalesce into the miracle of a human life - this has always been and perhaps always will be the first and final mystery. Confronted with this enigma, man gropes beyond the physically obvious and seeks answer in the supernatural. Unable to explain or even to comprehend the intri cate processes that combine to make a man, he turns to the idea of special creation, not as a chemi cal formulation, but as an act of God. Thus groping, thus hoping, man comforts and ennobles himself; and in the exercise of hope he dis lnisses or evades the despair of ignorance. In the end he achieves a sense of origin that transcends atom and protoplasm and relates him filially to God. He becomes the Final Result of the First Cause! But he is also a physical animal, with every hungry cell demanding :sustenance. If he does not live by bread alone neither can he subsist solely on a diet of philosophy or :spiritual contemplation. Moments of ultra-physical comprehension come and go, with their ecstasies and torments; but his stomach re mains fairly constant in its demands.

Human Nature So man ekes out his days and drifts finally into the limbo of things forgotten, sustained equally by his spiritual concepts· and by his use and enjoyment of what he makes and earns. There is no sepa ration or distinction of values as between the material and the "hu man." All his needs are human needs; and they are satisfied alike by his intellectual or spiritual per ceptions, and by his ownership and consumption of the "goods" he has created or acquired. The essential condition of free dom is not to live without fear, but to live without un-natural fear. That man should fear wild beasts, 78 THE FREEMAN February or robbers, or the scourge of pestilence - this is a natural heri tage of his mortality. To fear the unknown, or adverse fortune, or pain, or death - these also are fears natural to man. But it is not natural, or should not be, to fear government, which is an instru mentali ty man has himself cre ated, not for his oppression, but for his protection. To the degree that government at any time ren ders the citizen apprehensive as to his life and possessions, it has betrayed its purpose and disserved its sole reason for being.

The government that curtails or cancels man's right to own and enjoy his material possessions such a government has diminished or destroyed his freedom as truly as though it had denied his right to think, or speak, or vote, or pray. Common sense and the sanc tion of long usage, to be sure, dic tate that the citizen will surrender a portion of his earnings in return for the protection and stability of an organized society. This is the essence of the implied agreement between the citizen and the State that is known to scholars as the Social Contract. The Overpowering State But when the State constantly takes more from the citizen than is needed for the normal' act of governing; when in the name of social progress it piles debt on debt and sets the printing presses to work grinding out paper money of ever~diminishing value; when its leaders rashly undertake to substitute their puny economic guesses for the impartial wisdom of the free market; and especially when, with callous arrogance, they presume to instruct the people how their savings shall be dis posed of, or whether, indeed, they shall be allowed to have any sav ings at aU - when such usurpa tions occur, under whatever pre text or camouflage, then the Social Contract has been violated, and the State is no longer a govern ment in the historic and tradi tional sense. Instead, it is an ex pensive and dangerous experi mental laboratory in which the citizens not only pay the cost but serve as the guinea pigs!

A Legacy of Truth January is usually cold and raw in London, and in 1649 its last day but one was doubtless no ex ception. Whitehall itself was a chill and gloomy pile. Charles probably welcomed the brisk walk across from St. James, where he had been held prisoner . It is of record that he asked his guards pleasantly to "walk apace." What were his thoughts in that last hour? Regret? Remorse? Did all his intrigues come forth to ac19·'74 OUR LIVES AND GOODS 79 cuse him? Did he lament his own perfidy in letting the faithful Strafford go to the block? Was he sustained by the knowledge that his private life had been austere and blalnelescs? Who knows? He is dead now these three hundred years and more. About all we can say for sure is that he met his end well, AUTHORITARIAN GOVERNMENT is well known to be the instrument by which man's freedom to act peacefully is most often hindered or prevented.

The advocate of freedom in the United States, or in any land where the government officials are elected by the democratic process, Mr. Sparks is an executive of an Ohio manu facturing company and a frequent contributor to The Freeman. bringing to the scaffold that day ,~hatever of dignity and decency the fading moments of a wasted Hfe could summon. That much ... and also that he managed to utter one brief legacy of truth, namely That our liberty and freedom consist in having those laws by which our lives and goods may be most our own! , 04 <:Pre6cripti,," to Soothe JOHN C. SPARKS is aware of the difficulty of remov ing this authoritarian tendency even in democracies. To remove totali tarianism from a democracy, the relatively few who understand why individuals should be free to make their own decisions must be able to persuade the majority of voters to the freedom point of view. To achieve such a mission may take generations, if not cen turies. Small wonder that the 80 THE FREEMAN hopes and efforts of those who love freedom often end in frus tration.

The purpose here is not to di vert attention from the main event. To work toward a wider understanding of the exci ting freedom philosophy is of prime importance. But instead of being frustrated, let the seeker of free dom know there is an area of open opportunity to practice the basic tenets of his philosophy without hindrance: in his personal affairs. And to the extent that he suc ceeds, the rewards are most grati fying. Suppose our freedom advocate is a family man with a wife and children. How easy and natural it would be for him to assume the role of the tyrant or dictator in , his· family, while fully intending to be kind and beneficent. As the total ruler of this" small kingdom, his word is la'.¥, applying repeat edly to the actions of his wife, sons and daughters. Picture the stifling effect on the potential creativity of those under his thumb, as well as an absence of real love of the subjected for their ruler.

Such an atmosphere is bound to affect adversely the well-being and health of the family tyrant. Imag ine the heavy and continuous re sponsibility of making major and minor decisions, not just for one person, but for two, three, four: or five. The burden would be heavy - and the results can be predicted: members of the family absent from home beyond normal reason: little genuine fun and relaxation, children secretive and reluctant to confide in the despot, turning for counselor information to sources other than the home. All of these are serious reactions, but none could be termed outward revolt. Consequently, the danger exists that the life of the tyrant of the family rolls along uninterrupted while the estrangement solidifies. One by one, as they reach adult hood, the children sever all family ties, leaving the aging tyrant in creasingly embittered that his children seem without any love or concern for him.

This same man who logically and clearly sees that excessive power given to men in government produces unhappiness for the op pressed citizens, seems wholly ob livious to those personal circum stances where he held a small amount of power as head of his family and used it badly to rule and dictate. Had he been able to see himself and apply the philos ophy of freedom to those around him in his family, his rewards would have been full beyond all expectations. Parental direction is an awe some responsibilty and should not 1974 A PRESCRIPTION TO SOOT'HE ONE'S WOUNDS 81 be abdicated. But it can be done joyfully, gently, lovingly, persua sively, to yield a lifetime of plea sure and gratification. The freedom advocate also may be in a supervisory position over employees. Again, his power can .be dispensed with, or without, abra siveness. Since his effectiveness would be adversely affected if he chooses to be an all-out tyrant boss, he may curb his tendencies to wield power ruthlessly. He may have just enough introspection to see that such action could injure his opportunities for advancement or promotion. Unless he owns his business, failure to understand and control his use of power could lead to his early dismissal. Even a business owner can ill afford to be a tyrant over his employees, although his harvest of resent ment and lost production may not be immediately apparent.

Although this advocate of free dom may discern clearly the evils of power-mad governmental officials, he may at the same time fail to perceive the similar error in the heavy-handed way he employs power personally. It is appropriate that a supervisor instruct and pro vide direction for subordinates. If he can do this in an atmosphere of freedom, he may then be able to tap the latent creativity of the people who work with him, and encourage its flow, thus enjoying the good will and well-wishes of his colleagues. From one's personal life, there fore, can come the healthful satis faction of practicing freedom among those over whom one has the power to demand submission. Freedom applied in his persona] life can do much to soothe the 'wounds of the freedom advocate as he is outraged by the oppres siveness of big government. As a :matter of fact, he may find that :minding his own business is quite :a happy and rewarding way of life. I) IDEAS ON LIBERTY Self-Development Is Our Job THE WORLD is full of problems, but most of them are man-made, and essentially unimportant. They do not belong to the eternal verities; many of them are petty side issues and not even en route to the great achievement. There is only one maj or problem in the whole world, and that is the salvation of the individual soul.

HANFORD HENDERSON J "To Find the Way Out"

The Public Interestof Private Enterprise and the Private Interest of Public Polic' WILLIAM H. PETERSON Politics is the conduct of pub lic affairs for private advantage. Ambrose Bierce public (pub/Ilk), adj. 1. Of or pertaining to the people; relat ing to, belonging to, or affect ing a nation, state, or commun ity at large;- opposed to private. 2. Open to common or general use, enjoyment, etc.; as a publ ic meeting. 3. Open to the knowledge or view of all; generally seen, known or heard. >J private (prj/vit), adj. 1. Be longing to, or concerning, an individual; personal; one's own; not general or common; as private property or opinions. 2. Sequestered; secluded; as, to wish to be private. 3. Not public in nature,' not in public life or under public control; as, privat_e schools or citizens. -Webster's New Collegiate Dictionary 82 ONE of the unsettling incongruitief of the 20th Century lies in thE mislabelings, semantic inversion~ and twisted meanings thrust on a host of everyday words - a thrus1 which has garbled communication~ no end and trapped hs in a lot of false notions and unpublic public policies. Orwell illustrated this Newspeak problem beautifully in 1984 and Animal Fa,rm.

Take the world liberal, for ex ample, whose modern meaning de notes an advocate of big govern ment but whose root is the Latin liber - i.e., free. So originally a liberal was a liberator, a minimizer of government's role, or, more preDr. Peterson is a government economist pres ently on leave to work at a book on economic reasoning based on the theories of the late Ludwig von Mises.

1974 THE PUBLIC INTEREST OF PRIVATE ENTERPRISE 83 cisely, an advocate of freedom. In political terms, 18th Century lib erals like John Locke and David Hume sought to limit the power of government so as to maximize the freedom of the individual. John Locke, for example, held in his Second Treatise on Civil Govern ment that the only function of government was the protection of property, which he broadly defined to include life and liberty. In economic terms, early liberal economists like French physiocrats Francois Quesnay and Jean Vin cent de Gournay and classical econ omists Adam Smith and David Ricardo called for laissez faire (then essentially meaning free trade but bastardized today into something bordering on economic anarchy). To enhance in particu lar the royal tax take and in gen eral the wealth of nations (the phrase is of course Smith's) they wanted to cut back the over-ex tended and self-defeating policies of mercantilism - the very policies which touched off the Boston Tea Party and the American Revolu tion.

But as Webster's foregoing defi nitions indicate, the semantic trap is perhaps nowhere better seen in the two everyday supposed anto nyms, public and private, as in public schools and private corpor ations. Public suggests something open, social, above-board, altruistilc, operated on a nonprofit basis. Private, on the other hand, sug gests something closed, asocial, secretive, self-interested, operated for profit (yet another word in disrepute) . Shame on You! No wonder, then, private corpor ations are prodded to think of the public interest, of their Social Re sponsibility instead of their pres ent self-interest. Accordingly, cor porate owners and managers are reminded of their great wealth and power and are exhorted, if not admonished: Consider social indi eators, engage in social accounting, be mindful of our national objec tives. In other words, don't just stand there but do something con structive on poverty, education, crime, alienation, ecology, conser vation, consumerism, occupational :safety, job monotony, women's rights, racial discrimination, urban renewal, cultural deprivation, economic development at home and abroad. This list of sins of commis sion and omission and kind of when-are-you-going-to-stop-beat ing-your-wife indictment could be extended and certainly will be as our troubled times roll on.

Indeed, some of the exhorters and admonishers have lacked on a Social Engineering Thesis to the Social Responsibility Thesis; they hold that if we can find the tech84 THE FREEMAN Februar1 nology to get to the moon with a systems approach, so with linear programming and operations re search we can crack the social problems of, say poverty or urban decay or - what have you? All it takes is less private interest and more public interest; all it takes is will - in the case of Social Respon sibility, corporate will. Economist Milton Friedman is one man who has rej ected this thesis of Social Responsibility, saying that businessmen should stick to their private knitting, worry about their stockholders and concentrate on making profits. The unintended upshot: Society is thereby furnished with goods, ser vices and jobs - Smith's valid but much derided Invisible Hand. (In this vein, Friedman has also criti cized public schools as education ally deficient because of their lack of competition, and has pushed for the voucher plan whereby parents can choose private or public, i.e., government, schools.) Economist Neil Chamberlain of Columbia University does not go as far as Friedman. In his new The Limits of Corporate Respons'i bility (Basic Books), Professor Chamberlain says, yes, business men can take some "modest, in cremental, assuaging actions" on the Social Responsibility and So cial Engineering fronts - say, a corporate gift to underwrite a ballet at the Kennedy Center or tc equip a lab at Cal Tech - that kind of thing.

Social Responsibility Chamberlain labels his compro mise position the Limited Respon sibility Thesis and well reminds us of the corporate facts of life the constraint of cost, the impera tive of profitability, the injunction of competition. But assuaging ac tions may not be enough, muses Chamber lain as he ranges over corporate involvement in consum erism, education, ecology, Wash ington politics, trade unionism, local communities, foreign lands. For if responsibility for solution of mounting social problems is shunted onto other shoulders or ignored, what then? Maybe some kind of Federal takeover would be in the offing and survival of the corporate sys tem would no longer be in the cards. Better, then, harkening to the Committee for Economic De velopment's call for a public-pri vate partnership, or as Chamber lain quotes approvingly from the 1971 CED publication Social Re sponsibil1ities of Business Corpor ations: The converging of two trends - the business thrust into social fields, and government's increasing use of mar ket incentives to bring even greater business involvement - is gradually 1974 THE PUBLIC INTEREST O:F PRIVATE ENTERPRISE 85 bringing these two powerful institu tions into a constructive partnership for accelerating social progress. This emerging partnership is more than a contractual relationship between a buyer and seller of services. Funda mentally, it offers a new means for developing the innate capabilities of a political democracy and a private enterprise economy into a new poli tico-economic system capable of man aging social and technological change in the interest of a better social order.

Strange Partners Partnership - admittedly the word is sweet and what the CED and Dr. Chamberlain envision is limited in scope, but partnership between what and what? And how limited would the public-private partnership turn out to be over time ? We are brought full circle to the implications of public and private, to the public interest of private enterprise and the private interest, not uncommonly, of pub lic policy - to what I am afraid adds up to the unsocial side of So cial Responsibility and Social En gineering. Consider the private interest of much public policy. Think of Watergate, for example, and how in the name of national security or Social Responsibility some rather private interests were ad vanced when a number of execu tives of blue-chip corporations were "requested" to contribute to the Committee for the Reelection of the President, or CREEP. (This comment is nonpartisan, for cor porate executives - perhaps some of the very same contributors to CREEP - had also donated heav ily to the Democratic campaign coffers in the 1964 campaign when the Democrats were the incum bent party; and, of course, quite a few corporate executives are regular Democrats and Democratic contributors. ) Or think of the ICC's "public policy" in rejecting Southern Rail way's application for a 60 per cent cut in grain haulage rates in intro ducing its 90-ton "Big John" hop per cars - a cut which offended truck and barge line operators. Or think of our public-private sugar policy ever since the first Sugar Act in 1934. Here Uncle Sam plays sugar daddy to a host of relatively high-cost domestic cane and beet sugar growers and then cuts in a number of "selected" foreign sugar producers who are favored with import allotments. Washington sugar draws lobbyists like flies, especially when quota-reshuffling time rolls around. All this wheel ing and dealing is, of course, at the expense of the American consumer who regularly pays pennies per pound more for sugar than what the market price would have been, and has been doing so for four 86 THE FREEMAN February decades. The list of such public policies privately motivated and privately benefited could be ex tended ad nauseam.

Or think in historical and civil libertarian terms of how the Founding Fathers met the di lemma of authoritarianism, typi fied by George III, with the checks and balances of limited govern ment. Just how limited would our Government be under the partner ship concept? Who's to Say? Some more questions, particu larly as the partnership matures: Which partner, public or private, would be the majority partner, which the minority partner? Which would be the dominant partner, which the silent partner? And what would happen to com petition, economic calculation and freedom of enterprise? The ques tions beg the answer: Sooner or later the "partnership" would drift into some sort of planning; and overtly or covertly the government would choose and enforce its rul ings, notwithstanding the prefer ences and efficacies of the market, i.e., the consumers. Or think how perilously close the Chamberlain-CED's endorse ment of a public-private partner ship comes, or is capable of com ing, to state dirigisme, to further erosion of our market economy, to the real possibility of modern authoritarianism not unlike that which surfaced in Europe, Asia, Africa and Latin America in the 20th Century. In fact, isn't this what President Eisenhower was warning us of, in his reference to the "military-industrial complex"

in the final hours of his Adminis tration? Now, on the other hand, what of the public interest of private en terprise? First, it should be noted private enterprise is private in name only. Every business must serve the public or it will be swiftly punished with losses and, unless it mends its ways, ulti mately extinguished. GM and GE, Exxon and Dupont, IBM and Ford are indeed giants but they, too, like the Ma and Pa delicatessen, are under the yoke of profit and loss, of the life-and-death power of the consumer - who can be cor porate as well as individual. (What happened to Ford's Edsel, RCA's and GE's computers, Lockheed's Electra, Dupont's Corfam - or to those defunct corporate giants of yesteryear like American Locomo ti ve, American Molasses and American Woolen?) Moreover, the ability of so called private enterprise to serve the public far better than public enterprise in economic matters has been demonstrated over and over again. (Witness the "service" of 1974 THE PUBLIC INTEREST OF PRIVATE ENTERPRISE 87 the U.S. Postal Service, study the doleful findings of Brookings In stitution researchers on Great So ciety programs, l ask yourself why the Government continues to sub sidize hospital construction and teacher education when hospital beds and school teachers are in 1 See Setting National Priorities: The 1973 Budget (Brookings Institution, Washington), 1972.

Morality and Choice surplus, or check with your friends back from Eastern Europe on pro ducer responsiveness to consumer needs there.) So a public-private government industry partnership anyone? I hope not. Neil Chamberlain has helpfully spelled out the limits of corporate responsibility. I only wish he had reaffirmed the Consti tutional limits of government re sponsibility as well. , IDEAS ON LIBERTY WHAT OUR GENERATION is in danger of forgetting is not only that morals are of necessity a phenomenon of individual conduct but also that they cap exist only in the sphere in which the individual is free to decide for himself and is called upon voluntarily to sacrifice personal advantage to the observance: of a moral rule. Outside the sphere of individual responsibility there is neither goodness nor badness, neither opportunity for moral merit nor the chance of proving one's conviction by sacrificing one's desires to what one thinks right. Only where we ourselves are responsible for our own interests and are free to sacrifice them has our decision moral value. Weare neither entitled to be unselfish at someone else's expense nor is there any merit in being unselfish if we have no choice. The members of a society who in all r€~spects are made to do the good thing have no title to praise.

FRIEDRICH A. HAYEK, The Road to Serfdom WHILE the early afternoon sun shine warmed the wooded hillside, an old man and a little boy slowly wended their way upward toward the top. The old man's hair was snow-white, and though his chis eled features were covered with wrinkled and leathery skin, his pale blue eyes sparkled and snapped, revealing an ageless spirit in a body that had learned to live well. The littleboy was like most little boys of about 7 chunky, plump, ful~ of bounce and energy, a mind like a sponge, and indulging in the greatest of all his delights, spending a Sunday after noon climbing a hill with Grandpa. It was a slow climb, with lots of pauses, to catch one's breath, to study the trees, the leaves, the shrubs, the bugs, to listen to the birds, and the sound of water bub bling in little brooks and streams, Mr. Demers is a vocational counselor in Veneta, Oregon. 88 R. W. DEMERS and the wind through the pine needles, and all of the glories that live on a hillside.

The little boy was a fountain of questions, the old man a treasure chest of answers. Grandpa ex plained why leaves are green, why moss grows heaviest on the north side of trees, and all about last year's fallen leaves. Almost before they knew it the top of the hill had been gained, and they sought a place to rest their bones and weary muscles, and to look out upon the vistas be low. Grandpa next did what he al ways did when they were at the top of a hill. They stood up and Grandpa said: "All right, Lad, you're facing north; what com pass direction lies behind you, on your left, and on your right?" The boy answered brightly: "Behind me is to the south, on my left is to the west, and on my right is to the east."

1974 FROM WHENCE COMES THE WIND 89 Grandpa beamed: "Good, boy, good, it pays well to know where you are in relation to the wider world. You'll note there needs to be a point to start from. Now I know where north is fromexperi ence. Without experience you need a compass. But even then it's well to get above it all every once in a while, so that you can get things in focus, get things in proper re lationship to one another. And that's why, Lad, you and I climb hills on Sunday afternoons." "Now, Lad, looking to the north east and out into the valley do you see where those two roads cross?" "Yes, Grandpa." "All right, now where they cross what do you see in the north corner?" "Why - just an empty field, Grandpa." "Right, Lad, right; and did you know that where the field sets empty now there was once a great house, and it was in that house that your Dad was born?" "Golly!, I didn't know that, Grandpa; what happened to the house?"

And with that invitation, the old man launched into one of his thrill ing tales of the past. The little boy sat with his elbows on his knees and his chin cradled in his cupped hands as he absorbed, \\lith eager delight, a fascinating story \vhich \vas a critical part of his history. When Grandpa finished his story he stood up and turned about to face the south. Pointing down the slope which they had climbed, he said to the boy: "Lad, looking down this slope and out into the meadow below, tell me what you see that you've seen before?" The boy leaped upon an old stump and with enthusiasm scanned the slope below him. His eyes began to open wide as he recognized first one landmark after another, and the words spilled out of him in frenzied de light: "There's that big, old dead tree, with the grey, splintered top, which you said had probably been struck by lightning. And there's that big, huge rock, a boulder, and I can even see the big split in its side. And there's that clearing on the bend of the creek we crossed at the foot of the hill, where you pointed out to me the old, dead tree up ahead. Golly I, Grandpa, now I know why we'd stop now and then and turn around and look at things."

"Right, Lad, right; it's always good to stop now and then and turn around and look at where you've been. There's more than one side to things and the more you can get to see and recognize the better off you'll be. Also, Lad, \ve don't always get 'where we're headed. Despite our best try, we just n1ight have to return the way 90 THE FREEMAN February we came so that we can try again; and its good to know the way back, just in case." The sun was much closer now to the western horizon as Grandpa said to the boy: "Lad, turn about slowly till you feel the breeze full upon your face, then tell me from whence comes the wind." The boy did as he was in structed, and stopped when his face was looking into the western rays of the sun: "I can feel the soft wind from out of the west, Grandpa." "Right, Lad; now 'tis well to know from whence the wind blows, Lad, for it not only carries with it some indication of what the weather might be but it carries the weather with it too. If you can learn to read the signs you may be able to know what's coming before it comes and be able to make nec essary preparations. The clouds in the sky are borne along by the winds and both the wind and the clouds are formed, or are the re sult of, wonderous things which are happening beyond the horizon, beyond the reach of a man's eye, or his senses."

"Lad, you must be ever looking, ever searching, ever seeing, ever learning, and aware that you'll never know it all. It starts when you're born and it never stops un til you're like that old, grey snag down there, still reaching toward the sky above. Look now, into the west! See those dark clouds in the far distance, see the grey haze which seems ahead of those clouds and moving slowly this way? Well, that might mean some wet weather, and it looks like it's just far enough off to give us time to return down the hill and home be fore we get wet; so -let's be off) Lad." The years will go by, and this lad will grow into a man, as all lads must do. And what sort of a man might he be? Well, he'll probably be a man who knows from whence he came, and where he is going, and why. He'll no doubt agree with Jose Ortega y Gasset: "The past has reason on its side, its own reason, and if that reason is not admitted, it will return to demand it." And, most of all, he'll no doubt climb hills on Sunday afternoons with little boys, perhaps his own. And facing from whence the winds pre vail, he might agree with Goethe: In the Endless, self-repeating flows for evermore the Same.

Myriad arches, springing, meeting, hold at rest the mighty frame. Streams from all things Love of Living, Grandest Star, and Humblest Clod. All the straining, all the striving is Eternal Peace in God. t) Competition, Monopoly, and the Role of Government SYLVESTER PETRO The great monopoly problem mankind has to face today is not an outgrowth of the operation of the market economy. It is a product of purpos,ive action on the part of governments. It is not one of the evils inherent in capitalism as the demagogues trumpet. It is, on the contrary, the fruit of policies hostile to capitalism and intent upon sabotaging and destroying its operation. -LUDWIG VON MISES, Human Action IN THE free society government keeps the peace, protects private property, and enforces contracts. Government must do these things effectively, and it must do nothing else; otherwise, the conditions in dispensable to personal freedom in society are absent. Whether or not a free society is attainable no mortal man can know; the limits of our knowledge are too narrow.

But one thing we do know: that until at least the advocates of the free society are fully aware of the conditions necessary to its exist ence, it can never come about. For they must ever be on guard against new movements, ideas, and princi pIes which would endanger its re alization. And on the other hand, they must be sharply aware of ex isting impediments so that they may direct their energies intelli gently to the removal of the causes of current imperfections. I take up with considerable trep ida tion the task of arguing that government should quit trying to promote competition by means of the antitrust laws, especially since some proponents of the free so ciety believe that vigorous en forcement of those laws is abso lutely indispensable. Yet, antitrust Professor Petro of Wake Forest University School of Law reveals here some results of his special attention to labor and antitrust legislation and policy. This article, first ap pearing in the December 1959 FREEMAN, bears reading again in the light of current affairs.

91 92 THE FREEMAN February laws are inconsistent with the basic principles of the free society, private property, and freedom of contract; they deprive persons of private property in some cases and outlaw certain contracts which would otherwise be valid. More over, they expand the role of government far beyond that en visaged by the theory of the free society and thus amount to an un conscious admission that the fun damental theory itself is incoher ent; for antitrust policy implicitly accepts the Marxian premise that a laissez faire economy will result in the decay of competition and in the emergence of abusive monop oly. Finally, and this may be the most pressing reason for the pres ent article, in their attempt to promote competition the antitrust laws may in fact be inhibiting it. Vague and Uncertain Laws One of the basic evils in the antitrust laws is the vagueness and uncertainty of their application.

They have produced mainly con fusion. Seventy some years ago the antitrust laws prevented the Great Northern Railway and the N orth ern Pacific from merging, al though but a minor fragment of their respective lines overlapped in competition. But a few years later United States Steel was per mitted to consolidate a vast pre ponderance of the steel production of the country under one manage ment. Since then we have been off on another antimerger binge, and so Bethlehem and Youngstown have been enjoined from doing on a smaller scale what U.S. Steel did on a grand scale. Socony and other integrated oil companies were told that they might not buy up dis tress oil at prices set· in competi tive markets. But only a few years earlier the Appalachian Coals As socia tion had been permitted to act as exclusive marketing agent for most of the coal production of an entire region. Forty years after its foresight, courage, and capital had been instrumental in develop ing the great General Motors pro ductive complex, the du Pont Com pany was ordered to give up con trol of its G.M. stock because of a relatively picayune buyer-seller re lationship between them. Only space limitations preclude an al most endless listing of equally contradictory and inequitable re sults of the unpredictable erup tions from the antitrust volcano.

At present, the allegedly competi tive policies of the Sherman Act are mocked by those patently anti competitive components of the an titrust laws, the Robinson-Patman Act and the fair-trade laws. Thus, to the careful and honest observer the antitrust laws appear to be a charter of confusion, rather thUll t he "charter of economic lib1974 COMPETITION, MONOPOLY, AND THE ROLE OF GOVERNMENT 93 erty" which oratory calls them. They have been transmogrified by the political vagaries to which their vagueness makes them sus ceptible into an insult to the idea that laws should apply equally to all. Some may regard these con sequences as merely unfortunate incidents of a generally praise worthy program. Yet we need con tinually to remind ourselves that law is for the benefit of the citi zenry, rather than for the sport of government and of the legal profession. The main function of law is to provide people with c.lear and sound rules of the game, so that they may pursue their affairs with a minimum of doubt and un certainty.

While aggravath}g the existing uncertainties of life, the antitrust laws can make no demonstrable claim to improving competition, despite the contentions of enthu siastic trustbusters. I have heard it said that the result of breaking up large firms is to create com petition among its fragments, and thus to contribute to social well being. But a moment's reflection will expose this as a bare and un supportable assertion. Even though additional firms may be created by breaking up large businesses, the result is not .necessarily in the social interest, nor does it neces sarilycreate or improve competi t iOll. The social interest and conlpetition are not automatically served by an increase in the num ber of firms. It is a· commonplace that competition may be more vig orous and the service to society greater when an industry has few firms than when it has many. The question from the point of view of society is not how many firms there are, but how efficiently and progressively the firms - no matter how few or how numerous - utilize scarce resources in the service of the public. Maybe pro duction will improve after a single large producer is split into frag ments; but it is equally possible that it will not. No one can tell in advance, and it is also impos sible to do so after the fact. The only thing that can be said with certainty about the breaking up of businesses is that government's power has been used to deny prop erty rights rather than to protect them. If we really believe that private property is the most valu able institution of the free society, and that in it lies the strength of the free society, then it is wrong to abrogate that institution on the basis of pure guesswork.

Monopoly Unionism The antitrust approach to im proving competition loses even more of its glamor when one un derstands that the most abusive and socially dangerous monopoly 94 THE FREEMAN February which exists today in this country is the direct product of special governmental privileges. Labor unions are today the most destruc tive monopolies in our system, and they are also the greatest benefi ciaries of governmental special pri vileges. First and foremost, there is the virtual privilege of violence, which trade unions alone enjoy. Neither individuals nor other organizations are so privileged. Memory is strangely short as regards union violence, and yet every big union in America has used it habitually, in both organizing and "collective bargaining." Of the men who resist union membership, many are beaten and some are killed. They have much more to fear than do persons who reject the blandishments of sellers of other goods or services. And this is true despite th.e fact that the right not to join a union is as firmly entrenched in legal theory and the theory of the free society as is the right to buy as one wishes or to refuse to buy when one so wishes.

In 1959, the United Mine Work ers engaged in one of its periodic purges of the nonunion mines which spring up continually owing to the uneconomic wage forced upon the organized mines by the UMW. An Associated Press dis patch, dated April 10, 1959, reported that "one nonunion opera tor has been killed, five union mem bers charged in the fatal shooting, and three ramps damaged by dyna mite since the strike began March 9. It has made idle more than 7,000 men over the union's demands for a $34.25 a day wage, a $2.00 in crease." The grimmest aspect of the dispatch lay in the news that Governor A. B. Chandler of Ken tucky was threatening - after a full month of terror and pillage by the union - to order National Guardsmen into the coal fields. The Pattern of Violence This is no isolated case. On the contrary, violence and physical ob~ struction are standard features of most strikes, except where the struck employers "voluntarily"

shut down their businesses, in ac cordance with the Reuther theory of enlightened management which I have described in Power Un limited: The Corruption of Unlion Leader'ship (Ronald Press, 1959). A special dispatch to The New York Times, dated August 5, 1959, reported that "a siege was lifted today for 267 supervisory em ployees at the United States Steel Company's Fairless Works here ... From now on the supervisory personnel will be allowed to enter and leave the plant at will for maintenance." The dispatch is silent concerning the probable con1974 COMPETITION, MONOPOLY, AND THE ROLE OF GOVERNMENT 95 sequence of any attempt by the steel companies to maintain pro duction. But the fact that super visors were besieged because of maintenance operations suggests that rank-and-file workers who at tempted to engage in production would be mauled. It is not out of order to infer that the siege: of the supervisors, otherwise: a pretty silly act, was intended to get across that message.

The careful student of industrial warfare will discern a pattern of violence which reveals an institu tionalized, professional touch. Mass picketing, goon squads (or "flying squadrons" as they are known in the Auto Workers union), home demonstrations, paint bombs, and ~erhaps most egregious of all, the "passes" which striking unions issue to management personnel for limited purposes - these are the carefully tooled components of the ultimate monopoly power of unions. As a matter of fact, we have be come so befuddled by, and so weary of, the terror, destruction, and waste of the unions' organizing wars that we view with relief and contentment one of the most pro digious contracts in restraint of trade ever executed - the cele brated "no-raiding pact" of the AFL-CIO. No division of markets by any industrial firm has ever achieved such proportions. The "no-raiding pact" divides the ·whole organizable working force in accordance with the ideas of the union leaders who swing the most weight in the AFL-CIO. It deter mines which unions are "entitled"

to which employees. The theory of modern labor relations law is that employees have-a right to unions of their own choosing. Reversing that principle, the "no-raiding pact" asserts that the choice be longs to the union leadership. If any business group were so openly to dictate the choices of consum ers, it would be prosecuted by sun dry federal agencies and hailed be fore one or another, or perhaps many Congressional committees. It would not receive congratula tory telegrams from the chief poli ticians of the nation. Government Intervention The more one examines Ameri can labor law the more one be comes convinced of the validity of Professor Mises' theory that no abusive monopoly is possible in a market economy without the help of government in aIle form or an other. If employers were permitted to band together peacefully in or der to resist unionization, as unions are permitted to engage in coercive concerted activities in or der to compel unionization, it is probable that the purely economic (nonviolent) pressures of unions 96 THE FREEMAN February would not be as effective as they have been in increasing the size and power: ,of the big unions. But the government has taken from employers all power to resist un ionization, by peaceful as well as by violent means. At the same time it has permitted unions to re tain the most effective methods of economic coercion. And so picket ing, boycotts, and other more sub tle modes of compulsory unionism are in many instances as effective in compelling unwilling member ship - in the absence of counter vailing economic pressures from employers - as sheer physical vio· lence.

Monopoly unionism owes much, too, to direct and positive help from government. Consider the vigorous prohibition of company assisted independent unions which has prevailed for over twenty years. Although such small unions might at times best serve the in terests of employees, the early Na tional Labor Relations Board prac tically outlawed all independent unions, and more recent decisions continue to favor the big affiliated unions. The MajorityRule Principle But perhaps the most significant contribution of government to mo nopoly unionism is the majority rule principle vvhich makes any union selected by a majority of votes in an "appropriate bargain ing unit" the exclusive representa tive of all employees in that unit, including those who have not voted at all, as well as those who have .expressly rej ected the union as bargaining representative. Major ity rule is a monopolistic principle; it is always to be contrasted with individual freedom of action. But it is particularly prone to monopo listic abuse in labor relations. De termination of the "appropriate bargaining unit" is left to the vir tually unreviewable discretion of the National Labor Relations Board. And that agency has in nu merous instances felt duty-bound to carve out the bargaining unit most favorable to the election of unions. Indeed, politicians might learn something about gerryman dering from studying the unit de terminations of the Labor Board.

Even if the gerrymandering could be eliminated, the majority rule principle would remain a source of monopolistic abuse, based on monopoly power granted and enforced by government. A union may be certified exclusi ve repre sentative in a 1,000-man bargain ing unit on the basis of as few as 301 affirmative votes, for an elec tion will be considered valid in such a unit when GOO employees participate. If a bare majority then votes in favor of the union, the ren1uining G99 are saddled 1974 COMPETITION, MONOPOLY, AND THE ROLE OF GOVERNMENT 97 with the union as their exclusive bargaining representative, wheth er or not they want it. Competitive Sa/eguards Society has nothing to fear from unions which without privi leged compulsion negotiate labor contracts and perform other law ful and useful jobs for workers who have voluntarily engaged their services. For they are then but another of the consensual serv ice associations or agencies which a free society breeds so prolifically.

Moreover, the free society has demonstrated that its fundamental mechanism, free competition in open markets, is tough and resil·· ient enough to defend against ex·· ploitation by any genuinely volun·· tary association. The critical prob-· lem arises when a man or an asso·· ciation destroys society's chief defense mechanism by violent and coercive conduct, or when that mechanism is blacked out by spe·· cial privilege from government. For then, without the checks and balances of free men vying against free men in civilized competition, society lies as prone to exploita·· tion by the unscrupulous as a rich store would be without guards and burglar alarms. \Vhen the sources and compon ents of union monopoly are under stood, it becomes clear that the :llnitl'llst laws cannot cure the problem. The fundamental source is to be found in failures and er rors of government which the most elaborately conceived antitrust laws could not cure. The basic job of government is to keep the peace.

I t has not kept the peace in labor relations. Local, state, and federal governments have all failed to pre vent labor goons and massed picket lines from interfering with the freedom of action of nonunion em ployees and of employers in bar gaining disputes. (See my book, The Kingsport Strike, Arlington House, 1967.) A similar failure in organizing campaigns has per mitted unions which would be pyg mies, if they represented only workers who wanted them, to be come giants. The antitrust laws would equally clearly do nothing to remedy the monopolistic conse quences of the positive aids granted by government to the big unions, such as the majority-rule principle and the virtual outlawry of small independent unions. I am convinced that the socially dangerous aspects of big unionism have been brought about by the errors and failures of government whieh we have been considering. Government has on the one hand been tolerating the violence and economic coercion by nleans of which the big unions have attained their present power, and it has, on the other hand, positively inter98 THE FREEMAN February vened in their support. Moreover, for the last forty years or more, officers of the national administra tion have played a critical role in the key industrial disputes which have set the pattern of the so called inflationary wage-cost push.

The latter is a much more im portant fact than it may seem at first view. It suggests that the checks and balances of free enter prise are adequate to protect the public even from the artificially constructed compulsory labor mo nopolies which we now know. Moreover, it is not unreasonable to infer that those checks will work even more effectively if poli ticians not only stay out of nego tiations but also enforce the laws against compulsory organization. These considerations suggest that the logical first step for those con cerned about union power is to in sist that government remove the present special privileges which unions enjoy and then wait pa tiently, to see if the problem will work itself out without further government intervention. Government's Limited Role, As Outlined by Mark Twain I believe that the same approach should be taken in respect to busi nesses suspected of monopolistic abuses. Rather than following the hit-or-miss political vagaries of the antitrust approach, it would be better to make sure that all special privileges, such as tariffs, exclu sive franchises, and other govern mental devices for blocking access to markets are withdrawn. Repeal of the tax laws which unfairly pre vent high earners from amassing the capital necessary to compete with existing firms would also help much more than antitrust prosecu tions do in promoting competition.

In short, if government would con fine itself to protecting property and contract rights, and if it would desist from impairing those rights, it would be doing all that govern ment can do to promote competi tion. And we should not need to be greatly concerned about monopo lies and contracts in "restraint of trade. For, as Mark 'rwain's ac count of the career of the river boat pilots' monopoly in the nine 4 teenth century d~monstrates, the free enterprise system is in itself fully capable of destroying all abusive restraints upon competition which are not supported and pro tected by government. In the years before the CiviI War, Twain writes in Life on. the Mississippi, the river steamboat pilots formed an association which was to become, as Twain put it, "the tightest monopoly in the world." Having gone through many trials in building up its membership, a sudden increase in the demand for pilots gave the as1974 COMPETITION, MONOPOLY, AND THE ROLE OF GOVERNMENT 99 sociation its first break. It held members to their oath against working with any nonmember, and soon nonmembers began having difficulty getting berths. This diffi culty was increased by the associ ation .pilots' safety record, which grew out of an ingenious method evolved by the association for cur rent reports on the ever-changing Mississippi channel. Since the in formation in these reports was confined to members of the asso ciation, and since nonmembers had no comparable navigation guide, the number of boats lost or dam aged by the latter soon became obviously disproportionate. "One black day," Twain writes, "every captain was formally ordered (by the underwriters) to immediately discharge his outsiders and take association pilots in their stead."

The association was then in the~ driver's seat. It forbade all ap·· prentices for five years and strictly controlled their number thereafter. It went into the insur·· ance business, insuring not only the Jives of members but steam·· boat losses as well. By United States law the signature of two licensed pilots was necessary be·· fore any new pilot could be made. "Now there was nobody outside of the association competent to sign," says Twain, and "consequently the making of pilots was at an end." The association proceeded to force wages up to five hundred dollars per month on the Mississippi and to seven hundred dollars on some of its tributaries. Captains' wages naturally had to climb to at least the level of the pilots', and soon the increased costs had to be re flected in increased rates. Then society's checks and balances went to work. This is Twain's summa tion: "As I have remarked, the pilots' association was now the compact est monopoly in the world, per haps, and seemed simply indes tructible. And yet the days of its glory were numbered. First, the new railroad ... began to divert the passenger travel from the steamers; next the war came and almost entirely annihilated the steamboating industry during sev eral years ... then the treasurer of the St. Louis association put his hand into the till and walked off with every dollar of the ample fund; and finally, the railroads in truding everywhere, there was little for steamers to do but carry freights; so straightway some genius from the Atlantic coast introduced the plan of towing a dozen steamer cargoes down to New Orleans at the tail of a vul gar little tugboat; and behold, in the twinkling of an eye, as it were, the association and the noble science of piloting were things of the dead and pathetic past!"

100 THE FREEMAN February The moral: government's job is done when it defends the right of competitive businessmen or work ers to take over functions which are being abused by monopolistic groups. The deeper moral is that monopolistic abuses rarely survive without a basis in one form or an other of special privilege granted The Fault Is Ours by government. The long steel, auto, and other big strikes we have suffered would not have lasted nearly so long if government had effectively protected the right of the companies to keep their plants operating and the right of em ployees to continue working dur ing the strike. ~ IDEAS ON LIBERTY I know a man who used to be in the margarine business and thought it was a crime that butter makers could color their product when he couldn't. Now he owns a dairy and he thinks it's a crime that the margarine makers are now allowed 'to color it! Not long ago on a train, I was talking with a farmer who was loud in his condemnation of government spending. When I suggested that a good stopping place might be to withdraw subsidies on wheat, he couldn't see it. Another man I know is a strong advocate of gov ernment price control. He thinks it's wrong for the merchant to make a profit, or for landlords to get enough rent to keep up their properties. But he buys and sells oil leases, and thinks it's just good business to buy a lease for a dollar and sell it for a thousand.

Any suggestion to control his margin sends him into a frenzy! Is it any wonder that the government reflects such thinking, and tries to break up the A & P mainly for the "crime" of having sold too many groceries to too many people too cheaply? Before we start wondering why we have a government like that, however, maybe we ought to ask ourselves why we are like that. D UK E BUR G E S S, "One-Man Pressure Group"

The False~ God of Politics ALLAN C. BROWNFELD FOR too many Americans, govern nlent has become the source of all good and all evil to be found in the contemporary world. If there is too much crime, if the high ways are overcrowded, if the pro gramming on television is medi ocre, if jobs are unsatisfying and marriages are unrewarding, if children seem indifferent, and a sense of community seems less and less evident, then what we need, of course, is a change in Administration, a new party in power or, to radicals, a revolu tionary upheaval. Somehow we have come to be lieve that we do not have respon sibility for our own lives but that established political authority is responsible for the good, the evil, even the ambivalence of the modMr. Brownfeld of Alexandria, Virginia, is a freelance author, editor, and lecturer especially interested in political science. ern world. Where men and women once turned to the church and to the family for the inner meaning of life and the fulfillment of emo tional needs, they now seek such answers from the political process.

Unfortunately, politics cannot pro vide such answers. Discussing the faith which mod ern man has placed in politics, and the futility of such an ap proach to life, the Russian poet Joseph Brodsky, currently poet in-residence at the University of Michigan, has provided an analy sis which Americans would do well to consider. Brodsky declared that, "I do not believe in political movements. I believe in personal movement, that movement of the soul when a man who looks at himself is so ashamed that he tries to make some sort of change - \vithin him ~elf, not on the outside. In place 101 102 THE FREEMAN February of this we are offered a cheap and extremely dangerous surrogate for the internal human disposition toward change: political move ments of one sort or another. Dangerous psychologically more than physically. Because every po litical movement is a way to avoid personal responsibility for what is happening .... As a rule com munality in the sphere of ideas has not led to 'anything particu larly goOd."l On Changing the World What, then, is to be said of political ideas?

Often, we are told by politi cians, such as those who urge redistribution of wealth or a com plete alteration of our social and economic systems, that "The world is bad, it has to be changed." To this, Brodsky replies: "The world is precisely not bad; one could even say the world is good. What is true is that it has been spoiled by its inhabitants. And if it is necessary to change some thing it is not the details of the landscape but our own selves. What is bad about political movements is that they depart too much from their own origins, that on oc casion their results so disfigure 1 Joseph Brodsky, "A Writer Is a Lonely Traveler, And NoOne Is His Helper," The New York Times Magazine, October 1, 1972, p. 11. the world that it really can be called bad, purely visually; that they lead human thoughts into a dead end. The intensity of politi cal passions is directly propor tional to their distance from the true source of the problem."

Underneath the rhetoric, what those who seek political solutions for all social and personal prob lems are saying is that such solu tions do exist, and that, in effect, all of our difficulties can be cor rected, if only they are given a chance to do it. Joseph Brodsky, who has recently emerged from a Communist society which tells us tha tit has all of the answers to such problems, states that, "There is something offensive to the hu man soul about preaching paradise en earth. Replacing ~etaphysical categories with pragmatic ethical or social categories is somehow a debasement of human consciousness." The Limits of Government The conception of government believed in by the Founding Fath ers of our own country was that all the political process could or should do was to provide order and an atmosphere of freedom within which each man could go as far as his own ability would take him. A political process which attempted to do more than this, to provide equality of condition 1974 THE FALSE GOD OF POLITICS 103 rather than of opportunity as the advocates of racial and sexual quotas urge today, would inevi tably end as a tyranny.

There was no doubt at that time that government had to be severe ly limited, and that the political process should not deal with a wide range of societal and per sonal problems .but should deal only with certain carefully and clearly defined areas of concern. The Federalist Papers (Number 51) declare: "What is government itself but the greatest of all reflections on human nature? If men were an gels, no government would be necessary .... In framing a gov ernment which is to be adminis tered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself. A dependence upon the peo ple is, no doubt, the primary con trol on the government, but ex perience has taught mankind the necessity of auxiliary precau tions." At this time there is a great deal of confusion about the mean ing of the term "equality." What is meant by this term, in the con text of our political tradition?

According to John Locke, in the state of nature there exists a "state of equality, wherein all the power and jurisdiction is recipro cal, no one having more than an other ... " Yet the English philos opher emphasizes that this equal ity is not one of condition, and is hardly absolute, even in the state of nature: "Though I have said above .... that all men by nature are equal, I cannot be supposed to under stand all sorts of equality: Age or virtue may give men a just prece dency. Excellency of parts and mer it may place others above the com mon level. Birth may subject some, and alliance or benefits others, to pay an observance to those to whom Nature, gratitude or other respects may have made it due; and yet all this consists with the equality ... I there spoke of as proper to the business at hand, being that equal right that every man hath to his natural freedom." When Thomas Jefferson wrote in the Declaration of Independence that, "All men are Created Equal,"

he was speaking of ,,'equality" in the terms set forth by John Locke in his Second Treatise: not equal property, or equal status, but an equal right to be free. A Los;ng Battle We are told today that individ ual freedom must be sacrificed so that those who are "disadvan taged" can be given a more "equi table" place in society. Peter 104 THE FREEMAN February Viereck has noted that, "There is a line of diminishing returns for humanitarianism. Beyond it, the increase in security is less than the loss of liberty."2 Freedom, those who challenge it today should un derstand, has never been taken away, except for a "good" reason. To expect the political process to make men good when God has made them otherwise, is to expect what politics cannot do. Discus sing the creation of the Republic, John Adams declared that, "Who ever would found a state and make proper laws for the govern ment of it, must presume that all men are bad by nature .... Human nature with all its infirmities and depravities is still capable of great things. . .. Education makes a greater difference between man and man, than nature has made between man and brute. The vir tues and powers to which men may be trained by early education and constant discipline, are truly sub lime and astonishing."3 A free society traditionally has sought to permit men and women to become themselves, and each man and each woman will, and should be, different and unique.

Those who urge egalitarianism in the name of "justice" must remem ber that every movement which seeks to make men the "same" has only made them similar in their servitude. Politics is no panacea, and only when we begin to look not to Wash ington but to ourselves will our lives have any purpose and mean ing. Man cannot find outside of himself what is not to be found within, though in this troubled time many are trying to do this. The end of such a futile search is the disillusionment with politics and with ourselves which is so evi dent today. When men discover that their idols are indeed false, they smash them with a venge ance. By then, however, it is often too late. , 2 Peter Viereck, The Unadjusted Man (Boston: Beacon Press, 1956). 3 Quoted in Conservatism in America by Clinton Rossiter (New York: Vintage, 1955) . IDEAS ON LIBEHTY Ingratitude IF ONCE they are habituated to it, though but for one-half year, they will never be satisfied to have it other\vise. And having looked to governlllent for bread, on the very first scarcity, they will turn and bite the hand that fed them.

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Back Door MELVIN D. BARGER Press Control THERE'S A NOTE of genuine anxi ety in the current wave of news paper articles and editorials pro testing the recent government at tacks on the press. In the past, such warnings sounded a lot like the boy who was merely crying, "Wolf." But it's now clear that many newsmen do feel threatened and are seeking public support in defending the traditional free doms of the First Amendment. They may be seeking the im possible. The government, long denied the right to impose direct licensing or controls on the press, may soon be able to establish press control by indirect methods. Such indirect methods grow out of Federal and state power to regulate business, professions, and indus try. It is true that some businesses are not presently controlled by Fed eral regulations or are only partly regulated. No matter. The pattern of Federal regulation was estabMr. Barger is a corporate public relations ex ecutive and writer in Toledo, Ohio.

lished long ago, and is available for immediate use whenever the oppor tunity to impose additional regula tion presents itself. This new threat is an ironic development because nobody can accuse newsmen of failure to stand up and be heard when di rect attacks were being made on press freedom. Time and again, newspapers ha ve thoroughly roasted and ridiculed government officials who tried to intimidate reporters and censor newspapers. There was mass cheering on most editorial pages when The New York Times won its celebrated Pentagon Papers case. Newsmen have been quick to close ranks when a maverick columnist such as Jack Anderson has been direct ly threatened by the government. Every journalism textbook care fully presents the case for press freedom, and there's probably not a reporter in the country who doesn't know the classic story of 105 106 THE FREEMAN February John Peter Zenger 1 and similar milestones in the fight for press freedom.

But indirect, or "back door," attacks on press freedom are an other ball game, and it may be that the popular newspaper col umnists and writers don't know how this new game is played. Many of them, in fact, supported the adoption of the very control measures that now threaten the press. Over the past 50 years, a large number of newspaper writ ers and commentators have cla mored for additional government regulation of business and indus try. But few have bothered to ask what the effect would be on press freedom once intensive regulation of business became a reality. They have apparently felt that news papers and magazines could exist as islands of freedom in a com pletely regulated society. But it is not working out that way in prac tice. Press freedom is now being threatened in several ways that 1 John Peter Zenger, printer of the New York Weekly Journal, was jailed in 1734 on charges of seditious libel for labeling Governor William Cosby a ty rant and oppressor of the colony. A brilliant lawyer named Andrew Hamil ton won Zenger's acquittal in a trial· by jury, effectively ending "seditious libel"

as an instrument for press control. Har old L. Nelson and Dwight L. Teeter, Jr., Law of Mass Communications (The Foundation Press, Inc., Mineola, N. Y., 1969) pp.23-26. differ radically from the old direct attacks on First Amendment rights. Here are some recent trends: • Proposals are being made to license newsmen. The central issue in a 1931 landmark case called Near vs. Minnesota 2 involved "prior restraint" of the press. It has been well-established that any form of government licensing of publishing also would result in . prior restraint of the press and would be a denial of First Amend ment rights. Congress later created a legal limbo in this area when it passed the Federal Communications Act of 1934, establishing governmental licensing of broadcasters. There has been good reason to fear that the same principle would eventually be extended to cover print media. But with the mounting govern2 "Near vs. Minnesota involved a scandal sheet published in Minneapolis by J. M. Near and a partner who ran afoul of an extraordinary Minnesota law. The famous Gag Law provided that it was a public nuisance to engage in the regular, persistent publication of a 'ma licious, scandalous and defamatory' peri odical. The state could step in, stop and permanently suppress such a publication.

If a publisher disobeyed an injunction against his publishing, and resumed it, he could be punished for contempt of court. Under the law, Near was enjoined from continuing to publish his Saturday Press. He challenged the constitutionality of the law, and the United States Supreme Court reversed his conviction." Ibid., p. 409.

1974 BACK DOOR PRESS CONTROL 107 ment attacks on broadcasters, newspapers have finally begun to be alarmed and are calling into question the rationale for broadcast licensing. But professional licensing is an other matter. For a long time, state licensing of doctors and den tists has been widely recognized and accepted, and has been readily embraced by the members of the licensed professions as a mark of status and also as a means of ex cluding others from entry to the field. The public has been schooled to believe that licensing raises the standards of a profession and ex cludes crackpots and incompetents. (Not to be outdone, practitioners of trades such as barbering and plumbing have followed suit, al though the chief advantage to the public is the privilege of pay ing higher prices for haircuts and plumbing than would otherwise be possible!) The rationale for licensing news men is that incompetent reporters lack the education and judgment necessary for handling the news in the best interests of society.

According to an Associated Press story published in The Detroit Free Press on February 5, 1970, Dr. W. Walter Menninger advo cated licensing of reporters and news commentators with certifica tion to be approved or disapproved by peers or members of the news profession. Menninger, the only psychiatrist on the 13-member National Commission on the Causes and Prevention of Vio lence, was apparently echoing the oft-repeated view that newspapers cause violence by reporting it. He complained that reporters and news commentators may lack the basic understanding of such is sues as minority frustrations and may be inaccessible to the man on the street. This was not an isolated pro posal. The following month, a Michigan state representative named James Del Rio called for a special study of the possibilities of licensing and regulating news reporters and editorial writers. 3 In 1971, then United States Sen ator Jack Miller of Iowa told a New York County Lawyers As sociation that in his opinion jour nalists should be licensed, with each subject to "having his priv ilege . . . to practice his profes sion revoked for unethical con duct."4 The licensing proposal is very much alive, and is certain to get serious state legislative and Congressional interest in the fu ture.

3 Associated Press report in The Jack son Citizen Patriot, Jackson, Michigan, March 11, 1970, p. 3. 4 A Free and Responswe Press, Task Force Report for a National News Coun cil, (The Twentieth Century Fund, New York, 1973), p. 14.

108 THE FREEMAN Februa,ry Whatever the arguments for licensing newsmen, the result of such an action would be to place the control of news and opinion under the government. It would be prior restraint of the worst kind. It would give bureaucrats a lethal tool for excluding the very journalists who questioned their activities. It would effectiveiy end any tendency to criticize the gov ernment or the party in power. After all, "unethical conduct" is really a subjective term, and among politicians any news story is unethical if it is unfavorable to them. But this threat to First Amend ment rights, be it remembered, did not come to life in a vacuum. It is a natural outgrowth of the elab orate system of licensing and cer tifying members of other profes sions. If newsmen are, disturbed over this threat to freedom, per haps they should reexamine the entire concept of professional licensing. There is a great deal in this type of licensing that is a form of restraint of trade. It is not surprising that the system could easily be extended to in hibit freedom of expression. The proposal to license newsmen is getting serious attention only be cause other licensing schemes have become accepted and have been promoted by the various trades and professions. Itwas bound to reach the journalist pro fession someday.

• Proposals have been accepted for a voluntary press council to review the performance of the various media. Early in 1973 the Twentieth Century Fund' an nounced that it had formed a N a tional News Council to scrutinize the national press, including broadcasters, and investigate com plaints from the public about fair ness and accuracy. The core of the media council idea, according to the Fund, "is the effort to make press freedom more secure by pro viding an independent forum for debate about media responsibility and performance, so that such de bate need not take place in gov ernment hearing rooms or on the political campaign trail."5 On the face of it, the News Council proposal sounds construc tive and it's certainly within the right of any voluntary organiza tion to set itself up to monitor the press. But unless it's very unus ual, the Council will soon be cap tured and dominated by individ uals who have an ax to grind.

There will be the problem of mon itoring the Council's own fairness and accuracy at the same time it is supposedly examining these qualities in the media. 5 Ibid., pp. 3-5.

1974 BACK DOOR Pl:tESS CONTROL 109 Government Supervision There is also the possibility (indeed, the probability) that the work of the' Council will pave the way for some form of government supervision of the press. This is always the risk in voluntary ef forts that are based on the idea of "cleaning-up-our-own-house-be fore-the-government-does-it-for us." The government is often un able to "clean anybody's house," not even its own, but it does have the power to force outward com pliance that gives an appearance of improvement. Voluntary pro grams never can hope to bring about total compliance in the way that compulsory programs do. It is not hard to predict that com pulsory measures will appear more attractive if the voluntary efforts of the Council fail to bring the desired results in media pe,r formance. The News Council is also an other example of a disturbing trend, the establishment of "rep resentative groups" who are sup posed to act in the public interest.

There are 15 members of the Coun cil's task force and, not surpris ingly, there's a person who sup posedly represents every race, group, or class. As a rule, the representatives selected are prom inent but not usually controver sial. The theory seems to be that of giving everybody representation by selecting a member of his group or class. One fallacy in this practice is that highly publicized members of a representative group do not al ways represent the people for whom they allegedly speak. Quite often, they are merely people who have been able to gain a certain prominence in a particular field or have access to a number of polit ical figures. But it is a mistake to believe that such prominence means they can speak for all mem bers of their race or group. It is always possible to find cross-cur rents of opinion in any ethnic or religious group. One prominent spokesman who "represents"

blacks or Mexican-Americans may demand that newspapers conceal any racial or ethnic identifications in news stories. But other mem bers of the same group may, for reasons of their own, feel that such identifications serve a con structive purpose. Their views will not get an airing in a typical panel of "representative groups." • Demands are being made for "rig ht of acc'ess." One of the lat est bids for control over the press is the advocacy of "access to the ,press as a First Amendment Right." The proponent of this de mand is a law professor named Jerome A. Barron, who argued quite convincingly in a law re110 THE FREEMAN February view article 6 that new laws are required to meet the changing conditions of modern times. Bar ron insists that technological and economic changes have made the First Amendment ineffective and inadequate as a means of imple menting the free flow and distri bution of new ideas. In fact, he believes that the Amendment is actually used by monopoly news paper owners as a protective cover for refusing to publish unpopular views. He argues that there can be no real "marketplace of ideas"

if there is no corresponding right to have one's ideas published in major newspapers, particularly newspapers having monopoly status. He also deplores the profit seeking aims of these newspapers and suggests that the owners are neglecting their true responsibil ities when they publish bland and popular material while excluding articles of greater depth. Change first Amendment To provide access to the press, Barron wants definite changes in the present interpretation of the First Amendment. He believes that the Courts can make such (3 Barron's proposal for right of access was thoroughly presented in the Harvard La,w Review, Vol. 80 :1641, 1967. (Har vard Law Review Association, Cam bridge, Mass.) Similar articles by the same author have appeared in other pub lications. change by extending their inter pretation of the First Amend ment to include right of access. Failing that, he proposes legis lative change, a new law, that would have the same effect.

There are a number of fallacies and pitfalls in Barron's proposal, which has been getting serious attention in intellectual circles. 7 For one thing, he focuses on pop ular mass media, completely ignor ing the diversi ty of other media that can often be useful to an aspiring writer or advocate of so cial change. A good example of the effectiveness of small-circula tion media is the case of, Ralph Nader, who was virtually unknown a dozen years ago. His earlier attacks on the auto industry were published in small-circulation journals before they were picked up by the popular press. In this case, the First Amendment was effective in giving Nader the right to publish his views, but it was up to Nader to prove that his ideas merited broader distribu tion. There is no way that the publishers of large circulation newspapers could have known in advance that Nader's ideas would catch on with the public, just as 7 For a variation of Barron's argu ment, readers should consult The Rights of Americans, (Pantheon Books, New York, 1970); article beginning onp. 276, entitled, "The Right of Access to Mass Media," by John De J. Pemberton, Jr.

1974 BACK DOOR PRESS CONTROL 111 there is. no way of picking out the popular writers and advocates of tomorrow from among the hun dreds who are now struggling to get their views accepted. With thousands of small newspapers and other publications available as a proving or testing ground, these writers cannot truthfully say they are excluded from print. Barron himself was able to get his argu ments published in law review publications and thus became in dentified with a certain viewpoint that is now getting serious na tional consideration. To put it an other way, Barron's success in getting his views known is an ex cellent answer to his own argu ment. A Nightmare in Practice The more disturbing problem is not the success or failure of the individual writer, but what really happens to First Amendment rights if "access to media" be comes a law. The Barron proposal is one of those arguments that sounds reasonable in theory but can become a nightmare in prac tice. He does not explain, for ex ample, how equitable methods of providing access to the press can be developed without damaging the objectivity and effectiveness of newspapers. He does not really deal with the possibility that "ac-· cess" laws in practice would turn out to be disguised forms of prior restraint. He fails to explain how "access" rights can be allocated when an unusually large number of groups are demanding desirable newspaper space for their own viewpoints.

Barron also evades the greatest danger of his proposal-the likeli hood that it will result in news papers being subjected to Federal regulation of the type now im posed on broadcasters. It is true that no regulatory body would be established simply by new rulings giving increased "access" to the media. But continuing dissatisfac tion with access rights would cer tainly lead to the demand for some Federal body or communications czar to supervise the process of granting access. The result would be de facto regulation. • Shortages, general increase in controls. Although they often rep resent themselves as public inter est organizations, newspapers and other media are businesses which have the central purpose of pro ducing earnings for their owners. There has been some attention focused on the business problems of a few leading publications and the failures of several popular magazines. In fact, however, many newspapers and broadcasting out lets are highly profitable, with earnings margins that would be 112 THE FREEMAN February envied by most manufacturers and retailers.

Being profit-seeking businesses, newspapers cannot escape the reg ulations and restraints that are being imposed on other privately owned businesses. If the govern ment continues to expand its reg ulation of business "in the public interest," it will expand its con trol over newspapers and various other media. Soon or late, the gov ernment will also involve itself in such matters as news content, fairness of news presentations, and the effect of news on personal behavior. It is becoming widely accepted that the government has the responsibility to regulate such matters, so it is also likely that the government will use all of its powers to carry out that respon sibility. This tendency to employ all of its powers to gain certain ends seems to be an accepted way of operating in American govern ment, and probably any govern ment. For example, people who are having trouble with the Exec utive Branch of the government may find themselves getting a sud den audit from the Internal Rev enue Service, an audit that has nothing to do with suspected fi nancial irregularity but may be only a form of· harrassment. It is not hard to see that this form of harrassment could have infinite variations once the government gained considerable control over such matters as the allocation of newsprint, the location of news paper plants, the hiring and firing of news personnel, pricing of ad vertising and other services, and performance in meeting pollution and environmental standards.

Reconsider ~he Marketplace In the changing social climate of the 1970s, it is likely that ad ditional forms of "back door press control" will be developed to sup plement the trendS' discussed in this article'. Back door press con trol, like most efforts of an in direct nature, is very difficult to detect. It usually arises as a hid den component of another pro posal that seems socially desirable or reasonable. It seems reason able, for example, to license pro fessional people in the public in terest. It is only upon closer examination that the licensing proposal is seen as an indirect form of control. And it is not al ways the government that uses this control for its own purposes. In an organization of licensed professionals, the majority can use licensing control as a means of bringing minority dissenters into line. During the past few years - in deed, during the past few months - it has been made clear that gov1974 BACK DOOR PE~ESS CONTROL 113 ernment officials are not above using underhanded and even crim inal methods in.. getting their way.

Yet the problem of American gov ernment is not that a certain group of rascals came into office and used their powers for self serving purposes. The problem is that government already had been given excessive powers and con trols over people's lives. If newsmen are alarmed by the government's growing power to control them they should take a fresh look at the kind of controls that are already mandated for business, industry, and profes sional groups. They should study the nature of the marketplace for goods and services, which is linked more closely than they care to ad mit to the marketplace for news and ideas. There really can be no such condition as a completely regulated marketplace for goods and services without a correspond ing attempt to control news and John Stuart Mill ideas. In fact, an effort to permit considerable freedom of the press eventually would become intol erable to those who have the responsibility for establishing or der and compliance in other seg ments of society.

Businessmen who have squirmed under attacks by obviously "anti business" newsmen should not take pleasure in the rising threats of back door press control. Amer ican society has already lost con siderable freedom through an at titude of "it-serves-them-right" or "they-brought-this-regulation-on themselves." It is unfortunate when the fist of tighter govern mental control closes on any seg ment of society. But it is even more unfortunate that newsmen did not understand the nature of government regulation and con trol. It had to reach them some day, and it came in through the back door that was opened by regulating and controlling others. IDEAS ON LIBERTY A STATE which dwarfs its men, in order that they may he more docile instruments in its hands - even. for heneficial purposes will find that with small men no great thing can really he ac complished. On Liberty LEONARD E. READ By directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.

-Adam Smith FOR YEARS I have quoted this fam ous line from The Wealth of N a, bions, but have often wondered precisely what Adam Smith meant by "invisible hand." The answer is not to be found in his monu mental book. Smith was a moral philosopher, so it is my guess that he referred to the Divine Will, the order-producing factor in the uni verse. Invisible? Yes! Knowable? To some extent! If what I appre hend of the Divine Will is any where near correct, then I am ob liged to try once more to explain the correlation between freedom and the remarkable outburst of creative energy experienced by the American people. If freedom is not seen to be the reason for progress, it may be neglected and abandoned as of no value. When that happens, we are beset by all sorts of authoritarian controls, along with shortages and rationing. Does this not justify my attempt to explain? 114 The lives of all persons, be they dictocrats or practitioners of the Golden Rule, are identified with self-interest. The differences have to do with how intelligently self interest is interpreted. The man to whom Adam Srni th referred interpreted his self-interest as best served by producing goods or services of the greatest possible value that he might gain the most for himself. In a word, he was minding his own business. He in tended nothing more; indeed, like most people then and now, he was utterly unaware of anything more - of consequences beyond his own gain.

However, have a look at the man who minds his own business; for certain, he is not minding anyone else's business. By reason of this fact, no other person is restrained by him. All others, insofar as his actions are concerned, are free men, even though that thought does not occur to him. Just a man 1974 THE INVISIBLE HAND 115 tending to his own knitting, ob livious of the beneficial overall ef fects of such behavior - "led by an invisible hand to promote an end which was no part of his inten tion." The end? Clear as crystal: the freedom of everyone to express his uniqueness and seek his own gain! No restraints - none whatsoever against the release of creative hu man energy. It is this end and this alone which has accounted for the Am.erican miracle. The Power of Attraction Adam Smith's man, releasing his own talents and permitting all others to release theirs, acts cor rectly, ideally. Correct action bears fruits unimaginable in· quantity and quality. True, this astounding result is no part of his intention he intends only his own gain. Fur ther, the freedom which his kind of action assures is beyond the scope of sensory perception; it is not seen with the eyes or heard with the ears. It is in this sense invisible. As in a magnetic field, the forces of attraction are invis ible; they cannot be seen or· heard; nonetheless, they work. Freedom its attractive forces likewise invis ible - works!

When it is recognized that most people regard as reality only that which comes within the range of their sensory perceptions, it becomes clear why invisible freedom is so rarely correlated with human progress .. The progress they ob serve is credited instead to what they can see or feel or hear: co ercive gadgetry such as compul sory unionism, social security, medicare, socialized mail delivery, government education, dilution of the money supply, wage and price controls, rationing and, to top it off, national self -sufficiency, isola tionism, call it what you will. Few, indeed, are those who realize that it is the attractive force of in visible freedom that accounts ex clusively for whatever progress there is or ever will be. It would be very well if Adam Smith's economic man would per sist in his ways - "by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain." He would, in this circum stance, "be led by an invisible hand to promote an end which was no part of his intention." But that man, to whom freedom is invisible, is the very one who, more than likely, is drawn. off course, who correlates what is visible to him with the progress he observes. Un wittingly, he joins the interven tionist parade, s~king gain not by improving his own industry but by trying to seize the fruits of the industry of others. Blindly, he be comes his own worst enemy. Adam 116 THE FREEMAN February Smith, be it noted, spoke of what ought-to-be, rather than what-is.

Thank heaven, there are two ways of seeing. True, no one can see freedom with his eyes or hear it with his ears. Freedom, in this sense, is invisible. Were this the only way of seeing, the case for freedom would be hopeless. No one would ever correlate progress with men acting freely. All would be lost! Seeing with Insight The other way of seeing? I n sig ht, with which a few are graced and many others could be. Insight, rather than the out ward, superficial glimpse of things and events, is an inward, behind the-scenes observation - "the abil ity to understand and see clearly the inner nature of things." It is achieved, if at all, by reflecting on what one sees when looking un der the covers, so to speak, for causal sequences. Perhaps such in sights can be attributed to inter ceptions of the Divine Will. But without resort to mysticism, we do know that seekers after light ex perience more insights than non seekers. "Seek and ye shall find,"

so it was said of old; and it is true today. However, one does not need to reflect very deeply to see why all progress stems from individuals acting creatively as they freely choose without violating the right of others to do likewise. Merely assess your own life. Is it not obvi ous that no other could identify your uniqueness, be he acclaimed the wisest who ever lived. Adam Smith comments on this: The states~an who should attempt to direct private people in what man ner they ought to employ their capi tals would not only load himself with a most unnecessary attention, but as sume an authority which could safely be trusted, not only to no single per son, but to no council or senate what ever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exer cise it. Further, so far as you are con cerned, whoever you may be, all insights, flashes of intuition, dis coveries, inventions are exclusively personal outcroppings; these en lightenments never have been or can they be the coercive imposi tions of any other person. Insights are not implants but outgrowths of the inner self.

Onels Social Duty Freedom, while invisible to the eye that only looks outward, is clearly and easily visible to the eye that can and does see within. Free dom undeniably has the case. What is lacking is the insight. Of course, ever so many people 1974 THE INVISIBLE HAND 117 in today's world will look down upon Adam Smith's man who "in tends only his own gain." They will charge that he is devoid of social consciousness, and so he may be; but not of social behavior. William Graham Summer pos sessed the insight to reveal this apparent contradiction. Every man and woman in society has one big duty. That is, to take care of his or her own self. This is a social duty. For, fortunately, the matter stands so that the duty of making the best of one's self individually is not a separate thing from the duty of filling one's place in society, but the two are one, and the latter is accomplished when the former is done. 1 Freedom is indeed the invisible hand, the magnetic force that draws to the use of each the unique talents of everyone. As a part of this mysterious attractive force which governs the whole uni verse, it is not a surface thing for outward observation. Further, even those who see "the inner na ture of things" do not know pre cisely what it is; they do, however, know that it is - and they know of the magic it works. May their tribe increase, for to the bounties of freedom there is no end. ~ 1 William Graham Sumner, What So cial Classes Owe to Each Other (Cald well, Idaho: Caxton Printers, 1954), p.

98. IDEAS ON LIBERTY People Control THE NEXT TIME you hear a politician or a neighbor advocating price supports or rent control or some similar subsidy, ask him why he favors people control, and forcing other peaceful persons to do what he wants them to do, and taking money from people who have earned it and giving it to others who haven't. At that point, however, you had better duck. For the nature of the ambitious politician and the well-intentioned do-gooder is to consider only the "fine objectives" of their plans and to ignore completely the shoddy means used to enforce them. They won't appreciate your calling this to their attention. DEAN RUSSELL, "Price Control Is People Control"

A Matter of Self-Responsibility PAUL L. POIROT IN "THE GOOD OLD DAYS"- of my boyhood on the farm, any fuel shortage we experienced was strictly our own fault. And the procedure to avoid or correct the situation was to get out the ax and crosscut saw, hitch a team, and head for the wood lot. It was no great trick for a couple of teen agers to make it home by nightfall with a cord of wood cut and split to stove size. Fortunately, our neighbors didn't mind if we sawed a fallen log or cut a crooked tree from our own woods. As long as we were in good health, they were perfectly willing to let us freeze if we didn't want to chop wood. I should hasti ly add that they were always ready to lend a hand in any case of real 118 need. Otherwise, they generally minded their own business and left ours to us. If there had been a thermostat in our house, we could have turned it to any setting we pleased. That is what I would call self-sufficiency on the energy front, but I'm not so sure it's what the President has in mind for the United States by 1980.

Nor would I advocate or vote for a reversion in 1974 to those good old days of each-to-his-own wood pile. Let me make it perfectly clear that we had an alternative then; we could have purchased a load of coal from the "foreigner" five miles away at the nearest railroad siding. And I'm quite sure we would have availed ourselves of 1974 A MATTER OF SELF-RESPONSIBILITY 119 that opportunity if ever we had more money than time and enthu siasm for chopping wood. We weren't being self-subsistent as a matter of principle - just lack of cash. More accurately, we didn't have anything we were willing to offer that the coal dealer was will ing to accept for a load of coal; so, we cut wood, if and when we had nothing better to do. Most of us today have something "better to do," which explains why we buy fuel in the form of oil or gas or electricity or whatever in stead of chopping wood. We spe cialize, and we trade with "for eigners," whether they be the neighbors next door, or the mer chants in town, or the mail order houses in Chicago, or the shippers in London, or the suppliers of "black gold" in Saudi Arabia.

We're not exactly self-sufficient any more, not with respect to fuel or to hardly anything else we de pend upon for our regular use. But that is not really the issue. The question is whether we are self-responsible. Is it my own problem if I want fuel, or is it the President's problem? There are stories about a couple of American Presidents who were pretty good at chopping wood. But I haven't heard if one has done it lately. So, I'm beginning to think my fuel problem is a bit too im portant to turn over to the President. I'll grind my ax and sharpen my saw, just in case I'm driven all the way back to self-subsistence. What One Can Do to Try to Stop the Meddling Hopefully, however, the market may not be closed entirely. Occa sionally, perhaps, a friendly "for eigner" may be found willing to part with a bucket of coal, a tank ful of gas or fuel oil, an hour or two of electrical current. As a po tential customer, I can do my best not to antagonize any potential supplier. If I think his price is right, I can buy from him, which should make both of us happy.

Otherwise, I can leave him alone and cut wood if I've nothing bet ter to do. Beyond this, I can urge the President and everyone else not to antagonize my potential supplier. If I want to pay his price, I wish others would not try to forcibly take from him what I've freely paid - not even the part that might have been pure profit for him. Without that part, he isn't going to be much of a future sup plier for me. More importantly, I can respect fully urge those meddlers not to set arbitrary price ceilings for me or my potential suppliers. For in that case, how could I possibly con vince any supplier that he should be trying harder to increase the 120 THE FREEMAN February supply? After all, if there's a, short age, lack of supply must be part of the problem. And the other part would be excessive demand, for which there is no better cure than higher price. So, price controls can only be described as one of the causes, certainly not a way to al levia te a shortage.

Good Neighbors Getting back to the wood lot, I cannot recall ever having had our load hij acked on the way home by needy neighbors - or even by "for eigners." Noone ever forced us to deliver a fourth or a third or a half of each load to the Whi te House for distribution among the poor. Hardly anyone was so poor that he couldn't fetch his own wood. But if he just couldn't make it, "Uncle Carl" or some other :p.eighbor generally attended to the matter without bothering to call a committee meeting or make a Fed eral case of it. In their "retirement" years, my parents rented a small farm house and a plot of "truck patch" or garden. This was part of a larger farm which boasted an oil well which, in turn, yielded a supply of natural gas that had been tapped as a source of heat and energy for the house. To the best of my knowledge, not once did the neighbors ever think of trying to tell the owner what to do with the gas or how much oil he could pump. In fact, I doubt very much that they helped drill the well in the first place. They simply minded their own business - cut their own wood. It's not easy to find such "careless" neighbors any more.

I Cut the Tree Recently, I confess, I chopped down our cherry tree. The poor thing had died. Somewhere in the neighborhood I suspect there lies a half-signed petition exhorting me to "cease and desist from de stroying our natural environ ment." Natural, my foot ! You wouldn't believe the hours of ten der .loving care the previous owner and I spent over· a . period of 30 years planting 'and feeding and spraying and pruning that sweet cherry in return for a week's peek at springtime blossoms and an an nual feast for the starlings at har vest time. Little do those potential petitioners know how often I've plotted - fruitlessly - to murder a starling. I've often wondered whatever possessed George Washington to chop down a cherry tree; but, if he did such a thing, I'm willing to forgive him. I doubt that the mat ter merits Congressional investi gation. I don't believe for a min ute that he was trying to take care of a national fuel shortage.

But, if he were, and if it wasn't 1974 A MATTER OF SELF-RESPONSIBILITY 121 his own cherry tree, perhaps there would have been reasonable grounds for impeachment. I believe it is not the Presi dent's place to tell me I have a fuel shortage, or to solve it for me, if I do. I'd rather he leave me alone, to chop wood if I choose, or to trade if I can with whomever is willing and able to supply fuel. The President's job is to stop me if I lie or cheat or steal or defraud anyone to get what I want from others, and to stop others who might try such coercive tactics against me. But let his job end there, leaving all of us free to com pete in the open market for the goods and services we want. Closing the Market When the President announces a goal of national self-sufficiency (independence) by 1980, he in ef fect is declaring war against the citizens of the U.S., implying that he intends to close the market at the national boundary lines as of that date. But he's only concerned about oil, you say? And if that's true, why would it be so? Is fuel more important than various min erals, foodstuffs, and numerous other items we now import? And what is it we are not to be allowed to export once we are not allowed to import oil? The President ought to know that imports are paid for with exports - and vice versajust as in the case of voluntary ex change between any willing buyer and any willing seller, wherever each may live.

Oh, I see, payment would be made with money instead of goods! And what kind of money would that be? Money the seller is pleased to accept in trade? Or a piece of irredeemable paper that has been declared "legal tender"? What the President has not ex plained to the American people is that our fuel shortage, like the re cent grain shortage and meat shortage and other "failures of the market," is really a monetary prob lem. When the U.S. gold window was closed to foreigners on August 15, 1971, when they were supposed to accept the irredeemable U. S. paper dollar as though it were good as gold, the American people suddenly were faced with a short age of foreign suppliers. They'd rather have wheat or soybeans or any commodity - rather than "paper gold." Nor is it likely that any Secretary of Foreign Affairs is magician enough to restart the flow of "black gold" from the Mid East if he has nothing better to offer in exchange than U. S. "legal tender."

The sad truth is that foreigners cannot be bound by U. S. declara tions of "legal tender." They don't have to supply goods and services to us at our ceiling prices in ex122 THE FREEMAN February change for paper dollars. Unless we are willing and able to give in return as good as we get from them, then we need not wait until 1980 to be self-sufficient and inde pendent. We are already. And isn't it grea t to thus be allowed to queue up and wait for a supplier who's been excluded from the mar ket by our insistence on paying him with bad money? Nor does such closure of the market occur only at national bor ders. To the extent that domestic price controls are imposed and en forced, they can make "foreigners" out of all potential suppliers of goods and services. Noone is go ing to fill your gas tank voluntar ily in exehange for unwanted "le gal tender" - as devalued by him as it is by you, because he can't buy much with it.

A Chilling Prospect So, now we 'all are in a position to know how foolish it was of us over the past generation and long er to ask the government to solve our money shortages for us. The paper promises are irredeemable. If we persist in demanding that government solve our fuel short age, the likelihood that we can keep warm by burning our ration coupons is a chilling prospect. Furthermore, the energy crisis is merely one of an endless list of shortages of goods and services that must inevitably grow out of government manipulation of mon ey and closure of the market. Since government is noncreative and nonproductive, it can only "solve" one shortage by causing one or more others; it can only give to one person or group what it first takes from others; it can only in tervene in international disputes in favor of one of the claimants by antagonizing the others; it can dispense as foreign aid only what it withdraws from the domestic market; it can only close the mar ket to foreign suppliers by simul taneously closing it in like amount to domestic consumers.

If the government is to main tain a fair field for all competitors -producers as well as consumers it must refrain from granting privileges to any of them or play ing favorites in any way. And if there is any hint of a shortage or surplus, the best the government can do is to get out of the way, stop its meddling, and leave th~ matter to willing buyers and sell ers in the open market. If the gov ernment will let us, and if we will be self-responsible, there is no rea son at all why anyone ever again would have to chop his own wood except for fun and recreation. , A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN ___F A S(: I SM _ WHO AND WHAT IS A FASCIST?The word is used pejoratively, with as little precise meaning as is at tached to the adjective "Red" by many well-meaning people who can't distinguish between a Com munist and an old-fashioned liber tarian or antiStatist. The confu sion about Fascism is the enemy of good foreign policy; it is also something that stands in the way of recognizing the many domestic weaknesses of democracy that pre pare the way for the coming of a Caesar, or a Man on Horseback.

Because of the practically univer sal obfuscation, any even half-way successful attempt to reach a true definition of Fascism is welcome. In an ambitious book called Fascism (The Free Press $7.95), Paul Hayes, a Fellow of Keble College, Oxford, has made a strong effort to uncover the roots of the Twentieth Century's second most malignant political phenomenon. (I say "second" because 1 believe Communism is an even bigger evil.) Professor Hayes struggles nobly with his problem, but he doesn't quite overcome the many difficulties that inhere in the at tempt to distinguish between vari ous shades of authoritarianism, Nasserism, tribalism, military dic tatorship, royal absolutism, or whatever. Nor is he quite as clear about the economic origins of Fascism as the late John T. Flynn, whose As We Go Marching has just been reissued in paperback by Free Life Editions, with a preface by Ronald Radosh ($3.45).

Professor Hayes realizes at the start that he is trying to get a grip on a most baffling problem. Mussolini's Italy was surely a Fascist state. But it never really made an issue of race, even though, at Hitler's proddings, it did do official obeisance to anti Semitism during the short-lived period of the Rome-Berlin Axis. German Nazism was Fascism on all of Professor Hayes's counts, accepting the myth of racial su123 124 THE FREEMAN February periority along with the trappings of militarism, national socialism, economic corporativism, and wor ship of the leadership principle. But how does the Nazi form of totalitarianism differ from the So viet Communist version? Bolshe vism, in practice, has discrimi nated against Jews, not to mention Ukrainians, or Baltics, or Moslems when they exhibit too much aware ness of their own religious heri tage. The Soviets subscribe to the idea of the party elite, they "plan"

industry, they are imperialist, and they suppress free trade unions. Nevertheless, Professor Hayes, even as John T. Flynn before him, distingu~shes between Fascism and Communism. The difference would seem to re side in contrasting attitudes toward the concept of ownership and in the divergent class origins of the two forms of totalitarian ism. Fascism permits private prop erty, subject to control of its uses; it also tolerates the existence of more classes than the proletariat. So there is a reason why neither Professor Hayes nor John T. Flynn chose to deal with the Marxist varieties of the totali tarian State. Not Much Difference For myself, I don't see very much to choose between Brown and Red Bolshevisms. Fascism made use of the bourgeoisie and the private corporation, but the Lenin who approved the Nepmen private farmers in the days of the New Economic Policy was not a pure Communist, and Brezhnev is even now contemplating making deals with the capitalist Occidental Oil Company. On the other hand, as Professor Hayes recognizes, both German and Italian Fascism had their Marxist forebears. Mus solini had been a socialist, and Hitler depended on crossovers from the German Communist and Social Democratic parties to swell his ranks in the late Twenties and early Thirties. There are good rea sons for regarding Fascism and Communism as variants of the same evil thing that denies the whole theory of inalienable indi vidual rights.

Professor Hayes does a master ful job in isolating the various in tellectual currents of the Nine teenth Century that coalesced into Fascist theory. There were the ra cial supremacists from Count Go bineau to Houston Stewart Cham berlain. There were the Hegelians who exalted the idea of the State. There were the militarists and the extreme nationalists. There were the theoreticians of economic au tarchy, from List and Rodbertus and Diihring in Germany to Cun ningham and George Bernard Shaw in Britain. There were the 1974 FASCISM 125 pre-Civil War American protec tionists who encouraged German protectionists. There were the "ra tionalizers" who thought in terms of big cartels subject to national planning and the coercion of in ternational trade by currency con trols. Setting the Stage The Nineteenth Century think ers who opposed the Adam Smith and Richard Cobden theories of unfettered competition were not Fascists, but they all combined to disseminate the Statist philos ophy that was necessary for the triumphs of Mussolini and Hitler~ And there was, of course, Niet zsche and his "will to pov\7er" that exalted strength for its own sake, even the strength that violated the laws of any given community.

Before we are through with Professor Hayes's book we have had the equivalent of a good se mester's immersion in anti-liber tarian thought. But we haven't quite defined Fascism. Is Franco's Spain a Fascist country? Paul Hayes, noting that Franco kept his country out of World War II, decides that Spain is simply a counter-revolutionary country. Franco used the Fascists in order to preserve a traditional Spanish conserva tism. By making an exception of Spain, Professor Hayes seems to be saying that authoritarian coun tries· which refrain from interna tional intrigue and expansionism are not Fascist. But then he con fuses the issue by seeing Argen tinian "peronismo" as a form of Fascism. Since Peron had no de signs on his neighbors, how does he differ from Franco? The dif ference could be in Peron's mobili zation of labor to supply the bulk support of his regime. But Profes sor Hayes introduces a second note of confusion when he says that the "European fascist model was based on massive middle-and up per-class support together with a sizeable minority from the work ing class." So it can't be a major reliance on labor that distin guishes the true from the false Fascism.

Not that it makes much differ ence anyway: oppression is op pression no matter how the local details differ. No One Really Wants It What makes John T. Flynn's thirty-year-old As We Go Ma,rch ing a really superior book is Flynn's way of showing that Fascism can come to a country even though nobody really wants it. Italy's liberal politicians cre ated Fascism by spending far more than could be recouped by taxation and then plunging their country into a frustrating war.

126 THE FREEMAN February Mussolini was simply the oppor tunist receiver of a ruined nation. Germany's leftist and center par ties made disastrous economic de cisions, couldn't cope with the problems created by the fantastic inflation, and failed to control the militarists. Looking at the tre mendous growth of government debt and the ballooning of military expenditures in the U.S., Flynn warned us in 1944 that we could become a Fascist country by mere ly adding a war-minded dictator ship to New Deal-type economic interventionism. It could happen without anti-Semitism and with all our banners proclaiming that "Progressivism" had won its greatest victory. ~ EDUCATION IN A FREE SOCI ETY, Edited by Anne Husted Bur leigh (Indianapolis: Liberty Fund, Inc., 3520 Washington Blvd., 1973) 182 pp. $3.50. Reviewed by Thomas Johnson OF ALL the activities in which men engage, education - development of the human mind - is the most important. What sort of education should exist in a free society? In an attempt to answer this question as it pertains to higher education, two directors of Liberty Fund, Ben"

jamin A. Rogge and Pierre F. Goodrich, wrote a position paper enti tled "Education in a Free Society." Four other well-known educators and writers (Gottfried Dietze, Rus sell Kirk, Henry Manne, and Stephen Tonsor) also presented papers at a seminar held in Indian apolis in 1971. Present were other educators and writers who dis cussed the ideas put forth by these men. The papers are here reprinted, and the discussion summarized. This makes for provocative, inter esting reading. Rogge and Goodrich take a strong stand on behalf of the need for a free enterprise approach to education. They recognize that "the educational arrangements currently in use· in this country are grossly inefficient, inequitable, contrary to human rights, con trary to human nature, and des tructive of the society ~f free and responsible men." They present their idea of what an institution of higher learning should be like in a free society, which includes such matters as the selection of faculty members according to their promise as teachers, the income of faculty based on "their effective ness in serving the purposes of the college," decisions of policy to be made by the board and carried out by the administrators, the elimination of tests or exams (ex cept those voluntarily requested by the student), grades and de1974 OTHER BOOKS 127 grees, and all financing from pri vate funds - p:referably the' col lege would be a profit-making concern.

The other participants, however, do not envision a radical restruc turing of our educational institu tions. They accept the idea of a grade-giving, degree-granting uni versity, while urging reforms de signed to revitalize the institu tion, restore proper authority to trustees and administration, and so on. Little do they realize that the scholastic environment by its nature subordinates the quest for truth to the student's desire for grades, degrees, and certification. The system fosters obsequious ness, hypocrisy and mental leth argy. Not even Rogge and Goodrich realize that in a free society there would and should exist only edu cation businesses which would of fer their courses of instruction to any paying customer, regardless of age, who wished to purchase this instruction. In a free society only· the market demands would determine what is taught, how it is taught, and to whom it is taught, and the individual would possess full freedom of choice in determining the development of his or her own mind. A business setting is the only healthy, and free, environment in which proper mental development can occur.

~ LABOR LEGISLATION FROM AN ECONOMIC POINT OF VIEW by Gustavo R. Velasco (3520 Washington Blvd., Indian a,polis, Indiana: Liberty Fund, 1973) 65 pp., $3.00. Rev·iewed by Paul L. Poirot THAT BENJAMIN A. ROGGE would edit and write an introduction should be evidence enough of qual ity in-a book on Labor Legislation from an Economic Point of View; but its value is doubly assured when the author is Professor GustavoR. Velasco of Mexico City, lawyer, banker, author, teacher, and internationally recognized ad vocate of freedom. As Rogge points out, "He has long stood for free markets and free men in a nation where the ruling party has been formally socialist and in a world where the ruling practice has been somewhere between the interventionist and the socialist." A clue to Professor Velasco's purpose in this monograph comes in his opinion that instead of call ing our age "the era of socialism"

it would be more nearly correct to name it "the era of labor or of laborism." Workers, of course, are interested in better pay, more free time, better working conditions, and more economic security. And the question is whether or not these objectives are likely to be 128 THE FREEMAN February achieved through the collective ac tion of labor unions and govern ment intervention. To the arguments that "labor is not a commodity" and that work ers are objects of "exploitation" by capitalists, Velasco answers by explaining the functioning of the market and concludes that "wage rates depend finally on the value that the wage earner's fellow men ascribe to his services and achieve ment." So, what happens when govern ment intervenes directly to force wages above market rates, or in directly by delegating to labor unions the privilege of using co ercion? What happens is that the least productive of the workers or those with the least political clout - face unemployment; and consumers in general suffer the ef fects of relatively lower productiv ity. This is the inevitable conse quence whenever force is used to prevent cooperation between will ing buyers and willing sellers of any scarce and valuable resource.

Or conversely, as Velasco says, "the only way of coordinating production t6 the highly variable conditions that result from the perpetually fluctuating desires and opinions of consumers, from sci entific and technological progress, ~rom the phenomena of nature, and from a hundred more-circum stances, consists in not hampering the movements of the market." Once the prolabor policies of government result in market dis tortions, the victims of such in tervention are prone to demand cures which mean further inter vention. The makers of laws which cause unemployment are pressured to create spending power - money - to subsidize idled workers back into the spending stream, if not into the productive process. The political actions which grant spe cial privileges to labor unions are actions which also promote infla tion. Professor Velasco admirably summarizes in this brief volume the unforeseen disastrous conse quences of prolabor policies, and offers an extensive bibliography for those who would explore the issues at greater depth. (!) tile Freeman VOL. ~~4, NO.3. MARCH 1974 Public Goods and Fear of Foreigners Gary North 131 Subsidized services attract more "customers" than taxpayers want to serve.

Land Use RegulationA Tool of Politics,Not of Planning Bernard H. Siegan 138 Planners and politicians, in view of the record, had best leave decisions on land use to the owner. Capital Conservation Edgar B. Speer 142 Unless savers and investors are allowed to keep the returns for their thrift and creativity, national disaster lies ahead. Socialism Edmund A. Opitz 152 Socialism promises to distribute abundance but is at a loss as to how to produce it. Do You Want to Live Forever? Charles R. LaDow 155 An obsession for security is the enemy of freedom, and a threat to our survival. Strive for the Simple Life Leonard E. Read 163 Far simpler to live in an advanced exchange economy than to make one's way alone at the frontier. The "Social Security"Mira,ge-Current Productiol1lParamount W. A. Paton 167 Unless production can be increased through saving and investment, there's little future in it.

What Is Seen and What Is Not Seen Brian Summers 172 If one looks behind government spending, he finds that "you can't get something for nothing." Welfare FiftyYears Hence Morris C. Shumiatcher 174 The pendulum will swing back toward individual responsibility and freedom. Book Reviews: 184 "Four Reforms: A Program for the 70's" by William F. Buckley, Jr. "The liberal Middle Class: Maker of Radicals" by Richard L. Cutler "National Suicide: Military Aid to the Soviet Union" by Antony C. Sutton "The Fastest Game in Town/Trading Commodity Futures" by Anthony M. Reinach Anyone wishing to communicate with authors may send first-crass mail in care of THE !FREEMAN for forwarding.

tile Freeman A MONTHLY JOURNAL OF IDEAS ON LIBERTY IRVINGTON·ON·HUDSON, N. Y. 1053,3 - TEL.: (914) 591·723{ LEONARD E. READ PAUL L. POIROT President, Foundation for Economic Education Managing Editor THE F R E EM A N is published monthly by thl Foundation for Economic Education, Inc., a non political, nonprofit, educational champion of privatI property, the free market, the profit and loss system and limited government. Any interested person may receive its publication: for the asking. The costs of Foundation projects an( services, including THE FREEMAN,are met througl voluntary donations. Total expenses average $12.00 : year per person OIl the mailing list. Donations are in vited in any amount-$5.00 to $10,000-as the mean of maintaining and extending the Foundation's wor:H Copyright, 1974, The Foundation for Economic Education, Inc. Printe in U.S.A. Additional copies, postpaid, to one address: Single copy, 5 cents; 3 for $1.00; 10 for $2.50; 25 or more, 20 cents each.

THE FREEMAN is available on microfilm from Xerox University Microfilm: Ann Arbor, Michigan 48106. Some articles available as reprints at cost; state quantity desired. Pe mission granted to reprint any article from this issue, with appropriat credit, except llLand Use Regulation - A Tool o(Politics, Not of Pial ning," "Socialism," and "Welfare Fifty Years Hence."

GARY NORTH PUBLICGOODS and""---Fear of Foreigners BACK· IN THE DEAR, dead days of the Sputnik mania, Americans were told that they were in a great economic race with the Soviet Union. We were going to have to tighten our financial belts and "get America moving again." In the rhetoric of the 1960 campaign for the Presidency, this meant .more government spending. The man who coined the slogan for John F. Kennedy was Walt Rostow, whose 1960 book, The Stages of Econom ic Growth, became a best-seller. In it, Rostow argued that the so';' called take-off into sustained national prosperity could be ac complished, in part, by heavy Dr. North, economist, 'lecturer, author, current ly is an associate of Cha1cedon, an educational organization dedicated to Christian research and writing. His latest book is An Introduction to Christian Economics, Craig Press, 1973. government expenditures in "so cial overhead capital" - highways, education, health care facilities, 2md so forth. Professional econom ic historians devastated his thesis' historical examples in· a little known book published in 1963,The liJconomics of Take-Off into Sus tained Growth (St. Martins, 1963), edited by Rostow, but the public never heard of it, including most of the academic public. The· reac tion against Rostow's vision came only after 1965.

Since the mid-1960's, a flood of academic and pseudo-.academic studies has been published on the ~~rowth question. Zero population growth, the no-growth economy, and .the no-growth urban region have all been ballyhooed. Even no growth government _. incredible 131 132 THE FREEMAN March prior to 1965 - has been at least discussed in academic circles. But the standard argument today is that the economics of zero growth can be achieved only with the di rect interference of the political authorities (just as, in 1960, it was assumed that continuous eco nomic growth could be sustained only by means of direct govern ment interference). Those who have faith in the State are not likely to overcome their infatua tion just because their goals have been reversed. Only with a change in operating principles should we expect to see a reversal of the juggernaut State. Economic growth is now too often regarded as a threat to the nation or to a community. Some people fear that we will deplete our national resources. This is quite likely, if the various agen cies of government insist on im posing price controls on key re sources, thus stimulating demand for them without simultaneously stimulating a search for suitable substitutes. Either the State ra tions the goods politically - an in vitation to corruption and ineffi ciency - or else one day we run out of the resource, and we find that the transition to alternative substitutes must be accomplished overnight, at considerable waste and expense.

Other people fear economic growth because of their fear of social change. They wish to pre serve a monopolistic position, so cially or economically, and they can sometimes influence legislators to restrain newcomers in the search for profit or position. Thh: has been the primary result of America's supposed antitrust leg islation; newer, more efficient com· petitors are locked out of the mar kets by legal restraints on price competition. This has been docu mented by D. T. Armentano's book, The Myths of Ant,itrust (Arling ton House, 1972), but the mythol ogy is deeply ingrained in the textbooks. Monopolies continue tc be created by the legislation which is supposed to halt monopolies. But the most important fear o:f economic growth in terms of ib political impact is the fear of bankrupt municipal treasuries, This is one argument against local growth that cuts across ethnic and class boundaries. Almost everyone resists any increases in his taxes: especially property taxes. This iE the arena of the battle against economic growth today.

Subsidized Shortages Perhaps the best way to illus· trate my point is by means of ar historical example. On May 15 1972, the Tarrytown, N. Y. Plan ning Board vetoed the construc tion of 348 town house apart1974 PUBLIC GOODS AND FEAR OF FOREIGNERS 133 ments on a local 25-acre site. Some 60 people jammed the Village Hall to protest the proposed develop ment. "I think it will be a long time before they want apartments in Tarrytown again," commented one of the planning board mem bers after the meeting. "They've had it." (The [Tarrytown] Daily News, May 16, 1972, second front page.) Why the opposition? Because the local streets would be over burdened by a proposed increase of 700 automobiles. Anyone who has tried to drive through Tarry town at peak traffic hours - any time other than midnight to five a.m. - knows how accurate the complaint was. The streets, need less to say, are "free" goods. Sec ond, the village did not need any new apartments. Anyone who has ever attempted to find housing near Tarrytown knows how inac curate that assertion was. But an absence of available housing kept "undesirables" out and returns to owners of rental property high.

Finally, there was a fear of the strain on existing village services - strains that might lead to tax increases. They wanted to restrain access to other "free" goods. "'Who wants this?" asked one resident. "I've talked to people all over town" - a dozen? his next door neighbors? - "and I've found no one who has the slightest desire." The trouble with all such surveys, however sophisticated, is that they never ask those living outside the municipality whether or not they would like to move into a region. Those arbitrarily excluded from the town are then forced to seek less desirable hous ing or surroundings. A Demand for More The overwhelming difficulty with all State-subsidized "services" is that they create demand for more such subsidized services. The only exceptions to this rule are those projects so utterly without re deeming social value that nobody w'ants them at any price. Either the parks or streets get over crowded, or the power lines get overburdened, or the telephone lines get jammed. The government agency then is forced to increase its revenues by placing higher prices on the services (unpopular w'ith those already enjoying the subsidy), or by increasing taxes (:~omewhat less politically objec ti.onable, since resistance is usually diffused in numbers and therefore less vocal in opposition). So resi dents feel compelled to place re straints on newcomers who will not pay their way.

This is not an isolated phenom enon. If anything, the problem is getting worse, since the "war on poverty" programs at all levels of 134 THE FREEMAN Marc) government in the 1960's have cre ated new demands for services, some of which were inconceivable in 1950. U.S. News & World Re port (Dec. 10, 19'73) describes the opinions of residents of Hoffman Estates, a suburban community 30 miles northwest of Chicago. It keeps doubling its population, as more and more people leave the Chicago residential areas. One woman, describing how the once empty fields have filled up with homes, now complains: "We've heard people describe. the' apart ment complexes as a tumor en gulfing the whole area. The people are O.K., but these apartments crowd the schools and raise taxes." She sees the construction of apart ments as a tumor; the desire of others to move into more accept able housing is a threat.

If someone wants open spaces next door, he can purchase the land and leave it empty. Such a purchase must be paid for: prop erty taxes, forfeited purchases of other commodities, increased worry about upkeep, and so forth. The buyer must defend his owner ship economically every day. He forfeits the rent that the land would bring; he keeps out other potential users of the land. It is expensive, especially as the other available plots of open land are gobbled up by apartments. But it is possible to keep a. personal lifestyle if the buyex wants to pa: for it. But people do not want topa: for it. They think that becausl they moved into a small, semi rural community five years agl that they have some kind of auto matic right to the older conditions blessings, even when new economi, conditions appear. They mistak, the right to compete for land 0 open spaces for a property rig h to the land. They call in the polit ical authorities to defend thei "property rights" to semi-rura life at below-cost rates.' They ex elude others from the competitioJ by force, rather than by economi means.

What if there were no publicI: supported school system? What i all the schools were private, 0 even profit-making institutions Then every school would want t, encourage new faces, and local cit izens would not see their pocket books threatened by new arrivah What if the parks and swimminJ pools and street lights were SUIJ plied by profit-making firms? N one would have to pay for anothe person's consumption. The threa would rapidly disappear. N e~ faces would mean new sources 0 profit, new sources of productiv services, new people to trade wit! a wider, more productive loc~ market. But with an ever-growin list of "free" municipal service: 1974 PUBLIC GOODS AND FEAR OF FOREIGNERS 135 outsiders are regarded with sus picion and hostility. These are the direct effects of "free" services and goods - not side-effects, but effects. They receive little public ity in the press; such costs are not counted in the professional sur veys made by graduates of the public administration departments of the uni versi ties.

New Apartments Resented People who live in apartments, especially newly constructed apart ments, generally have children. Low-cost apartments make this doubly true. Or if not children, then older, poorer people live in them. They draw on local tax re sources. They are resented. So new apartments are resented. They are money losers for the municipal governments. Prof. William Alon so, in the Fali, 1973 issue of Dae dalus, puts his finger on the issues involved: Suppose that growth is restricted. What happens to the people who would have moved in but could not? Obviously neither they nor their chil dren cease to exist. They will find sec ond-choice homes; their children will go to more run-of-the-mill schools and impose their costly presence on people who are less able to afford this added burden than the wealthy residents of the suburb in question. It would ap pear that they will be worse off, and so perhaps will the present residents of wherever they end up. The rub is that what seems from the local view point an issue of growth is, in a larger framework, an issue of distribution, both in the social and in the geo graphic sense - not whether these people and their children shall exist, but where and how.

.Alonso concludes, grimly: "The point of the example is that the current Balkanization of metro politan areas into dozens and even hundreds of local governments en courages beggar-thy-neighbor strategies." The point he does not D1ake, however, is that the incen tive behind these strategies would be drastically reduced if the pri mary source of the difficulty were removed: below-cost or "free" D1unicipal services. It is interesting, to say the least, that one agency in the state of New York has been exempted from all local zoning laws: the 'Urban Development Corporation. 'l~his is the agency· that constructs below-cost public .housing for mi nority groups and builds them in residential areas. There is. no doubt that this does disrupt a local community. This is not the slow, steady change encouraged by free market pricing, but rather the instant-transformation, jerky alteration social and economic change of the State-supported wel fare agency . The resentment against the Urban Development 136 THE FREEMAN Marc} Corporation or similar New York City agencies is legendary, and New Jersey residents are not no ticeably more "liberal" in their attitudes. Push comes to shove; zoning law coercion becomes anti zoning law coercion. And as zon ing shifts from local communities to state governments or even Fed eral agencies, the intensity of the coercion and the mob reaction will be that much worse. Yet this is where the trend is headed (U.S.

News & World Report, March 6, 1972: "Fight Over Zoning Heats Up") . A Moral Question Ultimately, the problem is not simply technical. It is a moral and religious question. Do men have a right to property that they have not or will not purchase for them selves? Do local residents have the right to maintain their lifestyles at below-cost prices? Does one family have the right to educate its children at the expense of some other family? So long as a vocal minority and a silently assenting majority of people answer yes to such questions, the fight over zon ing will indeed heat up. But it is .not just the school question, either. In Fairfax, Vir ginia, a relatively wealthy suburb of Washington, D. C., there has been a moratorium on the con struction of new sewers, as well as restrictions on new buildinJ permits. Why should this be neces sary? Why can't the municipal au thorities add new residents to th sewer lines? Because it would ne cessitate an increase in taxes tl treat the sewage successfully. Nl one considers the other possibil ity: private sewage treatment.

Given the tremendous pressure in Fairfax for new homes, lanl costs have skyrocketed. An acre 0 land without the sewer line rna; be worth $5,000; with the sewel $15,000 or more would be likelv Thus, the mere addition of a sew er line grants a huge subsidy t local land owners. Is it not reason able to suspect that a private firI1 could find a way to make a profi under such circumstances? Is i not likely that many thousands 0 dollars could be generated fror the sale of sewer lines ? Would no local owners be willing to pay thousand or even two thousan dollars to be allowed to hook int a line that would grant them a instant increase in the value 0 their property? But local, "pul: licly owned" sewers are suppose to be priced "fairly," that is, bE low the value of the service. S heavy demands are placed upo the municipal authorities to buil more and more lines, and expan the treatment facilities as weI Only taxes are not supposed to g up, or if they are, they must 1J 1974 PUBLIC GOODS AND FEAR OF FOREIGNERS 137 paid by those who have not yet been allowed to hook up to the lines. Under such circumstances, it is not difficult to understand· that a moratorium on sewer construc tion has been imposed. Economic growth - best defined as an in crease of people's voluntary op tions - slows down.

Some municipalities are now re quiring housing developers to build public schools in order to get licensed. Others are not al lowed to expand at all. With the ecology pressure groups all around, developers are assumed to be guilty before they can prove them selves innocent. They must con form. to other's conception of aes~ thetics (not just medically harmful or land-value-depressing pollution, but aesthetics). So growth slows down. Nothing New The problem is very old. The poor law legislation of early mod ern England forced parishes to care for indigents. As a result, potential indigents were not al lowed to come to a new parish. The same result took place in seven teenthcentury New England when the Puritans imitated the poor laws by establishing tax-support ed charities (although they were incredibly tiny efforts by modern standards). Visitors could stay only a few days or weeks; if they stayed longer, they became poten tial permanent charges of the public treasury. Thus, restrictions were placed on the sale of land or rentals throughout the century in virtually every town. Town offi cials had to approve every such sale.

The problem is simple: public goods are in short supply in com parison to demand. The prices of the goods are politically imposed. Thus, communities want to re strict access to these goods and services. They use political coer cion to keep outsiders away from the treasury. Only those who are clearly not tax liabilities are greet ed with open arms. The conclusion is simple· enough: reduce the level of the redistribution of wealth by coercion within any communitY:l and you thereby increase the op tions of the inhabitants and po tential inhabitants to make eco nomic decisions without legal sanc tions or public censure. In short, economic growth is furthered by increasing freedom. The very na ture of the local redistribution of vvealth restricts men's options, and by definition this restricts eco nomic growth. By abolishing these redistribution schemes, you reduce the fear and hatred of outside "'invaders," and civilized life be comes more likely. Let every man pay his own freight, and the costs of shipping will go down. ~ land Use RegulationA Tool of Politics, Not of Planning Bernard H. Siegan IN THE PRESENT nationwide con troversies on land use regulation, one concept appears largely un challenged: it is government land use planning. There seems to be much agreement that public plan ning for the use of land is both necessary and desirable. Surpris ingly, even strong opponents of zoning at times have conceded the virtues of land use planning at some levels of government.

When two diametrically opposed parties each contend that their views are consistent with and sup ported by "sound planning," one cannot help but wonder what they really mean, for both cannot be correct. Thus it is not uncommon at public hearings for environ mentalists to contend their pro posals are supported by better or Copyright 1973 Bernard H. Siegan. Mr. Siegan is the author of Land Use Without Zoning and many articles on the subject. He practiced law for 20 years in Chicago before moving in 1973 to La Jolla, California where he is an adjunct professor of law at the Uni versity of San Diego Law School. 138 sounder planning and for the pro development groups to argue pre· cisely the opposite. Moreover, in these controversies, each side us ually bulwarks its position witlJ testimony from planning experts. There is obviously much appeal in the notion that we must haVE more and better planning. AfteI all, goes the refrain, if we had only planned our cities better: there would be less pollution, leSE congestion, no slums, more beauti ful buildings, etc., etc. It seemE that at almost every dinner part) I attend, some guest will describE in exhausting detail some loca horror that could have heer avoided by: (1) better, (2) stricter (3) sounder, (4) some, or ever (5) any, planning. (On investiga tion, it frequently develops tha' the local planning department hac approved that particular horror.) The argument continues: do no1 individuals and corporations care fully plan their activities and out lays? Why then, should govern 1974 LAND USE REGULATION 139 ment not be allowed or required to engage in this selfsame activity?

The simple, yet highly profound answer, .is that land use planning is doomed to failure in a repre sentative society - and is likely to create many more problems than it solves. Detached Experts Land use planning means or im plies an orderly, rational arrange ment of or for the use of land for the present or the future, directed or controlled by detached experts in planning. Although this definition raises many questions, it represents, I believe, what most people think they are saying when they speak or write of planning. The assump tion seems to be that there is something precise, measurable or quantitative about planning or its standards; in other words, that it is, or is comparable to, a science. This assumption is exceedingly difficult to substantiate, and few' of even its most ardent proponents make the effort. Is there some precise measurement available to determine the "best" use of some or all of the land, of growth and anti-growth proposals, of whether the land is better suited for trees, lagoons, or· the housing of people?

Should the land be developed with two, eight or twelve housing units to the acre, or perhaps it is better suited for a mobile home park or shopping center or should be re tained as open space? By now, after fifty years of zoning experi ence in this country, it should be clear that there are respectable, distinguished and knowledgeable planners who would disagree in many if not most instances to any or all of these alternatives. Plan ning is unquestionably highly sub jective, lacking those standards and measurements that are requi sites of a scientific discipline. To settle any doubts on this score, simply read the records in nlost zoning cases .. Typically, one finds testimony from two plan ners - one supporting the plaintiff (landowner) views, and the other favoring the defendant (city) views. At the trial level, many zoning cases have become verbal duels between planners, each pro nloting a substantially different position. Accordingly, what goes under the name of planning is an opinion by someone who has stud iled and is learned in the creation, growth and development of cities.

The country's zoning experience raises serious doubts that such training and knowledge provides any special insights, either in eval ulating the present or predicting the future. Planners confront serious prob lems in fulfilling their responsibili ties. Theory and education alone 140 THE FREEMAN Marc} cannot substitute for the actual experience of making practical de cisions and suffering their conse quences. Few planners have ever been part of the construction or development industry, nor respon sible for actual decisions in the development of residential, com mercial or industrial projects. Even if they once had been, their information about prices, materi als, innovations and trends, con sumer desires and preferences must necessarily now come from secondary or more remote sources, not directly from the "firing line." How then can planners possibly be as familiar with the develop ment, construction and operation of shopping centers, housing de velopments, nursing homes or mo bile home parks as those who de velop, own and operate them?

Owners and their mortgage lend ers risk substantial funds on their success. Yet planners are expected to regulate all of them, which is akin to asking the blind to lead those who can see. Unfortunately for the community, in lieu of hard information, they will tend to rely on their own experience .and background - which does not bode well for those of differing per spectives, tastes and attitudes. But regardless of their knowl edge, training and abilities, the fact is that planners are not des tined to make a significant impact on the regulation· of land use. ThE decisions and controls will bE adopted by politicians or thOSE appointed by politicians. And the~ are expected to, and do, responc primarily to those who placed then and keep them in office, and thif involves politics rather than plan· ning. In short, zoning (and othel land use regulations) is, and ha~ to be, a tool not of planning, bu1 of politics.

Political Factors Consider these limitations or the power of the local planner First, he is the paid employee oj the locality and cannot be expectec to espouse with any degree of con· sistency policies contrary to thOSE of his employers. The basic rule~ are established by those elected to govern. A planner who strongl)' advocates high density housing ill the affluent single family suburb~ may not last much longer than hi~ first paycheck. Confrontations arE probably rare because a planner i~ not likely to be hired or seek em· ployment if his basic orientatioll appears to differ substantiall)l from that of his prospective em· ployers. Disagreements will OCCUI and be tolerated - within limita· tions. Secondly, even if a proposed plan appears to accord with thE general desires of the local law· makers and its preparation may 1974 LAND USE REGULATION 141 actually have been commissioned by them, it still must be accept able in significant .respects after hearings and debates, to at "least a majority, to be adopted. Amend ments" 'required for passage can easily change the meaning and im pact of the proposed legislation.

In practice, the "perfect" plan stands little chance of remaining intact against the opposition of a group of voters or politicians, the pressures exerted by political sup porters or contributors, the pay ment of graft or perhaps even the voice of the local newspaper. Ac cordingly, the "perfect" plan is likely to be quite imperfect by the time it emerges from the legislative process, whether it be on a local or higher governmental level, and it might be ravaged still more as administered. And it is possible the courts ultimately may lay some or much of it to rest. In a speech I once delivered in a city in Iowa, I told the audience that if zoning had controlled my trip from Chicago, I might have had to go many miles out of the way - perhaps through Denver. I speculated on the possible reasons that would influence the decision of the local legislators with respect to my routing, and they could be many. Anyone who considers this example farfetched might ex amine the "gateway regulations"

of the Interstate Commerce Com mission which control the routes taken by commercial trucks be tween cities and are ostensibly designed to improve the truckers' profit margins. In a recent law suit, it was 'alleged that under these regulations some trucks are forced to travel more than twenty per cent extra miles. A staff sci entist for the Environmental De fense Fund was quoted to the effect that one hauler of propane from Boston to upstateN ew York was required to go by w,ay of Man hattan's George Washington bridge. The detours in our society should be reduced, not multiplied. It is time we recognized that pol itics and planning are substantial detours in the use of the land. ~ IDEAS ON LIBERTY Zoned or Owned? ZONING AND OWNING are different systems of determining land use. Either the land will be privately owned and its use de termined by the owner to his greatest satisfaction from the choices available to him in the market place, or the land will be used as directed by government.

JOHN c. SPARKS CAPITAL CONSERVATION EDGARB. SPEER A FEW WEEKS AGO, when I in formed my wife that I had to go to Washington for a very impor tant meeting, her first comment was, "Oh, Ed, what have you done now?" But then I told her that the group would be made up of some of the leading realtors of this country. So she made me promise that I .would thank the members of your profession for the many services you have rendered the Speer family, during aU of the moves that we've made through the years. And I do thank you for past services and for this op portunity to join you at your na tional meeting here today . You don't have to be in business very long to realize that a prime ingre dient of industrial development is the knowledge and experience conMr. Speer is Chairman of the United States Steel Corporation. This article is from his address at the National Meeting of the Society of Industrial Realtors, Washington, D. C., No vember 10, 1973.

142 tributed by the industrial realtor. It is sometimes said that every new business, and every expansion of an old business, begins with an idea and a prayer for success. But if that idea is to get off the g-round and have a prayer of a chance for success, somebody has to find the right ground in the first place the right site, in the right location for the right price. And, of course, this is where you people enter the picture. So I have deep respect for the members of the Society of Indus trial Realtors and the contribu tions you make to the ongoing success of American industry. I'm sure· that without those contribu tions, there would be a lot less capital generated within our capi tal system in this country. A great deal of attention is be ing centered these days on real and possible shortages of the natural resources we're going to need in the years ahead. You can 1974 CAPITAL CONSERVATION 143 pick up almost any issue of the news and trade magazines and read about the importance of con servation in our use of oil, gas and other resources, because of the widening gap between con sumption and domestic supply.

Even in real estate, there is a gap between demand and supply, cre ating a land fever across the coun try the likes of which we haven't seen since the days .of the Wild West. In fact, as you well know, the land boom is generating its own special brand of inflation with values and prices climbing quite a bit faster than the Consumer Price Index. The problem, as I understand it, centers about the rapid consump tion of what your profession calls "buildable land." Of course, many of the eighty thousand units of government that we have in this country are contributing to the problem, rather than its solution, by a rush to find legal ways of restricting the use of the land that remains. All of this comes on top of the turmoil being created in the name of a clean environment by many groups, most of them sincerely concerned, although not always fully informed. There are times when I suspect that the first of our natural resources to be ex hausted may turn out to be the American taxpayer. He must foot the bill for the army of inspectors and enforcers who staff all of the agencies and bureaus that are one of the fastest growing elements in our American society.

Capital, a Vital Resource There is one national resource, however, that we absolutely can not do without. This national re source is essential to the develop ment of land. It is more important than drilling rigs or mining tech nology in locating and extracting raw materials from the ground. It is the "magic" ingredient that converts all of the other ingredi ents of the business process into jobs and income, goods and ser vices, and all the real and intangi ble progress that our nation gains from each successful business venture. This vital national resource is capital. It is the money put to gether from a variety of sources and invested in what we always hope will be a "money-making" project - which means a project that will generate not only wages and salaries, but will also pay div idends and interest and increase the nation's supply of investment capital. It isn't 'necessary,. of course, to tell a group of industrial realtors about the role of capital in keeping the wheels of progr~ss turning.

I'm sure that you and the mem144 THE FREEMAN March bers of your Society spend a good portion of' your time explaining these economic facts of life to those who come to you for service and guidance. I mention the sub ject because, like other resources, the supply of capital is not inex haustable. We get a hint of this from time to time - as we have during much of 1973 - when money gets tight and the cost of borrowing capital gives every eco nomics professor a chance to show his students what happens when demand outruns supply. It's also true that there's a greater need for capital today than ever before - and we're going to need more of it in the future. But unless we begin to practice some capital conservation - exercising the same degree of concern toward this vital national resource that many Americans have toward our natural resources - all of the rhet oric about how far and how fast our economy grows in the future will have become little more than an academic discussion.

How much capital are we using, and how much will we need in the future? Well, capital expenditures by American ind ustry have been averaging around one hundred bil lion dollars a year. And I've seen estimates on future needs that place capital demand at well over a trillion dollars during the next twelve years - that is, between now and 1985. Now, I'll confess that I'm not used to thinking in trillion-dollar terms, even in this era of the trillion-dollar economy. But it isn't difficult to see how such a figure on capital needs could be correct, if you break out some of the individual require ments. Specific Needs For example, the' domestic oil industry believes that their capital needs alone could be a minimum of two hundred billion dollars over the next twelve. ye-ars. '. The power generating' utilities are talking of a need for seventy bill,ion dollars just in the next five years. In com munications, one company - Amer ican Telephone and Telegraph has projected its capital require ments at forty to fifty billion dollars during the next decade. In transportation, the railroads be lieve that capital spending in the neighborhood of thirty-six billion dollars will be necessary over the next decade to keep pace with ex pected demands on their transport facilities. And in the steel indus try, estimates of capital spending range upwards of thirty billion dollars between now and 1980 if we are to keep steel supply in bal ance with steel demand, and install the nonproductive equipment re quired by ever-changing pollution control standards.

1974 CAPITAL CONSERVATION 145 That's a. lot of billions to be in vested .over a rela tively short pe riod of time - yet it is only a partial listing. Additional capital in equally large amounts will be needed for private housing and other land development activities . . . to increase the stock of goods and services that American fami lies have come to expect and want ... to build recreation centers and the facilities to house a growing national interest in the arts. So there's an unprecedented need for capital to maintain as well as to improve our standards of living and to move forward in our efforts to upgrade American standards of life. You know, when naturalists talk about conservation of the land, they mean preserving the capacity of the land to renew itself. It is in this same sense that I speak of capital conservation, for the whole theory of our system is one of using, renewing and increasing the supply of capital. We invest dollars in productive efforts . . .

that create profits ... which are reinvested or paid out in dividends so that more dollars will flow into the mainstream of capital invest ment. And under ordinary circum stances, this system could be counted on to supply all of our capital needs. But today's circumstances are not as "ordinary" as they once may have been. For one thing, we haven't been investing as much of our Gross National Product in new assets as we once did. Back in 1950, almost eleven and a half per cent of our GNP was being returned to the economy to in crease our stock of fixed assets in this country. As recently as 1970, however, this percentage had dwindled to 6.2 per cent - about half what it was twenty years earlier. During those same twenty years, we dropped to last place in the rate of net domestic invest ment among the ten leading in dustrial na.tions of the Free World. And what about profits from the investments we have made? Well, I don't know how you people are making out in the real estate busi ness, but I can tell you that in steel and many other areas of in dustry, they're nothing to write home about.

Paper Profits Oh, I've been reading those arti cles in the papers about the big increases that are occurring in business profits. I saw one not long ago that said the after-tax earnings of U.S. corporations in the second quarter of 1973 climbed to an annual rate over seventy-two billion dollars - a 36 per cent jump over the same period of 1972. And from numbers like that, I'm sure many of the American 146 THE FREEMAN March people believe that business is roll ing in profit dollars these days. But the truth is that an inflated dollar is still an inflated dollar, whether it goes into a pay enve lope or is added to the profit col umn of a business ledger. Morgan Guaranty Trust Com pany pointed out several months ago that more than half of the in creased profits reported by non financial corporations during the past year have been so-called "in ventory profits." These are the gains made on the goods that a company sells out of inventory or put another way, the difference in the value of those goods between the time they were bought or pro duced and the time they were used or sold. And this value reflects the rate of inflation that occurs during that period.

So a business gains no lasting benefit from these inventory prof its. In fact, considering the Fed eral tax bite on the profits result ing from the increased value of inventories, and the higher cost of rebuilding those inventories, there actually could be a loss. On this basis~ then, the ongoing level of corporate profits didn't increase during the first two quarters of 1973. It went down - to a point where, as a share of Gross Nation al Product, they were some forty per cent below the average level of the 1960's. Would You Believe? In fact, during the past three years, the average return on sales for all manufacturing companies was only 4.8 per cent - not the 28 per cent that the general public believes companies make in profits - and below the average of six per cent earned in the 1950's and the 5.7 per cent earned in the decade of the sixties. We are particularly concerned about our own profit situation in the steel industry. As we look down the road, we can see the demand for steel growing right along with the rest of the economy. After all, steel is not only a very versatile material-but it is also an inex pensive material. Your average pound of steel costs in the neigh borhood of ten cents, and there isn't much you can buy these days for ten cents a pound. It's even less expensi ve than those pro verbial peanuts.

We've worked hard to keep the cost of steel down. Over the past dozen years, the steel industry has invested more than nineteen billion dollars to acquire the modern effi cient facilities we need to produce better steels - and to maintain and improve both the jobs and the earning potential of steel employ ees. Millions of additional dollars were spent to research and develop not only new steels that give the buyer more for his dollar, but new 1974 CAPITAL CONSERVATION 147 ways of using steel that reduce the costs of such things as housing and commercial buildings. I'm hap py to say that even in this era of intense competition among ma terials, these efforts have paid off with a continuing high demand for steel in this country. Just about every order book in the industry has been full during 1973, and some of them are beginning to fill up for the early months of 1974. This kind of business won't last forever, of course, but we do ex pect the demand for steel to grow at a pace that will require perhaps twenty to thirty million tons of additional raw steel production by 1980. And this is where that thirty billion dollars comes in that I men tioned a few moments ago. It's go ing to require that amount of capital to add this new capacity to replace our existing facilities as they wear out - and to meet the demands being placed upon the in dustry to help clean up the en vironment.

Generating Additional Capital Now, the thirty-billion-dollar question is this: Where is all that capital to come from? I can assure you that we don't have it squir reled away in an old ingot mold. During the five years prior to 1973, the industry's average return on sales was a lowly 3.7 per cent. Even during the first half of 1973, when sales were at an all-time high, the average profit on sales in the industry was a mere 4.5 per cent. Four and a half cents on the sales dollar isn't the kind of return that generates the large sums of capital required by an industry like steel-where a single facility in a single plant can cost many millions of dollars, and where several hun dred million dollars are spent every year in pollution control equipment alone. I t isn't the kind of return, either, that can cause the lending institutions to welcome steel com panies with open arms - although I'm not sure many steel companies would be interested in acquiring much more indebtedness. The in dustry as a whole is already carry ing more than five billion dollars of long-term debt - most of it ac quired while we were upgrading our facilities ... to become more efficient . . . to meet the foreign steel imports that during most of the 1960's the government told us weren't really a problem.

More recently, of course, the government has told our industry that our profit problem is not as important as the one it has with the overall fight against inflation. And while inflation has to be of major concern to every business and every American, I wonder how long we can continue to rob prof its to pay the price of containing 148 THE FREEMAN March infla tion. I don't claim to be an expert in economics, but I do know that among the causes of inflation is the inability of production fa cilities to supply growing demand. This was reflected just last sum mer in the spiraling prices of food and other commodities. The same theory is at work in real estate as the demand outruns the supply of Quildable land. So I fail to see any great eco nomic wisdom in containing the forces of inflation by restricting the profits that are the basis for expanding production. It may be politically expedient over a short period of time - but in the long run, it is economic folly. In fact, with the need for capital already great and growing in almost every sector of the national economy, the "long run" may be shorter than we think.

Look to the Market Now, what's the answer? Well, at the risk of bringing down the wrath of the economic gods here in Washington, I think it's time they restored their faith in the Ameri can free market system. After all, we didn't become the most produc tive nation in the world as a result of bureaucratic tinkering with the economy. Economic controls aren't some new device, created by mod ern economists. In ancient China, Egypt, Greece, Rome - in fact, for more than four thousand years the idea has persisted that govern ments can hold down prices simply by making it illegal to raise them. Yet in all this time, under aU man ner of circumstances, the results have usually been shortages and economic chaos, generating greater problems for the same people that the controls were. supposed to protect. The results are much the same here in the Twentieth Century. Al most daily, shortages and disloca tions caused by the current eco nomic controls are becoming more evident. And while the government says it is trying to find a way out of controls, there are hints that it may recommend some type of per manent agency which could, as Business Week phrased it, "keep the federal government in the con trols business forever."

Frankly, I believe it's time to put more freedom back into our free economy. It's not that I dis trust the planners here in Wash ington. It's just that I have a lot more faith in the private judg ments of the American public, whether they're acting as consum ers or producers - whether they consider themselves part of labor or management-whether they are packaging, selling, or buying real estate. In other words, I'd rather see the cost of living controlled by the millions of private decisions 1974 CAPITAL CONSERVATION 149 that are made every day in the supermarkets of this nation than by some super-authority located in our nation's Capital. The only true test of whether a product is worth its price, or a company worth its profit, is that ultimate decision that's made at the point of sale. So it seems to me that a very necessary first step toward prac ticing capital conservation in this country should be to "phase out"

the economic controls hampering the price structure and the rates of profit that are essential to in creasing the flow of capital in our type of economy. It would be a big help also if, somehow, we could get as many Americans interested in the conservation of this vital na tional resource as seem to be con cerned about the proper conserva tion of our other resources. Conservation Conscious We are rapidly developing, and in some respects already have a conservation culture here in Amer ica. Individually and in groups, large numbers of our people are actively engaged in a wide variety of conservation efforts. Conserva tion of energy ... conservation of our natural resources ... conser vation of land ... conservation of historical landmarks ... the list of things to be conserved and pre served is almost endless. I say "almost endless," because the one that has been mIssIng is the conservation of capita1. Cer tainly, it is this national resource that we need to conserve, if we are to accomplish the other objectives.

Yet the current trend seems to be one of putting most of the others first, often at the cost of increas ing the amounts of capital that will be needed to maintain the Ameri can way of life. As I've already mentioned, some of the largest amounts of capital investment to be made in the years ahead will be those by the energy producing industries. Supplying the growing energy needs of this country is going to be a costly job, and the longer we wait to get on with the job, the higher those costs will rise. But delay, rather than progress, seems to be the or~ der of the day in our approach to our energy p.roblems. Whether it is bringing oil from Alaska or gen erating electricity, months and even years go by while environ mental matters are given prece dence - and the costs of each proj ect climb. Don't misunderstand me. Pro tecting the environment is a high ly desirable goal. American indus try in general is working hard to do its part, spending billions of scarce capital dollars every year to meet various environmental needs.

Yet there is still no scientific basis for many of the pollution 150 THE FREEMAN March control standards that industry is being asked to meet. For example, at U. S. Steel's Fairless Works, north of Philadelphia, we are al ready controlling better than 99 per cent of the dust emitted from the open hearth furnaces of that plant. The equipment was expen sive - but it is effective. Now, we are being asked to remove all visi ble dust from this steelmaking fa cility. And if we are forced to go this final mile, the additional invest ment cost - in terms of the capital spent per pound of dust collected - will be two hundred times great er than the original investment we made to reach 99 per cent effect iveness. At the moment, however, no one knows whether this and similar expenditures at other plants are justified, for there is no scientific data to show that any harm is done by this relatively insignificant amount of dust. And I think you'll agree that an industry already facing a "capital crunch" can't af ford, and shouldn't be asked, to spend excessive amounts of capital for nonproductive equipment that may, in the end, be proved unnec essary.

In many areas, you can find other efforts that - however well intentioned - threaten to push the costs of growth beyond the range of capital available to bring about such growth. This is certainly evident in the rush to find legislative ways to cool off the land fever that's sweeping the country. As you know, a bill to establish a na tional land-use policy has been passed by the Senate. I understand that hundreds of other measures are before the Congress and state and local governments, dealing with everything from urban growth to "no-growth." In fact, much of this legislation seems designed to discourage the use of land,' despite the fact that land itself is a very vital resource. Aside from its surface value, the land of this country has beneath its surface other resources - oil and gas, coal and other minerals that we're going to need in ever larger quantities. The development of land, in cluding its use for the production of energy and minerals, is already a very costly business. And if common sense isn't applied in large quantities today, we may find at some point in the future that both the land and its mineral wealth have been legislated into a position where no one will be able to justify the capital outlays re quired to make it useful to the American people.

Seward's Folly You know, ladies and gentlemen, out of the more than two billion acres that comprise these United 1974 CAPITAL CONSERVATION 151 States of America, there is one plot of better than three hundred seventy-five million acres that now makes up our forty-ninth state, Alaska. At th€ time we acquired this land from Russia over a cen tury ago, the purchase price was seven million dollars. That was a lot of money in those days, and the whole deal was known as "Sew ard's Folly," because no one could see the value of those acres so far to the North. Today, of course, Alaska's min eral wealth alone has a value many, many times the original price, even if you were to measure it in one-hundred-year-old dollars. And the term, Seward's Folly, has been relegated to a brief mention in the history books. Let us hope that our efforts to generate growth in this second half of the Twentieth Century will turn out as well as did the pur chase of Aiaska in the second half of the last century. But let us also do more than hope.

Let's be sure that our economic policies and goals in this country are set by us, and not for us. Let's be sure that in your industry and mine, we make every effort to con vince those in government that our goals are also very much in the national interest. And let's be sure we use every opportunity to tell the American public that the con serving of capital is the one con servation effort that cannot be ig nored - because capital and the profits that create and attract cap ital are essential to whatever ob jectives we set for ourselves and for our nation. I) IDEAS ON LIBERTY Uneconomic Conservation WE CONSERV,E natural resources by using them, in the most effi cient and economic manner. "Uneconomic conservation" is a contradiction in terms - it is waste. But if politics dominates a conservation program, what we get is "uneconomic conserva tion." There are those who talk in grandiose terms about this or that river valley project and who urge us not to count the costs.

Actually, of course, there is no way of determining whether a given program is conservation or waste except by counting the costs. If a given project cannot pass the test of economics, that is a sure sign that it is not conservation but waste. ADMIRAL BEN MOREELL, Our Nation's Water Resources Policies and Politics SOCIALISM EDMUND A. OPITZ THE TREND away from ecclesiasti cal authoritarianism in the post Reformation period gave rise in the eighteenth century to popular sovereignty in the political realm, with such characteristic docu ments as The Federalist Papers and The Wealth of Na,tions. A dif ferent kind of dream gathered momentum during the nineteenth century, contemplating the per fected temporal life of man in a planned society, to be achieved by governmental direction of eco nomics and technology. Socialism is the appropriate generic term for this movement. The quintessence of modern So cialism is government ownership of productive property and the centralized management and di rection of economic life. Socialists are divided into parties, sects and hostile factions, but beneath the The Reverend Mr. Edmund A. Opitz 1S a senior staff member of the Foundation for Economic Education. This article, reprinted here by permission, is one he contributed to Baker's Dictionary of Christian Ethics, Carl F. H. Henry, editor, (1019 Wealthy Street, Grand Rapids, Michigan 49506: Baker Book House, 1973) 726 pp., $16.95.

152 clash of labels they all advocate the planning of economic affairs by political authority - control over production and excha.nge being the key to leverage over other sectors of life and the means of achieving national goals. Such practices as voluntarily pooling goods, sharing the com mon tasks of a community, work ing with the hands, reviving interest in folk arts, do not con stitute Socialism. And it goes without saying that concern for justice is not limited to socialists; the noblest work in behalf of slaves, prisoners, the sick, the handicapped, children, and ani mals has been done by non-Social ists. When it comes to improving man's lot on earth, the influence of Adam Smith probably did more to upgrade the poor than any other single factor, and the major thrust of Classical Liberalism maximized civil, intellectual, and religious liberty for all men by limi ting government to the tasks of policing.

1974 SOCIALISM 153 To Appreciate freedom, Consider the Alternative Socialism is in contention against the Free Society, and we know a thing better if we under stand its adversary. To insist that centralized political planning of the economy is the essence of So cialism may plant the misleading suggestion that the Free Society - call it the free economy, the market economy, or capitalism is characterized by lack of plan ning. Such is not the case. There is indi vidual planning of all sorts in the Free Society, but no cen tralized economic planning. The Rule of Law is not a random de velopment; it is intentional, the result of generations of planned effort by men seeking to establish institutions which ma~imize hu man freedom. The market econ omy operates within the frame work of the Rule of Law, and is regulated by millions of consum ers making billions of decisions as they carry out their private plans for the achievement of their per sonal goals - as well as by other millions who plan ahead for their businesses, their churches, their schools, their hospitals and other corporate ventures.

There are two radically opposed ways of life here, Socialism ver sus the Free Society, and they lock horns over the questions: Who shaH plan? and For whom? Socialism has an overall plan which the handful of men who wield political power must impose on the mass of citizenry in order that the intended' national goals and purposes may be realized. But, millions of people have bil lions of plans of their own, and because many of these private plans do not fit into the govern ment's plan they must be an nulled; and if persuasion does not suffice punishment must be in voked. The ideal blueprint for or dering the life of a bee'hive may be identical with the private plans of the last little bee; but it is not so in human society, where each person is a unique self. Socialism means a nation with two kinds of men; the few who have the power to run things and the many whose lives are run by other men.

The Worst Get to the Top What kind of men are best adapted to the task of fitting the lives of other men into the Plan? Men possessed by an ideology which convinces them they are carrying out History's mandates when they conform the lives of citizens to the social blueprint. As History's vice-regent, the Planner is forced to view men as mass; which is to deny their full stature as persons with rights endowed by 154 THE FREEMAN March the Creator, gifted with free will, possessing the capacity to order their own lives in terms of their convictions. The man who has the authority and the power to put the masses through their paces, and to punish nonconformists, must be ruthless enough to sacri fice a person to a principle. The operational imperatives of a so cialist order demand this kind of action; a commissar who believes that each person is a child of God will eventually yield to a commis sar whose ideology is consonant with the demands of his job.

The ideology which facilitates the Planned State was not in vented by Marx; it was at hand in the form of nineteenth century materialism. Man, in terms of this ideology, is a mere end product of natural and social forces, inhabit ing a universe which does not re flect the handiwork of the Creator, but is reducible instead to the me chanical arrangement of material particles. There is no transcendent end for men to serve, and no soul needing salvation; mankind will be regenerated by altering its en vironment so as to put men fully into the service of the State. In Socialist eschatology the State will finally wither away and men will enjoy an earthly paradise. The skewing of the Christian vision here is obvious; Socialism needs a secular religion to sanc tion its authoritarian politics, and it replaces the traditional moral order by a code which subordi nates the individual to the collec tive. This inversion of values is intended to enhance economic well-being, but in vain. Socialism promises to distribute abundance but is at a loss as to how to pro duce it. A classic study by the, eminent economist, Ludwig von Mises, Soc,ialism (1922), demon strates the impossibility of eco nomic calculation in a planned economy, and experience attests to the chronic shortages of goods which afflict Socialist nations. t) IDEAS ON LIBERTY The Market Method WHEN any commodity is carried to market, it is not the necessity of the vendor, but the necessity of the purchaser that determines the price.

ED M: UN D BUR K E. Thoughts and Details on Scarcity. 1795 CHARLES R. LADow DoYouWa Forever? A MARINE OFFICER, leading his men into battle, exhorted them with this line: "Come on, you . ........ . ! Do you want to live forever?" This is a good ques tion in this era of over-preoccupa tion with the notion of security. It is doubly apposite when one con siders that the world's nations boil with unrest, while the hydrogen bomb hangs over our heads. Mus ing over such matters makes one realize just how far American poli ticians and intellectuals have got ten out of touch with reality. Assuming that we do, or should, seek physical immortality, they have undertaken to protect us against all daily hazards of mor tality. Even as living vegetables, they pump life into us through Medicare, to the bitterest end. While we are spry, they spare no pains (nor our scarce resources) Mr. LaDow, of San Diego, recently retired as a teacher of social studies in high school.

to snug us in with seat belts and protect us from all dangers, either from the environment or consum abIes. Their latest concerns have reached down to the safety of tri cycles and infant's cribs. What are the realities of these matters? People may surrender to seat belts or air bags in their cars; but, when they reach Sun Valley or spot an unclimbable mountain, they will ski the most deadly slope or try to scale up the sheerest cliff. Infants will choke themselves in the safest crib, with a pillow or a tantrum, and a fail-safe trike will easily carry a nonswimmer into the family pool. There is no way to keep the individual from sur rendering his relief check to the nearest poker game. Realizing that each heartbeat is a gamble with nature, man is a gambling animal. "Nothing risked; nothing gained," is his primordial motto. Going beyond such trivial risk155 156 THE FREEMAN March ings of life and health, men will positively seek danger, either for a cause or for thrill alone. Twitted by Oliver Goldsmith for his casual view of martyrdom, Samuel J ohn son said: "Sir, as to voluntary sui cide, as you call it, there are twen ty thousand men in an army who will go without scruple to be shot at, and mount a breach for five pence a day." Although the price has been driven up since Johnson's day, even in this nation there is no lack of willing mercenaries - nor of youthful militants willing to risk their Iives in protests against war, of all things. Our athletics and daredevil events often rival the Aztecs in human sacrifice. Al though crowds are no longer enter tained with public hangings, larger crowds, including the huge televi sion audience, watch mangled driv ersburn to death in flaming race cars.

Put in this perspective, the pre occupation of our political and in tellectualleaders with environmen tal, personal, and social security does seem a little odd. If a neigh bor should only dare advise you to do what governments order, you would shun him at the least - or, more probably, sock him in the jaw as a busybody; but, somehow, the art of propaganda has twisted our thinking around so that we tolerate, and even abet, this non sense of government. Good Intentions-Bad Results Actually, it is our· philanthropic virtue which makes this folly pos sible. Most of us do not think of ourselves as requiring all this con trol. It is to help, the other people who are careless, impecunious, or helpless. My father, a staunch con servative, voted for the 18th Amendment (Prohibition) be cause, as a grocer, he saw workers drinking up their paychecks and leaving wives without grocery money.

At the time, we do not think of the long term effect, on ourselves and others, of these piecemeal "re forms." Such wisdom is the busi ness of statesmen and, of these, we are always in short supply. Never theless, we cannot excuse our selves. Common sense and any knowledge of history should tell us that government is the least effective agent of philanthropy we could choose. Funding the Salva tion Army with 5 per cent of our income would outdo 20 per cent turned over to politicians. But, of course, we have bought the im practical philanthropy of Rous seau. Ameliorating misery is not enough. "If the people won't be good, we will make them be good." Such preventive discipline has never worked and never will. Peo ple insist on learning, so far as they do learn, from their own mis takes. One cannot keep one's own 1974 DO YOU WANT TO LIVE FOREVER? 157 children safe. Much less can gov ernment save anyone from his own folly.

The welfare-environmental, world-saving state did not arrive in a day, or in four decades. It is the fruit of over a century of logi cal positivism and Marxist dialec tic. Such modes of thought, if such they may be called, have gradually permeated a ruling number of our university staffs, our public schools, and the general intellec tual milieu. Hence, they have spread through our media in an era of their burgeoning ubiquity. Through such propagation, we have developed the current breed of political "liberal," concerning whom the late Albert Jay Nock said he "would not trust one alone in a room with a red hot stove unless it was valueless." (And, by all, historical standards, Nock, him self, was a liberal.) Look to the Individual To put the current liberal men tality in its proper place, one must compare it to the successful in tellectual tradition of the Western world. The progress of Western science and philosophy stems from the recognition that, in reality, "nothing exists apart from par-, ticulars." We learn the mystery of things by studying individual specimens, not by speculating in.

generalities. As Aristotle put it "The physician does not cure man kind. He cures Socrates, or Callias, or some other individual who hap pens to be a man." Even cursory observation shows us that the cur rent breed of liberal is engaged in "curing mankind." Certainly, he is not in any way, but accidentally, concerned with individuals. Groups he understands, and statistics from random samples; but individuals are the often troublesome acci dents which interfere with his glittering generalities. If biolo gists, botanists, physicists, or any kind of real scientists operated with his logic, we wouldn't have any workable science, or the kind of productive society which can afford to support liberals in un productive idle speculation. (Inci dentally, the Cal-Tech men who charted the spaceship trajectories to the moon give fundamental credit to Galileo-fifteenth century man of the honest tradition.) William James suggested that: "It is the primitive tendency of the human mind to affirm the re ality of anything conceived." Once one's ideas become more "real"

than the objects around him, he is out of touch with reality. With some notable exceptions, this is the condition among the liberals and academic "social scientists." It puts them in direct line with the medieval metaphysicians who speculated on how many angels 158 THE FREEMAN March could dance on the point of a pin. However, medievalists honored something more exalted than hu man stupidity. Wishful Thinking Liberals, of course, have an ad vantage over those among us with primitive minds. Wishful think ing has always been preferred to harsh realism among a large pro portion of any populace. Universal suffrage places a heavy handicap on sanity in government, as dem onstrated by every successful mass movement in history. Liberal con trol of compulsory public training (euphemistically called education) has come close to ensuring a frame of mind, among the popu lace, suitable to their forms of argumentation. Such forms dress tenuous, or even false, generaliza tions with the dignity of facts. We have come a long way from the thinking of Oliver Wendell Holmes' Autocrat of the Breakfast Table: "Facts are the brute beasts of the intellectual world. I tolerate no facts at this table." In the liberal mentality, the most miserable "fact," such as poverty or pollu tion, outweighs the most glorious truth, such as the survivability and progress of free men - even under the most arduous of circumstances.

In their book, The Disaster Lob by, Melvin J. Grayson and Thomas R. Shepard, Jr., have thoroughly documented how far we have strayed from common sense and logic in handling our political econ omy. Only Lewis Carroll or J ona than Swift could do justice to the present American scene. All of our priorities seem to be arranged as if the cart should be before the horse. Ecology holds pre-eminence over food, lodging, or energy. Birds, bison, or fish take prece dence over people. Race and sex are more important than individ ual excellence, or personal liberty. Watergate obscures inflation and the fumbling of all departments of government-Federal, state, and local. Consumerism Worst of all, the consumer, once deemed to be king in our economy, is now considered such an idiot that he must be protected, night and day, by the likes of Ralph Na der and a host of legislators and bureaucrats against the dire out comes of his stupidity. At the same time, the public "education"

which, presumably, nourished this stupidity, is endowed with increas ing billions of public funds, while private education languishes. In the midst of this shambles it created, the smugness of the lib eral establishment is amazing. At a time when most of· us are beset by doubts and misgivings, and are likely to be apologetic even when 1974 DO YOU WANT '.['0 LIVE FOREVER? 159 proven right, many newspaper edi tors and columnists, along with most network commentators and the liberal intelligentsia, seem to rest assured in their rectitude. "The best of all possible worlds" in which they appear to live is im mune to outside criticism. Without blushing, they can filch public doc uments or deal in innuendo de stroying public figures and appear to feel no qualms, even when caught up. Their formulae, which separate the good guys from the bad, appear to be unassailable. Lib erals are good; all others are bad.

It's as simple as that. Although there are strong signs of public disenchantment with this fanatic smugness, surprisingly the liberals manage to hold onto their controls, outside of modest losses here and there. Their security lies in the persistence of fanaticism, and the long-term conversion of the American people to their brand, coupled to the power of a. bureaucracy dedicated thereto and. backed by police force. Only an angry and aroused electorate can succeed in bringing this •reign to an end, just as an angry and aroused' public made the bureauc·· racy possible. Unlike the stead)!r fire of fanaticism, the boilin~~ points of individuals are immense .. ly variable, and indifference, is all too\common. However, smugness i8 an ugly human characteristic. No·· body really likes a know-it-all. So, the liberal establishment has an Achilles' heel. A Word for the Defense The current "energy crisis" of fers a great opportunity for liber tarians and market economists to be heard. Only when people are hurt are most of them willing to listen. The harder the crunch, the more likely is a response. Today, even our liberal legislators seem wordless at the possibility of an easing of environmental control. It is unanswerable that their ob struction of off-shore drilling, atomic power plants, strip mining, private forestry, the Alaska pipe line, and refinery building has placed us in an unenviable eco nomic position. Their emasculation of National Defense has maimed our bargaining power in a tot ali tarian world. Likewise, their head long, progressive mandates of questionable gadgets to clean up automotive exhausts have multi plied fuel use and resultant short age. If it comes to unemployed people huddling in cold houses, be reft of free use of their automo biles, the environmentalists are apt to lose their audience. People would prefer clean air and water, and a pristine landscape; but they would trade off quite a bit of pol lution for the right to use those facilities.

160 THE FREEMAN March Once the audience is ready, "selling" the free market should not be difficult. It is not as if there were an alien idea to explain. (In deed, the welfare state is the real alien idea!) An open market has always existed in human experi ence, even in times and places where it has operated as a "black market." Laissez faire, indeed, is the plainly observable law of na ture, predating human law. And man is a competitive creature, with a strong sense of territory (property), similar to all others in the animal kingdom. Only his strong moral proclivities can ex plain his willingness to submit to the will of legislators, short of be ing forced, and there can never be enough police in the world for complete subjugation. Lawmakers in a society which considers itself a democracy thus play a game of brinksmanship when they legislate morals and push eminent domain toward the extinction of individ ual liberty. One step too far (which may have been taken) and the free marketeers will have won the audience.

One of the many pleasant out comes of such a change will be a new genuine openness. Unlike rad ical liberals, libertarians nurse no urge to shut up the opposition. It is not in our credo to suppress ideas. We would suppress only violence, force, or fraud. That is, we would limit government's acts of suppression to these fields and would, within these limits, allow people to live their own lives; which, allowing for a good deal of official harassment and impedi ment, is what they already must do. It will be surprising how peaceful things will become on the home front under such conditions. Our relations with other nations are likewise sure to improve. The man who is free and happy at home is unlikely to stir up trouble else where. Voluntarism Is Best The free market offers genuine majority rule. Every majority is made up of individuals. If each in dividual, within the limits of legit imate law, is free to make his own choices in life, this will be the op timum condition of majority rule.

It is a fraudulent majority rule where a minority made up of leg islators and bureaucrats, or even a majority of voters (themselves a minority of the whole), can regu late the personal lives and choices of every individual in the society. The "true believers" in the wel fare state have managed to bring us to this pass. We do not suggest that they give up their predilec tions; only that they give up co ercion and put their ideas back in the open market. Ecologists, conservationists, and 1974 DO YOU WANT TO LIVE FOREVER? 161 humanitarians should have enough faith in the generosity of the American individual to place their cases before the court of individ ual choice. There is nothing in the record of private philanthropy in this nation to indicate that deaf ears await any legitimate claim. As a matter of fact we have a strong record of voluntary re sponse, even to ridiculous appeals, as indicated by the flourishing of private associations favoring al most anything under the sun. But it is an insult to the individual citizen and the spirit of our laws that any such association should be afforded the coercive powers of government in achieving its ends.

The Sierra Club, labor unions, Na der's Raiders, the National Edu cation Association, or any other form of pressure group whatever should face the same form of in dividual veto that every producer in the nation faces. Any other course puts the. cart before the horse. The reformer should con vince the consumer - not rule the producer. Of course the true believers are too obsessed with their particular manias to recognize alternative claims. Focused on the ideals of primordially pure air, crystalline rivers, lakes and oceans, untouched natural parks, flourishing endan gered species, and boundless health, they have. lost sight of the daily necessities of daily living and the basic truth of all econo mists: Human wants are unlim ited; resources are always in short supply; hence all economic deci sions must be compromises with necessity. In the pure majority of the market, such compromises are an amalgam of individual choices.

Whatever the political system or laws, the individual must decide what he shall have and what he must do without. This is as true on Park Avenue as it is in the darkest depths of Africa, or in a Soviet state. To the extent that any government circumscribes the individual citizen's field of free choice and association, it has lim ited his power of survival, let alone his chances of success. Why an ecologist, who can benignly watch a lion pull down an eland or harte beest, does not appear to under stand the foregoing is a trifle hard to explain. It's a tough world, rather unforgiving, and the true believers, in order to return it to Eden, seem determined to bring it down upon us. They have so twist ed up our priorities that not even General Motors has any clear idea how to plan. In such an arena, what are the prospects for the in dividual? The Ingenious Individual Contrary to the doomsayers, left to his own devices, the individual 162 THE FREEMAN March has always shown remarkable pow ers of survival, even in the most unlikely environments. One by one, he has created all the engines of economic ease which we possess, while reform governments have done nothing but milk the cows of his creation. Determined to man date an abstract "social justice,"

true believers have ignored the rela tivism that even the American sharecropper was rich by compari son with the vast majority of the world's inhabitants. Encouraging self-pity (to which we are all prone) in the less fortunate, they have dampened the spirit of such barefoot farm boys whose determi nation once made them captains of industry. (They now major .in "social service" and end up in pro football! ) If their ideas are not unseated from places of power, it is difficult to see how the reformers can avoid "killing the goose that laid the golden egg": American Capitalism. Everything we have is owed to the exercise of free indi vidual initiative. Its sole necessary and proper discipline, short of vio lence, force, or fraud, comes from the free choices of individ uals as consumers. Government has more than enough to do with the exer cise of legitimate police powers, justice. and defense. As it is, it is clearly doing nothing well, as Pe ter Drucker has said, with the possible exceptions of ventures in space, foreign wars and diplomacy.

These are, basically, Executive ac tivities, of a department which the liberals in Congress are set on weakening. Posing the question, "Do you want to live forever," implies no denial of immortality of the soul. As in the case of the Marine leader first quoted here, this is a question concerning this worldly existence. Patrick Henry's cry, "Give me lib erty, or give me death !", was more than political oratory. It strikes a chord in nearly all of us, if not all, from panhandler to merchant prince. There is the point beyond which we will not be pushed. Life is sweet only when it is creative; and we will always risk its loss on the altar of achievement, whether it be mounting a barricade, climb ing a mountain, rocketing to the moon, or in some more mundane occupation. Life is what we ulti mately spend: each person's total gift to the universe of reality and the essential coin of philanthropy.

A man's closest desire is that his passing through is not meaning less, for he knows that he is mor tal. Compared to this small glory in each· of us, how paltry seem the concerns of the welfare state. Let us live by our choices and die as free men! , STRIVE FOR THE S\MPlE l\fE LEONARD E. READ I, TOO, LOVE A LIFE whose plot is simple. However, my idea as to what's simple differs from that of the great naturalist and essayist, Henry David Thoreau. Doubtless, he had in mind the quietude of Walden Pond and its seclusion from society. And this is what near ly everyone regards as the simple life. My great-grandfather, born dur ing the founding of America, was the first settler in Shiawassee County, Michigan. There was no "society" to interfere with his comings and goings - the nearest village being miles away - and ex cept for the prying eyes of forag ing Indians he and his family hacked it out alone. According to the popular definition, his life was indeed simple, far more so than Thoreau's.

What, really, is the simple life? Unless we settle that question, we will be plagued by a troublesome, socialistic cliche: "The more comI love a life whose plot is simple. -Thoreau plex the society, the more govern ment control we need." The, result, eventually, will be out-and-out dic tatorship as intricacies in society are used as an excuse for total gov ernment. Is it not true that most people in today's world think of my great-grandfather's life as simple and of mine as complex? Actually, it is the other way around. You and I really live the simple life, and this is the point I wish. to clarify. If, as I believe, man's purpose is to grow, evolve, emerge along the lines of his uniqueness, it fol lows that he must emerge from that poverty which attends those who are forced to become a J ack of-alI-trades. My great-grandfa ther's unique talent might have been musical composition, or he might have become a distinguished naturalist and essayist, as did Thoreau - for all I know, or for all he knew! He, so preoccupied in do ing nearly everything for himself, never had a chance to discover his 163 164 THE FREEMAN March uniqueness; he was imprisoned by the lack of opportunities to dis cover himself.

Then and Now I reflected on the differences be tween my great-grandfather's and my way of life on a recent flight from New York to Los Angeles. Think how complex it would have been for him to get from Shiawas see County to such a destination! Enormous preparations, hardships, and several months of dangerous travel! Me? Perfectly simple! All I did was to board a plane, de barking five hours later. His wife had to weave and sew the clothes they wore - so complex a series of operations that only a very few in America today have any idea of how this is done. My case? My suit was tailored in Hong Kong - 12,000 miles away the shirt in Madrid, the shoes in Rome. Complex? Indeed not; so simple that all I did was to sign three checks. Came the luncheon at an alti tude of 39,000 feet. Among the delectable dishes was fresh salmon from the Pacific Northwest and broiled in the plane's kitchen. My part in this wonderful fare? As simple as waving a friendly greet ing to a passing stranger! As to my ancestor, the complexities would have been too profound and numerous for him even to imagine.

Salmon still fresh after 3,000 miles in transit! A jet plane never en tered his head, or that broiler, or the coffee brewed from beans from another part of the world. My life is far more simple, much less com plex, than his. Gaining a More Simple Life Through Social Cooperation How to explain this evolution toward civilization - from the complex to the simple life? How does one accomplish it? Instead of continuing as a recluse, leading a solitary, secluded existence, run ning away from others, man be comes civilized by getting into so ciety, that is, by letting others with their unique talents come to one's aid. Let them do their count less things, which permits me to do my "thing." We need only re member that man is at once an individualistic and a social being, the latter no more warranting oversight than the former. Actu ally, the individualistic side of any person can never be fully realized except as the social side is under stood, embraced, and skillfully ex ercised. Think of the things literally millions of them - which are beyond your or my competence but by which you and I prosper.

Next, how shall this way of life in its ideal form be: defined? I hesitate to use one apt. expression, "social cooperation," for the rea1974 STRIVE FOR THE SIMPLE LIFE 165 son that most statists, be they Ru's-, sians or Americans, apply it to their coercive devices. Their com·· mand to "cooperate by doing as I say" is a contradiction in terms., Cooperate means "to act or work together with another or others: for a c'ommon purpose." The de-· crees and edicts of authoritarians reflect strictly their own, not com-mon, purposes. In any common cause, the working together has to be private, personal, voluntary. In a word, let each do whatever he pleases so long as it is peaceful. What, then, do we have in com·· mon? Each pursuing his uniqueness! That would be my ideal of free·· dom: No man-concocted restraints against the release of creative hu-man energy. More precisely, Ire·· fer to the free market, private ownership, limited government philosophy with its moral and spiritual antecedents. To me, this is but an ancient, moral axiom-the Golden Rule - expressed in politico-economic terms. You and I can best help each other by tend·· ing to our own knitting, pursuing our own uniqueness, respecting the rights of each to the fruits of hiB own labor, and freely exchanging when and if mutually advantage· ous - not an iota of coercion! Does this not clarify what we mean when referring to the freedonl philosophy?

The Miracle of the Market We have had in the past few decades a remarkable demonstra tion of the simple life. Yet, few have taken any note of this mira cle of simplification - which brings the wealth of the world to our doorstep; they are blind to the wonders they have been experienc ing. This makes all the more ex traordinary Lord Tennyson's pro phetic vision of more than a century ago: For I dipt into the future, far as human eye could see, Saw the Vision of the world and all the wonders that would be; Saw the heavens fill with commerce, argosies of magic sails, Pilots of the purple twilight, dropping down with costly bales. So let us understand and enjoy the simple life - its exclusively voluntary nature, and the unimag inable wisdom which attends the unfettered release of creative en ergy. Otherwise, if we remain un aware of its blessings, our blind ness threatens its termination and promises instead a descent into the complex life of the primitive. For it is an observed fact that the com plexities are alarmingly on the in crease.

In every instance, the complex166 THE FREEMAN March ities are composed of coercive in trusions by dictocrats in and out of public office. The excuse, of course, is that the intricacies are now too enormous to operate with out dictocratic management; these people actually believe that they possess the capabilities needed to make things function. Really, the intricacies are no more numerous than before; all that has happened is a fantastic and wonderful expan sion in specialization - division of labor - that is, each to his own uniqueness. This, in turn, has made all of us interdependent. We have here a flowering of the simple life, the continuation of which re quires a moral conduct, namely, an observation and practice of the Golden Rule - the way it should be! Recall that no one knows how to make an ordinary wooden pencil, let alone an automobile or a jet plane. But, then, no one under stands a cell, a molecule, an atom.

You name it! Yet, the dictocrats Planned Chaos do not know that they know not. In their behavior they attempt to go beyond their finite minds, which is to say that they are out of their minds, regardless of how brilliant they may appear. It is this coer cive intrusion, this unreasonable force, that threatens man's sur vival. The way to strive for the simple life is to gain an awareness that the wisdom implicit in its observa tion is trillions of times greater than exists in you or me or any other discrete individual. Every discovery, invention, insight, in tuitive thought, think-of-that since the dawn of human consciousness - the overall luminosity - flows to your and my benefit if we can avoid its nemesis: the complexities of coercive intrusions. Why should we lose that highest form of moral and economic life each to his own uniqueness which we have had the privilege of sampling! Truly, it is a life whose plot is simple. (I IDEAS ON LIBERTY Men must choose between the market economy .and socialism.

The state can preserve the market economy in protecting life, health and private property against violent or fraudulent ag gression; or it can itself control the conduct of all production activities. Some agency must determine what should be pro duced. If it is not the consumers by means of demand and sup ply on the market, it must be the government by compulsion. LUDWI~ VON MISES W. A. PATON TheuSocialSecurity" ~~rn&(ID~CJ UNSOUND economic policy, lon!~ continued, tends to become ac cepted and entrenched. When Fed eral "social security" first ap peared on the horizon there were many skeptics and critics. But with the passage of time this re sort to the power of the central government to provide for our re tirement years has gained wide approval, has grown like Topsy, and has spawned a flock of other welfare programs, including stat~e and local measures. And protest ing voices are now few and faint.

Acceptance of the present array of handouts under the welfare banner, moreover, has now reached the stage where many seem to forget the fundamental fact that no gove:r:nmental agency or com, bination of agencies can assur,e W. A. Paton is Professor Emeritus of Account ing and of Economics, University of Michigan. He is author (or co-author) of a score of books and many articles, largely in the field· of ac counting. Since his retirement at· Michigan, he has continued his writing and lecturing activities and has done part-time teaching at a dozen cc.l leges and universities, in ten states. everyone of a specified level of consumer goods to enjoy. Laws might be enacted by legislative bodies making dollar commitments to all hands, but such actions would simmer down, broadly speaking, to nothing more than authorizing a certain legal posi tion for each of us in the line of individuals awaiting their 'turns at the economic spigot. No power on earth can guarantee the size of the flow from the pipeline of pro duction, even for a year or two.

This is a world full of more or less uncontrollable factors that have an impact on economic activity and output. Familiar examples are fluctuating weather conditions, varying population, changing at titudes, and modification of meth ods. Perhaps the outstanding un predictable influence today is war or fear of war, and the accompany ing ups and downs in military man power and expenditure. In short, there is no way in which the economic future of an 167 168 THE FREEMAN March entire people can be assured by state action. Redistribution of such output as appears may be forced by government, but the size of the pie is not enlarged by increasing Paul's slice at the ex pense of Peter's. Production re mains the key to prosperity, not government promises. This is par ticularly true in the case of the United States, as we can be sure that no foreign nation or nations will play Santa Claus for us.

That volume of economic output is the basis of the American stan dard of Iiving is of course unde niable. It is almost equally plain that it is· the current flow of con sumer goods on which we largely depend to meet our current needs. But these simple truths are so widely ignored, especially in con nection with plans and schemes private as well as governmental designed to insure our economic future, that they deserve continu ing explanation and emphasis. I have a few suggestions to offer that may be helpful in clearing the air for anyone who is willing to take a hard look at economic reality. Stockpiling Consumer Goods Phony "Reserves" One way to bring to light, very plainly, our overall dependence on current output is to take a look at the problem of stockpiling consumer goods under existing condi tions. Back in Egypt, long ago, so we are told in Genesis, Joseph stored "corn" in the "seven plen teous years" in an amount so large that "it was without number," and then doled it out in the "seven years of dearth." Apparently he had remarkable storage facilities, and a very docile people to deal with. And since the famine was "all over the face of the earth" he also did a big business with the other countries that "came into Egypt to Joseph for to buy corn."

We have no data as to the pricing policies and other procedures fol lowed during the famine years, in dealing with either Egyptians or foreigners, as the granaries were emptied. The Biblical account also provides no details 'as to how the stored grain was commandeered, guarded, and kept from spoiling and insect infestation. A .tyrannical government in the United States could attempt to follow Joseph's example, and seize a part of the current crop of wheat or other grains for stockpiling purposes. Indeed we have had con siderable experience with coerced storing of farm products, although the objective was mainly to induce an artificial scarcity, to force up prices to producers, rather than to increase the future supply of consumer goods. And this venture, as is well known, soon led to cur1974 THE "SOCIAL SECURITY" MIRAGE 169 tailment of supply by restricting plantings and other devices - a fantastic piece of folly from which we are still suffering.

Grain Is a Raw Material But my main purpose here is, not to criticize government inter-· ference with agricultural opera-· tions. The point I want to empha-· size, first, is that in our situation grain is a raw material, not a con sumer good. Our output of grain is fed to livestock or sold to manu-· facturers of packaged cereal prod-· ucts (or exported). Conceivably the government could start a pro·· gram of making us tighten our belts by storing part of the cur·· rent flow of canned tomatoes and other packaged foods that could be preserved for some time (and stilll be fit for consumption under our fussy "Food and Drug" laws and regulations). As far as I know,. however, no such program is un·· del' consideration or has been suggested. The fact that we are not accu·· mulating a usable food bank, how·· ever, is not the end of the story .. The American standard of living today is in substantial measure composed of products that are impossible to stor'e. We can in·· crease the capacity to produce but we can't stockpile electric energy,.

either to provide power in produc·· tive processes or to consume as lighting and power in our homes and outside. Transportation ser vice - by motor vehicle, train, plane, or any other means - can't be piled up for future use. The only way to enjoy a vacation trip or a jaunt abroad is to go. We can't accumulate a stock of per sonal services such as haircuts and shampoos. Medical service likewise can't be stockpiled. We can store books, but educational services in general must be con sumed as produced. The same may be said of much of our entertain ment, including horse racing and football ga:Ipes as well as a seat at the opera. Obviously we can be come informed of what's going on only by the morning paper, the radio and TV presentations, the telephone, the mail service, and so . on. There are other illustrations that might be given, but these shouldn't be necessary to make the point that taking care of our fu ture - as a people - by either vol untary or coerced stockpiling of consumer commodities ,and ser vices, as found in today's markets, is largely impossible or impracti cable. It is primarily the current output of the ultimate products on which we live.

Perhaps I should add here a reference to the notion that many people seem to have to the effect that "social security," at the Fed eral level, is backed by "reserves,"

170 THE FREEMAN March on a sound actuarial basis, which assure the beneficiaries that the promises made will be faithfully kept. This view of the program is truly a mirage. There are no "re serves" involved in any meaning ful sense. The funds diverted to social-security recipients, acquired by taxation or borrowing, or gen erated via the printing press and related means, add nothing to the output of consumer goods or the array of productive resources. Stashing government IODs, either in the form of fancy engraved paper or just bookkeeping entries, provides no real support for meet ing the expectations of eligible payees in terms of standard of living. Such "reserves" are a finan cial hoax, and the expense of main taining such a system is money thrown away. It would be an im provement if the system were amended so as to make it plain that we are on a pay-as-you-go basis, overall.

Stimulating Productivity I've already stressed the fact that no particular level of eco nomic output can be assured by government action, in the face of the uncertainties besetting us. And, of course, neither can private associations, insurance companies, or other nongovernmental' groups, do the impossible. There are, how ever, some condi tions, arrangements, and courses of action that promote productivity, and tend to increase the flow of consumer commodities and services - the ul timate objective of the economic process. Thus if the goal of any nation is that of maintaining and perhaps improving - the stan dard of living' of the population children, grownups in the work force, those not employed for any reason, and "senior citizens" - the road to follow is the stimulation of production. A higher level of consuming, currently or later, de mands a higher level of producing. I've no intention here to go beyond a very few comments on the factors that tend to promote an increasing volume of economic output. A major requirement, cer tainly, is continuing improvement of tools and methods. Almost be fore our eyes in this country is an amazing picture of what the tech nological march has done and can do for us. Avoidance of waste, and efficient utilization of natural re sources, are important. Another major ingredient is a climate that encourages the hustler, the go getter, the innovator, the enter priser. Also should be noted the importance of saving and capital accumulation, including the ven ture funds necessary to finance risk-taking and experiment in bus iness activity. Hard work and dili gence, in all levels and branches of 1974 THE "SOCIAL· SECURITY" MIRAGE 171 the force engaged in production:, including supervisors and admin·· istrators, are of course.essential to efficient operation. Above all i8 needed an array of sensitive mar·· kets, capable of reflecting promptly the results of the interaction of buyer and seller views and desires ..

And financial facilities that serv€~ to implement specialization and free exchange must· be available. Conversely, we must avoid like the plague all policies and prac·· tices that impede the-efforts to expand output, increase the size of the economic flow. Union tactics that discourage utilization of im·· proved machines and methods, or lead to absenteeism, inefficiency:, unreasonably short hours per week, and so on, are surely not conducive to economic progress, for all of us, or for any group in the long run. Noncompetitive tend·· encies in business managements and organizations are similarly ob·· jectionable. Dishonesty and fraud in any sector has an adverse im pact on the productive process. Interference by government agen cies in business operation is sel dom helpful, and is currently so extensive that it is putting a damper on individual initiative and enterprise. Onerous, progres sive tax levies restrict saving and capital formation, and welfare ex penditures on a vast scale, at the expense of the earners, are dis couraging to the rank and file as well as to those especially talented and energetic.

In conclusion I want to acknowl edge that there are still a few of us around who firmly believe that an economy dominantly private and free, with a strictly limited government role, is superior on all counts to any form of socialism or welfare state. And we believe that historically and currently the available evidence supports this stance, overwhelmingly. , IDEAS ON LIBERTY Insecurity THERE IS NO SECURITY to be had from any government so long as its program, intentionally or otherwise, destroys private property, promotes coHectivism, and progressively discour ages production. Under such a government all liberty is soon lost. Serious cause for alarm exists in the United States today. PAUL L. POIROT, The Pension Idea WhatIsSeen BRIAN SUMMERS and MORE THAN one hundred years ago the great French economist, Fred eric Bastiat, wrote his classic es say, "What Is Seen and What Is Not Seen in Political Economy!"l Can such an essay, written in a different time and a different land, have something to say to today's Americans? It certainly can!

Bastiat pointed out, in brilliant fashion, the universal truth that you can't get something for no thing. To most people this seems perfectly obvious. Yet many of these same people forget all about this "obvious fact" when the con versation turns to economics! They say: "Look at all the good that government spending does. Look at these fine public works. Consider, if you will, the many jobs these public works create. Surely you wouldn't suggest that government spending be reduced when so many jobs depend on it." 1 Frederick Bastiat, Selected Essays on Political Economy (Irvington-on Hudson, N.Y.: The Foundation for Eco nomic Education, Inc.), pp. 1-50. Mr. Summers is a member of the staff of the Foundation for Economic Education. 172 The concrete results of govern ment spending are what is seen. What is not seen is what would have happened to the taxpayers' money if it hadn't gone for taxes.

"What would have happened ?" The money would have been spent or saved. If it had been spent then it would have created jobs in the private sector just as jobs were created in the public sector, except that people would have been spend ing their money on what they wanted. If it had been saved then, di rectly or indirectly, it would have been invested and turned into fac tories, machines, and tools. That is, the money would have been con verted into capital goods that cre ate jobs for millions of workers. "Then government spending re ally doesn't increase employment?" That's right.· Jobs created by government spending are what is seen. However, they are only one side of the coin. The other side is the jobs that would have been cre ated by private spending and in vestment if taxes weren't so high. These jobs that government spend1974 WHAT IS SEEN AND WHAT IS NOT SEEN 173 ing destroyed are what is not seen.

"But what about. the public works that government spending creates ?" We are all aware of public works. They are what is seen. What is not seen are the vacations never taken, homes never built, appliances never bought, and who knows what else that never came into being because the taxpayers couldn't afford them. They couldn't afford these things because the money that would have paid for them was taxed away and spent on public' works. In evaluating public works, we must always remember that they came into being at the expense of whatever the taxpayers' money would have created if the money hadn't gone for taxes. Whatever the money would ha,ve created is, of course, not seen,. It is, however, the price we pay for the public works that a,re seen. The entire question of govern ment spending is perhaps best per ceived when one realizes that the government is not a source of wealth. The people themselves are the only true source of wealth.

Hence .the government can only give to the people what it has al ready taken from the people. You ean't get something for nothing! Once one realizes that there are not, in fact, any economic benefits inherent in government spending, how does one decide upon its ideal level? It seems to me that the only way to decide is to consult that woefully neglected entity we can c'onscience. How is this? What is the con nection that takes one all the way from the affairs of state to one's own innermost feelings? The connection is simply this: We live in a republic. Thus, our elected representatives act in our names. The government is our agent! Hence I should ask the govern ment to do only that which I want to feel personally responsible for. To me this means that govern mental expenditures should be re stricted to those needed to protect people from humanly initiated force and fraud. Any government spending that goes beyond this must benefit someone at someone else's expense. No matter how I look at it, my conscience tens me this is wrong.

I will not presume to tell you how you should feel about these matters. I am only beginning to know my own conscience! How ever, I do suggest that, stripped of economic nonsense py the works of such great men a~ Frederic Bas tiat, questions of political economy are best resolved iby consulting one's own inner sense of right and wrong. What better way could there be? ~ WELFARE FIFTYYEARS HENCE MORRIS C. SHUMIATCHER SINCE LORD BEVERIDGE drew his blueprint of the welfare state for Britain, it has become almost axiomatic in all western countries, including Canada, that govern ments will each year come to per form new functions that tradition ally had been regarded as the re sponsibility of the individual. As the state and other dominant institutions exercise their growing authority over the citizen, his own capacity to make future choices diminishes. Whilst the objects of institutional direction and control are undoubtedly initiated out of the most benign motives of crea t ing a secure and egalitarian so ciety, they ultimately succeed only to the extent that the citizen be comes "cabined, cribbed, con fined." The paradox is that the Dr. Shumiatcher is a prominent lawyer in Regina, Saskatchewan, well known as a lec turer, writer, defender of freedom.

This article is reprinted by permission as part of a longer one of the same title in the March 1973 issue of The Canadian Bar Re view. 174 benevolent quest for security and egali tarianism leads to a custodial society of unrelieved monotony that must corral the creative, hob ble the energetic and devour the dissentient if it is to achieve its ends. A projection of present trends, therefore, will lead us not to a new society. Rather it will return us to a society in which the ele ments of status are of greater im portance than the constitutents of freely negotiated relationships, particularly those of contract. The senior citizen, the pensioner, the deserted wife, the dependent mother, the injured workman, .the university student, the day-care centre-charge, the treaty Indian, the "in....scope-employee", the bi lingual public service employee, the uni-lingual civil servant, the prisoner, the parolee - each must be accorded his special status in a structured society that has al ready grown as rigid as the hier1974 WELFARE FIFTY YEARS HENCE 175 archies of the feudal system of the thirteenth century. Lords and nobles, knights and serfs each in his place, performed his duties to, and claimed his rights from the authority that stood immediately above him in the feudal pecking order. What each man did was not so important as the status he oc cupied in the hierarchy. And while no social security numbers were then issued by the Soverejgn, the place of every citizen and what he was entitled to claim of the society of which he was a part, were matters as precisely defined in the feudal age as they are now under the Social Security Act, the Unemployment Insurance Act, the Canada Pension Plan and the fed eral and provincial welfare stat utes. Under the feudal system, so long as he faithfully conformed, the individual was assured that his master would provide him with all of the necessities for life. He required no means by which to make choices on his own. He was paid no money-wages; he did not, and indeed, could not choose where he would work or where he would spend his earnings. Why should he? Did he not have complete se curity? So it may be expected that, present trends continuing, wIthin fifty years the individual will return to a neo-feudal status of total security.

But it is my view that man's growth and development do not proceed in straight or even curved one-dimensional lines. Neither do quantitative data of past events necessarily reveal the course of human conduct of the future. Graphs that may demonstrate the growth of population in the past fifty years do not necessarily chart the trend for the next fifty years. In the 1920's, some population ex perts predicted that by 1970, Ca nada's French-speaking population would constitute a majority since the birthrate of French-Canadian Roman Catholic families far ex ceeded that of all other groups in Canada. The emergence of French speaking Roman Catholics as the predominant racial linguistic and religious group in Canada was bound to shape the culture and mores of Canada in the last quar ter of the twentieth century. So ran the popular theory that came to be referred to as "the revenge of the cradle" for the Plains of Abraham. It was a prophecy but tressed with solid statistical graphs projected fifty years into the future. These lines went a long way to nurture the nationalistic aspirations of many who foresaw as inevitable, a French-speaking Canada. Obviously, the statistical experts of fifty years ago lacked both the facts and the imagina tion necessary to build into their projections the decline in influence 176 THE FREEMAN March of the church or the effects of the pill. These played a vital role in reversing the population trends that the statisticians thought to be inevitable. Smaller families among French-speaking Cana dians, the postwar baby boom and immigration all had the effect of reducing the proportionate growth of French-speaking Canadians, and when these facts became ap parent, many no longer were will ing to rely on the cradle to inten sify their influence and turned to other means.

The Pendulum Principle Thus, in human affairs, the theory that if a trend be recog nized, it is likely to continue, does not provide an accurate basis on which to forecast the future. It is the unexpected and the unforeseen that are likely to become the most significant factors for change. Surprise makes fools of statistics. If some theory is to be applied in considering the state of the law pertaining to health, welfare and education fifty years hence, ex perience would seem to favor the pendulum principle that views hu man tastes and choices, institu tions and standards of conduct as constantly changing and as peri odically oscillating bet:ween ex tremes over periods of years or even centuries. Nowhere is this more apparent than in the changing fashions of physical adornment and personal morality. The contemporary culti vation of long hair and hirsute facial embellishment is a re-run of the preferences demonstrated by royalist cavaliers of the court of the Stuarts. Our moral permis siveness is in the tradition of a licentious England in the years of the Restoration when the pendu lum swiftly swung against the bleak years dominated by Crom well's round-headed republicans.

The libertarian society dominated by Edward VII was a moral and sartorial reaction against the strictures attempted by a widowed Victoria upon the ebullience of her vigorous people. The ethical self-reproach following World War I produced a pendulum-like swing from a free-wheeling morality on the one hand, to so prolific a proc lamation of blue laws on the other, as to spawn a whole generation ac cused of being moral malefactors. Literature, liquor and libido all had their lynchers. It was some forty years before the pendulum of public opinion swung. New standards of morality were so swiftly incorporated into the law in the 1960's that some complained that society abandoned all but the barest elements of decency. What ever one's tastes, it is common ground that trends in sartorial and moral standards have always 1974 WELFARE FIFTY YEARS HENCE 177 moved pendulum fashion. It is my view that man's health, welfare and education, being as uniquely personal to him as his clothing and his morals, are likely to be sub ject to the same kind of swings.

History is replete with evidence of the reversal of apparent trends. The concept of contract was the pivot upon which the feudal sys tem's most stable concept - that of status - was reversed. As a re sult of that reversal, there devel oped a relatively free and mobile society. State Intervention The trends of the past fifty years have repudiated the concept of the free· market place. The pro duction and marketing of all major agricultural commodities are regu lated by the state; the flow of commerce across international boundaries is controlled by law; private land purchases in some jurisdictions must be approved by a cabinet; the direct sale of com modities, from encyclopaedias to kitchen utensils, are subject to re pudiation during a "cooling off period"; employment agreements are spelled out in statutes that accord special status to those who work; the practice of the learned professions is made subject to sta te controls; the press itself is regulated by government councils.

The pendulum of such a society has indeed moved to an extreme position in its oscillations between freedom and servility, contract and status, independence and pa ternalism. And over the whole scene there floats, like some giant satellite, the theory that the state has eminent domain over all life and property . Upon that theory it claims and collects taxes at rates that would cause the most callous feudal lord to blush. A reaction against this relation ship between the state and the individual is inevitable. The present position of Cana da's economic and social pendulum has reached the point of a status structured society from which the common sense of citizens will re treat when the implica,tions of their status are recognized and the tribute they pay is assessed. The trends that have produced the total state will be arrested and reversed when it is recognized that governments, grown greedy for money and p<lwer, debilitate and destroy the industry that is the source of a nation's wealth.

Legislatures grown hyperactive produce citizens who are inactive and unproductive. The major controls of the fu ture, therefore, will not be im posed by public laws: they will become the restraints that indi viduals will exercise over their own desires and appetites, accept178 THE FREEMAN March ing the concept of Ortega y Gasset that: Order is not a pressure imposed upon society from without, but an equilibrium which is set up from within.! The society of the future will be one in which men themselves will fashion the relationships that are expected to satisfy their needs. The sanctions of the state will be resorted to only in the most ex ceptional cases. Fifty years hence, men. will agree that fewer laws be passed and that fewer sanctions be im posed by the state .. Governments will be moved to disengage and leave the individual free to de velop a higher degree of self-dis cipline. Parliamentarians will take pride not in the number of new statutes they will have passed in any year, but in the number of laws they have succeeded in re pealing. They will come to embrace the view of the ancient philos opher Chuang-Tzu who said: 2 There has been such a thing as letting mankind alone; there has never been such a thing as govern ing mankind. Letting alone springs 1 Mirabeau 0 el politico in Obras com pletas (1947), Vol. III, p. 603.

2 James Legge (trans.), The Writings of Kwang-zze, The Great Learning, in The Chinese Classics, vol. I (2nd ed., 1893), pp. 355-381. from fear lest men's natural dispo sition be perverted and their virtue laid aside. But if their natural dis positions be not perverted nor their virtue laid aside, what room is there left for government? This insight will be widely ac cepted when the sanguine prom ises of politicians concerning the magic of the laws they propose will prove illusory. Individuals will then come to exercise their own capacities and energies to support themselves and discover their own destinies, and they will exercise their own judgment to restrain themselves and consider their neighbors. Egalitarianism Rejected The concept of egalitarianism will also be rejected. The ethnic and cultural differences that be came recognizable during the latter part of the twentieth cen tury arose as a counterpoise against the rising Canadian nationalism that was reflected not only in the country's economic and cultural activities but in the declarations of almost all political personalities.

So in the twenty-first century, in dividual differences which are the hallmark of the human person ality, will be accentuated as a pen dulum-like reaction against the collectivist social policies of the age. Equality of opportunity will remain a cornerstone of national 1974 WELFARE FIFTY YEARS HENCE 179 policy. But the concept that all in dividuals are equal will be rejected as unrealistic and retrograde. Un realistic, because in whatever he does each man is unique and his personali ty differs from tha t of every other man. Retrogressive, because equality repudiates the concept of excellence upon which a meaningful life and a good so ciety both depend. The welfare state will not suc ceed in changing the basic nature and motivation of mankind. Men will remain self-interested though not necessarily self-centered. They will continue to be competitive whenever they are free to exercise their will to succeed and to excel.

The pious policies of planners, who will design a state in which there are no losers and only winners, will fail. To believe that fifty years hence, some national pater fami lias will produce a condition of security and egalitarianism in which there will be defused man's instinct to strive to distinguish himself above his fellows, whether in the laboratory or in the boxing ring, in the concert hall or on the ice, in the market place or in the court room - is as unrealistic as a painted picture on a stage back drop. It May Get Worse Of course, it may be that the pendulum has not yet swung to the extreme, and there will be more laws controlling the lives of Canadians before there are less. By the end of the twentieth cen tury, the costs of the welfare sys tem will have grown so over whelmingly that Canada will be faced with the alternative of aban doning it or of entering an era of national impoverishment. There will be no questio ll of distinguish ing then between the rich and the poor. Poverty will be the lot of all.

The reasons will be apparent to our progeny. First, the national guaranteed annual income will, in effect, become the national uni versal income, and it will be the sum and total received· by almost all Canadians. By definition it will continue to be regarded as oR pov erty income. Most Canadians will receive no less than this fixed sum though they be wholly nonproduc tive and content to do nothing to earn it. By that same token, most Canadians will receive no more than this fixed income even though they toil from dawn to dusk and accept onerous responsibilities. The desire to work, the capacity to work and the productivity of work actually done will be irrele vant to the income received by the individual. His needs, as deter mined by the Economic and Social Councils of Canada alone will govern. Secondly, the increasing propor180 THE FREEMAN March tion of a man's wealth that the state will take, will render it im possible for him to become wealthy either by his earnings or by in vestment. For most, there will be a hand-to-mouth existence, and for those who are able to save, there will be no worthwhile return on investment. Saving will be re garded as an antisocial act.

Thirdly, egalitarianism will ele vate the welfare recipient to the status of model citizen. The right to be supported will become the national ethic, and the duty to work and to produce will be viewed as an aberration from the norm. Under these circumstances, the nation's plant and equipment will grow obsolete; capital will disap pear; production will decline and there will be achieved a society in which each citizen will share equally in the poverty of all. Then Change Must Come It will be then that the pendu lum will swing. The concept of rights and obligations will be ex amined afresh, and it will be rec ognized that no citizen can prop erly claim of his fellow citizens, through the state or otherwise, an annual guaranteed income for life, as a matter of right. It will be found that while it is a simple matter for an individual to con tend that he has certain inalien able rights, no right can be enjoyed by him unless some other individual is able and willing to deliver it; that rights and obliga tions are simply opposite sides of the same coin, and that there is no right to be had, unless there be an equal and corresponding obli gation assumed by someone.

When this equation is accepted as a fact of life, the curtain will be lifted between the majestically impersonal tax-collecting machin ery of governments on the one side, and the anonymous bureau cratic welfare-dispensing agencies on the other. The citizen receiving his guaranteed stipend from the state will finally become conscious of the fact that although he may not have worked for what he has received, some other citizen has; and that his right to claim susten ance is meaningful only because some other citizen has been willing to assume the burden of giving effect to his claim. He will become aware of the simple fact that his claim to the right to be supported is as empty as a cry in the wilder ness except when the conscience of another human being recog nizes a duty to respond to his plaint; that there really exist no rights but only obligations, and that the first obligation of every man is to care for and maintain himself and those directly depend ent upon him, on the simple prem ise: "If I am not for myself, who 1974 WELFARE FIFTY YEARS HENCE 181 will be?" It is then that the con·· cept of welfare will undergo the kind of change that will assign it an appropriate place in the Cana-· dian society: it will reassume its original purpose as an aid for the weak, the disabled and the infirm.

so long only as they cannot care for themselves. No Guaranteed life The concept that the world owes everyone a living, so popular in the latter years of the twentieth century, will gradually fall into disrepute in the twenty-first. Ob·· servant and thoughtful people win come to regard mankind as only one of a vast variety of an infinite number of living things that in-· habit the earth; that like the trees and the stars, human beings are children of the uni verse and to that extent they have a right to be here. 3 But since no inhabitant of the earth, save man, has ever claimed the right to be supported by all others, the welfare ethic will be rejected. In its place, there will refurn to prominence, and eventually, to popularity, the work ethic which, in the middle of the twentieth century, had been so denigrated. Only by accepting and applying 3 From Desiderata, by Max Ehrmann (1872-1945) whose statement acquired great popularity in the latter part of thE~ century.

the desirability of work will it be possible to rebuild the Canadian economy, so seriously will it have declined in the age of the guaran teed life income. It will be many decades before Canada will find her place again among the nations whose people, in the middle of the twentieth century, led the world in industrial productivity and in ventiveness. Philosophers, historians and poli tical scientists will wonder why it was that, after a period of fifty years of welfarism and rej ection of the work ethic, the Canadian pendulum should have swung so decisively away from the lethar gic, nonobjective way of life pur sued by Canadians for half a cen tury. A leading historian will say that the reason lay simply in the oscillations of the value-system. An outstanding economist will point to the .paradox of the sheer poverty in the midst of vast po tential wealth that finally moved Canadians to change their stance on the welfare issue and resume the serious development of their land. A distinguished philosopher will say that man, as a rational creature, could not long maintain the irrationalities of a welfare state and revolted against its strictures. A lawyer will venture the view tha t the change from welfare to work was simply a mat ter of finding a way out of bore182 THE FREEMAN March dom when the fun and games of the entertainment and travel in dustries were no longer amusing, and people decided to use their lives seriously and to play for keeps.

Duties vs. Rights When the measure of man is taken by the duties he assumes rather than by the rights he de mands, assistance to the needy will become personalized. One of the justifiable criticisms of the wel fare system throughout the latter half of the twentieth century was based upon its impersonality and hence its inhumanity. It treated all claimants according to· fixed formulae that failed to take ac count of individual differences and idiosyncrasies. The computer de termined eligibility, and the ma chine proceeded with its calcula tions as to quantum. So gargan tuan had the system grown, even those who had benefited from it most came to believe that it was time to revise its procedures and, ultimately, to rethink its philos ophy. To humanize the process of as sisting those in need, the welfare system will cease to be a function of government. The problems of determining who genuinely are en titled to aid will become a func tion of those groups and associa tions who have most consistently concerned themselves with humane and charitable works. The churches, synagogues and temples of the world have occupied this role for centuries, recogl1izing that: ... the poor shall never cease out of the land; therefore I command thee saying, thou shalt open thine hand wide unto thy brother .... 4 During the twentieth century, most of these religious organiza tions were more concerned with charitable works in distant lands than with the needs of their pari shioners and neighbors close at hand. The reasons for this curious phenomenon were twofold: first, since governments appeared to be assuming the burden of welfare at home, the charitable role of reli gious organizations became super fluous. And secondly, it was then, as always, simpler to love and help neighbors who lived ten thousand miles away in foreign lands than those who shared a common lan guage and a common bathroom.

Reform Begins at Home In the twenty-first century, men will begin to recognize that if the world's affairs are to be set right, it is necessary to first set matters right at home. When religious or ganizations at last renounce their 4 Deuteronomy, 15: 11.

1974 WELFARE FIFTY YEARS HENCE 183 political ambitions and put away their international pretensions, they will regain the confidence of their parishioners who will once more make the temple and the church their house. That house in turn will be able to bestow ma terial and spiritual comfort upon those in need. When this miracu lous change appears, the same re ligious organizations will also win the confidence of governments, who will be grateful at last to discover a simpler, less expensive and more satisfactory way of pro viding funds for those who genu inely require assistance. It will be found that the parish priest knows Human Rights more about the needs of the people who come to him for help, acts more wisely, wastes less and achieves a happier result than all of the clerks of all of the govern ment welfare offices that did busi ness in the twentieth century. He will view a man in need as a whole person and not as a mere social security number. And to the new relationship that will thus come into being, there will be brought a fresh dimension of love and un derstanding and faith that no Par liament had ever succeeded in leg lislating, and no government had ever found a way of adminis tering. ~ IDEAS ON LIBERTY THOSE who favor instituting "economic rights" have invented a supposed distinction between "human rights" and "property rights." These human rights are said to be prior to and superior to property rights. Thinkers who make this distinction are ac customed to refer to all concern with money, finances, and prop erty as selfish and motivated by the desire for "pecuniary" gain, the latter being ignoble and inhuman in its consequences. But property (or monetary) rights are reducible to the rights of human beings to the fruits of their labor and the enjoyment of their life. The expropriation of property or money is an expro priation of that part of the life of a man which he has spent in acquiring or improving his property and earning his money.

More, it is an ex post fQ~cto incursion upon the liberties of the individual, for it is the taking from a man the product of his use of his liherty. If the right to the disposal of his property is not a human right, there are no human rights. CLARENCE H. CARSON, "Of Rights - Natural and Arbitrary"

A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN __A Program for the 70's-THE TITLE of William F. Buckley Jr.'s Four Reforms: A Program for the 70's (G. P. Putnam's Sons, $4.95) is a slight misnomer - ac tually, with characteristic lar gesse, Mr. Buckley offers his read ers six reforms. Save for the proposal that the American Presidency should be limited to a single six-year term, the Buckley prescriptions will hardly satisfy libertarians who distrust government to mitigate its own present and past depreda tions. Those who called the late Senator Robert Taft a socialist because he sponsored "lesser evil" public housing and education bills will see in Mr. Buckley's approach only a Taftian echo. But there is one difference: where Bob Taft really believed that government had a minimum duty to provide houses and schools for the lag gards in society, Mr. Buckley pro fesses no such concern beyond a wish to avoid a charge of "mis anthropy." Mr. Buckley describes 184 his reforms as "entirely proce dural in character." They are not designed as "solutions," but as devices that "seek to free up con stricting molds and to flush out accretions of government, so as to induce a greater freedom of move ment."

In brief, the idea behind the reforms is th.at it might benefit the antistatist cause if the battle fields were to be changed. Mr. Buckley is not proposing that social welfare subsidies should be abolished forthwith. His proposed Welfare Reform reads this way: "Congress shall appropriate funds for social welfare only for the benefit of those states whose per capita income is below the na tional average." The "procedural" effect of such a reform would be to continue twenty-two states, be ginning with Iowa and ending with Mississippi, as Federal wel fare wards. In the twenty-eight above-average states the fight for welfare payments would be trans1974 A PROGRAM FOR THE 70's 185 ferred from Washington to the state capitals. Presumably the local welfarists would have to make compromises in order to keep taxpayers from moving to those states that threatened them the least. Thus "procedure" would favor the retention of the old Brandeis-Frankfurter idea that states should be prepared to pay for their. own social laboratory ex periments. Incidentally, the ad ministrative savings under the Buckley plan on the back-and-forth passage of tax money between the twenty-eight above-average states and Washington might be con siderable.

Education Vouchers On education, Mr. Buckley re frains from making the effort to eradicate the memory of Horace Mann. He proposes an Amendment to the Constitution that reads: "N0 child shall be denied admis sion to a public school . . . on ac count of race, creed, color, or na tional origin, notwithstanding any provision in the Constitution of the United States or of any State. Nor shall any relief authorized by any legislature for children at-, tending nonpublic schools be de nied by virtue of any provision in the Constitution of the United States or of any State." This would allow for voucher systems, and might save a lot of private~ schools, both sectarian and paro chial. Libertarians would still ob ject that vouchers issued to par ents for presentation as tuition money at private schools would lead to state control of curricula. ("He who pays the piper calls the tune.") But at least the voucher aided schools would have a little immediate money to live on during a period in which they could or ganize to send their own defenders to state legislatures.

Shifting the Battlefield Once again the Buckley "pro cedure" would shift a battlefield. As it affects parochial schools the Buckley Amendment would, of course, be mere supererogation, for freedom of religion, as guar anteed in the First Amendment, must, under any proper interpre tation of the law, cover the right of churches to establish their own standards of education and the concomitant right of their parish ioners to keep their share of the education tax money to pay for it. Our judges, in taking a Catholic's or a Jew's school money, have been effectively infringing the re ligious guarantee of the First Amendment all along. So maybe there is need for a Buckley clari fying amendment to supplement the present language of the Bill of Rights. When it comes to tax reform, 186 THE FREEMAN March the Buckley "procedural" change actually does amount to a signifi cant change in philosophy. With a bow to Friedrich Hayek's Con sMtution of Liberty, a great and greatly overlooked book, Buckley proposes that Congress should eliminate the progressive feature of the income tax along with "all deductions except those that relate directly to the cost of acquiring income." With exemptions gone, Congress should also eliminate the corporation tax. In order to coun ter the discriminatory features of special taxes, Congress should re imburse taxpayers below the pov erty line by giving them a rebate on Federal taxes that are regres sive in impact. Mr. Buckley figures that a uniform income tax of fifteen per cent would raise enough to run the Federal government even with the repeal of the corp oration tax.

Criminal Justice As for reforming the system of criminal justice, Buckley suggests that no great harm would be done by repealing the Fifth Amend ment, which is periodically in voked as protection against self incrimination. The Fifth was orig inally adopted to prevent brutal beatings by police, Star Chamber excesses, and other Nazi-like prac tices designed to force confessions. Modern technology, however, could be invoked to prevent torture; .all that would be necessary would be to compel the legal authorities to keep tape recordings, oral and vis ual, of the interrogation of suspects. As a matter of fact, the Fifth Amendment is already ignored in government practice. It is not ac cepted by Internal Revenue as an excuse for refusing to admit in come derived from smuggling, theft, cheating or extortion even though the declaration of such "earnings" would obviously be self-incrimination.

Only one of the six Buckley re forms does not involve any change in the law. Feeling that something must be done about the problems posed by the longer life-expectancy of old people, Buckley would have the trustees of the ten top-rated private colleges and universities announce that beginning in 1976 nobody would be accepted into the freshman class until he had passed one year in public service, pre ferably in charitable and religious homes for the elderly. This would not only save on the relief bills, it would also help ,with the "re establishment of a lost circuit: of spirit, and affection, and under standing." A nice idea, since it involves nothing more than voluntary non Statist action. But can you see it happening by 1976?

1974 OTHER BOOKS 187 • THE LIBERAL MIDDLE CLASS: MAKER OF RADICALS by Rich ard L. Cutter (NewRochelle, N.Y. : Arlington House, 1973) 255 pp., $8.95. Reviewed by Emerson P. Schmidt THIS WORK is the result of face-to face experiences and encounters by Dr. Cutler as professor at Berkeley and Ann Arbor, vice president of' student affairs and for some years as practicing child psychologist. The author's experience as vice: president at Michigan separated him from his earlier "impractical liberalism." (p. 52) . Now he is a self-made dedicated conservative~ in politics and economics and in his understanding of the human condition and student psychology .. He defines neither liberal nor rad·· ical, but adequately characterizes and describes them. His account of personal experience with Tirrl Leary, Tom Ha.yden, and other rebels tends to confirm confidence in the author's diagnosis and pre·· scriptions which pervade the book.

Middle class liberal parents, heavily occupied with their exten sive away-from-home a.ctivities, entertainment, fun, and indulg ences, provide few solid anchors and values for their growing chil dren. Their affluence showers their offspring with vast quantities of toys and other playthings, baby sitters, exciting amusements at theaters and via TV, and unlim ited streams of edibles and bev erages. Permissiveness at home, school, and in the community gen erates a wildness or spirit of re bellion. Drug addiction easily fol lows. This satiation of every desire and want develops in the young ster a strong feeling that he· is entitled to such quick response from all others. The young child need only ask, and .it shall be pro vided by the loving parents. When he encounters the real world out side, such readyresponse no longer occurs. As he grows up his desires and wants multiply. They become more expensive to fulfill. At some stage deep frustration may occur.

Most of the book is concerned with a small minority of students and parents; yet these students are deeply ·distressed and' become extreme activists. Why the major ity remain calm and studious is not clear. Yet a. small minority "is able to terrorize a high school, radicalize a portion of junior high school students, intimidate teach ers and principals, and effectively disru pt the process of education at almost any level." (p. 46). On a campus with 30,000 students, a mere one per cent, 300, can para lyze the institution, take over the president's office or that of a dean, and disrupt an invited speaker. The radical student is not easily 188 THE FREEMAN March defined. He may be New Left, Maoist, Stalinist, collectivist, state, welfarist. Yet, generally he is not devoted to government centraliza tion, or massive government own ership of industry. He is anti-es tablishment with a strong flavor of anarchism, nihilism, and authori ta.rianism. He is often more crit ical of government than of our capitalist system. He rarely exudes a coherent philosophy on produc tion and distribution, on law and order, or on government. But al most anything is worth a try - at least on paper.

The author discovered that deep anxiety, fear, and individual help lessness runs through the radical's consciousness - often without the victim's awareness. These traits abound: arrogance, self-impor tance, intolerance for any frustra tion, impatience, fascination with off-the-top-of-the-head solutions, need for immediate relief from tension, intolerance of authority (police and judiciary) , strident demands for total freedom with no sense of responsibility. Non-nego tiable demands are advanced. (p. 50). Antagonism extends to the family, schools, the church and re ligion (not merely indifference). All is boring and irrelevant in cluding parents, teachers, law and order, government, the judiciary. Anyone over 30 is passe. Political attitudes are usually extremely juvenile and superficial, consisting largely of slogans. Much of the ranting and sIogan eering calls for revolution, but without a program. Force rather than persuasion, and emotion rather than reason characterize the radical activists. Position-pa pers are drawn up which are re plete with sophomoric rhetoric about war, defense, taxes, money, work, the ghettos, the poor, and minorities. The author does not analyse separately the black activist radical. I The radical places himself above the law; hence he is justified in using violence, arson, and murder; he blocks traffic and the orderly process of government and eco nomic life. Freedom of speech be comes the foundation for all man ner of assemblies, speeches, and publications, using language with out taste or civility. No outsider merits consideration.

A special chapter "Why the Uni versities?" shows how they have served as the major staging and recruiting area for the revolution minded minority. (p. 183). Appar ently institutions which adhered to the traditional functions of teaching, maintained standards of rigor and intellectual discipline, and dealt forthrightly with un reasonableness as it began to oc cur and recognized the reality that they cannot be the allies of every 1974 OTHER BOOKS 189 infantile or noxious demand, have had the least difficulty. The hard science divisions of the schools have produced relatively fewer violent radicals than the arts and social sciences. Liberal, left of center teachers, clergymen, and news media spokes men have often nurtured and fos tered this counterculture. The au thor provides many constructive insights and countermeasures for the concerned parent, teacher, edi tor ,and clergyman. Marked changes are required. If the diag nosis and corrective steps provided by the author are ignored, the vio lent minority may increase, and continue in its troubled and trou blesome course.

• NATIONAL SUICIDE: Military Aid to the Soviet Union by An tony C. Sutton (New Rochelle, N.Y.: Arlington House) 283 pp., $8.95. Reviewed by: David A. Pietrusza DR. SUTTON proves conclusively that the technology imported from the West by the Soviet Union has been vital to its military capabil ities, both in quantitative and qualitative terms. His newest book is required reading for anyone studying or debating the topic of East-West trade. Take, for example, the instance of Soviet mechanized military vehicles: There are over 300,000 trucks in the Soviet military ar senal - all built in American con structed plants. Until 1968, the largest of these was the Gorki plant built in 1929-1933 by the Ford Motor Company and the Aus tin Company. Aside from simple cars and trucks, the Gorki plant has produced armored cars, Red army staff cars, half-tracks, ar mored personnel carriers, amphib ious carriers, truck-mounted weapons, rocket launchers, and the first Soviet wire-guided anti-tank system.

Then there is the Soviet ZIL auto factory, built by the Arthur J. Brandt Company of Detroit in the 1930's, the "Togliatti" plant built in Volgograd in 1968-71 largely with American equipment, and the Kama truck plant built in the late '60's with help from a large number of American com panies and lending institutions. "The tractor plants at Stalin grad, Kharkov, and Chelyabinsk, erected with almost complete American assistance and equip ment," writes Sutton, "and the Kirov plant in Leningrad, recon structed by Ford, were used from the start to produce-Soviet tanks, armored cars, and self-propelled guns. . . . Since 1931, up to half of the productive capacity of these 'tractor' plants has been used for tank and armored-car production."

190 THE FREEMAN March Direct military aid, of course, was given to the Soviet Union dur ing World War II. Since the Sov iets were then our ostensible allies, there was some rationale for this aid - but not for the massive scale of it. Soviet requests for aid were given priority over all other Allied fronts - even those where U.S. soldiers were engaged. Let the scope of thi5 aid speak for itself. The Soviets received 14,018 aircraft, 466,968 vehicle units - including 1,239 light tanks, 4,957 medium tanks, 47,728 tanks, 47,728 jeeps, 182,928 two-and-a half-ton trucks, and 491 ships in cluding 77 mine sweepers, 28 frig ates, 175 torpedo boats, and 46 submarine chasers. The Soviet Navy, thanks to Lend-Lease, doubled in tonnage during World War II. Only a few of these naval vessels have been returned to the United States de spite agreements which required their return at war's end. During the Vietnamese War, a number of these Lend-Lease· merchant vessels were observed on the Haiphong run - supplying the killers of American soldiers.

In recent years, large sales of American computer technology and ball-bearing grinding equipment have aided the Soviet missile pro gram. But the most senseless ac tion of our government in regard to Soviet missiles involves the decision to allow Soviet specialists to study the manufacture of Amer ican accelerometers in 1966 - only 18 months after a Soviet agent had been arrested by the FBI for at tempting to purchase one. Dr. Sutton, a highly respected Stanford research fellow and· the author of a three-volume study, Western. Technology and Soviet Economic Development, has re ceived no cooperation from the U.S. Government in his current proj ect. In fact, he has found Sov iet official sources to be' more open on the subject of East-West trade than U.S. sources. Noone, after reading this work, can be comfortable with the thesis that trade with a totalitarian gov ernment is a mutually bene'ficial procedure.

~ THE FASTEST GAME IN TOWN/Trading Commodity Fu tures by Anthony M. Reinach (New York: Random House, 1973) 175 pp. $10.00 Reviewed by Hans F. Sennholz ONE of the great evils of inflation is the disruption of orderly eco nomic production. Inflation gene erates malinvestments and malad j ustments because economic de cisions are no longer guided by considerations of consumer de mand, but by the desire to preserve capital assets. Inflation tends to 1974 OTHER BOOKS 191 make both objectives mutually ex clusive. If you maximize consumer services you may suffer capital losses; if you aim at preservation of your capital, consumer services may have to be curtailed. Calcula tion of cost and yield becomes nearly. impossible when money is depreciating at incalculable rates. T~us, scarce resources become "hedges" against inflation rather than complementary goods in the production process. When order ly prod uction be comes increasingly difficult more and more businessmen turn to trading in commodities and corpo rate securities, commonly called speculation .. After all, the malad justments openly invite specula tion while material production is hampered by inflation and other government intervention. Rampant inflation discourages production and causes many people, even those least qualified, to seek their fortunes in speculation.

It is not surprising, therefore, that the last ten years of Great Society-N ew Republican inflation have made speculators out of countless Americans. Every year the number of transactions on the major commodity exchanges is re ported to double. Indeed, commod ity speculation is inflation's most spectacular growth industry. Now, with his grea.t knowledge and insight gained from many years of personal experience in stock and commodity markets An thony M. Reinach has written a book that is both informative and entertaining. But above all, it is a forceful invitation to his readers to play "the fastest game in town," the commodities market. For profit, tax. benefits, or as an inflation hedge he would like us to consider buying and selling com modity futures contracts. It is true, he wisely warns us against tackling commodities "unless or until you have successfully traded common stocks." And even then you may "emerge from the com modity fray with bloody noses."

(p. 29) But such occasional warnings and reservations stated in a few sentences do not in· the least weaken his invitation made in glowing colors throughout the book. Reinach is a persuasive writer whose reservations are easily overlooked. His discussion of the technical aspects of commodity trading is laudable indeed. Even a seasoned trader can learn from his analysis of trend and volume action, the characteristics of congestion areas and, above all, his technique of charting that is so essential for all trading. Nevertheless, I reluc tantly take exception to the very message of his book: to join in the fastest game in town. Thomas A. Hieronymus in his 192 THE FREEMAN March authoritative treatise on the Eco nomics of Futures Trading (Com modity Research Bureau, Inc., 1971) reports that of a sample of 8,782 traders in grains 2,184 earned net profits of $2,064,800 while 6,598 traders lost ~ total of $11,958,200. If we bear in mind that some of the successful trad ers are professional hedgers who manage large corporate accounts for manufacturers, granaries, ex porters and other large users of commodities, what then are the odds of the amateur speculator to be for long among the successful traders, the doctors, dentists, at torneys, professors in Spring Mills, Pa. or any other reader of Reinach's book?

And yet, we are not denying the important function of speculation in making a commodity market. And no one denies that large profits can be earned by excep tionally able professionals in the field. The layman would be well advised indeed to entrust a small risk capital to a successful ac count manager. There must be some around although this writer has not yet found one after five years of costly commodity sp,ecula tiona I know there are some be cause I happen to know the richest speculator in town. When I re cently inquired into which com modity she is trading sp success fully she answered, "I don't really know. My nephew in New York is handling my account. He is the commodity manager of a well known brokerage firm." The present rush into commod ity speculation reminds me of the 1849 California gold rush. Among tens of thousands of fortune hunt ers a few were spectacularly suc cessful. The vast maj ori ty only found hunger and deprivation. By far the most successful entre preneurs were the manufacturers and merchants who supplied the miners with food and equipment and, above all, road maps to the gold fields. t) the Freeman VOl_. 24, NO.4. APRIL 1974 Markets and Morals Roger Donway 195 The consumer is king in a free market, but no one is compelled to serve him.

Choice or Chains Ridgway K. Foley, Jr. 199 Men free to choose among alternatives may dwell in harmony, not in chains. On Misery and Rule Stanley C. McDonald 205 To relieve the individual of suffering is to deny him an important guide to choice and action. The Puritan Experimentin Common Ownership Gary North 209 The important discovery that social peace is best achieved through private ownership of the means of production. Best Housing Hope Bernard H. Siegan 221 An unrestricted private market affords tlhe best chance for better housing for the less affluent. The Sanctifyingof Plunder Leonard E. Read 224 Let the law defend the rightful owner of plrOpertyrather than the thief. The Motive force of Society The role of man in a harmonious universe. Frederic Bastiat 228 Is InflationHere to Stay? Morris J. Markovitz 238 An inquiry into the monetary policies which cause inflation, and prospects for a cure.

Th-e Necessityof Government Coercion has a place in social life, but it must be kept in place. Book Reviews: "Toward a New World Monetary System" edited by G. Carl Wiegand "The People Factor: Managing the Human Climate" by Philip Lesly "Psycho Chemical W~rfare: The Chinese Communist . Drug Offensive Against the West" by A. H. Stanton Candlln David Kelley 243 249 Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

tile Freeman A MONTHLY JOURNAL OF IDEAS ON LIBERTY IRVINGTON-ON-HUDSON, N. Y. 1053·3 TEL.: (914) 591-7230 LEONARD E. READ PAUL L. POIROT President, Foundation for Economic Education Managing Editor THE F R E E MAN is published monthly by the Foundation for Economic Education, Inc., a non political, nonprofit, educational champion of private property, the free market, the profit and loss system, and limited government. Any interested person may receive its publications for the asking. The costs of Foundation projects and services, including THE FREEMAN, are met through voluntary donations. Total expenses average $12.00 a year per person on the mailing list. Donations .are in vited in, any amount-$5.00 to $10,OOO-as the means of maintaining and extending the Foundation's work. Copyright, 1974, The Foundation for Economic Education, Inc. Printed in U.S.A. Additional copies, postpaid, to one address: Single copy, 50 cents; 3 for $1.00; 10 for $2.50; 25 or more, 20 cents eac~.

THE FREEMAN is available on microfilm from Xerox University Microfilms, Ann Arbor, Michigan 48106. Some articles available as reprints at cost; state quantity desired. Per mission granted to reprint any article from this issue, with appropriate credit, except IlBest Housing Hope," and liThe Necessity of Govern ment."

ROGER I)ONWAY MR. IRVING KRISTOL, speaking to the Mont Pelerin Society, raised the question whether a market society can survive, if it not only permits anti-market views, but actually fosters them insofar as they provide business opportuni ties. And on the assumption that it cannot,. he asks whether there is in the market philosophy any reason for an entrepreneur not to invest in, say, the publication of anti-market literature. We know, as a matter of fact, that the Right has generally protested actions such as Simon and Schuster's publication of Jerry Rubin, but could the Right do isoconsistently, if such a publication were prof itable? Mr. Garry Wills has carried the argument even further in Nixon Mr; Donway, a recent graduate of13rown Uni ver,sity, continues to deal ~s a free lance student and writer with the social implications of certain philosophical issues. Agonistes. The philosophy of the market,. he says, assumes that if it is profitable to supply some good, then that good will be sup plied; which means, will be sup plied by someone. But that as sumption is possible only if we also assume that the marketeer's sole standard for production is: whatever is profitable. And this means that the marketeer cannot regulate his actions by any other standard, for instance, by any moral code. Thus.' ~here Kristol says that the market society can not maintain the ethics on which it is based, as a generally. prevail ing social norm, Wills says that the marketeer himself cannot maintain any ethical views.

Now it cannot be denied that such critics have been given grounds for their arguments. Pro fessor Jeffrey. Hart, in his book The American Dissent, wrote the 195 196 THE FREEMAN April following, approving description of Wilhelm Roepke's thought: "To the extent that an economy is free, he points out, production goes forward at the command of the consumers, whose desires, re flected in the market, are then reflected in the decisions of the producers." Hart contrasts·· this with a collectivist economy in which production goes forward at the command of bureaucrats. It would seem, then, that under any system producers can have no standards of their own, and the only question is: by whom shall they be commanded? Similarly, in Hu,man. Action, Ludwig von Mises wrote: In his capacity as a businessman a man is a servant of the consumers, bound to comply with their wishes ... His customers' whims and fancies are for him ultimate law, provided these customers are ready to pay for them.

He is under the necessity of adjusting his conduct to the demand of the con sumers. If the consumers, without a taste for the beautiful, prefer things ugly and vulgar, he must, contrary to his own conviction, supply them with such things. I suppose one can understand why, as a matter of history, the defenders of capitalism adopted this line of argument. When the New· Deal was' culminating the long attack on businessmen as rapacious and exploitative, the image of a servant, or even a slave, may have looked like a good way to stylize the truth that business rnenmake profits only by satisfy ing demand. It was an intelligible if unfortunate move. (And it should be pointed out that the most powerful, pro-capitalist re jection of this image, Ayn Rand's novel, The Fountainhead, was written in the very teeth of the New Deal.) \. Consent vs. Coercion The inherent problem with the attempted accommodation was summed up in another chapter of Human Action. In a section en titled "The Metaphorical Employ ment of the Terminology of Polit ical Rule," Mises pointed out the vogue of describing entrepreneurs as "autocrats," or "kings"; and he also pointed out the fallacy of do ing so, by making the necessary contrast between economic action, which is based on consent, and government action, which is based on coercion. The irony is that this section occurs as part of a larger one entitled "The Sovereignty of the Consumer." The new critics of capitalism have shown us why it is as necessary to forego political metaphors about the consumer as it is to deny them about the entre preneur.

The questions raised by these attacks can be conveniently di vided into those concerning the 1974 MARKETS AND MORALS 197 trader, and those concerning the entrepreneur. And in each case, I believe, the correct answer can be seen to lie in a return to the basic principles of capitalism. In the case of the trader, this is fairly easy to see. In order for an exchange to take place, we need a buyer seeking a type of good, and offering certain prices for certain quantities of it. And we need a seller offering the type of good sought by the buyer, and offering it in at least one quantity for the price which the buyer is willing to pay. Weare often reminded in eco nomics that it may happen no mutually acceptable terms can be reached, and that then no trade will take place. Weare less often reminded, though it is equally true, that a person may have no supply schedule at all for the good sought, even if he is capable of supplying it. Indeed, if he believes it is immoral to produce the good, he may well have no supply sched ule for it, and there is no reason in capitalist theory to expect that he will.

Nor is there any reason to say that a person is "not acting as a businessman," if he refuses to supply a good when he believes it is immoral to do so. We know that trade results in mutual advantage; that is, each party values the situ ation following the trade more highly than he valued the situ ation preceding the trade. This l~ain, which Mises calls "psychic profit," is what the trader acts to achieve. But obviously there are Jpreconditions for experiencing 8uch again, and obviously too it is part of the businessman's job to ensure that those preconditions exist for him after the trade. There is thus no point in a trade 'whose very terms destroy those preconditions. And for that rea son, a trader cannot set any' price on his .own death; and for that same reason, .he cannot set any price on the suicide of his soul. Anticipating Demand In the case of the' entrepreneur, of course, one can and should make the same point. But an en trepreneur is also set at the oppo site pole from amoral pandering by another characteristic, which relates to the essence of his eco nomic role. The arguments against the entrepreneur assume that his activity is called forth by demand.

But it is not. As Mises says, "The only source from which an entre preneur'sprofits stem is his abil ity to anticipate better than other people the future demand of con sumers." We must remember that the en trepreneur acts in the present to meet future demand, and we' must remember that the time distinc tion is crucial. For then we can 198 THE FREEMAN April see how absurd is the critic's image of the entrepreneur as one who makes his profit by cynically catering to the consumers' irra tional desires. Under this image, we would have to imagine him telling his bankers : first, that he intended to produce a good which it was widely thought people would not buy (since profits arise from unanticipated demand) ; sec ond, that it was a good which peo,:" pIe did not really need ; .and third, that it was a good which people could not reasonably desire. In ef fect, he would be asking them to bet against general opinion, against people's needs, and against people's intelligence. And that is, when one thinks of it, a most un likely scenario.

A more plausible picture would be to note that because the entre preneur must always stand against general opinion, he therefore needs, all the more urgently, to enlist the other two factors on the side of his product, and not against it. But how can he predict what people will truly need, or could reasonably desire, except by knowing for himself what is truly val uable? And why, knowing that, would he risk offering anything else? Thus, when Garry Wills por trays the marketeer as "the late mover, the tester of responses," we may reply that, on the con trary, it is only through .a per sonal estimate of his product, and a confidence in the correctness of his values, that the entrepreneur can have confidence in the correct ness of his necessarily maverick judgment about the appeal his goods will have for others. And when Irving Kristolsays that the market offers no reasons against immoral trades, we may say that, first, the market .insists a trade shall take place only, wpen the terms are amenable to both parties, and in accord~nce with any standards they care to set; and second, that an immoral trade would by its nature, be a bad trade, because it would destroy the pre conditions of gain. The same point has also been phrased: what shall it profit a man if he shall gain the whole world and lose his own soul?

tl IDEAS ON LIBERTY Appeal to Man's Best ERROR always addresses the passions and prejudices: truth scorns such mean intrigue, and only addresses the understanding and the conscience. AZEL BACKUS HUMAN LIFE is a continuing series of choices between alternatives. This characteristic distinguishes human beings from other crea tures. Animals may opt for one alternative in lieu of another but no base mammal possesses the faculty of rational choice, nor do the beasts and birds know that they choose - they act by habit or instinct. Man alone· possesses, acquires and hones the innate and improv able capacity to perceive, study, measure, evaluate, and finally se lect between courses of action. True, some of our choices appear intuitive, instinctive or habitual upon superfluous examination: for example, a rational adult seldom lays his hand upon the activated burner of an electric range unless he intends to maim himself; we learn, often after being informed Mr. Foley, a partner in Souther, Spaulding, Kinsey, Williamson & Schwabe, practices law in Portland, Oregon.

by our elders, sometimes after so bering and painful experience, that hot stoves usually burn flesh and cause severe pain. Animals may also perform with superficial similarity: a dog once caught in a trap will exhibit wariness about similar devices. But the distinction between the two situations rests with a rational selection of alter natives: a canine will seldom if ever encounter a trap in order to release an unrelated beast; a man may touch a hot stove in order to rescue a human being or an ani mal somehow endangered by the machine. Thus, man may choose to countermand an instinctive course of conduct because he perceives the risk but believes he must (or ought to) assume the hazard in order to secure some ultimate per sonal goal. Thus, man makes value judgments, a feat which describes his choices and distinguishes him from other living creatures. 199 200 THE FREEMAN April No One Can or Should Destroy Another's Right to Choose If choice relates to the values held by individual, thinking, per ceptive human beings, no one in dividual or group of individuals ought to deprive any other person or association of the right to choose, for no one can comprehend the values which make up the be ing of another person. Eachindi vidual is the product of the numer ous concepts, mores, customs, ex periences, deductions, intuitions and the like which constantly bombard and alter his being.· Even if an all-knowing sage could look inside his neighbor's soul and mind and discern, at a given mo ment of time, the content stowed within, his wisdom would be out dated the next instant when the subject encountered some new knowledge from within or with out, or the effect of a new experi ence. Thus, no man can possibly garner the wisdom necessary to make a meaningful choice for an other being. More saliently, how ever, no man ought to denigrate the humanness of one or more~ of his fellows by depriving him of his right to choose in even the smallest particular. Since· making choices separates human· beings from mere biological inhabitants of the-universe, one who dares destroy the right of free choice -in another being, by coercion, threats, or fraud, in even the most minute particular, to that extent destroys the essential humanity of his victim for our humanity de pends upon our choice-making capacity and· our worth as persons depends upon the value of our choices.

Deprivation of choice or dis placement of alternatives abound in modern society. A group of in dividuals seize power and tell others within a given territory that they may not manufacture, distribute and sell hydroelectric power, or that they cannot con struct a fourplex on their real· es tate, ,or that they must work for a given wage and no other, or that they must contribute a share of the cost of putting a man on an other solar body, or that they may hire only certain individuals of a given race, creed or color, or any one of thousands of other matters, insignificant or substantial. In some instances, the actor loses his choice completely, or is presented with a Hobson's Choice: do (or don't do) this, or you will lose your life, or all your property, or your liberty. Either the choice be comes nonexistent (no one will work for more or less than the stated wage because of fear, and two actors are required to act) or the consequences devastate the al ternative which those in power wish to avoid (no conscripted sol1974 CHOICE OR CHAINS 201 dier will refuse to obey a battle field command, even if immoral, because of fear of immediate death at the hands of his superior offi cer).

Power groups may also displace free choice by offering induce ments to some actors at a cost to others. Ordinarily, consumers would prefer clean and inexpen sive electric heat for their homes and apartments, and the majority of them would cast their dollar vote in the market place for such a service. However, the claque in power may determine that oil pro ducers should receive a subsidy un available to electricity distribu tors; the granting of this subsidy enables the oil and gas manufac turer to offer his product more cheaply, thus encouraging a change in consumption habits by the consuming public. Harmonious Differences Despite the seemingly haphaz ard and random existence of bil lions of choosing individuals, all seeking their private goals, an amazing phenomenon occurs in a free and unfettered ,vorld: a con catenation of effort and effect where each actor can fully and freely release his or her creative energy. No coercive, man-planned system can create harmony among myriad indi vid uals - history is filled with examples of millions crushed under the heel of the despot's boot, or mutilated to fit Procustes' Bed. Twentieth century liquidation of kulaks in Russia, peasants in China, and the Jews in Germany bears sad witness to the tyrant's method of planning and its effect on human freedom.

What causes this meshing to gether of individual choice into a cohesive and rational whole? No man can fully comprehend and ex plain, any more than one can know and explain the phenomenon of electricity. But freedom, like elec tricity, offers substantial benefits to be enjoyed and appreciated. I need not understand how elec tricity develops, or how it is trans mitted into my abode, in order to relax and bask in the generated warmth on a cold winter night. So, too, with liberty. I may not be able to explain why freedom works in bringing together myriad choice-making individuals into an ever-higher order, but I can rec ognize the fact and cherish the result. A partial explanation appears to reside in the nature of man kind. Each questing, choosing hu man seeks to act in harmony with his vision of ultimate truth. Each approaches that· essential reality from a different view with a dif ferent capacity for perception and action. The result isa blending of choices; and each step closer to 202 THE FREEMAN April truth more perfectly harmonizes the several choices. Man calls the ultimate truth of the Universe by different names. For some of us, the real essence resides in a per sonal, all-powerful Being we call God, Allah, or Yahweh. For oth ers, the universe appears as a never-ending expanse governed by the ultimate force of natural laws.

For the statist, man is a wholly perfectible creature in a relativ istic sphere; man represents no more than silly putty to be molded into perfection by the all-wise planner (who, oddly enough, rises up from the mass which is to be planned and programmed). The free man believes that man, finite and imperfectible but capable of improvement, represents an ulti mate value in himself and he re sides in a rational universe gov erned by immutable laws and an unchanging truth which he can partially espy. The statist firmly believes that a man-created state can turn iron into gold (or, more saliently, special drawing rights into gold). The free man recog nizes that, despite legislative and legalistic legerdemain, iron will remain iron, gold will remain gold, and never the twain shall meet. The fact that the unprogrammed choices of diverse individuals can coordinate into an increasingly improving world does not preclude disharmony from arising in human affairs from refusal to accept the burdens of liberty.

The libertarian avoids applica tion of force and withstands the pangs attendant upon rejection, recognizing that freedom to live includes freedom to fail. He ob serves that values may conflict: A may wish a quiet life in a resi dential neighborhood; B may wish to play hard rock at 3 in the morning; C may opt to burn old rubber tires. In such instances, a free man seeks voluntary solu tions to human problems, while the statist can only suggest force. Application of force necessarily deprives some man of his choice making power and thereby deni grates his essential humanness. Choice Represents an Absolute Some things remain constant and eternal in a dynamic world. Choice is one of those matters. Creation occurs by choice, not chance. Only man or his Creator can create value, for only man and his Creator possess the power and ability to assess meaningful alternatives and to choose. Choice, like truth, love and freedom, exhibits an absolute value as well as an absolute fact.

Rightness or justice demands that each human being be permitted to exercise his essential humanness by an unfettered decision between alternatives.

1974 CHOICE OR CHAINS 203 Choice cannot be avoided. I choose when I Ifail to choose or when I refuse to choose. Failure or refusal to choose constitutes a deliberate and voluntary decision as much as a preference for rose buds over carnations or an election between euthanasia and life. Man cannot escape choice, nor can he avoid its consequences. Choice per vades life and one cannot elude his responsibility by the affirmation that the decision represents the product of some group, committee or state. If I commit theft by taking value created by my neigh bor by force or duress, I must bear the consequences of that con duct; I cannot hide behind the alibi that the majority of voters somehow sanctioned this looting. No association or committee need answ,er for its conduct; only indi viduals incur that burden. Which is to say that every act of choos· ing incurs moral consequences for which the individual is respon sible.

Again, how can one ascribe moral consequences to every de cision between alternatives? In some cases, all will recognize the obvious: the decision to kill, molest or defraud or not to kill, molest or defraud another human being. In other instances the relation ship, while very real, seems less readily apparent. In this regard, we must remain cognizant of the fact that reality exists, with or without our personal perception of the matter. The Seen and the Unseen In discerning the moral conse quences of mundane choices, we must recall Bastiat's constant cry: Note the seen and the unseen! I lay my hand on a hot burner 01 a stove with the resultant searing of flesh. As a libertarian, I must concede that I am free to do with my life as I desire, without indi vidual or group interference; I may maim myself or destroy my self. Thus, from the seen point of view what I have done by crip pling my hand contains little moral effect. But consider the un seen: I must live with the cons~ quences of that act. If unable to work because of my injury, I become dependent upon others for food, clothing and shelter and to the extent that I deprive the pro ducer of value of the fruits of his labor I am responsible. If a prom ising pianist or mechanic, I de prive others of the value I could have produced and traded. The list is endless.

Again, I may choose to walk to work on Lancaster Street or on Lexington Street. How can we say that represents a moral choice? Suppose by taking Lancaster, I may witness an accident victim unattended, a scene I' would not 204 THE FREEMAN April have encountered had I journeyed down Lexington. By venturing on Lancaster I came upon further circumstances which present further choices to me: shall I aid the victim like the good Samari tan or leave him because I wish to remain uninvolved. Remember, I cannot eschew choice so I must act. My choice of Lancaster over Lexington thus has more obvious moral overtones because of its re lationship to subsequently develop ing situations and the decisions required thereby. Simply put, every choice repre sents a moral choice not because of the particular act involved (taking Lancaster instead of Lexington) but by virtue of the intertwining of myriad choices into life itself. Because we reside in a causal world, decision inter relates with decision in a natural and immutable way and each of us must abide the ultimate re sponsibility for the way he lives his life. The morality of choice means that man must assume re sponsibility for all of the effects rationally generated by his choices.

Rousseau declared, "Man is born free, but everywhere he is in chains." Oddly enough, Rousseau and his followers helped chain suc ceeding generations of men more brutally than before. Free choice represents the sole means of avoiding fetters. Either you choose, or some other man or group of men will choose for you. To the extent· that others dom inate your choice, you are chained. Yet this singular fact remains: even though one voluntarily chooses chains or involuntarily loses his choice, he cannot escape the awful responsibility imposed upon human beings. It is this burden which so dismays the ex istentialists. Man was created free, and he functions better in a state of liberty. He bears personal respon sibility for his moral choices whether or not he is politically free. Therefore, he had best reside in a free dominion, fully respon sible for his actions and choosing between the widest range of al ternatives. To the extent that he lacks this choice, he loses his essential humanity and remains in the chains of slavery. ® IDEAS ON LIBERTY Ralph Barton Perry IGNORANCE deprives men of freedOlll because they do not know what alternatives there are.

ON MISERYAND RULE STANLEY C. McDONALD A SOCIAL doctrine currently fash ionable within the "intellectual community" is that poverty, hun ger, and suffering in general are intolerable in a humane society. The implication is that society is not humane if it does not as a matter of course provide for the relief of all types of suffering .. Since there is no consensus as to the means or extent of the relief of suffering (otherwise the point taken would be manifestly redun·· dant) it must be left to the gov·· ernment, as society's instrument of force, to ensure this relief. Let us look at this principle in the context of the philosophy ex· pressed in the Declaration of In dependence, that the function of government is to secure the vari 0us "inalienable Rights, that among these are Life, Liberty, and the pursuit of Happiness." To be consistent, we must either acknowledge as one of the Rights that of freedom from suffering, Dr. McDonald, a lecturer in the Department of . Applied Mathematics and Theoretical Physics at the University of Liverpool, England, cur rently is on leave of absence at the University of Rochester, New York.

or else append the philosophy of the Founding Fathers with the no tion that government has a fur ther function. On the one hand, it appears that it is not an inherent Right that we be free from suffering. The "inalienable Rights" claimed by the Founding Fathers are those states of being with which men are "endowed by their Creator," states which are not only possible, but manifest. The thesis that· a condition is a Right is thus ~n tenable if, under foreseeable cir cumstances, that condition cannot possibly he realized. Hence, one cannot claim the right to be Pres ident, although he may claim the right to one day qualify for nomi nation, simply because not every man can possibly attain that posi tion. Although the Creator is selec tive when providing men with physical and mental attributes, He is exceedingly impartial with Rights, to the extent that they are equally bestowed upon men .

The notion that freedom from suf fering is a Right cannot be justi205 206 THE FREEMAN April fled on the basis of any empirical evidence, since it has never been demonstrated that men can be free from suffering. Weare thus left with the alter native - the relief of suffering is a funcNon of government in addi tion to that of securing the "in alienable Rights/' What remains to .be shown is that it is not in violation of Rights th~t. govern ment exercises functions beyond the maintenance of Rights. In other words, is there a legitimate social use of force other than that necessary to secure men's natural rights? We would like to show that in the particular c~se of re lief from suffering the answer must be "no." We will base our conclusions on the premise· that suffering is an inherent aspect of man's cognizance of reality, and we will consequently try to dem onstrate that the suffering ex perienc'e is a necessary. part of the pursuit of Happiness.

Through experience and reason we have come to realize that it is always those conditions which give rise to suffering which we aim to eliminate. Although suffer ing is a disagreeable experience, which may .possibly bring about more suffering, it is not a substan tial condition. We may describe "suffering" as the natural re sponse of the body or mind to conditions which are not in harmony with the natural state of the body or mind. Whereas the state of Happiness may be characterized by the cog nizance of the condition of physi cal and psychological harmony, the pursuit of Happiness must entail the endeavor to eliminate the in harmonious conditions. Apparent ly the experience of suffering is the indication of sensitivity to such conditions; and, without that sensitivity, it is not clear how those conditions may be remedied. The systematic suppression of the suffering experience must prove a forbidding obstacle to the pursuit of Happiness. Only for those con ditions of suffering which are evi dently irremedial can we justify systematic relief.

Helpless or foolish? Let us look at two types of con ditions which give rise to suffer ing. One type of suffering is Poverty - a condition symptomatic of the lack of means, will, or freedom to attain a given level of productiv ity. Poverty itself is a state of in ability to attain some level of consumption, and is frequently a source of other types of suffering. Inasmuch as the degree of con sumption is determined by appe tite as well as by need, we distin guish Poverty solely as a matter of necessity.

1974 ON MISERY AND RULE 207 Hazlitt 1 has suggested that the poverty line be the "level of sub sistence sufficient to maintain rea sonable health and strength." One interpretation of "reasonable health and strength" is that con dition in which one can be pro ductive to the extent that, relative to the prevailing societal mechan isms which correlate productivity and consumption, he may sustain his physical condition. In this in terpretation, a man's situation is vie'wed in relation to self-perpetu ation, independently of appetite and other arbitrary considera-, tions. The poverty-stricken must somehow attain the necessities for consumption, presumably through increased productivity, or perish" It is for the relief of those who cannot help themselves that Char·· ity is devoted. In addition to Poverty, variou8 kinds of suffering arise from error and folly. Whether the resultant suffering is of a physical or psy·· chological nature, we are made sufficiently aware of actions which otherwise might pass as effecting harmonious conditions. Whether it is the remorse springing fronl harsh words to a friend, ora pain ful sunburn after a day at the beach, we have received a definite signal, a kind of natutal chastise ment.

1 Henry Hazlitt, The Conquest of Po't,· erty, (Arlington House, New Rochenc~, New Y.ork) 1973, p.39. Mistakes Become Habits 11 We Will Not Learn We then have a choice. We can disregard the causal relationship between certain actions and suffer ing, and instead rega:rd the pain as a matter of chance. We expect that as time passes we will suffer more and more': not only will we suffer repeatedly from the same type of mistake, but we will no doubt have to suffer from new mistakes. Alternatively, if we con clude that certain types of activ ities always result in suffering, we can resolve to avoid the suffering by not indulging in those actions. This is just what we mean by "learning from our mistakes." Only through this process do we have reason to expect that our efforts might become more fruit ful and our sufferings decrease. We could consider other types of suffering as well, but those which we have discussed cover a wide range of possible conditions and should be sufficient illustra tions for our argument. In the one, suffering indicates a lack of balance between consumption and productivity, and spurs men to strive for such balance. In the other, suffering indicates that the causative activities are faulty or misdirected.

We conclude that although suf fering is disagreeable, it is a nat ural response to certain conditions 208 THE FREEMAN April of life, which we disregard at our own peril. Life consists of a series of situations which are either forced upon us or are resultant from our actions. If we choose to be insensitive to the conditions which cause suffering, we are opt ing for ignorance and an endless struggle with a malevolent uni verse. On the other hand, if we pay heed to our sensitivity to the conditions we experience, we can expect the chance to learn from our mistakes. It thus seems that any systema tic attempts to shield men from the natural responses, including suffering, to those conditions to which their actions have led nec essarily deny those men the facil ity to pursue Happiness. This is just another way of saying that if men are not held accountable for their actions, then they will soon have little way of knowing which actions they should under take.

It may well be argued that, since government is an institution of force rather than production, it does not command the means to alleviate the conditions underlying suffering. Moreover, it is argued, government is sensitive only to political activity; its response to conditions of suffering must at most· be unreliable. What, then, is the point of our argument? We have shown that the attempt to protect men from the results of their actions, particularly suf fering, is a move to deny them their inherent means with which to pursue Happiness. The pro posal that a basic function of gov ernment is the relief of suffering is incompatible with the philos ophy that government guarantee the Right of the pursuit of Hap piness. Moreover, such a function is destructive of this end, and it is the "Right of the People to alter or to abolish it.... " In the past forty years, the no tion that "suffering is intolerable in a humane society" has been used with increasing effectiveness by those who would have an om nipresent state. We have seen, and are seeing more and more each day, the countless burdens we are having to bear as a result of some foggy theories about misery and rule. If anything, the cry that the government should undertake the relief of suffering has resulted in a gigantic free-for-all for the spoils of power.

If we will, we may learn from these mistakes and proceed on a course which, as envisioned by the Founding Fathers, will truly "se cure the Blessings of Liberty to Ourselves and our Posterity." If we won't, we have only ourselves to blame. ~ ThePuritanExperiment inCommon Ownership GARY NORTH ONE of the more familiar inci dents in American history, at least within conservative .circles, is the disastrous experiment with. a com mon storehous~ in the Pilgrim col ony in 1621-23. Governor .Brad ford describes in some detail in his history of the .colony how young men refused to work in the common fields in order to lay up produce. for a common storehouse, only to see all goods divided equal ly among families. Upon·· petition of the planters, the. Governor and his council decided to follow their advice: assign families their per sonal plots of farm land (accord ing to family size) and abolish the common storehouse. Immediately, men and women returned to the harvest fields.

Dr. North, economist, lecturer, author, cur rently is an associate of Chalcedon, an educa tional organization dedicated to Christian re search and writing. His latest book is An Introduction to Christian Economics, Craig Press, 1973. What is less known about this incident is how the little colony ever made such a disastrous deci sion in the first place. The. fact of the matter is that the colonists had never wanted to inaugurate a sys tem of totally common property. The group of British "adventur ers" that had supplied the Pilgrim exiles in Holland with traveling money and capital had insisted that the colony be made. a part of the joint-stock company. The as sets of the .colony therefore were the assets of the company, head quartered in Britain, and the ag ricultural products were to be shared equally among company members, both colonial and Brit ish. Governor Bradford was the chief agent of the company in New England; hence, he was com pelled to impose the common store house systetp.

In the original negotiations, it 209 210 THE FREEMAN April had been understood that profits would be shared by all members of the company~ but the colonists had not agreed to the sharing of hous es, gardens, and other improved land. They were informed of these terms only as they were about to leave for North America, and as they left, they sent back word to the merchant adventurers that their agents who had agreed to such terms had not been empow ered to do SO.1 But the continuing dependence upon the company for resources during the first year of the colony's existence compelled them to give in to the company's terms. 2 The story did not end in 1623, when necessity forced the hands of the colonists. In 1627, the bick ering British directors sold out their interests in the colony to the settlers for £ 1800. The settlers were to spend a decade and a half in paying oJtr their debt, and at times had to borrow extra time at rates of 30 per cent to 50 per cent.

Nevertheless, they persisted and finally repaid the debt, in 1642. In 1627, shortly after buying out the British directors, Gover nor Bradford supervised the divi sion of the eolony's assets among 1 George D. Langdon, Jr:, Pilgrim Col ony (New HavEm: Yale University Press, 1966), p. 9. 2 Ibid., p. 26. the settlers. First, they divided livestock. There were few animals, so the 156 people (less than 40 families) were divided into adoz en companies; each company re ceived a cow and two goats. In January of 1628, the land was divided, this time by random lot. Complaints about unequal housing were forestalled by requiring those who received better housing to make an equalizing payment to those receiving poorer housing. Peace was preserved. There was one decision, how ever, which was to prove costly. Meadow was in short supply, so it was kept in common ownership. Furthermore, fishing, fowling, and water remained "open" to all set tlers. 3 The Pilgrims were to have the same difficulties with the ad ministration of these common fields as their neighbors, the Puri tans, were to experience. Only after 1675, when the "commons"

throughout New England were in creasingly distributed to the fam ilies in each town, were these problems overcome. Varying Concepts of Ownership In order to understand the thinking of the first half century of New England settlers, we have to realize that these immigrants did not bring over from England some 3 Ibid., p. 31.

1974 THE PURITAN EXPERIMENT IN COMMON OWNERSHIP 211 universally accepted concept of land ownership. There was an ob vious tendency for groups of set tlers from one region in England to establish homogeneous town ships in Massachusetts. English towns had developed at least three major systems of land tenure: the open field system, the closed field system, and the incorporated bor ough. All three appeared in New England in the early years. The open field system stressed the community administration of land. It is this system which we generally associate with the word ((medieval," although the Middle Ages saw many systems of land tenure. Sumner Chilton Powell has described these systems in some detail in his fine study, Puritan Villl(J;ge. The open field system "re garded the advantages of the area as communal property, to be shared by all. Noone was to exclude a neighbor from such a necessity as good meadow, or the down, or the woods. And if anyone practiced such exclusion, or attempted to in crease the amount of his holding at the expense of his neighbors, all villagers reacted instantly to restore their 'rights.'''4 Needless to say, this approach did not sur vive long in the setting of New England.

4 Sumner Chilton Powell, Puritan Village (Garden City, N. Y.: Doubleday Anchor, [1963] 1966), p. 11. Extensive Trading of Land in' Berkhamsted Quite different was an English borough like Berkhamsted. In the early seventeenth century, over one thousand acres "were opened up, bought, or traded, in countless individual transactions. If the men of Berkhamsted were 'doing noth ing else, they were trading land."5 The 'legend of the Yankee trader was rooted in this sort of English inheritance. There were some en closed lands, but most of the farm ers were shifting as rapidly as possible to a system of individual farm management. A third system was a sort of combination, the' closed field sys tem of East Anglia. "There was one common pasture, but each farmer was' expected to provide a balance of arable, pasture, and hay meadow for himself. He succeeded, or failed on his own farming ability."6 One of the problems in a Massachusetts town like Sud bury' was the diversity of back grounds of its inhabitants. There was no agreement as to where the locus of economic sovereignty should be. Should it be the indi vidual farmer? Should it be the town's selectmen who controlled the resources of the town com mons?

The towns and colonial govern5 Ibid., p. 26. 6 Ibid., p. 72.

212 THE FREEMAN April ments of seventeenth..;century New England were not strictly theoc racies; ordained ministers could not be elected to political office. But they were important as ad visers. Furthermore, the laymen of that era were very often more theologically motivated than min isters of this century. Most of the towns were regarded as tightly knit Christian commonwealths by their inhabitants, and during the first fifty years of their existence, they imposed restrictions on im migration into the local commun ity. They were concerned that newcomers might not meet the religious and· moral standards of the present inhabitants. As late as 1678, the records of Plymouth Colony offered the hope that "the Court will be careful, that whom they accept are persons orthodox in their judgments." The' ·Puritan towns of Boston,. Cambridge, Ded ham, and probably many others all included the' requirement that outsiders be cleared by town 'offi cials before they were allowed to buy land locally. Braintree even included a restriction' on land sales (though not explicitly religious in intent) that ···local.residents would have the right to bid first on all property offered for sale to out siders.

It is significant that in the final quarter of the century, these religious restrictions were generally dropped. Instead,a new re quirement - in fact,a new empha sis on an old requirement - ap peared: restrictions on· immi grants who might become a bur den on the welfare rolls. The towns had steadily become more pluralistic theologically, but the fear of an increase in tax rates was a truly ecumenical device.' By offering economic support to local indigents, the townspeople were afraid that outsiders might take advantage of this legal charity. Barriers to entry followed in the wake of "free" goods, however modest - and they were very mod est - the size of the public welfare allotments. 7 Pressure on the Commons The fear of increased welfare burdens was not the only economic issue confronting established com munities every time a stranger sought admission as a resident of some town. In the early years of settlement, each town had con siderable land - six to eight miles square - and relatively few inhab itants. Each resident· had legal access to the common pasturage and to any .future divisions of land from .the huge blocs owned 7 On the size of local town charities, see Stephen Foster, Their Solitary Way: The Puritan Social Ethic in the First Century of Settlement in New England (Yale University Press, 1971), p. 137.

1974 THE PURITAN EXPERIMENT IN COMMON OWNERSHIP 213 by the town. But as the number of inhabitants increased,·· and as more and more distributions of town land reduced the available source of unowned land, the per capita supply of land began to shrink. Those inhahitants who had a share in the common pasture and the common lands sought· to protect .their control over furthe]~ use and distributions of such prop,· erty. In town after town, a neVlT rule was imposed: outsiders had to purchase access to rights in the common property from local inhabitants. The result was a neVlT appreciation of private ownership and private control of property, even among men who had grown up in English communities that had used the open field system of farming. The land hunger of Ne,,' England after 1650 created new incentives to gain and exercise personal sovereignty over the chief economic resource, land.

There was another incentive to reduce the size of the community·· owned property :burea ucra tie wrangling. Page after page of thE~ Massachusetts town records, year after year: how to restrain acceS8 to the common meadow? How to keep midnight visitors from cut·· ting down choice trees for fire-· wood or other uses? How to keep the meadow's fences in repair?' Statute followed statute, to no avail. Fines were imposed, equally to no avail. "Free" land meant strong demand for its productiv ity, and town leaders never were able to find a rational, efficient means of restricting uneconomic uses of the town property. Men had a· strong incentive to further their personal economic ends, and far less incentive to consider the public's position. The commons served as incentives to waste, for without a free market and private ownership, it was impossible to calculate accurately the costs and benefits associated with the use of .the land. This is the chief eco nomic flaw of all socialist' systems, and the early settlers of New England· were unable to solve it.

The Eternal Problems of Supply and Demand Someone who has only a super ficial· knowledge of the history of the Puritans of the Massachusetts Bay Colony tends to see them as men obsessed with imposing re ligious restraints or moral re straints on private activities. They were concerned with such ques tions, as the records indicate, but from the bulk of the ·legislation, two problems were eternal, un solvable, and endlessly bothersome to Puritan leaders: pigs without rings in their noses running through the town, and midnight tree cutters on the commons. The tree cutters, like the pigs, insisted 214 THE FREEMAN April on sticking their noses into other people's property. The commoners - those who had legal access to the common fields and meadows - were too often in volved in what today is known as "free riding." They planted crops in the common property, but ne glected to keep their portion of the commons properly fenced. It was almost impossible to keep track of who was responsible for which plot. Towns had to inter vene and assign plots, thus creat ing opportunities for local politi cal dissension. Animals that wandered around the fenced land often broke down unrepaired fenc ing between plots, .getting into someone else's crops. Tension here was continual.

Fencing inspectors were im portant officials in every town. Conflicts over responsibility were endless. Without private plots pri vately repaired, such conflicts were inevitable. In the early decades of Massachusetts, no single public policy prevailed long. First, the colony's General Court - the chief legislative agency - placed the re sponsibility for fencing on the local town; then it placed the responsibility on the local indi vidual citizen; next it switched back to its original position of town control. The statutes did not function well in practice. Differ ent communities had different problems, and the central govern ment had difficulty in dealing with all of them through the use of any single administrative policy.8 The problem facing every select man in every New England village was "the tragedy of the commons," as the biologist Garrett H,ardin has called it. Each person who has access to the benefits of public property for use in his own per sonal business has a positive in centive to drain additional re sources from the commons, and he has a very, low or even negative incentive to restrain him. The cost of his actions are borne by all the "owners," while· the bene fits are strictly individual. One more cow or sheep or goat grazing on the town commons will register no noticeable increase in the com munally assessed economic burden which rests on any single individ ual. Yet such grazing is immedi ately beneficial to the owner of the animal. High benefits, low costs: "Each man is locked into a system that compels him to in crease his herd without limit - in a world that is limited."9 It is not 8 William B. Weeden, Economic and Social History of New England, 1620 1789 (2 vols., 1890), I, pp. 59-60.

9 Hardin, "The Tragedy of the Com mons," Science (13 Dec., 1968); reprint ed in Garrett de Bell (ed.), The Environ mental Handbook (New York: Ballan tine, 1970), p. 37.

1974 THE PURITAN EXPERIMENT IN COMMON OWNERSHIP 215 surprising that selectmen would find themselves burdened with endless disputes concerning the: size of the local herds and the proper - "fair" -- assessments of the economic costs of running those herds on the commons. There is an answer to the trag edy of the commons, at least where it is inexpensive to assign prop erty rights. As C. R. Batten has argued, the transfer of ownership from an amorphous common group to individual citizens provides an incentive to reduce the demands made on the land. Private owners have to assess both costs and benefits of any activity, seeing to it that costs do not outrun bene fits. By the end of the seventeenth century, Puritan leaders - or at least leaders who were the de scendants of Pu1ritans - reached a similar conclusion. 1o With each piece of legislation, another problem or set of prob lems appeared. First, only actual town commoners could run their animals in the common meadow or in the outlying common lands.

Only local residents could cut the trees. Later, the selectmen had to impose limits on the number of cattle that could be run, frequently on a "one cow per man" rule. Each man was assessed a few shillings 10 C. R. Batten, "The Tragedy of the Commons," THE FREEMAN (Oct., 1970) . per year for this right. Some peo ple brought in horses; Boston banned them on Sundays. Sheep had to be supervised by a sheep .. herder. As more animals required full-time supervision, towns hired herdsmen. To keep the cost-per beust low, each town resident was required by law to run his animal with the herd. Cambridge, for ex ample, imposed a fine of one shil ling on anyone whose cow was found on his land after 8 a.m. Since the driver left at 6 a.m., anyone who had not yet delivered his animal to the herd had to escort his cow to the driver, eat ing up scarce time. A similar law for goats was passed two years later, in 1639. 11 People naturally attempted to evade the law, and by 1648 the revenues supporting the town's herdsman were not meeting his salary. Consequently, in typical interventionist fashion, the selectmen decided to assess all men a certain amount, whether or not they ran cattle on the com mons. 12 A similar rule was estab lished in Watertown in 1665, and the massive evasions encouraged the selectmen to pass an even stiffer law in 1670.13 11 The Records of the Town of Cam bridge, Massachusetts, 1630-1703 (1901), pp. 28, 39.

12 Ibid., p. 72. 13 Watertown Records (1894), I, pp. 92, 94-95.

216 THE FREEMAN April Corrected Over Time The confusion reigned for dec ades. As the Watertown records report so eloquently, "there being many complaints made concerning the disorderliness of cattle and swine and the multitudes of sheep in the town, it was voted that the matter above mentioned is left with the selectmen. to consider something that may tend to refor mation and to present what they shall do to the town to be con firmed."14 Needless to say, the selectmen could not do anything about it, any more .than half a century of Puritan town govern ments before them. The only solu tion was the distribution of the commons to local inhabitants - the demise of the commons. Traditional patterns of life do not die out overnight. Men are usually unwilling to change their way of life unless forced to do so, either by economic circumstances or by direct political pressure. The little town of Sudbury was a case in question. Its inhabitants clung to the old English system of com munal property management. The access .to the commons was re stricted, in 1655, and at least thirty younger men received no meadow grants for their animals.

They went out of th~ selectmen's meeting ready· to fight. Fight they 14 Ibid., p. 142. did, until the town was split. They formed a new community down the road, Marlborough. Not gain ing access to the .10cal commons, they were perfectly .willing to settle for a. 24,000 acre plot a few miles away.15 Factional strife was not a part of the original goals of the found ers of New England. Factionalism was a blight to be avoided; this opinion remained a touchstone of American political thought until James Madison wrote Federalist #10. Yet the quarreling oyer the commons was incessant, in direct opposition to the political and communal ideal of the peaceable kingdom. "Togetherness" The town of Sudbury was not to be the only Puritan village un able to cope successfully with the centrifugal forces created by the presence of socialized property within the town limits. The crea tion of Marlborough, despite the fact that the young founders also established a town commons, testi fied to the difficulty of preserving both the old common field tenure system and social peace in the midst of vast stretches of unoc cupied land. It was too easy to move out, and this feature of New England was to erode the medi15 Powell, Puritan Village, chap. 9.

197J" THE PURITAN EXPERIMENT IN COMMON OWNERSHIP 217 evalism of early Puritan thought. The centralized social control nec essary to enforce such a system of common land required the exist ... ence of widespread land scarcity. Ironically, it was in the final quarter of the seventeenth century that such land scarcity appeared - scarcity of the most productive lands - but by that· time the hag gling over the administration of the commons and increasing land values had already provided the incentives necessary to convince both leaders and average citizens that the commons should be dis tributed permanently. One of the original goals of the founders ofN ew· England was that of social cohesion. The life of each community was to bereli giously based. The church was the center of the town, both sym bolically and very often physically. Men were to Iive close to each other, share in each other's bur dens, pray together,and construct God's kingdom on earth. But there was a strong economic incentive to consolidate land holdings.

Even before the market of Boston created demand for agri cultural products, men in the vil lages had begun to barter their land allotments. A man might live in the town with five or six acres of garden and meadow, and he might also have been given some forty-or fifty-acre plots in the common lands scattered around the town. Obviously, it was to the advantage of some men to con solidate their holdings, trading with others who also wanted to cut down on the time spent to travelin mud, in snow, in dust - from one plot to another. Then, family by family, an exodus began from the central town. Artisans tended to come into the town's center; farmers, especially those affected by Boston's market (those in the immediate Boston area or close to water transport to Bos ton), needed to consolidate in order to rationalize production. Despite the efforts of ministers and local selectmen, the popula tion spread out; decentralization, when not political, was at least social. You could not examine your neighbor's intimate affairs when he was three miles aWray.

The market for land was an agent of social decentralization. The Urge for Privacy The· experience of the isolated little town of Dedham is illustra tive of the effect of market free dom on traditional patterns of social and economic control. Pro fessor Kenneth Lockridge de scribes the process: If· the corporate unity of the vil lage was slowly eroding, so was its physical coherence. The common field system began disintegrating almost 218 THE FREEMAN April from the day of its inception. Al ready in the 1640's the town permit ted men to "fence their lots in par ticular" and presumably to grow in these lots whichever crops they wished. By the 1670's it had become usual for men to take up both special "convenience grants" and their usual shares of each new dividend in loca tions as close as possible to their ex isting lots, practices which aided the consolidation of individual holdings.

The process encouraged by public policy was completed by private transactions, for an active market in small parcels soon emerged, a mar ket in which most farmers sought to sell distant lands and buy lands closer to their main holdings. The net result was the coalescence of pri vate farms. From here, it would be but two short steps for farmers whose holdings were centered in out lying areas to move their barns and then their houses from the village out to their lands. As of 1686 few seem to have taken these steps, but the way had been prepared and the days of a society totally enclosed by the village were numbered. In any event the common-field system was gone, taking with it the common de cisions and the frequent encounters of every farmer with his fellows which it entailed.l 6 The closer to Boston, the faster these changes occurred, for if transport was cheap enough16 Kenneth Lockridge, ANew Eng land Town (New York: Norton, 1970), p.82.

within 10 miles or so along a well traveled road - the effects of the free market were felt far more all uring ly. It paid to become more efficient. A Typical Development The demise of the commons in Cambridge seems typical. The first division took place in 1662. A second followed in 1665. Two small divisions were made in 1707 and 1724. Various methods were used to determine who got what parcels of land: lots were drawn, or acres were distributed in terms of the number of cows a family was allowed to graze on the common Jueadow, or a committee was formed to consider other methods. In some towns there was consid erable strife; in others, the distri butions were relatively peaceful. The effects on Cambridge were significant, and in retrospect they seem quite predictable. After 1691, it was no longer necessary to pass new laws against the cutting of timber from the commons. Men owned their, own land, and they cut or refused to cut as they saw fit. It was no longer necessary to pass laws against selling timber to men from other towns, a com mon feature of mid-seventeenth century legislation in the towns.

A thoroughly individualistic sys tem of land tenure evolved. The final impetus to private own1974 THE PURITAN EXPERIMENT IN COMMON OWNERSHIP 219 ership came in the 1680's. James II" after coming to the throne in 1685, sent Sir Edmund Andros, the former Royal governor of New York, to take over as governor gen eral of New England. The king meant to consolidate the political structure of the colonies, making them all purely royal colonies. An dros met with instant opposition. He began to hit too close to a cru cial legal weakness of New Eng land's towns. By 1685, there were four New England colonies, New Haven hav ing been absorbed into Connecti cut in 1662: Massachusetts, Ply mouth, Connecticut, and Rhode Is land. (Plymouth became a part of Massachusetts in 1692). The right of these colonial governments to create valid, legal townships was in question ; the right of the towns to act as if they were incorporated entities in giving legal title to land was not 'in doubt: it was illegal.

The king's seal was not present in the towns, and this was an invita tion for the king's newly appointed bureaucracy - a growing horde to intervene to their own advan tage. In 1686, the Andros regime im posed a 2.5 shilling quit-rent per annum on all 100-acre lots not. oc cupied or occupied by means of de fective titles. Andros called for a reexamination of the land patents. Whether or not this represented a true threat to the majority of land owners, they certainly were con vinced that his intentions were the worst, and that a major land-grab was about to be inaugurated. In the various political pamphlets issued in 1688-90 by outraged crit ics of his administration (later as sembled as the Andros Tracts), this criticism was made over and over. It was a major reason cited as a justification for his overthrow in 1688. "Henceforward, the colo nies took absolute control of the land .... "17 Men desired, as never before, to gain clear-cut title to their lands. It intensified a pressure that was five decades old or moreJ8 The Market Process Step by step, individual men as serted their sovereignty over land; the proprietors of the commons steadily transferred the unoccu pied land surrounding the village, as well as the land in the more central common fields, to the citi zens of the town. While they did not ask for competitive bidding as a means of distributing this land, the officials did effect a continuous 17 Roy H. Akagi, The Town Propri etors of the New England Colonies (Gloucester, Mass.: Peter Smith, [1924] 1963), p. 124.

18 Philip J. Greven, Four Generations: Population, Land, and Family in Colonial Andover, Massachusetts (Ithaca, N. Y.: Cornell University Press, 1970), p. 61.

220 THE FREEMAN April transformation of ownership. In doing so, they established a break from the historical inheritance of many towns, the old medieval open field system of common ownership. The continual bickering over the allocation of timber, fallen logs, tree cutting by moonlight, town herds, . herdsmen's salaries, fence mending, planting in the. common fields, and policing everyone to see that these Jaws were obeyed, finally broke the will of the town officials. It was easier to give the land away; it was also more profitable for to;wn residents, in most cases. The tradition of the independent yeoman farmer so impressed Jef ferson that he built an entire polit ical philosophy around it. The idea that individual men are more re sponsible for the administration of property than boards. of political appointees or even elected officials became a fundamental principle of eighteenth and nineteenth century American life. The concepts of personal responsibility and per sonal authority became interlocked, and the great symbol of this fusio~ was the family farm. The endless quest for land by American fam ilies is one of the most impressive tales in American history. It began as soon as the Pilgrims .stepped off the Mayflower and their Puritan neighbors stepped off the Arabella a decade later. The experiment in common ownership in village after village over half a century con vinced ministers, laymen, and polit ical leaders that the private own ership of the means of production was not only the most efficient way to get Christian goals accom plished, but also that such a form of ownership was economically profitable as well. They saw, almost from the start, that social peace is best achieved by means of the private ownership of the tools of production, especially that most crucial of tools, land. The lessons of that first half-century of New England Puritan life is one of the most important heritages of American life. Without it, indeed, American life would be impossible to interpret correctly. ~ IDEAS ON LIBERTY That Vital Spark THE SPARK of liberty in the mind and spirit of man cannot be long extinguished; it will break into flames that will destroy every coercion which seems to limit it.

HERBERT HOOVER Best Housing Hope BERNARD H. SIEGAN MOST people with incomes below the national average cannot afford to buy or rent new housing. This is not a condition solely of modern times nor of high inflation. It has probably existed throughout his tory. There never has been· a time or a civilization, and probably never will be one, in which all people had equal access to mate rial goods. Moreover, in the case of ,housing, the new products are not always preferred to the old at least this must be concluded from the many wealthy people who willingly pay huge amounts for old houses. However, there are many people who feel that those of lesser means are entitled to new housing, almost Copyright 1973 Bernard H. Siegan Mr. Siegan is .the author of Land Use Without ZoninA and many articles on the subject. He praCticed law for 20. years in Chicago before moving in 1973 to La Jol1a, California where he is' an .adjunct professor of law at the Uni versity of San Diego Law School.

as a.matter of right. They con tend that if the private sector cannot provide such housing, then it. is the obligation of.government to do so. This was an underlying prem ise ot the 1968 national housing act which called for the construc tion or rehabilitation ,of six mil lion .housing units, for low and moderate income families over the succeeding decade ..and established subsidy programs to accomplish that aim. Another basis for that legislation was the conviction that goyernment could effectively and efficiently subsidize the con~truc tion of. housing for the less fortu nate in our society. Time has shown' ~hat Congress in. p,a~sing this legislation, did not understand the operation of its own government. Admittedly, it was a mistake easily made, for the task .appeared ..relatively simple. Establish subsidy programs, pro221 222 THE FREEMAN April vide them with billions of dollars, and it would be only a question of time before those billions would create new and better housing for the country's less fortunate citi zens, at a reasonable per unit cost.

Nothing could have been further from the truth. Much housing was constructed under the program; in fact about 20 to 25 per cent of residential housing starts for 1970 and 1971 were for subsidized and public housing. Unfortunately, most of the beneficiaries probably were not poor people. By the time the product reached its intended re cipients, a great many had profited along the way, including many who cheated and gave and accept ed bribes. There were many scan dals in the progra.m, but even these might have been explained away. had the program largely ac complished its purposes. The results however, were high ly unsatisfactory. Much of the con struction was by the government's own evaluation defective and of poor quality. Perhaps the program created as many tax shelters for the rich as housing shelters for the very poor. A significant num ber of projects failed financially, and possibly worst of all, some of the developments intended to elim inate the slums themselves turned into almost instant slums.

With scandals and costs mounting and res ults remaining unsa tis factory, the Nixon administration in 1972 began to contract the sub sidy programs and subsequently froze funds appropriated for them. "We can no longer afford $100 billion mistakes," said George Romney, who assumed office as Secretary of the Department of Housing and Urban Development a strong proponent of subsidized housing and left office an equally ardent opponent. Government-Built Housing Is Costly and Wasteful If the total cost of the subsidy programs were averaged over the successful units - which, of course, were far fewer than those built the cost of each unit might be quite similar to the cost of hous ing in Beverly Hills (with hardly the same resale value). Even gov ernments can go broke on this basis, and taxpayers can and should .become very angry. But the cry goes out: "How else can··we provide for the hous ing needs of the less fortunate in society?" The operation of the real estate market provides the an swer: enable or allow builders to produce more private housing, and the less affluent will benefit as much as the more affluent. Due to the operation of the filtering process, construction of housing for the well-to-do will equally benefit those 1974 BEST HOUSING HOPE 223 of average, moderate and low in comes.

What is the filtering process? Filtering in housing occurs when new homes and apartments are constructed and families move in to them, vacating their former residences for occupancy by oth ers. The others, in turn, may va cate still other units and the proc ess continues through many se quences. A study of filtering in seven teen metropolitan areas of the country, made by the Survey Re search Center at the University of Michigan, has shown that on the average the construction of one new unit makes it possible for a succession of 3!j2 moves to occur to different and more likely better housing accommodations. New construction thus helps more peo ple indirectly than it does directly; 2lh moves occur to existing hous ing and only 1 move to new hous ing. The study shows that more than one-third of all those who move are likely to be in the lower and Mass Production moderate income categories, the targets of the subsidy programs.

It also reveals that while most new construction occurs in the outer portions of the metropolitan area, these moves extend to older areas near the center of the city, where the poorer portions of the population tend to live. The experience of the subsidy programs has demonstrated that new housing has not always meant decent housing; and it is decent housing, whether new or old, that should be the nation's objective. More private construction will ac complish that goal for more people without the huge waste of re sources that seems inevitably to accompany government's efforts. Accordingly, governments can ,best serve housing needs by elim inating laws and regulations such as zoning which impede develop ment of the land. An unrestricted private market still remains the most efficient and effective means yet devised to provide better hous ing for the less affluent. ~ IDEAS ON LIBERTY THE very principle· of capitalist entrepreneurship is to p1'ovide for the common man. In his capacity as consumer the common man is the sovereign whose buying' 01' abstention from buying de cides the fate of entrepNmeurial activities. There is. in the mar ket economy no other means of acqu,iring and preserving wealth than by supplying the masses in the best and cheapest way with aU the goods they ask for.

LUDWIG VON MlSES. Human Action LEONARD E. READ The law ... has converted plunder into a right, in order to protect plunder. -Bastiat THE COMMANDMENT, "Thou shalt not steal," would be far better kept today had not theft assumed vari ous disguises under which its prac tice .has been .. generally sanctified. The gilding of an evil gives it a virtuous face --;' a Mr. Hyde's ugli ness covered by a comely Dr. Jekyll mask. Why such subterfuge? To be thought of as a thief by others or to so regard oneself .. is utterly re volting to all but stunted mental ities; so, we try to sanctify our plunder! The sanctification of plunder is as old as the history of .ffian. If thievery was .indeed the first la bor-saving device, it was developed out of sheer ignorance. Survival is a laudable objective; therefore, if thievery is thought to be the only means to that good end, it must per force be good. Thus is plunder sanctified by those who know no better.

Many tribal societies have prac ticed plunder, raiding their neigh bors, taking home all the loot they 224 could garner. But we can hardly be critical of them without criticizing ourselves. Perhaps no other book has more wisdom between its covers than the Holy Bible. Yet, we find written there about twenty-three centuries ago: "Men do not despise a thief, if he steals to satisfy his soul when he ishungry."l This W&S written cen turies later than "Thou shalt not steal." How can any practice be more sanctified than by biblical en dorsement !However, we must un derstand the times lest we render too harsh a judgment. Move on another fifteen cen· turies to St. Thomas Aquinas: The superfluities of the rich belong by right to the poor .... To use the property of another, taking it secret ly in case of extreme need, cannot, properly. speaking, be characterized as theft. 2 1 Proverbs 6:30 (King James version).

It might be noted that modern transla tionsrender this passage differently. 2 See Thomas Aquinas, 2a, 2ae, quaes tiao 66, art. 7.

1974 THE SANCTIFYING OF PLUNDER 225 The Rich, Back Then Seven centuries ago, at the time of Aquinas, who were· the rich? They were plunderers, the feudal lords who lived off the serfs - the poor. In all justice, what the lords possessed belonged less to thenl than to the serfs fromwhonl they had taken it. Considering the politico - economic darkness in nledieval times, it is understand able how a religious leader might sanctify plunder by those who had been plundered. The axiom, "Thou shalt not steal," was but an ancient flash of light with no sustaining source of energy. There is no need for further il lustrations of plunder sanctified. Every age and all civilizations abound with examples of this primitive trait of gilding evil that it may appear virtuous, a weak ness which prevails to this day. There were some excuses in time8 past, prior to a knowledge of free market phenomena. But what of the present? How do we now sane·· tifyplunder?

Today, whichever way thema~· jority votes is generally conceded to be the criterion for what's right and wrong. 3 Once this nonsensical foundation of morality is accepted - approval by the majority - plun·· 3 For an excellent analysisof this fal-· lacy, see "The American System and Ma·· jority Rule," by The Reverend. Edmund! A. Opitz, The Freeman, November 1962. der is legalized and thus sanctified. Legislation, being a collective ac tion, leaves hardly anyone with a sense of guilt. Why?· The evil is depersonalized. Comparable is the mob that hangs Joe Doakes. The mob did it! The truth? Each of the lynchers committed the mur der precisely as each person who is a party to legal·· plunder is guilty. Yet, the collective action affords each participant a false sense of absolution. Legal plunder in the U.S.A. to day, in dollar amount, is many thousands of times greater than, say, at the time of Aquinas or even during the lives of our found ing fathers. In those days some one stole a pig or chicken or some other· small item, not because thieves were more scrupulous then than·· now but simply because no one owned· very much. However, my guess is that the proportion of all private property which is stol en or plundered is substantially the same today as in the past.

What has changed, aside from the method····of sanctification? The to tal quantity of property owned is thousands of times greater now than before. There is incompar ably more to plunder, that's all. The propensity to plunder - to live off the fruits of the labor of others - appears to be as persis tent a trait as it is evil. In the light of free market, pri226 THE FREEMAN April vate ownership, limited govern ment practices with their moral and spiritual antecedents-of which the American people have had a remarkable sampling - how is this possible? I am now be ginning to understand. This way of life has been but a flash of en lightenment, as dimly perceived as "Thou shalt not steal." The freedom philosophy, with but few exceptions, is no better under stood than was the commandment against theft of more than thirty centuries ago. No intellectual muscle in either case, no sustain ing force.

Cause and Effect With few exceptions, the masses of people in this and other "ad vanced" countries have not corre lated the fantastic outburst of creative energy with the practice of freedom. Ortega pinpoints this failure: The world which surrounds the new man from his birth does not compel him to limit himself in any fashion, it sets up no veto in opposition to him, on the contrary, it incites his appe tite, which in principle can increase indefinitely. Now it turns out - and this is most important - that this world of the XIXth and early XXth centuries not only has the perfections and the completeness which it actually possesses, but furthermore suggests to those who dwell in it the radical assurance that tomorrow it will be still richer, ampler, more perfect, as if it enjoyed a spontaneous, inex haustible power· of increase .... They believe in this as they believe the sun will rise in the morning. The meta phor is an exact one. For, in fact, the common man, finding himself in a world so excellent, technically and socially, believes it has been produced by nature, and never thinks of the personal efforts of highly endowed individuals which the creation of this new world presupposed. St,ill less wil'l he admit the notion that all these fa cilities still require the support of certain difficult human virtues, the least failure of which would cause the rapid disappearance of the whole magnificent edifice. 4 (Italics added) Is there a remedy? Yes, but the price gives the appearance of be ing too high. First, there is re quired of you and me a far better understanding of the freedom philosophy than we now possess and, to top it off, brilliant explana tions of its efficacy. In a word, show the correlation between the abundant life and freedom so at tractively that others are bound to take heed. Actually, this is not a high price - it is the very least we should. do for ourselves, if not for others.

Second, let us begin to call this practice of "robbing selected Peter to pay for collective Paul" by· its 4 From Revolt of the MlMses by Jose Ortegay Gasset (New York: W.W.Nor ton& Co., 1932).

1974 THE SANCTIFYING OF PLUNDER 227 right name: legalized plunder. Frederic Bastiat gave us the meas uring rod more than a century ago in The Law: See if the law takes from some per sons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime. (Italics added) This question of legal plunder must be settled once and for all, and there are only three ways to settle it: 1-The few plunder the many. 2 - Everybody plunders everybody. 3 - Nobody plunders anybody. We must make our choice among lim ited plunder, universal plunder, and no plunder. The law can follow only one of these three. Finally, there must be a recog nition that might-majority rule does not make right. Counting noses is no way to decide moral, ethical, or economic matters. This accompiished, plunder will lose its legal backing and, thus, its sanc tification.

Let the law defend the rightful owner of property rather than the thief. Let freedom prevail! , IDEAS ON LIBERTY Legal Plunder THE WAR against illegal plunder has been fought since the begin ning of the world. The law itself conducts this war, and itis my wish and opinion that thE~ law should always maintain this atti tude toward plunder. But it does not always do this. Sometimes the law defends plunder and participates :in it. Thus the beneficiaries are spared the shame, danger, and :scruple which their acts would other wise involve. Sometimes the law places the whole apparatus of judges, police, prisons, and gendarmes at the service of the plunderers, and treats the victim - when he defends himself as a criminal. In short, there is a legal plunder. FREDERIC BASTIAT, The Law IT IS NOT within the province of any branch of human knowledge to give the ultimate reason for things. Man suffers; society suffers. We ask why. This is equivalent to ask ing why God has given man feeling and free will. We know on this sub ject only what is revealed to us by the faith in which we believe.

But whatever may have been God's plan, what we do know as a positive fact, what human knowl edge can take as a starting point, is that man was created a senti ent being endowed with free will. This unfinished manuscript, written in 1850 during the final months of his life, is part of Bastiat's effort to explain man's role in a har monious universe. It appears as Chapter 22 in Economic Harmonies, translated by W. Hayden Boyers, edited by George B. deHuszar, avail able in paperback from The Foundation for Economic Education, Irvington-on-Hudson, N.Y. 10533, $3.50. 228 The MotiveForce of Society FREDERIC BASTIAT This is so true that I defy any one who may be astonished at it to conceive of a living, thinking, desiring, loving, acting being of anything, in a word, resem bling man - yet lacking in sensi bility or free will. Could God have done different ly? Of course, our reason says yes, but our imagination will forever say no; so radically impossible is it· for us to think of man as being without this double attribute.

Now, to be sentient is to be cap able of receiving identifiable sen sations, that is, sensations that are pleasant or painful. Hence well-being and suffering. By the very fact of creating sensibility, God permitted evil or the possibil ity of evil.

1974 THE MOTIVE FORCE OF SOCIETY 229 In giving us free will, He has endowed us with the faculty, at least to a. certain extent, of. avoid ing what is evil and seeking after what is good. Free will presup poses .intelligence and is associ ated with it. What good would it be to have the power to choose, if the power to examine, to compare, and to judge were not joined to it? Thus, every man born into the world possesses a motive force and an intellect. The motive force is that inner, irresistible drive, the very essence of all our energy, which impels us to shun evil and to seek after the good. We call it the instinct of self-preservation, personal inter est, or selr-interest. This impulse has sometimes been decried, sometimes misun derstood, but there can be no question as to its existence. We seek indefeasibly everything that to our mind can improve our lot; we avoid everything that is likely to impair it. This fact is at least as certain as that every molecule of matter possesses centripetal and centrifugal force. And even as this double movement of attraction and repulsion is the great motive force of the physical universe, so the double impulse of human. attrac tion toward happiness and human aversion to pain is the great mo tive force of the social machine.

Intelligence But it is not enough that man should be irresistibly disposed. to prefer good to evil; it is also nec essary for him to distinguish be tween them. And, this God has provided for by giving man the complex and marvelous mechan ism called intelligence. To direct our attention, to compare, to judge, to reason, to relate cause and effect, to remember, to foresee - such are, if I may so express myself, the moving cogs of this wonderful machine. The driving force that is in each of us moves at the direction of our intellect. But our intellect is imperfect. It is subject to error. We compare, we judge, we act accordingly; but we can be wrong, make a bad choice, turn toward evil, mistaking it for the good, or we may shun the good, mistaking it for evil. This is the first source of social di'scord; it is inevitable for the very reason that the main spring of human nature, self interest, is not, like attraction in the material world, a. blind force, but one guided by an imperfect intellect. Let us therefore clearly realize ·that we shall find harmony only with this restriction attached to it. God has seen· fit to establish the social order, or harmony, not upon the basis of perfection, but upon that of man's perfectibility.

Yes, if our intellect is imperfect, 230 THE FREEMAN April it is also perfectible. It develops, enlarges, corrects its errors; it repeats_ and verifies its operations; at every instant experience sets it right, and responsibility holds over our heads a whole system of punishments and rewards. Every step that we take toward error plunges us more deeply into suf fering, so that the warning signal does not fail to make itself heard, and our decisions, and consequent ly our acts, are sooner or later in evitably set aright. Under the impulse that actuates him, man, eager to pursue happi ness, quick to seize hold of it, is quite likely to seek his own good in another's harm. This is a second and fertile source of discordant social relations. But their field is limited; they are inevitably elim inated by the law of solidarity. The activity of one individual thus misdirected provokes the op position of all other individuals, who, being hostile to evil by their nature, reject injustice and pun ish it.

The Source of Progress In this way progress is achieved, and it is nonetheless progress for being dearly bought. It is the re sult of a natural, universal drive that is innate, directed by an in tellect that often errs, and sub j ect to a will that is often per verse. Halted in its course by error and injustice, it surmounts these obstacles with the all-power ful aid of responsibility and soli darity - a help that is ever present, since it stems from the obstacles themselves. This inner, indestructible, uni versal motive force that resides in every individual and makes of him an active being, this tendency of every man to seek happiness and to shun misery, this product, this effect, this necessary complement of sensibility, without which the latter would be merely a meaning less burden, this primordial phe nomenon which is the origin of all human action, this attracting and repelling force which we have called the mainspring of the so cial machine, has been disparaged by most social philosophers and political theorists; and this is certainly one of the strangest aberrations to be found in the annals of science.

It is true that self-interest is the cause of all the evils, as well as all the benefits, that can fall to the lot of man. This cannot fail to be the case, since self-interest determines all our actions. Certain political theorists, seeing this, have conceived of no better way to cut off evil at its roots than to stifle self-interest. But, since by this act they would also destroy the very motive force of our ac tivity, they thought it best to en1974 THE MOTIVE FORCE OF SOCIETY 231 dow us with a different motive force: devotion and self-sacrifice. They hoped that henceforth all so, cial transactions and arrange ments would be carried out, at their bidding, on the principle of self-abnegation. People are no lon ger to seek their own good but others'; the admonitions of pain and pleasure are no longer to count for anything, any more than the punishments and rewards of responsibility. All the laws of na·· ture are to be overturned; the spirit of self-sacrifice is to take the pla.ce of the instinct of self. preservation; in a word, no one i8 ever to consider his own personal ity except to hasten to sacrifice it to the common good. It is froni in their own hearts· so that it is this complete transformation of the human heart that certain po·· litica1 theorists, who believe them·· selves to be very religious, expect the coming of perfect social har,· mony. They forget to tell us ho~r they propose to carry out the in·· dispensable preliminary, the trans·· formation of the human heart.

Let Them Try It If they are mad enough to un·· dertake it, they will certainly not be strong enough to achieve it" Do they desire the proof? Let theml try the experiment on themselves;, let them try to stifle self-interest no longer evidenced in the most ordinary acts of their lives. They will not be long in admitting their own inability to do so. How, then, do they presume to impose upon all men, without exception, a doc trine to which they themselves cannot submit? I confess, that it is impossible for me to find anything religious, except in outward appearance and at the very most in intention, in these affected theories, these im practicable maxims, to which their authors give lip service while they continue to a.ct like the common run of humanity. Is it true reli gion that inspires in these Cath olic economists the presumptuous thought that God has done His work badly and that they must set it right? Bossuet 1 was not of this opinion when he said, "Man aspires to happiness; he cannot do otherwise."

Tirades against self-interest will 1 [Jacques Benigne Bossuet (1627 1704), bishop of Condom and of Meaux, was the outstanding pulpit orator of his day, his funeral orations for members of the royal family ranking as brilliant ex amples of French classical style and pow er. As tutor to the heir apparent, the son of Louis XIV, he wrote his Histoire uni verselle, one of the classics on which French school children were raised for generations. His vigorous stand against Protestantism and his successful leader ship of the Gallican movement, which brought increased independence to the Catholic Church in France, reveal him as an important ecclesiastical, as well as lit erary, figure.-TRANSLATOR.] 232 THE FREEMAN April never· have great scientific signifi cance; for by its very nature it is indestructible, or at least it can not be destroyed within man with out .destroying man himself ~ All that religion, morality, and polit ical economy can do is to enlighten us regarding this impulse, to show us not only the immediate but also the ultimate consequences of the acts that it prompts within us.

Greater and constantly increasing satisfaction following a momen tary sensation of pain; long and constantly aggravated· suffering following a momentary pleasure: this, in the last analysis, is moral good and evil. What determines man's choice in favor of virtue must be his higher, enlightened self-interest, but basically self interest it will always be. If it is strange that people have decried self-interest, not only in its immoral abuses, but also as the providential motive force of all human activity, it is even more strange that they have not taken it into account and have felt that they could work in the social sci ences without reference to it. With the unaccountable folly of self-pride, political theorists have, in· general, considered themselves the guardians and directors of this motive force. For everyone of them the point of departure is always the same: Assuming that humanity is a flock of sheep and that I am the shepherd, how shall I set about making humanity hap py? Or else: Given, on the one hand, a certain quantity of clay, and on the other, a potter, what must the potter do to make the best possible use of the clay?

Our political theorists may dif fer on how to decide who is the best potter, or who can mold the clay most effectively; but they agree on this point, that their function is to mold the human clay, just as it is the role of the clay to be molded by· them. They establish between themselves, in their capacity as the lawgivers, and the rest of mankind a relation ship analogous to that of guardian and ward. It never occurs to them that man is a living body, feeling, willing, acting in obedience to laws that it is not their province to invent, since these laws already exist, .even less to impose, but rather to· study. It does not occur to them that mankind is composed of a great host of beings in every way similar to themselves, in no way their inferiors or subject to them; that their fellow men are endowed both with an impulse to act and with intelligence to choose; that in everything men do they are affected by the prompt ings of responsibility and solidar ity; and that, finally, from all these phenomena there results a pattern of already existing rela1974 THE MOTIVE FORCE OF SOCIETY 233 tions that it is not the province of the social sciences to create, af~ these theorists imagine, but to ob·· serve.

Rousseau's Error Rousseau was, I believe, the po·· litical theorist who most naively exhumed from antiquity this idea, which. had already be,en resurrect·· ed by the Greeks, of the omnipo·· tence of the lawgiver. Convinced that the social order is·. a human invention, he compares it to a rna..· chine. Men are the cogs; the prince makes it ,run~ The •lawgiver invents. it at the bidding of the political theorist, who thus, in the last analysis, activates and con trols the human race. That is why the .political theorist never failH to address the lawgiver in the imperative mood; he orders hinl to give the orders: "Establish your nation on such and such a principle; .give it good manner8 and customs; make it bow to the authority of religion; orient it to, ward war or commerce or agricul ture or virtue, etc., etc." The more modest among them hide behind th,~ anonymity of the passive voice.

"Idlers w,ill not be tolerated in the republic; the population will be suitably distributed between the cities and the country; steps will be taken so that there will be nei ther rich nor poor; etc., etc." These formulas attest to the inordinate presumption of those who use them. Implicit in them is a conception of man that leaves the human race not one shred of self-respect. I know of no doctrine more false in theory or more disastrous in practice. On both scores it leads to lamentable consequences. It gives rise to the view that the social economy is an artificial arrangement that has sprung from the brain of an inventor. Every political theorist, therefore, con-· stitutes himself an inventor forth with. His greatest desire is to ,vin acceptance for the machine he has invented; his greatest preoccupa tion is to represent all other pro posed social orders as detestable and especially that which springs spontaneously from the nature of man and the nature of things.

Books conceived according to this plan are and can be only a long tirade against society. This false science does not study the concatenation of cause and effect. It does not investigate the good and the evil that acts produce, leaving it afterwards to the motive force of society to, se lect the course to be followed. No, it enjoins, it restrains, it imposes, and if it does not have the power to do these things, at least it gives advice; like a physicist who would say to a stone, "There is nothing to hold you up; therefore I order 234 THE FREEMAN April you to fall, or at least I advise you to fall." It is on this principle that M. Droz 2 has said, "The aim of political economy is to make prosperity as general as possible" ; a definition very favorably re ceived by the socialists because it opens the door to every utopian scheme and leads to regimenta tion. What would people think of M. Arago 3 if he began his course of lectures in this fashion: "The aim of astronomy is to make gra v itation as general as possible"? It is true that men are animate be ings, endowed with will power and enjoying freedom of choice.

But there is also a kind of inner force in them, a kind of gravita tion; the question is to know toward what they gravitate. If it is inevitably toward evil, then there is no remedy, and certainly none will come from the political theorist, who as a man is subject to the same unfortunate tendency as the rest of mankind. If it is toward the good, the motive force is ready-made; science has no need of replacing it with coer cion or advice. Its role is to en2 [Joseph Droz (1773-1850), French philosopher and economist, member of the French Academy.-TRANsLAToR.] 3 [Dominique Francois Arago (1786 1853), famous French scientist and statesman, member of the provisional government of 1848, and the Minister of War and the Navy.-TRANSLATOR.] lighten men's free will, to show the relation between cause and effect, confident that, under the influence of truth, "prosperity tends to become as general as possible."

A Crushing Responsibility In practice, the doctrine that places the motive force of society, not in all mankind and in the na ture of man, but in lawgivers and in governments, has even more unfortunate consequences. It tends to weigh down the govern ment with a crushing responsi bility that does not belong to it. If there is suffering, it is the fault of the government; if there is poverty, the government is to blame. For is not the government the universal motive force? If this motive force is not good, we must destroy it and choose another. Or else the blame is placed on politi cal economy itself, and in recent times we have heard it repeated ad nauseam: "All the suffering of society can be attributed to politi cal economy."4 Why not, when it is presented as having for its goal the securing of men's happiness 4 "Poverty is political economy's doing ... Political economy has to have death come to its aid ... It is the theory of in stability and theft." (Proudhon, Econom ic Contradictions, Vol. II, p. 214.) "If the people lack the means of sub sistence ... it is the fault of political economy." (Ibid., p. 430.) 1974 THE MOTIVE FORCE OF SOCIETY 235 without any effort on their part?

When such ideas· are current, the last thing that occurs to men is to turn their gaze upon thern selves, and to see whether the real cause of their woes is not their own ignorance and inj UH tice - their ignorance, which ex poses them to the law of respon sibility; their injustice, which brings down upon them the ae tion of the law of solidarity. Ho'w could men dream of blaming thenl selves for their woes when they have been persuaded that by na ture they are inert, that the source of all action, and consequently of all responsibility, lies outside themselves, in the will of the sovereign and of the lawgiver? If I had to point out the char acteristic trait that differentiates socialism from the science of eco nomics, I should find it here. So cialism includes a countless nUD1 ber of sects. Each one has its o'W'n utopia, and we may well say that they are so far from agreement that they wage bitter war upon one another. Between M. Blanc's organized social workshops and M.

Proudhon's ana,rchy, between Fourier's association and M. Cab et's communism, there is certain ly all the difference between night and day. What, then, is the corn mon denominator to which all forms of socialism are reducible, and what is the bond that unites them against natural society, or society as planned by Providence? There is none except this: They do not want natural society. What they do want is an artificial so ciety, which has come forth full grown from the brain of its in ventor. It is true that each one desires to play Jupiter to this Minerva; it is true that each one fondly caresses his own invention and dreams of his own social or der. But what they have in com mon is their refusal to recognize in mankind either the motive force that impels men toward the good or the self-healing power that delivers them from evil. They quarrel over who will mold the hu man clay, but they agree that there is human clay to mold.

Mankind is not in their eyes a living and harmonious being en dowed by God Himself with the power to progress and to survive, but an inert mass that has been waiting for them to give it feeling and life; human nature is not a subject to be studied, but matter on which to perform experiments. The Economic Approach Political economy, on the con trary, after first establishing the fa.ct that within every man are the forces of impulsion and repul sion that together constitute the motive power of society, after making certain that this motive 236 THE FREEMAN April force tends toward what is good, does not propose to destroy it and to replace it with another of its own creation. Political economy studies the highly varied and com plex social phenomena to which this motive force gives rise. Does this mean that political economy has no more to do with social progress than the study of astronomy has to do with the ac tual movement of the heavenly bod ies? Certainly not. Political econ omy deals with beings who possess intelligence and free will and as such - let us· never forget - are subject to error. Their tendency is toward the good; but they can be mistaken. The utilitarian function of science, therefore, is not to cre ate causes and effects, not to change man's natural bent,not to foist upon him social orders, in junctions, or even advice, but to show him the good and the evil that results from his own deci sions.

Thus, political economy is a sci ence concerned exclusively with the observation and description of phenomena. It does not say to men: "I urge you, I advise you, not to get too close to the fire"; or: "I have thought up a social order; the gods have inspired me to create institutions that will keep you far enough away from the fire." No; political economy notes that fire burns, announces the fact, proves it, and does the same for all similar phenomena of the moral or economic order, con vinced that this is all that is nec essary. It assumes that an unwill ingness to be burned to death is a basic, innate attitude that it did not create and that it cannot alter. Differences by which Men Grow Political economists cannot al ways be in agreement, but it is easy to see that their differences are of quite another kind from those that divide the socialists. Two men who devote themselves to observing the same phenome non and its effects, like. rent, for example, or exchange or competi tion, may not arrive at the same conclusion; but this proves noth ing except that one of the two, at least, has observed badly. The work will have to be done over.

With the help of other investi gators the chances are that the truth will finally be discovered. That is why - provided only that every economist, like every astron omer, keeps himself informed on the advances his predecessors have made - this science cannot fail to contribute to progress and conse quently to be ever more useful, constantly correcting past errors in observation, and continually adding new observations to those already made. But the socialists - isolating 1974 THE MOTIVE FORCE OF SOCIETY 237 themselves from one another, so that they may concoct, each one on his own, artificial contrivance,s out of their own imaginations-could go on pursuing their investi gations in this way through all eternity without ever. coming.· to an agreement and without one man's work ever in any way help ing another's. Say profited from Smith's investigations; Rossi, from Say's; Blanqui and Joseph Garnier, from those of all their predecessors. But Plato, Sir Thorn. as More, Harrington, 5 Fenelon, Fourier may. revel to their heart's delight in drawing up their Re: 'publics, their Utopias, their Oce anas, their Salentes, their Phalansteries, without there ever being any connection between anyone· of these flights of fancy and the others. These dreamers draw it all, men and things· alike, out of their own heads. They dream up a social order not connected with the human heart; then they invent a new human heart to go with their social order. . . . ~ o [James Harrington (1611-1677), English political philosopher, whose work on the ideal state, entitled Common wealth of Oceana (1656), advocating a written constitution, rotation of magis trates and legislators, indirect election of the presiden t, the secret ballot, and agrar ian reforms, is believed to have influ enced political thought in the United States and other democracies.-TRANS LATOR.] IDEAS ON LIBERTY Anlnteresting Question THE SOCIALIST does not trust in the goodness of humanity. He is convinced that the hungry will not be fed, the naked clothed, the aged cared for, the sick visited, unless the power of the state intervenes to confiscate from society the means necessary for the state to attend to thes,e needy. But this poses an interesting question. If the vast maj ority in our society· really share this powerful urge to help the needy, why do they fear for the fate of charity if left to the voluntary care of the people? It is a well-known fact that there is little or no administrative cost in the sort of family or neighborhood charity for which America was famous, whereas there is great administrative cost in the compulsory redistribution of wealth by government agencies. So what is there to lose in allowing the people to follow their avowed inclinations without recourse to the power of the state?

GLENN L. PEARSON, College of Religion, Brigham Young University MORRIS J. MARKOVITZ 1$ I~_ liON .•..". ····,"""""Wl'%llhiH,'":':"'l;:',",}:,:;;%}:,,,:,."".""",.,•.,.,. 'HERE TO $TAY? SOMEDAY, you will have to retire. How much money will you need to support a decent standard of living when that time comes? $7,000 for a single year? $10,000? $25,000? $100,000? There is no way to know, because there is no way to know exactly how much inflation there will be. But even without exact figures, we can know that it will take· many more dollars to support oneself in the future if inflation continues. A 35-year-old man now earning $20,000 a year may need $200,000 a year or more by the time he retires. How can he possibly save that much? Whatever he does save will be continually eroded by inflation, with the value of his dollars being stolen away gradu ally over the years. And the word "stolen" is used here in a very literal sense.

Mr. Markovitz is a commodity research analyst for a New York-based brokerage firm. 238 Inflation has a tendency to ac celerate - to get worse and worse, and at an ever-rising rate. During the past year or so, inflation has finally reached proportions signifi cant enough for everyone to notice its effects, though few understand its cause. Inflation usually is "explained" in one of the following ways: (1) Greedy businessmen, un satisfied with "reasonable" profits, raise prices to line their own pockets at the expense of consum ers. Then laborers have to ask for higher pay in order to maintain their standard of living. Business men, in turn, use this increased labor cost as a pretext for raising prices once more, and a vicious cycle ensues that results in spiral ing inflation. (2) Greedy labor unions, unsat isfied with "reasonable" pay scales, raise their demands in order to line their own pockets at 1974 IS INFLATION RERE TO STAY? 239 the employer's expense. He then raises prices, passing· the expense along to the consumer. The con·· sumer,noting that his cost of liv·· ing is increasing, asks for more of a wage increase. Again, the vic·· ious cycle ensues.

These two explanations are sim·· Bar from an economic point of view, but different from a politicaJl point of view. "Liberal" politician8 tend to use the first explanation" laying the blame conveniently at the door of business, whereas "conservatives," just as conve·· niently, would lay the blame at the door of labor unions. Both ex·· planations rely upon the same economic argument, and each is as false as the other. Monetary Manipulation Inflation is caused by neither business nor labor. The real cause is the government's manipulation of the monetary system. If getting' a raise were simply a matter of demanding it and going out on strike, then why doesn't labor ask for 1000 per cent instead of a mere 10 per cent? And if raising prices were simply a matter of the businessman's whim, then why doesn't he raise prices by 1000 per cent instead of a mere 10 per cent? Obviously, these are ex tremes. But economic principles apply at the extremes as well as in the middle. It should be obvious that, in these extreme cases, it is definitely not the threat of govern ment action that prevents the in creases. Even if the government tried to encourage such huge in creases, they still could not be adopted. Noone would buy the exorbitantly priced goods, so bus iness would fail. Noone would hire the exorbitantly priced labor, so workers would be unemployed.

Yet, even though this principle of supply and demand is obvious in the extreme case, most people tend to lose sight of it when only small amounts are involved. In order not to lose sight of it, let us ask: Why wouldn't people buy goods priced 1000 per cent higher? Why wouldn't business men hire labor costing 1000 per cent more? The answer is simply that they can't afford it. They haven't got the money. Now, let's carry this one step further. The same principle that applied to the extreme case of 1000 per cent above, also applies to the case of 10 per cent, or even the case of 1 per cent: Consumers can't pay even 1 per cent more for all their purchases unless they have 1 per cent more money. Bus inessmen can't pay even 1 per c'ent more wages unless they have 1 per cent more money. Where does this money come from? The government prints it on pieces of green paper, calls it 240 THE FREEMAN April "legal tender," and hands it out by various means until it gradually permeates the economy. Thus, it can now be deduced that even the "ridiculous" 1000 per cent increas es are not so impossible after all.

If the government were to inject 1000 per cent more money into the economy, all prices would rise about 1000 per cent~Wage earners would be getting $50 per hour, and a loaf of bread would cost $5. The .only thing that prevents this is the governmenfs decision not to print that much money. Instead, the government prints only 5, 8, or 10 per cent more money each year, so prices rise only about 5, 8, or 10 per cent. (Note, however, that a "mere" 8 per cent annual increase amounts to over 1000 per cent in 30 years, w.hencom pounded.) What does all this mean for the "typical" consumer? In general, it means bad things. Inflation hurts wage earners, those with savings, and those on fixed incomes such as the elderly and the handi capped. Inflation helps the sophis ticated borrowers and the poli ticians. Inflation literally takes money out of the pockets of some and puts it into the pockets of others.

Here's how the whole. scheme works: By a roundabout and com plicated procedure, the Federal Reserve Bank is allowed, in essence, to print money which it "lends~' to the government at in terest. (This, by the way, is where most of the national debt is owed: to the banks.) This money, consists of those green "Federal Reserve Notes" that everyone car ries in his wallet. These pieces of paper used to be redeemable in silver. Now, all. they are is a "promise" - a .promise to pay the bearer one dollar . Not one dollar in silver or gold. Just. one dollar. And what is "one dollar" today? Why, it's another one of those same pieces of paper! In other words, the money people carry in their pockets is really nothing more than a promise to give a promise to give a promise ... with out ever really promising anything at all. Legal Tender Laws A Unique Privilege However, the government has passed a law which gives a unique privilege to the Federal Reserve Bank (a nominally private bank).

The "legal tender" law says that this bank's notes must be accepted at face value for the payment of any debts. Creditors are thus forced by law to accept payment in such paper dollars .irrespective of any loss in value on·the market. This is very important because it is the key element that makes in flation profitable for the banks 1974 IS INFLATION HERE TO STAY? 241 and the government, at almost everyone else's expense. A large part of the newly printed "legal tender" goes to the government, which then spends it to buy some of the goods in the economy, leaving fewer goods for the rest of us. Since the general public still has essentially the same amount of money it sta.rted with, this money is left to chase fewer goods, the result being high er prices. It all. boils down to the law of supply and demand, which applies to money as well as anything else: if there is more money around, its value per unit decreases. Inflation is this increase in the quantity of money, which "depreciates" the value of each dollar. In this way, inflation amounts, literally, to the theft of the earned values of peo ple who save. It is a disguised tax - it enables the government to take real goods out of the market apparently without anyone having to pay. Everyone does pay, but in the form of higher prices instead of an outright tax. This is particu larly convenient because it enables the government to carry out its policies without being subject to the scrutiny of the citizens. For example, during the Viet Nam war, the government had the Fed eral Reserve print huge sums of money to pay for men and material to fight the war. The current inflation owes much to the printing spree of those years. If, instead, the government had taxed us di rectly' we would have known then how much it was costing us and might have reacted much sooner.

Financing the war by inflation de prived us of this choice. PattersOll' 5 Scheme As a matter of interest, central bank inflation was invented under circumstances of war by William Patterson, a canny Scot who founded the first Bank of England in the 1690's. Both the bank and the King benefited. The bank made fortunes in interest collected on money created out of thin air, by permission of the King. The King was allowed to continue fighting the war. The war had been very popular, but people began to lose their enthusiasm as their pocket books were pinched more and more by taxes. Patterson's scheme al lowed reduced taxes, so citizens didn't realize that their money resources were being depleted through inflation instead. The King was relieved of the distaste ful prospect of having to termi nate the war, Patterson reaped immense profits from his clever scheme, the public was hood 'winked into paying for the whole thing both in money and blood, and the institution of central banking was invented that would 242 THE FREEMAN April continue to hoodwink people for hundreds of years.

Inflation has always been a problem for countries whose gov ernments were allowed to print money without limit. For various reasons, inflation has a strong tendency to accelerate unless it is stopped altogether. Unfortunately, the usual remedy offered by gov ernments is price controls, which cannot work in theory, have never worked in p'ractice, and are not working today, because they do not attack the real cause of infla tion: the wanton printing of paper money. Price controls simply cre ate shortages, as is attested to by our current economic problems. One index some economists use Laissez F aire to predict forthcoming inflation is the Federal Reserve's holdings of government bonds. When these increase, it means that the deci sion was made to print more money to "pay" for them, and that inflation is on the way. The very government officials who pose as "inflation fighters" are in fact the people in society who are most responsible for the inflation in the first place.

The only way to end inflation is to end the unlimited power to print paper money. Unless the legal tender laws are abolished, there is slight prospect of a return to the kind of a hard currency traders would choose as a medium of exchange. t) IDEAS ON LIBERTY IT IS the very essence of prices that they are the offshoot of the actions of individuals and groups of individuals acting on their own behalf. The catallactic concept of exchange ratios and prices precludes anything that is the effect of actions of a central authority, of people resorting to violence and threats in the name of society or the state or of an armed pressure group. In declaring that it is not the business of the government to deter mine prices, we do not step beyond the borders of logical think ing. A government can no more determine prices than ·a goose can lay hen's eggs. LUDWIG VON MISES, Human Action TheNecess DAVID KELLEY ANARCHISM is, on the face of it, a political philosophy; it is, there fore, a theory about the proper re lation between the indi vidual and the government. The theory is very simple: it is that there is no pro per relation between the individ ual and the government - because there ought to be no government.

For this reason, anarchism is held by many to be a simple-minded theory. By many on the right, how ever, it is held to be merely a sim plification of their basic princi ples, with all the appeal of such simplicity. For libertarians believe that government has fewer proper functions than it currently as sumes, in this country and others; and when the so-called free mar ket anarchists say that govern ment has no proper function, it is often thought that they are merely taking the principle of liberty, with great rigor if little wisdom, to a logical extreme. And this image of the anarchist as a logiMr. Kelley is a graduate student in philosophy at Princeton University. cal purist, as a friend of rigor though the skies fall, is also culti vated very assiduously by the an archists themselves. But the image, I suggest, is an illusion. Logic, like virtue, is something of which one cannot have an excess; but anarchism is distinguished by its lack of that quality. Its anti pathy to law apparently extends even to the laws of thought.

The first and most basic failure of the anarchist logic is its fail ure to notice a crucial distinction. An anarchist is one who wishes to place coercion, the use of force and the ability to use it, on the market. The use of force to prevent the initiation of force against its cit izens is the basic function of gov ernment, and the essence of "free market" anarchism is to hold that this service should be on the mar ket, like any other. In holding this view, anarch~sts overlook a cru cial difference between this coer cive service, and all other econom ic goods and services. The distinctive feature of coer243 244 THE FREEMAN April cion derives from the position of values in the market place. Values are, in the first instance, the-sub ject of moral philosophy, whose task it is to discover their nature, and to formulate the proper stand ards for evaluating goods and ac tions, means and ends. This task is one of discovery, because values are objective. It is a fact that some things are values whereas others are not; it is a fact that some things are more valuable than others. In a free market and a free society, however, individuals may pursue whatever ends they choose, regardless of whether they really are valuable; and they may appor tion their time and money to things in ways that mayor may not reflect the relative importance of these values. People can and of course should take moral consid erations into account, but nothing compels them to do so.

Despite the protestations of statists from Plato onward, there is no contradiction here. For in a free society, the actions of one per son do not restrict the proper lib erty of another, including his lib erty to act morally. One has no right, therefore, to restrict the ac tions of someone just because they are immoral. In a free market, the production and trade of economic goods are determined by individ ual value preferences; and whether these are moral or immoral, rational or irrational, the exchanges of economic goods to which they give rise do not violate anyone's right ful freedom - that is to say, his rights. Your enjoyment of your rights is not endangered by my misuse of mine. If this were not the case, then to the extent that it were n.ot, the market would have to be regulated by some institution outside the market: for the mar ket is unjustifiable if it allows the violation of individual rights. For tunately, the market as we know it does not allow this, and requires no outside regulation - with the exception of a single economic good: coercion.

Coercion J5 Different The use of coercion against criminals and foreign aggressors is a service, one provided by the gov ernment to its citizens. As such it may be considered an economic good. But it differs from all other economic goods in just the respect mentioned. When its use is morally improper, it does violate individual rights. Coercion, in this world, must sometimes be exercis ed. Given the existence of crim inals, and the constant possibility that some men will prefer crim inal to honest means and ends, the existence of a power to prevent and punish this by force has a certain value. Its value is re stricted, however, by the moral 1974 THE NECESSITY OF GOVERNMENT 245 principle forbidding its use against persons who have not themselves used force against others. If this power is exercised improperly, if it is not used in accordance with the objective prin ciples that define and delimit its value, then it violates rights - the rights of innocent people, or at least the right of the guilty to have their guilt objectively dem onstrated before suffering punish ment. This is true by the very nature of coercion, and it is true only of coercion.

Coercion, therefore, and coercion alone, falls under the proviso men tioned earlier: since it has the potential for violating rights if used improperly, its use cannot be determined by the value prefer ences people happen to hold, whether right or wrong; and so cannot be determined by market forces. Coercion has a place in social life, but it. must be kept in place; and the market is not the institution to do this. Power to coerce, then, must be reposed in another institution altogether, one outside the market and the sway of subjective value preferences. This institution must have strict control-a monopoly, in effect over the use of force, since its function is to take force off the market. Its use of coercion must be determined solely by rules de rived from the appropriate moral principles; and it must operate in accordance with such rules with out taking into consideration any individual or collective desires to the contrary. This institution all men call government.

The Nature of the Market Here, then, is the first failure of the anarchist logic: it fails to discern that feature of coercion which distinguishes it from the economic goods offered on the market. A second failure concerns the nature of the market itself. It consists in the assumption that the market would exist without the government. Anarchists wish to see the services presently of fered by the government of f ered instead by pri vate "protec tion agencies" competing on the free market. We have seen why this is not appropriate, given the nature of this particular good. We must now question the assumption that in the absence of govern mental institutions outside and protecting the market, a free mar ket would even exist for protection agencies to offer their services in. The free market is one in which all exchanges are voluntary. A person can trade his time, effort, money or goods for those of an other only if the latter is willing.

The economic laws of a free mar ket are true only when or to the extent that this condition obtains.

2.46 THE FREEMAN April Consider, for example, the law of supply and demand. What would happen to prices if one did not have to pay for a good at a price acceptable to the seller, but could take the good by force, giving nothing in exchange? There is no way of telling. The law of supply and demand does not apply to thieves. The economic analysis of the market assumes that the use of force does not occur, tha t all exchanges are mutually acceptable to the parties involved. It assumes, in effect, that the cost of using force is infinite. This assumption is legitimate, for in free market theory there exists an institution outside the market which protects the rights of individuals, and therefore en sures that the principle of volun tary exchange will be observed. This institution may work well or badly, but its working well or badly is not a subject of economic law; it is the concern, rather, of political and legal theory. The government codifies and enforces the rules of the market; it es tablishes a framework of rights and liberties that men must re spect in action. Economic theory then tells us what happens as in dividuals act within that frame work to acquire the things they value. Economic laws are to polit ical laws as principles of strategy are to the rules of a game.

A Dilemma For anarchism, however, all this is changed. Anarchists hold that in their scheme also, force would not be used; coercion would not be a feasible alternative to volun tary exchange. But they cannot assume this in describing the mar ket as they would have it. They cannot assign the problem to an other field, as we do, and say that whatever is necessary to prevent the use of force we shall bring about by consciously designing our institutions to that end. The anarchists would place govern mental services on the market, to be offered by entrepreneurs on the basis of their own value prefer ences and their expectations about the preferences of others. But if so, then they can only try to pre dict what is likely to come about from the interplay of human in terests. If we ask how our rights are to be secured to us in the anarchist system, the anarchist can only answer que sera sera. At best he can try to predict what would happen.

The anarchists, then, have their work cut out for them. They must show how, by the mechanism of the market, things work out in such a way that force is not used. But of course they cannot do this without assuming the existence of a free market, an assumption to which they are not entitled. They 1974 THE NECESSITY OF GOVERNMENT 247 cannot make their case - substan tiate their prediction that force will not be used - without relying on economic laws; but economic laws, as we have seen, are true only on the assumption that all exchange is voluntary, which is the very point at issue. It should, no doubt, be easy to prove that the cost of using force is prohibi tive, if one assumes from the out set that the cost of using force is infinite. But the proof would be invalid; it would be circular. A principle of strategy, which tells one what to do given that the rules must be followed, is hardly the vehicle by which to prove that the rules must be followed in the first place.

The Problem of Monopolies Consider, for example, the prob lem of monopolies in an anar chistic society. What is to prevent protection agencies from banding together to destroy the competi tion and form a monopoly over protective services? Is it because monopolies do not occur in a free society? But the reason monopo lies do not occur is that anyone is free to compete with large firms and, by underselling them, cut into their market; it is because the only determinant of success in a free market is the ability of the entrepreneur to persuade consum ers of the value of his goods, to give them the best choice. What would happen if force as well as persuasion could be used against consumers and competitors? Why would the large protection agen cies restrain themselves from driv ing out the competition by force? That is, after all, what happens in the nearest model we have to the anarchist system of protec tion agencies - the criminal un derworld. Clearly the anarchists are assuming what they have to prove: that the market would be free, that competition would exist unhindered, that coercion is not a means by which men would deal with each other.

Coercion is not, of course, the only means by which men do deal with each other; in most societies, gang warfare is an exceptiop. The anarchist may wish to argue, on the basis of this fact, that from a state of nature protection agencies would arise in peaceful competi tion, and the anarchist vision would be fulfilled. But this argu ment too is denied him. For wherever men, finding themselves without government, have not de scended to the level of gang war fare, they have done something else equally damaging to the anar chist hypothesis: they have formed new governments. Or, in the anar chist terminology, they have formed monopolistic "protection agen cies." But this is precisely what 248 THE FREEMAN April the anarchist says would not hap pen in an anarchistic situation. Anarchism lives on its opposition to government, but every govern ment that exists is a refutation of anarchism; for it belies the anar chists' prediction that if only we can send government away it will not come back.

Again, anarchists complain that governments are immoral because they"'initiate, or would initiate, the use of force against anyone form ing a rival "protection agency." Now it is false that this would be immoral: a government is justi fied in preventing any private power designed to exercise coer cion, because such a power is a threat to the rights of its citizens, even if the power is never actual ized. But the fact that govern ments 'would use force in this way is another refutation of anar chism; for such a use of force by one "protection agency" against another to keep its monopoly is precisely what the anarchist pre dicts would not occur. That such things happen, or would happen, is embarrassing to the anarchist because he allows no means for preventing them from happening. The anarchist is caught in a dilemma. Like his namesake of the nihilistic left, he rej ects the social institution through which men attempt, by positive action, to insure themselves of certain conditions nec essary for social existence; yet unlike the nihilist he believes that there are such conditions, and that a form of society in which they do not obtain is unacceptable.

Caught in this dilemma, he can only try to argue that these con ditions will come about by natural law, so that we need do nothing ourselves. But this argument, we have seen, is riddled with logical errors. It ignores the difference between coercion and economic goods on the market, a difference that undercuts the argument from the outset. It relies, for its argu ment that coercion would not in fact occur, on principles that as sume coercion cannot occur, which makes the argument circular. And since it rests on a prediction about what men would do, it is vulner able to the historical facts about what men have done. In the end, the anarchist cannot escape his dilemma; his dilemma is a contra diction. He is advocating a certain end, a society free of violence among men, while rejecting the only means of achieving that end. Thus anarchism is hardly even a political philosophy. It is, much rather, an attempt to escape the responsibility of providing one. It would, as its critics contend, be a disaster in practice; but that is because it is fantastic and inco herent in theory. ~ A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN Said the Crawling Peg To the Dirty Float, "We're two lost souls "In a leaky boat, "And down below there's a hole in the hold "That can't be plugged with Paper Gold."

THIS, in rhymed capsule, is the gist of the proceedings of the first International Monetary Seminar, which was sponsored last spring by the Committee for Monetary Research and Education, Inc., at the Arden House campus of Co lumbia University. The semina.r was held some time before the Arabs, contemptuous of paper money whether called Paper Gold or not, decided to use the "oil weapon" to force the western world to let Israel go down the drain. But the handwriting was on the wall even before the Arab ukase. With not a single western nation dedicated to disciplining its econ~ omy, why would the raw material owners in the so-called Third World go on, giving their riches away for what John Exter calls, not IOUs, but "Who-owes-you nothings"? The,publication in book form of the Arden House proceed ings (Toward a New World Mone tary System, edited by G. C. Wie gand and issued by the Enginee·r ing and Mining Journal of the Mc Graw-Hill Publications Company; 249 250 THE FREEMAN April $8.95) is a not-so-gentle reminder that the oil-producing countries of the world, having achieved what is close to a corner on exportable energy, could use their dominant position to pick up most of the loose gold in the world. They would then .proceed to hold their gold, along with their oil, until the West had ceased to deal in "Who owes-you-nothings."

The contributors to Toward a New World Monetary System can't quite spell out what the money of account, or the numeraire, of the future will be, but most of them seem to agree that gold will be either the official or the unofficial standard. There may be no such thing as an objective store-of-value (value is always subjective, as Carl Menger and Ludwig von Mises both taught), but, histori cally, most people have agreed that a basic medium of exchange must have purity, rarity and in built resistance to rot. Gold fills the bill better than silver, which is more abundant and tends to drift off into use in industrial and commercial forms. Basie Disagreement The authorities who debated with each other at Arden House were not of one mind on the sub ject of the Bretton Woods system, which was viable· until a distrust ful world, uncertain of what to do about a seventy-billion "Eurodol lar" overhang due to the scandal ous monetary behavior of Wash ington, began to worry about the persistently adverse international balance of the U.S. Henry Hazlitt and John Exter, I gather, would agree that Bretton Woods, with its central bank manipulation of currency "swaps," its "special drawing rights," and so forth, is beyond resurrection. Fritz Mach lup, on the other hand, seems to be saying, along with Professor David Meiselman, that there could be life in the old dog yet. I am not enough of a technical student of banking to follow Professor Machlup on "gliding parities" and the various degrees of "managed floating" (isn't that a contradic tion in terms?), but I can see that politicians in past eras have not always respected a gold numeraire.

Says Fritz Machlup, "In my read ing of economic history neither the gold standard nor any other system of fixed exchange rates have [sic] ever effectively curbed gov ernments in their extravagant spending policies ...' when eventu ally the inflation of credit, prices and incomes threatened to deplete the country's gold and exchange reserves, the gold parities or dol lar parities were changed or given up. A barrier which is lifted, when ever it really bars is hardly worth having."

197J,. MONEY 251 Professor Machlup's knowledge: of history may be good, but there: are tides in the affairs of nations. When indiscipline has resulted in chaos, there is nothing to do but to agitate for a discipline that would permit people to protect themselves - against the further depredations of irresponsible pol·· iticians. Without peering too far ahead into the mist, can't it be said that the time has come to let U.S. citizens own gold if theY' so choose? Weare now off the~ gold exchange standard,· so what is the objection to letting people establish their own private hedges: against a continuing inflation? If Arabs can hold gold, why not John Doakes in Kokomo? Helpful Suggestions Henry Hazlitt's contribution to the Arden House deliberations seems to me to··be eminently sound simply· because he does not striv€~ to combine a lot of things into "a higher synthesis" that would be a blueprint for a better inter·· national monetary system. What Mr. Hazlitt does is to suggest that we stop doing a number of things: on the national scene before wor·· rying about great international conclaves. He says that establish·· jng a sound currency is an ethical problem that begins at home. Peo·· pIe have a moral right to make contracts in anything they choose;: that is what personal liberty means .. One of the things that Congress could do without waiting upon international cooperation would be to restore the right of American citizens to buy gold on whatever terms they choose. This, says Mr. Hazlitt, would open gold markets everywhere in the world, and it would immediately estab lish gold as a de facto interna tional money, whether monetized arnot.

The second thing advocated by Hazlitt would be to balance the Federal budget. He would do this not by raising taxes but by slash ingexpenditures. If we were to discipline. ourselves by balancing the budget .over a fairly long period, the dollar would be re spected in world markets, and it would become possible at some point to return to a full gold standard. Poor Reception What Mr. Hazlitt has to say is, of course, not being listened to in Washington. Nixon, in his des perate effort to find favor with some of his "liberal" enemies, has asked for a whopping budget that can be paid for in full only by running up some more Keynesian deficits. The little spending trickles will flow together to become broad rivers. As our "pols" see it, it w:ould be a desirable thing to 252 THE FREEMAN April protect people against· "catastroph ic" illness, so why not a "national" health plan? Poor people should have access to lawyers, so why not a private (Le., a government financed)·· corporation, something comparable to the Post Office, to provide "free" legal service to those who can't afford good coun sel? And why not a .Family As sistance Plan to put a "floor"

under everybody? This is the way the tide now runs on Capitol Hill. So what Mr.. Hazlitt proposes will probably not be listened to until we have had another round of inflation, culminating eventually in an inflationary crisis. Even though we have not reached the point where it is likely that the majority of our politi cians are ready to listen to Mr. Hazlitt's common sense, some things may be done to improve the U.S. position in the' world. William J. Casey, Jr., our Under Secretary for Economic Affairs, suggests, in an interesting paper on the "Internationalization of the Capital Markets," that we bal ance off the investments that we make abroad by attracting foreign investors to our own shores. He thinks we "have enormous assets not the least of which" is a "high standard of disclosure and fair dealing." Will the Arabs, who have gold to invest, listen? We'll see. ~ THE PEOPLE FACTOR: Manag ing the Human Climate by Philip Lesly (Dow-J ones-Irwin, Inc., Homewood, Illinois, 1974) $9.95.

Reviewed by Charles Hull Wolfe IN THIS book, an unusually per ceptive, knowledgeable and articu late public relations man has at tempted to tell how a private insti tution can do an effective com municatiq~s job in a relatively new situation - in a human atti tude-climate no longer peaceful and mild but essentially hostile and stormy. As the author puts it in his in troduction, "In an era when most men and women seem to have be come assertive, when every kind of viewpoint has a movement and a loud voice," the gap between in stitutions and their publics "is threatening to undermine all of our organizations and the-society they compose. It seems not only pertinent but urgent that· the causes of this estrangement be diagnosed, and a course of treat ment sought." From time to time the author reveals considerable understand ing of the American "miracle" which simultaneously "produced the greatest degree of individual freedom and the greatest range of individual choice of any major so ciety in history/' He is also aware 1974 OTHER BOOKS 253 that this society's foundations are threatened by those on the "left,"

and that their activism includes physical militancy and the pre sumption that private institutions are "guilty until they have gone through an inquisition." But Philip Lesly manages to trace this attack to a variety of secondary causes, terming the "es trangement" between private or ganizations and their publics "a direct consequence of the growth and complexity of our institu tions," the failure of business to communicate the need for profits, and the fact that "in some areas business has not performed ade quately in the public interest." Nowhere, as far as I could de tect, did the author bluntly and boldly portray the under lying cause - the deliberate, long-stand ing attack by collectivist-minded intellectuals determined to destroy our traditional, religiously-ori ented society and system of indi vidual liberty, and replace it with secularism and statism. Had the author worked from this premise, he could have better interpreted various phenomena which he has correctly observed but not adequately explained, such as the promulgation by contempo rary intellectuals of two contra dictory articles of faith : 1) That the average individual cannot be relied on to assume responsibility for his own actions, and 2) That the average individual must be given power to determine how all our institutions are operated.

While contradictory in and of themselves, in today's mental cli mate both contentions tend· to further the cause of socialism, and thus are consistent as precepts of socialist propaganda. Just as the author leaves some thing to be desired in explaining root causes of the worsening busi ness climate, he also fails to make some important recommendations for improving the mental atmos phere. For example, as far as I'm aware, he never urges those who prefer responsible freedom to de vote themselves to a systematic, in-depth study of liberty, and to develop their ability to intelligent ly present the case for a free so ciety and a free market. Again, in titling his book, the author may have violated one of his own precepts -:. that to lessen our social problems, we must stop creating unattainable expectations - for surely his title implies that the human climate in America can be managed. In an authoritarian country, "managing" the human attitude-climate - controlling or directing it, rendering it subservi ent to one's will-would be hard enough;· but in a relatively free society, no one - and certainly no businessman or corporation - has 254 THE FREEMAN April the power to make such clear-cut guidance possible.

Nonetheless, Philip Lesly is a most interesting and well-read man who appreciates ·liberty and fair play, and who reveals considerable writing· skill and a gre,at deal of insight· on a wide variety of sub jects. Most friends of freedom should be able to gain from his book useful ideas on how to com municate more effectively. ~ PSYCHO-CHEMICAL WAR FARE: THE CHINESE COM MUNIST DRUG OFFENSIVE AGAINST ·THEWEST by A. H. Stanton Candlin (New Rochelle, N. Y.: Arlington House, 1974) 540 pp., $14.95. Reviewed by Allan C..Brownleld IN THIS VOLUME, the author argues persuasively that the Chinese Com munists are engaged in a massive campaign aimed at the West with narcotic drugs as the primary weapons. A. H. Stanton Candlin, a native of Tientsin, North China, and a long-time member of the British Foreign Service who was at one time Chemical Advisor to the Brit ish High Commission in Germany, and held important intelligence re sponsibilities, makes an impressive case.

The use of narcotics as a politi cal weapon by the Chinese Commu nists, Mr. Candlin points out, is not·unique in world history. "His tory," he writes, "is replete with examples of the use of drugs to at tain political ends ... consider in this regard, examples of the use of drugs for political purposes, such as provided by the sect of the As sassins in Syria, Persia, and else where; the Roshaniyeh in Afghan istan; and, in more recent times, the Japanese narcotics or psycho chemical warfare offensive." Marco Polo wrote in his Travels of the Assassins: "The Grand Mas ter· of the Assassins, whenever he discover~ a young man resolute enough to belongto his murderous legions, invites the youth to his table and intoxicates him with the plant Hashish. Having been secret ly transported to the pleasure gar dens; the young man imagines that he has entered the paradise of Mahomet .... he is informed that he can enjoy, perpetually, the de lights he has just tasted if he will take part in the war against the Infidel as commanded by the Prophet."

It is from the Japanese, how ever, that the Chinese Communists learned how drugs could he used as an effective political weapon. The principal characteristics of the Japanese campaign, the. author notes, were that, "It provided a 197J" OTHER HOOKS 255 means of exploiting Chinese sus ceptibility to,wards drugs ... whereby theY,could undermine the fabric of Chinese society and liqui date the authority and influence of the National Government ... By it they could weaken the Chinese will to resist at all levels ... It was a means of inducing collective de featism among their enemies." Mr. Candlin warns that the nar cotics offensive being launched by the Chinese Communists embodies in a special Marxian sense the ap plication of the ancient military maxim of Sun Tzu (c. 500 B.C.), sometimes called the Chinese Clausewitz: "To fight and conquer in all your battles is not supreme excellence. Supreme excellence con sists in breaking the enemy's re sistance without fighting."

The book is filled with documen tary evidence and statements such as that from Harry J. Anslinger, the U.S. Commissioner for Nar cotics for many years. In 1950, after the Chinese Com munists established control of the Mainland, Mao Tse'-tung forbade opium smoking in China and a few opium growers were executed with great publicity. Yet shortly after this, Commissioner Anslinger placed an American complaint be fore the United Nations to the ef fect that the Communist Chinese were smuggling narcotics into Ja pan. His evidence was overwhelming and proved that during the early 1950s China was heavily en gaged in the illicit drug trade. When Mr. Anslinger made these charges at the U.N., the Soviet Union vigorously denied them. Af ter the Sino-Soviet split, however, Pravda, in its issue of September 12, 1964, charged that Communist China was the biggest opium, mor phine, and heroin producer in the world. Total proceeds from the illic it narcotics traffic were alleged to yield some $500 million annual revenue.

Drugs in Vietnam Mr. Candlin expresses the view that the Chinese Communists were largely responsible for the drug offensive carried out against Amer ican servicemen in Vietnam. He re ports of the investigation by John Steinberg of the Senate Subcom mittee on Juvenile Delinquency who discovered that heroin which was 99.5% pure was being sold for as little as $1.00 a vial. Heroin which was only 10% pure, he noted, could be sold for at least $10.00 a vial. It was, states Candlin, thus clear that the increase in narcotics was by no means only a money mak ing venture, but had other pur poses. The volume contains such eye witness reports as that of Miss Yuan Moun-ru, who testified be fore the Asian and Pacific Affairs 256 THE FREEMAN April Subcommittee of the House For eign Affairs Committee in May, 1972. A refugee from Communist China, Miss Yuan reported that, "My route of escape from China to Burma is via Yunnan Province. I rode through Lu River Valley and the district of Kaonigon Moun tains. I saw with my own eyes the Chinese Communist liberation army growing opium in that area.

So were the Burmese Communists and their mountain army under Chinese Communist influence." Another statement of the Chi nese Communist policy came on December 13,1961 from Lawrence Sullivan, Coordinator of Informa tion for the U.S. House of Repre sentatives, who declared that, "For the first time in human history, the systematic production and distri bution of narcotic drugs has be come an organized government monopoly in Red China. In ten years, Mao Tse-tung has built up a virtual monopoly in opium, heroin, and morphine." Prior to "detente," the author notes, there was real concern .in Washington over Communist China.'s role in the narcotics traffic. This increased when Egyptian edi tor Mohammed Heikal reported a conversation in which Chou En-Lai had told President Nasser that, "We are planting the best kinds of opium especially for the Ameri cans." Now, however, there is an at tempt to ignore this materIal. "The threat," Mr. Candlin writes, "has apparently been concealed from the public by persons who evidently had the desire to cultivate better relations with the Red Chinese."

With the publication of this im portant book, however, the burden of proof is placed upon those who deny such a role for the Peking regime. It seems unlikely that they will be able to meet it. ~ tt1e Freeman VOIL. 24, NO.5· MAY 1974 Livingwith Shortages Dick Sabroff 259 An engineer sees no reason why we should try to live with shortages. FED and the Gas Lines Milton Friedman 263 If we wait for Uncle Sam to provide, the lines will be interminable. Price, the Peaceful Regulator C. W. Anderson 265 When parties are not permitted to trade at the price agreeable to both, violence will erupt. Made in Washington Paul L. Poirot 267 Washington can lead us into crisis, if we so empower the government. The Puritan Experimentwith Price Controls Concerning the search in early New Englandl for a "just price." Gary North 270 WindfallProfits Robert G. Anderson 286 Erratic changes in consumer evaluations create profit opportunities for alert entre preneurs.

The Role of Savings Savings are discouraged by government inte!rvention. Brian Summers 291 The Blessingsof Diversity Leonard E. Read 295 Were all alike, instead of free, t'would meal1 the end of me and thee. Competition:Key to Consumer Dominance Bernard H. Siegan 298 The entrepreneur renders society valuable services without cost. In Quest of Justice Man's nature and justice in inter-human relationships. Peace and Justice One man's resolution to behave peacefully toward others. Ridgway K. Foley, Jr. Dean Russell 301 311 Book Reviews: "Having My Way" by leonard E. Read "The Enterprising Americans" by John Chamberlain "Population, Resources, and the Future: Non-Malthusian Perspectives" edited by Howard M. Bahr, Bruce A. Chadwick, and Darwin L. Thomas Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding. 314 tile Freeman A MONTHLY JOURNAL OF IDEAS ON LIBERTY IRVINGTON·ON-HUDSON, N. Y. 1053·3 TEL.: (914) 591·7230 LEONARD E. READ PAUL L. POIROT President, Foundation for Economic Education Managing Editor THE F R E E MAN is published monthly by the Foundation for Economic Education, Inc., a non political, nonprofit, educational champion of private property, the free market, the profit and loss system, and limited government.

Any interested person may receive its publications for the asking. The costs of Foundation projects and services, including THE FREEMAN, are met through voluntary donations. Total expenses average $12.00 a year per person on the mailing list. Donations are in vited in any amount-$5.00 to $10,000-as the means of maintaining and extending the Foundation's work. Copyright, 1974, The Foundation for Economic Education, Inc. Printed in U.S.A. Additional copies, postpaid, to one address: Single copy, 50 cents; 3 for $1.00; 10 for $2.50; 25 or more, 20 cents each. THE FREEMAN is available on microfilm from Xerox University Microfilms, Ann Arbor, Michigan 48106. Some articles available as reprints at cost; state quantity desired. Per mission granted to reprint any article from this issue, with appropriate credit except "FEO and the Gas Lines," "The Puritan Experiment with Price Controls," and "Competition: Key to Consumer Dominance."

Living with Shortages DICK SABROFF Dear Mr. ----I'D LIKE to comment on a question you raised a couple of days ago. You wondered if shortages were not something beyond our control and with which we must live. You thought that in such a situation Uncle Sam "had to" step in. To me this is very sad. Ele mentary notions of .economics, once taught in the schools and in homes, are largely forgotten today. For example, "shortages" are impossible in a free market. In stead, there is a constantly shift ing balance between supply, de mand, and prices. If today's de mand is higher than yesterday's, or the supply lower, prices tend to rise. This is due as much to buyers' bidding up of the price as to sellers' desires to take advan tage of the situation; both bid and asked prices go up in a most natural way. Dick Sabroff has taught and worked as an electrical engineer and demonstrates consid erable skill in the practice of freedom. This article is in response to a recent radio broadcast.

People tend to see in this only "greed" on the part of sellers. The thing on which to focus, however, is that the market is doing its, job of allocating scarce resources in the beautiful, imper sonal, automatic manner that only a market can. The ways in which the market does this job are far more subtle than the schemes of men. If the supply of gasoline, for example, temporarily drops without a cor responding reduction of demand, the resulting higher prices elimi nate the least necessary purchases so that the available supply goes where it's needed the most. But that's only the beginning. The higher prices also temporarily in crease profits which encourages Exxon and Mobil and others to expand their facilities in order to sell more and, hopefully, earn more of those high profits. New com petitors appear, too, to get in on the good pickin's. And the in creased demand on pipe and drill ing equipment suppliers produces 259 260 THE FREEMAN May similar effects; higher prices, higher profits, expansion. This sort of thing spreads to every industry needed to produce a greater supply.

Market Directives The beauty of it goes still deep er, however. The reallocation proc ess of the market not only causes expansion where needed, but also contracts the very industries con tributing most to the problem. For example, with a gasoline "short age," General Motors' sales tend to decrease, prices are forced down 'ward (new 1973 full sized cars are still for sale at bargain prices), and profits tend to decrease. GM and others are urged, if not forced, to liquidate plant investment de signed for production of gas-eat ers. The same contracting forces act in the case of snowmobiles, re sorts, and any other industry or activity tending to increase con sumption of the scarce item. Human resources are reallocated by this marvelous system, too. Layoffs in the contracting indus tries are accompanied by an in creased demand for workers in the expanding ones. This might mean retraining and moving for some, but the market is doing the best thing that can be done and doing it fast, automatically, and impar tially.

It goes still further. Higher prices on a "scarce" item, gasoline in our present example, mean greater potential profits from sub stitutes. This will spur industries and individuals to seek new ways - atomic cars or moving sidewalks or something. Investment of money and effort will be allocated, auto matically again, to such research. And it is likely that the tempo rarily depressed industries, such as auto manufacturing, will lead the way. Thus, an unhampered market acts immediately to solve so-called shortages and surpluses. Through the price mechanism, it causes in creased or decreased production as needed, it reduces or increases con sumption both directly because of higher or lower prices and indi rectly by contracting or expanding capital in industries which affect consumption. It reaches into every nook and cranny of our lives, and it changes our individual behav ior in ways of which we are often unaware, but which are always cal culated to bring about a better ad justment of economic factors. It acts so fast and so effectively that most of the time we don't even know that a potential problem has been averted.

The only thing required to pre vent this super system from work ing is to interfere through legal or illegal actions. It is the job of gov ernment to prevent the latter, but 1974 LIVING WITH SHORTAGES 261 it is government itself which is guilty of the former. A price con trol on gasoline, for example, elim inates the incentive to expand the industry while at the same time encouraging continued high con sumption. It also prevents pur chases from alternate sources will ing to sell at realistic prices. Sub sidizing consumption is another form of interference which has similar effects. In America, for ex ample, we have mostly public ("free") roads. Expressways and the I-system, especially, have en couraged people to live farther from work and to do more travel ling, thus encouraging greater consumption of gasoline. And be cause these roads are not owned by stockholders such as you or me, the market can't do much to reallocate resources from highway building and maintenance to gasoline pro duction.

Fast and Automatic To top everything, a free mar ket would not only solve a gasoline '"shortage" through the price mechanism, but the prices them selves would come back down al most before they went up. As soon as production is expanded and con sumption decreased, prices must be lowered to solve the potential "surplus." Add in the benefits of research also born of the high price situation and one can see that prices may well be lower than before with quality and service improved to boot. We could even end up selling to the Arabs for less than their costs of production. As mentioned previously, all of this happens so fast and so auto matically in a really free market that we are unaware that there ever was a problem. We see only that prices fluctuate slightly and constantly, reflecting changing conditions, new desires on the part of people, new methods and inven tions, and so on. "Crises" are un known in an unhampered free market economy.

The relative stability and quiet efficiency of a free market dull people's minds to a realization of the millions or billions - probably even trillions - of decisions and adjustments that are made every day by 200 million people acting and interacting, planning their futures, and so on. This marvel ous system clearly transcends the abilities of men. Any attempt to replace this near-perfect, natural, moral system with the political actions of .a relative handful of people is as pitiful as it is naive. The fact that the free market has been largely frustrated in the mat ter of education probably has much to do with the almost uni versal ignorance of the basic eco nomics I've touched upon in this letter.

262 THE FREEMAN May Ourselves to Blame One more point. When I speak disparagingly about "govern ment," I'm not referring to the people who make up the govern ment. The behavior of government is determined by the rest of us through our ignorance, our greed, our envy, our jealousy, and our childish belief that someone else can run our lives better than we and thereby relieve us of the re sponsibility for. our actions. There are many good people in govern ment, but they have little choice other than to reflect the consensus of opinion; even emperors and dic tators must face this if they wish to persist. Government officials, then, are not proper targets for our complaints. In our ignorance we have given government an im possible assignment and the blame for our troubles lies wholly with us. Sincerely, Dick Sabroff P. S. Please forgive me for preaching. I'm trying to avoid pressing my views on anyone un less asked. You didn't ask me, but you did sound sincerely puzzled and that seemed like my cue. I've known a few who have broken through the myths, superstitions, propaganda, ignorance, and self delusion, to discover the divine nature of freedom; a harmony and beauty which truly "passes all un derstanding." Once this initial breakthrough is achieved, a per son is in for a lifetime of unfold ing beauty which at times is al most too much to bear. The joy which accompanies this is also beyond description. To know that things are just fine at the founda tion is a source of great comfort.

It's a faith achieved by very few, but I've never heard of anyone losing it once he found it. Your interest suggested that you might be ripe and I would always feel guilty if I did nothing. People like me are often regarded as kooks and I'm used to it, so if you choose to disregard this letter, that's fine. There's nothing lost. But some thing could be gained if you are motivated to reflect more on the subject; you might even discover the wonderful world I've said is reserved for a select few. Should you care to delve more deeply, I suggest that the truth is not easy to come by and one should be highly skeptical of the popular sources of information. These sources (newspapers, television, bests ellers, and so on) are enter taining and informative, but they largely reflect the thoughts and desires of the masses and we're talking here about something much more elusive and profound Truth. ~ MILTON FRIEDMAN FEO andthe GasLines As I write this in Chicago, lines are forming at those gas stations that are open. The exasperated motorists are cursing; the service station attendants are fuming; the politicians are promising. The one thing few people seem to be doing is thinking.

How is it that for years past, you and I have been able to find gas stations open at almost any hour of the day or night, and have been able to drive up to them with complete confidence that the re quest to "fill up" would be hon ored with alacrity and even with a cleaning of the windshield? To judge from the rhetoric that pol lutes the air these days, ,it must have been because there was a powerful Federal Energy Office hidden somewhere in the under ground dungeons in Washington, in which an invisible William Simon was efficiently allocating petroleum products throughout the land, riding herd on greedy oil tycoons lusting for an opportunity to mess things up and create long lines at their gas stations. Of course, we know very well that the situation is precisely the reverse. The lines date from the creation of a real Federal Energy Office run by a very visible, able and articulate William Simon.

Which is the cause and which the effect? Did the lines produce the FEO or the FEO the lines? After the Arabs cut output, Germany imposed no price con trols on petroleum products. It did initially restrict Sunday driving but soon removed that restraint. The price of petroleum products jumped some 20 or 30 per cent, but there were no long lines, no disorganization. The· greedy con sumers found it in their own in terest to conserve oil in the most painless way. The greedy oil ty coons found it in their own inter est to see to it that petroleum products were available for those able and willing to pay the price. Other European coulJtries, like the U.S., imposed price controls. And, like us, they had chaos. The Arab cut in output can be blamed for higher prices, but it cannot be blamed for the long lines. Their creation required the 263 264 THE FREEMAN May cooperation of shortsighted gov ernments.

The world crisis is now past its peak. The initial quadrupling of the price of crude oil after the Arabs cut output was a temporary response that has been working its own cure. Higher prices in duced consumers to economize and other producers to step up output. It takes time to adj ust, so these reactions will snowball. In order to keep prices up, the Arabs would have to curtail their output by ever larger amounts. But even if they cut their output to zero, they could not for long keep, the world price of crude at $10 a barrel. Well before that point, the cartel would collapse. The effects of consumer and pro duce,r reactions are already show ing up. The European countries that introduced rationing and re strictions on driving have elimi nated them. World oil prices are weakening. They will soon tumble. When that occurs, it will reveal how superficial are the hysterical cries that we have come to the end of an era and must revolutionize our energy-wasting way of life.

What we have been witnessing is not the end of an era but simply shortsightedness. At home, unfortunately, our problems will not be over so soon. The panicky FEO forced oil com panies to shift so much production to heating oil that we face a glut of heating oil but a paucity of gasoline. The FEO's allocations among states have starved some, amply supplied others. Its order that refineries operating at high levels must sell oil to those operat ing at low levels sounds fine. In practice, however, it reduces the incentive for the recipients to buy oil abroad and produces a waste ful use of oil at home. We have the worst of both worIds: long lines and sharply higher prices - indeed, higher than I believe they would have been without the waste resulting from FEO controls. Is rationing the solution? Far from it. It is the problem. We al ready have rationing of producers and distributors. Coupon ration ing of final consumers would simply be the hair of the dog that bit you.

The way to end long lines at gas stations is to abolish FEO and end all controls on the prices and allo cation of petroleum products. Within a few weeks, your friendly dealer would again be cleaning your windshield with a smile. How can thinking people believe that a government that cannot de liver the mail can deliver gas bet ter than Exxon, Mobil, Texaco, Gulf and the re-st? f) Copyright Newsweek, Inc., March 4, 1974. Reprinted by permission.

c. W. ANDERSON ...-.-...-..5) gu\a.\O{ "GAS TRUCK DRIVER SHOT AND KILL ED ON TOLLWAY," screamed the headline! The second line could have been "... as he was delivering goods on a contract made voluntarily and peacefully between two parties." How come the violence and third party interest here? A good ques tion! But, actually, the killed was the fourth party of this transac tion - a third party having previ 0usly declared an interest in it. The third party was the Govern ment, which had ruled that prices for certain products and for de liveries must have Government ap proval. In effect, two parties who would normally work out a free market price agreement to their mutual advantage were prohibited Mr. Anderson is President of the Employers Association in Milwaukee. from doing so ... and in the proc ess, many felt their rights were infringed and that violence was required to correct the injustice.

Such actions, which take' the law into the a.ggrieved party's hands, are never justified, of course, but they dramatize the fact that vio lence in the exchange of goods and services (the market place) is almost always a result of a third party enforcing its decree or de mand. Normal two-party exchanges are nonviolent because of a won derful economic tool: price, the peaceful regulator. A free-market price is reached by a very compli cated, computer-like weighing of a va.st number of factors which include not only costs but personal buyer preferences, other attrac tions for the buyer's dollars, an265 266 THE FREEMAN May ticipated competition, and the like. When we understand how this process works, we will see our own business and personal activi ties in clearer focus. Also, what is happening in the current energy shortage will be more under standable ! It Takes Two to Trade An example close to all of us may illustrate how this tool works.

If we will ask ourselves how much our own services and time are really worth, we'll find that an honest answer is elusive - actually impossible. This is because our judgment is never the only factc,r in the determination of this price. There is always the value someone else, the buyer (employer), places on our services. As great as we may sometimes think we are, our effective price is not at that high level unless a buyer agrees with us. Only in a system where a dictator or a law sets an arbitrary price is our compensation deter mined without an agreement be tween a buyer and ourselves (seller) . Precisely the same is true of all products and materials. Just as you and I try to get "aU the traf fic will bear" in selling our time and services, so the merchant does this for his goods and the manu facturer for his "widget." And, this is as it should be because all the buyers of our services, or "widgets," try to pay as little as possible for these. The net result of these "conflicting" objectives is a willing, uncoerced exchange by mutual agreement ... with no con flict. Even when the buyer and seller don't agree, no violence oc curs - each simply seeks a seller or buyer elsewhere. No headlines; no one else even aware of what has happened.

Today, third-party interference is all about us working both subtly and with open violence; in either instance force, or the threat of it, hovers over voluntary, peaceful exchange arrangements. The-dang er in this is that we tend to be expedient, to adj ust to each new third-party interference, soon ac cepting it as normal. As evidence, consider only the growing normal cy of teacher strikes and the al most complete acceptance of con trolled interest rates and plane fares. But as we embrace each new third-party interference, our vi sion of a free market blurs and the ideals and the miraculous efficiency of a free, peaceful econ omy become more remote. Free-market pricing is, indeed, a kind of miracle-when we con sider the billions of exchanges made peacefully every day in our economy. Without it, the "energy erisis" will eontinue! Without it, no economy can survive! t) THE FACT that the nation's "crises"

are made in Washington leads many citizens of the United States to the false conclusion that solu tions are to be found there, too. Opinion polls may reveal that the popularity of the President, or of the Congress, or both, has fallen below zero; yet an overwhelming preponderance of these same sup posedly disillusioned citizens will demand that the Federal govern ment "do something" to solve whichever crises happens to be most aggravating at the moment. Let there be no doubt that crises are made in Washington - whether it be a matter of meat, grain, energy, transportation, education, health care, or even inflation. The reason why shortages invariably are caused in Washington is be cause that's where all the raw ma terial is concentrated. PAUL L. POIROT The raw material concentrated in Washington? The meat? The grain? The fuel? No, of course not these things. But meat is not the raw material of a meat short age, nor fuel the raw material of an energy shortage. The only raw material of any shortage of goods or services is coercive intervention.

And only when that coercive in tervention is concentrated in Washington can there be the kind of shortage that amounts to any thing like a crisis. Let's stick to the "energy crisis" for a moment. What is meant by coercive intervention? It is the use of violence to disrupt or inter fere with the peaceful voluntary actions and transactions of willing buyers and sellers. For example, someone steals a gallon of gas, or a whole truckload, or bombs a re finery, or even an entire oil field. 267 268 THE FREEMAN May Those are forms of coercive inter vention, and they are destructive and disruptive of production and trade. But does the theft of a gal lon of gas or the shutdown of a particular oil field result in a shortage or crisis of national or international proportions ? No, it doesn't. The market, if left open and free to function, can readily cope with and adjust to such changes. If supplies are dimin ished to some extent, higher prices will discourage consumption and stimulate production until a new balance is achieved, with no crisis whatsoever.

Major Violence Suppose there is more extensive violence - such as an Israeli-Arab war that closes canals, cuts pipe lines, destroys producing wells and shipping facilities. Wouldn't that bring an energy crisis? Indeed it could, but not necessarily, and not directly. Any crisis that comes of such warfa.re will come only in those countries where the war is used as a.n excuse to close the mar ket and coercively prevent prices from adjusting to the new condi tions of supply and demand. If the citizens of the United States, for instance, allow themselves to be stampeded by war in the Middle East to either demand or allow ceiling prices on oil and gas and other fuels, only then would there be concentrated in Washington the raw material of an energy crisis. And, to repeat, that raw material is coercive intervention: not the war in the Middle East, but the coercion turned against the people of the United States by the government in Washington to which they had surrendered their freedom of choice and freedom to trade.

Market Interference The process of closing the mar ket against citizens is called price control, but a more realistic name would be people control or prohi bition. Citizens are coercively pro hibited from buying or selling precious fuels at market prices. If the legal price is lower than the free market rate, the consequence is a shortage - a demand that will not voluntarily be satisfied at that arbitrary price - a crisis of coer cive intervention that must persist as long as the Federal government chooses to exercise the power of choice citizens have relinquished. What motivates individuals to allow government to close the mar ket may be of interest, but it doesn't have anything to do with the consequent shortage or crisis. Perhaps it was sympathy for Israelites or hatred of Arabs, a desire to befriend the poor, a con cern over pollution, an objective of national self-sufficiency, an at1974 MADE IN WASHINGTON 269 tempt to curb profit margins, or anyone of the other reasons that might have entered 200 million different minds.

The fact is that the power to close the market was concentrated in Washington and was exercised; and no other consequence was pos sible except a shortage and a cri sis, at the prices and under the rules coercively prescribed. To then demand that Washington ex ercise further power, impose ad ditional prohibitions, can only ag gravate the crisis. All that is nec essary to effect an instantaneous and miraculous end to the shortage A Better Idea is to lift all controls over the pro duction and marketing of fuels; leave the matter to the voluntary actions of willing buyers and sell ers in an open market. So, how does one go about lift ing these controls? Write his Con gressman to do something? Per haps that might be helpful. But an alternative is to stop writing Con gressmen to do things for us, do what we can for ourselves and ac cept the responsibility for such risky decisions and actions. Wash ington would soon get the message if we wanted to try freedom. t) IDEAS ON LIBERTY THE USE OF FORCE to battle an idea tends to generate it rather than to kill it. I doubt if an idea has ever been killed by means of force.

The enemy of the free market is an idea - the belief that controls can serve the freedom of man .... Any law or regulation win be nullified whenever enough persons judge it to be unwise and improper, and not until then. Not every person needs to become convinced that it is unwise. Not even 51 per cent of them need to become convinced. All that is necessary is for a few thought leaders lln all walks of life to become convinced because they are the ones to whom many others turn for guidance and advice. It is this understanding among the thought leaders that we now lack and that we must have for success in regaining freedom to trade. F. A. HARPER, "Gaining the Free Market"

GARY NORTH The PuritanExperiment with Price ControLs The court having found by experience, that it would not avail by any law to redress the exces sive rates of laborers' and workmen's wages, etc. (for being restrained, they would either remove to other places where they might have more, or else being able to live by planting and other em ployments of their own, they would not be hired at all), it was therefore referred to the several towns to set the rates among themselves. This took better effect, so that in a voluntary way, by the counsel and persuasion of the elders, and example of some who led the way, they were brought to more moderation than they would by compulsion. But it held not long. Gov. John Winthrop Winthrop's Journal, II, p. 24. Dr. North, economist, lecturer, author, currently is an associate of Cha1cedon, an educational organization dedicated to Christian re search and writing. His latest book is An Introduction to Christian Economics, Craig Press, 1973. He is the editor-publisher of the Remnant Review, a fortnightly economic newsletter.

270 1974 THE PURITAN EXPERIMENT WITH PRICE CONTROLS 271 THE LITTLE band of Pilgrims who settled Plymouth Colony in 1620 are more famous in children's textbooks than their neighbors, the Puritans. Plymouth Rock, Thanksgiving, Miles Standish, and Speaking For Yourself, John, are all ingrained in the story of America's origin. Nevertheless, in terms of historical impact, the Pilgrims never rivaled their Puri tan neighbors. Plymouth Colony remained a relatively isolated and closed society until it finally merged with Massachusetts in 1692. It was Gov. John Winthrop, not Gov. William Bradford, who left his mark on American insti tutions. The first generation of New Englanders were an optimistic bunch. Even those social and re ligious outcasts who wound up in Rhode Island shared this faith in the future. The Puritans, in the famous words of Gov. Winthrop, expected to become a "city on a hill," like the shining community mentioned in the Gospel of Mat thew (5:14) -a light to the dark ness of the world, an example of how godly living, both personal and social, might bring prosperity and peace on earth. By the preach ing of the gospel and the estab lishment of Christian institutions, they believed, Christian recon struction of the world is not only possible but mandatory.l This vision is best seen in the history of New England written by Edward Johnson in 1653 : "I am now pressed for the service of our God Christ, to rebuild the most glori ous Edifice of Mount Zion in a wilderness. . . . Then my dear friend unfold thy hands, for thou and I have much work to do, aye, and all Christian Soldiers in the world throughout."2 The question of what consti tuted a truly godly economic sys tem did not immediately disturb them. The leaders of the colony were sons of the lesser British gentry, made up of men trained in law, theology, and the classical education of the universities, Cambridge and Oxford. Most of the people were farmers, with a scattering of craftsmen and arti sans (too few, as they were, to discover) ; they were literate, re flecting the Puritan emphasis on education, but hardly scholars.

What little economics their lead ers brought with them was bas ically the economics of the medi eval schoolmen. Economics was only just beginning to become an independent discipline in England; there were no professional aca demic economists, and very few men who were more than pamph leteers even among the "profes sionals." Thus, it is not surpris ing that the first two generations of leaders in New England should 272 THE FREEMAN May have fallen back upon "tried and true" medieval economic concepts. One of these was the concept of the just price. A "Just" Price A lot of needless confusion has emerged from discussions of scholars concerning the just price. From the time of Thomas Aquinas right up until the mid-seventeenth century, a "just" price was as sumed to be the market price during "normal" times. No widely read schoolman ever tried to com pute some mathematically precise formula on the basis of ethics; indeed, Aquinas himself had de nied that such precision is possi ble.3 The problem of justice arose when there were disruptions in the market - a war, a famine, a local production monopoly - that made it appear that justice was being thwarted by greedy ex ploiters. Then the standard ap proach was to assemble a group of distinguished, "impartial" lead ers in the community, and they were supposed to determine the proper prices for various com modities. (If this sounds vaguely familiar in the 1970's, it is. Now, however, computers are supposed to guarantee the impartiality.) The goal, officially, was consumer protection. More often, not un surprisingly, the result was the creation of an even more monopolistic guild, for the "just" or "reasonable" price was, in the absence of a competitive ma:rket price, computed on a "cost-plus"

basis. As in World War II, this was more apt to lead to producer protection - from more competi tive producers. 4 These restrictions on free entry - to guarantee "quality" produc tion from "unscrupulous" produc ers who would offer shoddy goods at lower prices - were the foun dation of the medieval guild sys tem. Similar restrictions operated in New England during the first half-century of its existence. Li censing, municipality-enforced in spections, and self-policing by guild members we're all features of the medieval city and the New England town. But the most com mon feature was a system of price and wage controls. Early Controls Almost from the beginning, the colony of the Massachusetts Bay Company placed controls on the wages of artisans. The colony was begun in 1629; in 1630 a law was passed which established wage ceilings for carpenters, joiners, bricklayers, sawyers, and thatch ers. 5 Common laborers we,re lim ited to twelve shillings a day, or six if meat and drink were pro vided by the employer. Any arti san violating this statute was to 1974 THE PURITAN EXPERIMENT WITH PRICE CONTROLS 273 be assessed a ten shilling fine. The effect of these wage ceilings must have presented itself almost im mediately: an excess of demand for the services of artisans over the available supply. Under such conditions, it is always difficult to recruit labor. Within six months, these wage ceilings were repealed, leaving wages "free and at liberty as men shall reasonably agree."6 The implication was clear enough, however: if men should again grow unreasonable, the controls would be reimposed. They were.

The history of price and wage controls in New England is an "on again, off again" affair. The year 1633 brought a new set of regula tions, a law which the magistrates saw fit to repeal in 1635.7 The repeal was of a special nature, however. The civil government im posed a general profit margin of 33 per cent on any goods sold retail in the colonies if the par ticular good was imported. No imported good could therefore be sold above 33 per cent over the London price. 8 The magistrates then inserted a clause which was almost calculated to drive me'r chants and laborers to distraction. Instead of setting forth in the statute a precise, predictable defi nition of what constitutes eco nomic inj ugtice and therefore a breach of the written law, the magistrates chose instead to warn citizens against violating the intent of the law: Whereas the former laws, the one concerning the wages of workmen, the other concerning the prices of commodities, were for diverse good considerations repealed, this present Court, now, for avoiding such mis chiefs as may follow thereupon by such ill-disposed persons as may take liberty to oppress and wrong their neighbors, by taking excessive wages for work, or unreasonable prices for such necessary merchandise or other commodities as shall pass from man to man, it is therefore now ordered, that if any man shall offend in any of the said cases against the true intent of this law, he shall be punished by fine or imprisonment, according to the quality of the offense, as the Court upon lawful trial and convic tion shall adjudge. 9 In short, there was a law against "excess profits" back in 1635, and it provided the law en forcement agents with a consid erably broad unspecified coverage.

The men involved in trade in 1635 had about as little notion of what constituted the limits of state authority in the realm of economics as men have today. The 33 per cent figure was one of the few to appear in the legislation of that era, but men could never be cer tain that the court or courts would uphold the validity of any given transaction. It made for a con274 THE FREEMAN May siderable degree of uncertainty in economic exchange. The Road to Serfdom Max Weber, the great German sociologist, argued on several oc casions that the essence of both theocratic commonwealths and so cialist regimes is this reliance upon substantive concepts of jus tice. The law of the land is gov erned in terms of a higher ethical or theological system than mere economic efficiency or the possi bilities for profit. (It could be argued, of course, that the-em phasis on economic efficiency to the exclusion of everything else is equally religious in impact, equally ethical.) What character izes most capitalist economies, on the other hand, is a system of written, formal, predictable law that inhibits the decision-making power of theocratic rulers or so cialist bureaucrats and planners.

F. A. Hayek concurs with Weber, and his Road to Serfdom, and es pecially The Constitution of Lib erty are eloquent defenses of the rule of formal law as the founda tion of the free society as well as the free market. What is essential to capitalism, both Hayek and Weber agree, is legal predictabil ity. Written law is important, though not absolutely essential. (England has resisted formal written law for centuries, while the Soviet Union has a nice writ ten Constitution that is operation ally impotent.) Men need to know what to expect from the civil gov ernment if they are to plan ra tionally and make economic de cisions effectively. The magistrates, by assuming that the inherited medieval con cern about "ethical" pricing was the Christian approach to econom ic affairs, necessarily created a dilemma for themselves and the citizens of Massachusetts. How does one determine what is a just price? What are the legitimate limits on economic oppression?

How is the individual bargainer to estimate whether or not he is mak ing an infraction against, the "true intent of this law"? What are the legitimate limits on state authority? Prediction becomes ex ceedingly difficult, for the traders can never be sure of how the mag istrates - who were also the final court of appeals - would estimate "the quality of the offense." Another problem was the estab lishment of the locus of authority. (The Soviet Union is eternally caught on the horns of this dilem ma.) Should the local civil govern ment set prices in terms of local conditions, or is the central gov ernment responsible? In October, 1636, the General Court of Massa chusetts delegated the authority to regulate prices and wages to the 1974 THE PURITAN EXPERIMENT WITH PRICE CONTROLS 275 various towns. 1O Nevertheless, the magistrates could not resist the cry of "oppression," and in March of 1638, a committee was set up to investigate complaints against ex orbitant prices and wages. Such ruthless pricing, the authorities stated, is "to the great dishonor of God, the scandal of the gospel,and the grief of diverse of God's peo ple, both here in this land and in the land of our maturity .... "11 The city on a hill was not setting a godly example to the heathen and the people back home in Eng land. The central government con tinued to maintain its right to step in and regulate prices when such action seemed warranted by the situation, but in general the towns did most of the regulating work after 1636. Only with the great Indian war of 1675-76 did the central government step in to take vigorous action against high prices. As Prof. Richard B. Morris summarizes the history of the con troIs: "The codes of 1648 and 1660, and the supplement of 1672, continued substantially the basic law of 1636 against oppression in wages and prices, leaving to the freemen of each town the author ity to settle the rates of pay."12 Connecticut's Wage Code The other Puritan colonies were no better, with the exception of the Pilgrim group in Plymouth.

Connecticut's General Court in sisted that men had not proved reliable when left as "a law unto themselves," and therefore it passed an incredibly detailed wage code. At first, the officials appar ently had no insight into the con sequences of the regulatory night mare they were constructing. Skilled craftsmen were not to ac cept more than 20 pence a day (12 pence to a shilling) from March 10 through October 11, nor above 18 pence for work on any other day during the year. This included carpenters, masons, coopers, smiths, and wheelwrights. All other handicraft workers were prohibited from taking more than 18 pence per day for the first half of the year, nor more than 12 pence during the remainder of the year . Workers were obligated to work an eleven-hour day in the summer, in addition to eating and sleeping, and nine hours in the winter. Price controls were placed on sawed boards.l 3 This jumbled mass of legislation was repealed within a decade. 14 New Haven Colony, which was merged with Connecticut in 1662, imposed controls in 1640, just as the great economic depression of the 1640's struck New England.l 5 No longer would there be the massive exodus of Puritans from England, for the Civil War of the Cromwell era had begun, and Eng276 THE FREEMAN May lish Puritans stayed in the British Isles to fight. Thus, the capital and currency brought in by immi grants from 1630-40 was instant ly cut off. Prices collapsed almost overnight. The irony of imposing price controls in the year of the beginning of a collapse in prices should be obvious. As in the com parable medieval legislation, a group of supposedly disinterested men served as the committee which judged individual situations in cases involving disputes. 16 These controls do not appear in the 1656 law code of the colony, indicating that they had aban doned price controls in the inter vening period.

The Trial of Captain Keayne, a Typical Case Historians are not agreed on the actual effects of such legisla tion. Some think that the Puritans were in dead earnest about enforc ing the codes.17 On the other hand, one scholar has argued that they probably were not that crucial in operation; between 1630 and 1644 - the years of the most rigorous legislation in Massachusetts Bay Colony - less than twenty people were actually convicted for violat ing the wage and price guidelines. Twice as many people were con victed for speaking out against public authority in this period.t 8 The most famous case was the trial of Capt. Robert Keayne, but there is good reason not to regard this as a. typical case. Capt. Keayne, officer of the Ar tillery Company, was a zealous Puritan, a merchant of Boston, a public leader, and the subject of the most famous economic trials of New England. The 1639 trial involved a dispute over his alleged price gouging; the 1642 trial in volved a dispute with a local wom an over the ownership of a sow.

(Incredibly, this was one of the most important trials in American history. The dispute over its re suIt - Keayne was judged innocent by the magistrates - led to the es tablishment of a bicameral legisla ture, for the elected representa tives of the towns, the deputies, sided with Keayne's opponent, goodwife [Goodie] Sherman. The magistrates had vetoed the depu ties, and the deputies finally pressed for a division in the legis lature. A pig helped to destroy unicameralism in America !19) In the 1639 trial, Keayne was con victed of economic oppression, and he was fined £200 (later reduced to £80 by the magistrates, to the dismay of the more "democratic" deputies), and he was forced to confess his economic sins before the First Church in Boston. This is the only case of economic con fession in the archives of the Massachusetts ecclesiastical rec1974 THE PURITAN EXPERIMENT WITH PRICE CONTROLS 277 ords. 20 Thus, far from being typi cal, this famous trial was more of a pre-1640 symbol. Once his "de viant" behavior was exposed pub licly, the public promptly forgot about it, although Keayne never did.

Keayne's last will and testa ment, which has become one of the most important of all primary source documents for early New England history, records his dis approval of the whole affair. He desperately wanted to clear his name, a decade and a half later, even to the point of asking his es ~tate's overseers to petition the General Court to repeal the origi nal sentence "and to return my fine again after all this time of enjoying it.... which I believe is properly due to my estate and will not be comfortable for the country to enjoy."21 His economic prac tices had been fair, he claimed, and well within the bounds of merchants' ethics. Those who had accused him were all liars, he said, and spent several pages of his will to refute them. Furthermore, other men had committed really serious crimes, but they had been fined lightly. Keayne's most incisive ob servation related to the changed status of some of his former de tractors. This statement offers considerable insight into the proc ess of gradual decontrol of the economy after 1650: [My own offense] was so greatly aggravated and with such indigna tion pursued by some, as if no cen sure could be too great or too severe, as if I had not been worthy to have lived upon the earth. [Such offenses] are not only now common almost in every shop and warehouse but even then and ever since with a higher measure of excess, yea even by some of them that were most zealous and had their hands and tongues deepest in my censure. [At that time] they were buyers, [but since then] they are turned sellers and peddling mer chants themselves, so that they [the crimes] are become no offenses now nor are worthy questioning nor taking notice of in others. 22 • What had taken place to change the public's opinion about price controls? First, as Keayne noted, the self-interest of some of the participants had changed, so their ethics had changed. Second, the depression of 1640-45 had begun to slacken in the later 1640's, and one of the sources of revival was the birth of the New England shipping trade. The merchants were important in the economy now - crucial, in fact - and their influence could not be ignored without cost. New England in 1650 was no hotbed of laissez-faire cap italism by any stretch of the imag ination (or manipulation of the footnotes), but the old suspicion toward business was never com pletely revived after the 1640's.

278 THE FREEMAN May A Problem for Politicians Keayne's case had posed a seri ous problem for the political lead ers and the ministers who served as their advisers. (Ministers were not permitted to hold political of fice in New England, for this was regarded as a breach of separation between two God-ordained offices. There was no separation of reli gion and state - except, as always, among the outcasts of Rhode Is land - but there was an official separation of powers, sword and word.) Gov. John Winthrop re cords in his diary the problems confronting the judges. Rev. John Cotton, probably the leading social theorist among the New England clergy, had outlined for the magis trates the standard medieval cri tique of free pricing, already over four centuries old in European thought. Primary rule: no man has the right to buy as cheaply as he can in all cases, nor sell as dearly as he can in all cases, even if the market should permit it.

Second, no man of business should take advantage of another's ig norance to make a profit. Third, he may not sell above the current market price, even to make up for losses on other items, a restriction which was basic to medieval Chris tian casuistry. (Casuistry: the ap plication of general principles to specific circumstances.) In applying these standards in Keayne's case, Winthrop said, the magistrates had tended toward leniency. He offered several rea sons why. First, there was no law prohibiting profit as such. Second, because men in all countries use their advantage to raise retail prices. Third, he was not alone in his fault. But the fundamental point was the final one. It is here that we see the ultimate chink in the armor of all pri~e control schemes, from 1100 A.D. to the present: "Because a certain rule could not be found out for an equal rate between buyer and sell er, though much labor had been bestowed upon it, and diverse laws had been made, which, upon ex perience, were repealed, as being neither safe nor equal."23 Aquinas himself had warned that "the just price of things is not fixed with mathematical precision, but de pends on a kind of estimate, so that a slight addition or subtrac tion would not seem to destroy the equality of justice."24 Finding that elusive "equal rate" proved to be more of a task than successive pieces of legislation could achieve in New England, no less than in Europe as a whole. Noone knew what a just price was.

Kai Erikson has written with respect UYsocial deviants that they perform a kind of communal func tion. The deviant is ushered into his role "by a decisive and often 1974 THE PURITAN EXPERIMENT WITH PRICE CONTROLS 279 dramatic ceremony, yet is retired from it with scarcely a word of public notice."25 This was cer tainly Keayne's fate. He was later elected as a magistrate, and his occasional lapses into drunken ness are noted in the official rec ords only by the imposition of small fines. The humiliation of the trial disturbed him until his dying day, but the Puritan community, having made its point, was content to let bygones be bygones. It had asserted its medieval economic standards, and it promptly went about undermining them, a fact which Keayne saw clearly, but which did not bother the majority of his more energetic contempo raries. So long as a man's con science was sound and his intent was just, he was free to go about his business. Obviously, to prove the state of a man's conscience, especially if the suspect happened to be a leader in Puritan politics, industry, or shipping, would be no easy task. This difficulty would be far more obvious to the magis trates in 1650 than it had been in 1639.

Wage Controls in 1641 The last major attempt by the central government of ]dassachu setts to control wages in peace time came in 1641. The scarcity of money - scarce in comparison to prices common the year beforehad disrupted the economic life of New England. Immigration from England came to a standstill; in deed, a few energetic Puritans re turned to England to participate in the Civil War against Charles 1. Merchants were closing their doors, manufacturers were refus ing to hire laborers. The General Court declared that laborers must accept a mandatory reduction of wages proportional to the reduced price of the particular commodity they labored to make. Laborers, the law declared, "are to be con tent to partake now in the present scarci ty, as well as they had their advantage in the plenty of former times .... "26 At least the magis trates had enough sense to control prices in the gener,al direction of the market. In tying the laborer's wage to the value of his output, they acknowledged the close rela tion between the market price of the produced good and the v,alue of labor's services. In contrast to modern wage controls during a depression - wage floors, compul sory collective bargaining, artifi cial restrictions on entry into la bor markets, and so forth - the Puritans of 1641 understood that laborers should accept a lower wage if the value· of their output w,as falling. Three centuries later, their descendants were not to show equal wisdom in the face of a similar collapse in price expec280 THE FREEMAN May tations, even those who were the officially certified experts in eco nomics, a discipline undreamed of in 1641. The Puritans used ship ping and increased agricultural output to revive their economy; their descendants used deficit financing and a world war, and even then their depression lasted longer .27 The price controls of the seventeenth century, however mis guided, were a lot more sensible than those of the twentieth cen tury.

J675: The Turning Point After 1650, there was a relaxa tion of economic controls, espe cially price controls. (The controls on product quality and guild out put did continue, sporadic-ally.) As the new shipping trade expanded, the market expanded. This expan sion of market transactions, espe cially in the Boston vicinity, encou raged the greater specialization of production, and hence encouraged greater economic productivity. Furthermore, as more people en tered the markets, both as produc ers and buyers, the ability of in dividuals to m,anipulate specific prices decreased. There was more competition, greater knowledge concerning alternative prices and substitutes, and more familiarity with trade. The price spread be tween producer and consumer nat urally decreased as participants became more skilled in their trans actions. Thus, the need for specific legislation was reduced, as far as the magistrates were concerned.

Medieval just-price theory had al ways accepted market pricing as valid, except in "uncommon" or emergency conditions, and with the expansion of the free market came a respite from political interven tion into market pricing. The last great outburst of intervention came in 1675-76, during the seri ous Indian uprising known as King Philip's War. People seldom hear of King Philip's War today, yet in terms of the percentage of Americans who died in any war, this was by f.ar the worst. The Indians, led by their prince who was known as King Philip by the whites, struck without warning up and down the edge of the New England frontier. For almost a year it looked as though they would triumph, or at least seriously restrict European settlement in the area. Estimates of the loss of life have ranged above ten percent of the total pop ulation of the whites, unmatched by any other war. Thousands lost their homes and fled to the urban areas of more populated towns.

Understandably, such population shifts put terrible burdens on the New England economy. Outfitting the militia and paying the salaries intensified the disruption, as men 1974 THE PURITAN EXPERIMENT WITH PRICE CONTROLS 281 left their farms and shops to join the armed forces. Pastoral Pessimism For years, Puritan preaching had become increasingly pessimis tic in approach. After 1660, the old theological optimism had begun to fade, and a new sermon style ap peared. Known today as the "jere miad," these sermons w,arned the people against the consequences of sin and the failure of the young generation to join the churches as members (membership had always been a minority affair in New England, but after 1660 it was even more of a minority affair). Michael Wigglesworth's famous poem, the Day of Doom, and his less f.amous God's Controversy with New England, became best sellers in their day (the early 1660's). Pastors warned of God's impending judgment; the old faith in New England as a triumphant "city on a hill" appeared less and less in the sermons. The Indian up rising seemed to confirm all the dire prophecies of the ministers.

Rev. Increase Mather (who along with his son Cotton became the most prolific writing team in American history) pressed the General Court to pass a list of "Provoking Evils" that had brought on the curse of the w,ar. The "democratic" deputies in stantly followed his advice; the "aristocratic" magistrates held out for a week, until the news of another Indian victory forced them into ,action. The list included the usual social failings: the ignoring of God's warnings, the many un catechized children in the com monwealth, the decline of church membership, the wearing of wigs, long hair among men, and luxuri ous wardrobes, the existence of Quakers (this issue had faded in the early 1650's). (Topless fash ions among women - far more common in 1675 than today - drew a fine of 90 per cent less than the fine for being a Quaker, which may indicate something about Puritan priorities in 1675.) But the list of "Provoking Evils" could not be rounded out without calling attention to various economic op pressions. Double restitution for price gouging was imposed (for the amount of the overcharge); fines could also be imposed by the court. (Today, we also hear sug gestions to impose a system of res titution for crime victims, but with this grim variation: the vic tims are to be reimbursed by the taxpayers, not the criminals. 28 ) Complaints against artisans and merchants could be lodged by "vic tims," but there was no mention of inflated agricultural prices. 29 The key concern of the magis trates was shown in the following year, 1676. Inhabitants of differ282 THE FREEMAN May ent counties were charging vary ing prices for the same goods sold to the militia. (You can be vir tually assured that the higher prices appeared in those areas where the militia was actively en gaged at any point in time.) The General Court asserted that goods and services are the same in value, wherever found, that is, a rifle is a rifle, in any county of Massa chusetts. The answer to this prob lem, said the Court, was the im position of full-scale price con trols, and this became law on May 3, 1676. This was the last fling; not for another century, when a new war broke out, would any New England legislature pass such a comprehensive scheme of price controls. So they created a central council : It is ordered by this Court, that a committee shall be chosen in each county to examine the rates put upon all manner of things used or expend ed for the public, and to view the par ticular bills allowed by the militia of each town for expences, until the first of this instant [month]. And so far as they judge right and equal, to pass the same under their hands. And the committees abovesaid are hereby or dered to choose one man from among themselves, in every [ one] of the counties, who shall meet at Boston the first fourth day in July next, and bring with them the accounts allowed and passed in the several counties, where and when their work shall be to compare them together, and to reg ulate the whole, as to them shall seem most just and equal .... 30 One Last Try, Then a Century of Freedom A very similar piece of legisla tion was passed by the Connecti cut legislature in the same month. 31 Under the pressure of war, the magistrates and deputies could not resist the lure of offi cially stable, universal prices. The lessons provided by four and a half decades of price control legislation had not sunk in; the leaders still thought that they could legislate away the economic realities of scarcity and dislocation. Fortu nately for the-New England econ omy, the war ended before the year was over; the price controls of 1676 were allowed to lapse be fore the shortages, black markets, and disrupted supplies that are the inevitable products of price controls, could appear.

This was the high-water mark for price controls in New England. English mercantilism imposed controls on external trade, but not until 1776 were the people of New England to see full-scale price and wage controls. (Those controls proved to be economically disas trous. 32 ) After 1676, a whole series of restraints on free bar gaining were allowed to fade away. Controls on fashion 1974 THE PURITAN EXPERIMENT WITH PRICE CONTROLS 283 status-oriented sumptuary laws disappeared. As discussed in a pre vious article, controls on the buy ing and selling of land were abandoned. 33 Clearly, it was the end of an era. A half-century of experimentation with intermittent price and wage controls had ended. There was one exception to this general rule. The Massachusetts legislature did try, from time to time, to regulate the price and quality of bread. This continued until 1720. Finally, the legislature passed one last bill, an incredibly complex set of regulations on the price and size of each loaf - four general price categories, 23 dif ferent weights, three types (white, wheaton, household) - and ex plained why such a law was nec essary. The preface of this bill is an archetypal summary of the total ineffectiveness of price con trols through the ages: ... the act made and passed in the eighth year of King William III, en titled "an act for the due assize of bread," is found not effectual for the good ends and purposes therein de signed, and a little or no observance has been made thereof, but covetous and evil-disposed persons have, for their own gain, deceived and op pressed his majesty's subjects, more especially the poorer sort .... 34 I have not been able to ascertain if anyone was ever brought to trial as a result of this law, but there is no indication in the col ony records that I have been able to locate which indicates that this control of bread prices was ever attempted again. My guess is that this absence is not due to the suc cess of the law in thwarting "cov etous and evil-disposed persons,"

but rather that the law was, as all the others before it had been, a failure. The search for the "just price" was over. Conclusion The Puritans had to be a prac tical people. The New England wilderness was a rugged testing ground. Commitment to principle was important for their religious and psychological survival, but they were always convinced that Christianity is an eminently prac tical religion. If a particular pol icy failed again and again, then Puritan political leaders and min isters were willing to rethink the policy. Either it had to be based on a false principle, or else there had to be a misapplication of a general principle. After half a century of failure with price con trol legislation, Puritans were quite willing to let the civil gov ernment retreat from the market's pricing activities. They did not stop preaching about economic op pression or personal immorality in economic transactions, but they no 284 THE FREEMAN May longer sought to involve the ma chinery of civil government in questions of cost and price.

The important fact for Ameri can economic history is that the old belief, imported uncritically in the name of Christianity, that the civil government needs to set "just" prices, was abandoned. A medieval legacy - itself the prod uct more of Aristotelian logic than biblical exposition - no longer was assumed to be necessary in a Christian commonwealth. Men were left free to truck and barter at prices determined by mutual consent. A crucial break with an intellectual tradition that had been somewhat hostile to the free mar ket was accomplished in 1676. Americans in peacetime would be left free to pursue their vocations as they chose, not as some govern mental panel of "disinterested, distinguished persons" might choose. ~ - Footnotes1 On the optimism of the first genera tion of Puritans in New England, see Aletha Joy Gilsdorf, "The Puritan Apo calypse: New England Eschatology in the Seventeenth Century" (Ph.D.> disserta tion, history, Yale University, 1966), esp.

pp. 119-20. See also lain Murray, The Puritan Hope (London: Banner of Truth, 1971) . 2 J. Franklin Jameson (ed.), Johnson's Wonder-Working Providence, 1628-1651 (New York: Barnes & Noble, [1910] 1952), p.52. 3 Thomas Aquinas, Summa Theologica, II-II, Quest. 77. 4 Price competition broadens the scope of the market by making goods and ser vices available to buyers formerly too poor to enter the market. It was the fun damental form of competition in the com ing of modern capitalism: Max Weber, General Economic History (New York: Collier [1920] 1961), p. 230. 5 Nathaniel B. Shurtleff (ed.), Records of the Governor and Company of the Mas sachusetts Bay in New England (5 vols.; Boston: William White, Commonwealth Printer, 1853), I, p. 74. [Cited hereafter as Mass. Col. Recs.] 6 Ibid., I, p. 84. 7 Ibid., I, pp. 104, 159-60. 8 Ibid., I, pp. 159-60: the maximum rate was 4d/s, that is, 4 pence per shilling, or 4/12, or 33%.

9 Ibid., I, p. 160. 10 Ibid., I, p. 183. 11 Ibid., I, p. 223. 12 Richard B. Morris, Government and Labor in Early America (New York: Co lumbia University Press, 1941), p. 62. 13 J. Hammond Trumball and Charles Hoadly (eds.), The Public Records of the Colony of Connecticut (15 vols.; New York: A.M.S. Press, [1850-90] 1968), I, (1641), p. 65. [Cited hereafter as Conn. Col. Recs.] 14 Ibid., I, (1650), p. 205. 15 Charles Hoadly (ed.), Records of the Colony and Plantation of New Haven, 1630-1649 (Hartford: for the editor, 1857), pp. 35-36, 52, 55. 16 Ibid., p. 55. 17 Morris, Government & Labor, p. 72. 18 Marrion H. Gottfried, "The First Depression in Massachusetts," New Eng land Quarterly, XI (1936), p. 640. 19 T. H. Breen, The Character of the Good Ruler (New Haven: Yale Univers ity Press, 1970), p. 79. The debate raged for two years, 1642-44. The split occurred in 1644. 20 Emil Oberholzer, Delinquent Saints (New York: Columbia University Press, 1956), p. 189.

21 Bernard Bailyn (ed.), The Apologia of Robert Keayne (New York: Harper Torchbook, 1964), p. 51.

1974 THE PURITAN EXPERIMENT WITH PRICE CONTROLS 285 22 Ibid., p. 48. 23 James K. Hosmer (ed.), Winthrop's Journal: "History of New England," 1630 1649 (2 vols.; New York: Barnes & Noble, [1908] 1966), I, p. 316. 24 Aquinas, Summa Theologica, II-II, Quest. 77. 25 Kai T. Erikson, Wayward Puritans (New York: Wiley, 1966), p. 16. 26 Mass. Col. Rees., I, p. 326. 27 The colonies did impose various kinds of trade restrictions, including em bargoes, government monopsonies, and so forth, which undoubtedly prolonged the depression. 28 Cf. Trial (May / June, 1972), the pub lication of the American Trial Lawyers Association. 29 Mass. Col. Rees., V, pp. 59ff. 30 Ibid., V, p. 79. 31 Conn. Col. Recs., V, pp. iv-v. 32 Percy Greaves, "From Price Control to Valley Forge, 1771'-1778," THE FREE MAN (Feb., 1972). 33 Gary North, "The Puritan Experi ment in Common Ownership," THE FREEMAN (April, 1974). 34 Acts and Resolves of the Province of Massachusetts Bay (21 vols.; Boston: State Printer, 1869 ...... ) , II, p. 166.

IDEAS ON LIBERTY Price Fixing in Revolu~~ionary France THE ARGUMENTS in the convention relative to the matter ran the whole gamut from the principles of economic liberty advocated by the economists of the day to the radical abstractions of Robes pierre and his followers, who swept commerce aside by maintain ing that" the food necessary to man is sacred as life itself," and "The fruits of the earth like the atmosphere belong to all men.~' One of the most interE~sting of the many suggestions made in the convention was that of Barbaroux who advocated "a plan to form local associations to collect and circulate information about the crops. In other words, for coercion he would substitute co operation, believing that the French citizens, farmers and mer chants included, would not turn a deaf ear to an appeal for com mon action against the oncoming peril" (famine). Price fixing finally became one of the characteristic features of the Reign of Terror, and when Robespierre and his councilors passed through the streets of Paris in the carts of the executioners the mob jeered saying, "There goes the dirty maximum."

HENRY E. BOURNE OF ALL aspects of the free market economic system, the role of prof it-making by individuals is the one most subject to controversy. An air of apology seems to permeate any discussion of profit-making, even among those who generally commend the market society. Companies seem duty-bound to defend their latest financial re ports. Any increase in profits is contrasted with earlier periods of losses or "inadequate" profits. The relative smallness of profits is demonstrated in terms of capital invested, annual sales, or total wages. Public relations depart ments tremble over reported com pany success and gear themselves for the inevitable onsla.ught such favorable reports will bring. Mr. Anderson has taught economics and busi ness management and now is Executive Secre tary and Director of Seminars at the Founda tion for Economic Education. 286 Windfall Profits ROBERT G. ANDERSON Among the charges most feared is the accusation that the firm has reaped windfall profits. While "normal" profits might be tolerat ed, anything above so-called nor malcy is invariably subject to pub lic charges of exploitation. The implication subtly drawn is that windfall profits accrue as a result of someone else's losses. While the public might overlook small in justices, large profits are simply intolerable.

This massive assault on profit making reflects a belief that prof its are something extra, the elimi nation of which would result in a general improvement in human welfare, that profits are gained at the expense of others- "unearned" and "unjust." This anti-profit mentality stems from a failure to ·understand the true nature and source of profits, the integral relationship existing 1974 WINDFAI,L PROFITS 287 between profits and losses, and their basic importance to the func tioning of the market system. It is a failure to understand that an attack upon profits, even excess or windfall profits, is an attack upon the market system itself. Within the framework of a free market price system, profits show which producers have best satis fied the wants of consumers. Prof its appear as the result of actions taken earlier by those producers most successful in anticipating and serving the demands of the consumer. Profits demonstrate how well a producer has employed scarce resources in the past to ward the satisfaction of consumer wants. Profits are a record of ex perience, a reward for satisfac tory service rendered.

The process of profit-making, however, is not the same thing as the amount of profits recorded. Profits earned in the past serve as no specific guide for future pro-· ductive activity, though the fact that they were earned may offer hope of future profits. Past profit-· able activity in a given form of production assures nothing about the future. Attempts to imitate activities that have been profit-· able have resulted in many busi-· ness failures. The opportunity for profit-mak·· ing stems from the changing val·· ues of consumers over time, and the reflection of these changing values on prices. The individual who foresees correctly these de veloping changes in market prices, and acts upon his foresight, will be the profit-maker. Adjusting to Change If man were omniscient, or if his values were to remain static, the concept of profit and loss would not exist. But fallibility and change are part of the human con dition and necessarily affect man's economic behavior.

Today's market prices are reflec tions of values previously held by consumers and of the production those values generated. The prices so established will be either too high or too low with respect to the market conditions of tomorrow, conditions which could only be known by knowing the future, which is impossible. The profit-maker, however, must attempt the impossible. The un certainty of the future overrides all human action. The fact that fu ture prices are uncertain does not dissuade the potential profit maker from acting. It is this potential of profit making that provides the entre preneur's motivation and incentive for production. The entrepreneur identifies resources in today's mar ket that he believes will possess a higher market value tomorrow. If 288 THE FREEMAN May his foresight about the future values of the consumers is correct, a profit can be realized. The mag nitude of the profit will depend upon the degree of change in fu ture market prices and the entre preneurial decision to act on his foresight.

When the rise in prices is large, the entrepreneur holding the re sources so affected will experience large profits. The identification of this development as excess or windfall profits has been grossly misleading. The fact that he did not anticipate the precise degree of change in prices is no basis for denying the owner of the resourc es his right to the gain. The concept of windfall profit merely observes that large gains can be realized from drastic changes in consumer evaluations and their resultant impact on mar ket prices. The owner of the af fected resources experiences a dramatic and sudden increase in the value of his property. But, if consumer evaluations change in the other direction, market prices can just as suddenly and drama tically fall, causing windfall loss es to the owners of resources so affected. Windfall profits or losses simply emphasize the risk of productive activity resulting from the chang ing values of consumers. While the entrepreneur attempts to calculate future market conditions, he is not omniscient. An under estimate of future prices may yield him a higher profit than he had an ticipated when he took productive action, but that same higher profit becomes the magnet for an influx of new competitive activity.

A Reliable Guide With the profit and loss system as their guide, competing entre preneurs decide how resources shall be directed for future con sumption. Anticipated profitability attracts the productive capital of the entrepreneurs, but the ultimate prof).t is determined by the actions of the consumers. The entrepre neur's astuteness in judging the consumer's demands will decide whether profits or losses are to be realized by him in the future. A significant contributor to a smoothly functioning market is the much maligned speculator. As an entrepreneur, the speculator acts in anticipation of the changing val ues of consumers. His buying and selling of resources creates a more orderly market, reducing erratic fluctuations in prices, and thus holds down the magnitude and se verity of gains and losses. Accurate foresight by the speculator miti gates the errors of resource pricing and the consequent large profits or losses brought on by changing consumer tastes.

1974 WINDFAIIL PROFITS 289 Once profits are understood to evolve from the actions of the con sumers, it becomes pointless to speak of profits as being "fair," "normal," "excess," or whatever. The decision on how to allocate existing resources into future use is made by entrepreneurs on the basis of their interpretation of the consumer's actions in the market place of the future. Through a sub sequent return of profits and losses to the entrepreneur, the consumer is constantly signaling entrepre neurs, as to how to direct scarce re sources toward best satisfying con sumer wants. This relationship between the entrepreneur and the consumer is much like that of a revocable trust. The trustee-entrepreneur allocates resources for the benefit of the trustor-consumer, a relationship perpetuated by profits and revoked by losses. Through the signal of these profits and losses the con sumer steers the producer.

The allure of profit-making is the catalyst for productive activ ity. Sparked by an entrepreneurial decision on the future state of the market, resources are continually being directed into hopefully pro ductive use. The soundness of the original decision is reflected by profits or losses generated by the venture. Without some prospect that profits will substantiate the original decision, no productive activity would be undertaken. The problem of determining how re sources should be allocated could not be resolved. There would be no response to the will of the consumer in the market. The market would be in a state of chaos. The Fundamental Issue Concerns Property Rights The real controversy over the concept of excess or windfall pro fits evolves over who should be the beneficiary of these subsequent unanticipated changes in market prices. The fundamental issue in this controversy is one of property rights. In a free market system the entrepreneur subjects his property to risk in a prod ucti ve acti vity in the hope of generating a profit. If his judgment of the future demand of the consumers proves correct, his property increases in value, and he profits. The extent of his gain is thus determined by the con sumer. In a market system of pri vate ownership the gains would therefore accrue to the owner of the property.

Similarly, the burden of wind fall losses is borne by the entre preneur. If he directs his property into productive activities later re jected by the consumer's changing values, he is responsible for his erroneous decision. The sudden ab stention from buying on the part of the consumers causes a fall in 290 THE FREEMAN May the value of his property and a loss to the entrepreneur. Within such a market system, the entrepreneur subjects his property to risk-to the gain or loss that accrues from the changing tastes of the con sumer. The notion that windfall profits accrue at another's expense or loss is patently false. They result from the same forces that bring wind fall losses: changes in the values of consumers. Such windfalls re sult from future uncertainty, and should accrue to the owners who expose their property to the risks of production. Profits or Losses Stem from Changing Values of Consumers Once it is understood that pro ,fits and losses evolve from the changing values of consumers, it becomes obvious that abolishing windfall profits or windfall losses is impossible. Fallibility and change are a part of our nature, and both large errors and great changes are inevitable. To deny to the entrepreneur the gains or losses resulting from such error or change does not eliminate gains or losses; it eliminates entrepre neurs, disrupts the market, and ultimately leaves everyone under the dead hand of government con trol.

As long as consumers continue to express their changing values in the market place, profits, antic ipated or not, will continue to materialize. The only question is whether the gain in the value of the entrepreneur's property should accrue to the owner or to some one else. When the government attempts to make itself the beneficiary of windfall profits, it can only disrupt the productive processes of the market. The natural adjustments in supply and dem.and that occur in the free market are hampered, and further disequilibrium develops. The consumer's urgent signal for increased production, which is the essence of windfall profits, cannot be heard or acted upon by pro ducers to whom the market is closed. The ultimate consequence must inevitably be even higher prices for the resources involved. Thus, the expropriation of wind fall profits is not only counterpro ductive, but also denies the sov ereignty of the consumer in the structuring of society.

If the individual as consumer is to retain his personal liberty, if he is to remain the sovereign force in the structuring of society, he must be free to reflect fully his chang ing values in the market place. This requires that the profit and loss signal must remain unham pered. For that is the only signal to which entrepreneurs can reason ably respond. ~ BRIAN SUMMERS TheRole of Savings ONE of the least appreciated as pects of the private enterprise sys tem is the role of savings in in creasing the wealth of all the peo ple. That the savings of some can increase the wealth of all may seem, at first glance, paradoxical, so let us consider for a moment just what happens when an individual - call him Joe - forgoes a little spending to put a sum in the bank. Some people say: "The money that Joe has saved is money that won't be spent. The decrease in Joe's consumption can only mean a commensurate decrease in produc tion and a resulting rise in unem ployment. Saving should really be discouraged."

Saving is a form of spending! Joe's money doesn't just sit in the bank; the bank must lend it to someone in order to earn money to pay Joe interest. This lending is not 'only a form of spending, it is, Mr. Summers is a member of the staff of the Foundation for Eccnomic Education. in fact, the only kind of spending that actually increases wealth: in vestment. What happens when money is in vested? Say a corporation goes to Joe's bank and borrows money to build a factory. The corporation then spends Joe's money on build ing materials, machines, tools, and labor. The money that Joe has saved winds up being spent just the same as if he had spent it him self. There is no decrease in pro duction and no rise in unemploy ment. It fact, as we shall see, there is an inc'rease in production and a decline in unemployment! Soon the factory is complete. The corporation then proceeds to hire workers. Joe's savings have in creased employment!

How does the corporation hire workers? By offering better condi tions of employment than their competitors. Perhaps the most im portant condition - as far as work ers are concerned - is the level of 291 292 THE FREEMAN May wages. In all probability, the work ers in the new factory have been lured by higher salaries. Joe's sav ings, whether he realizes it or not, have increased the wealth of work ers in a factory he probably has never seen. "You said that savings increase the wealth of ~ll the people. What about the 210 million Americans who don't work in Joe's factory?" Competitive Sidding Consider first the workers in competing factories. If these fac tories don't want to lose their workers to new factories, they had better raise their wages. Joe's sav ings have increased salaries throughout an entire industry! As for workers in other fields, we should remember that most of them are potential factory workers.

If you want to keep your best farm hand from going off to work in Joe's industry or taking a job that has been vacated by someone else who went off to work in Joe's in dustry, you had better give him a raise. Competition among employ ers means that Joe's savings, and the savings of millions of other Americans, raise the wages of all workers. "That is still not everybody! How about people who don't work?" Every man, woman, and child worker and nonworker - is a con sumer. The end of economic activity - saving, factory building, working, and all the rest - is con sumption. We should always keep this end in mind. The higher wages we have talked about would prove meaningless if they didn't result in increased consumption. Joe's savings benefit everyone because the factory, machines, and tools they helped build are designed to produce goods that consumers will prefer to those already being offered on the market. The corpo ration that borrowed money from Joe's bank took a financial risk be cause they think that they can sat isfy consumers better than their competitors. In other words, they hope to give the consumer more for his money. If they fail, then the loss is theirs. If they succeed, then consumers consume more of what they want and thus enjoy a higher standard of living. The consumer - each and everyone of us - is the final judge and ultimate winner.

"Savings seem to be pretty good after all. What should be done to encourage more saving?" Instead of doing things to en courage saving, we should undo things that discourage it. In par ticular, the law itself is probably the greatest hindrance potential savers face. Let us make a brief survey of some of the ways in which the law discourages saving. To begin with, people can't save money they no longer have. Every 1974 THE ROLE OF SAVINGS 293 dollar that goes in taxes is a dollar that won't be saved. Add up all the taxes that Joe pays, and he may find himself withdrawing from, rather than adding to, his bank account. Tax Disincentives In addition to the general level of taxation, several specific taxes are especially discouraging to savers. Corporate profits taxes, capital gains taxes, and taxes on dividends and bank account inter est hit the saver particularly hard and must be taken into account by every potential saver.

High as taxes are, government spending is even higher. The dif·, ference, of course, is "made up" by running fiat money off the govern-· ment printing presses - inflation .. And inflation, combined with other ramifications of overextended gov·· ernment, is enough to give even the most devoted saver cause to re·· think his frugal habits. The saver sees inflation gallop·· ing along faster than legal limits on interest rates. Even though he actually has lost money, in terms of purchasing power, he finds him,· self forced to pay taxes on his "earnings." The saver sees inflation increas ing the paper value of his capital holdings. When he sells his hold ings he must pay capital gain:s taxes - even though his "capital gains," in terms of real wealth, ac tually may have been capital losses. The saver sees inflation increas ing the replacement costs of capital equipment - machines, spare parts, tools - while depreciation allow ances are determined by original costs. He finds that depreciation allowances have become inadequate to pay for new equipment to re place the old.

The saver sees inflation increas ing the paper profits of his corpo ration. In particular, inventory "profits" - the difference between the cost of producing an item and the cost of later replacing it in inventory after it has been sold are a direct result of inflation. Were all these inventory "profits" available for investment in new in ventory, the corporation could at least hold its own. However, almost half these "profits," on the average, wind up as corporate profits taxes. Thus, the saver may find his corpo ration losing money and paying profits taxes at the same time. Inflation itself, even without be ing combined with various govern mental controls and taxes, is dis couraging to potential savers. With prices rising, people are encour aged to make purchases before prices go any higher, rather than to save for future purchases. This brief survey of ways in which the law discourages saving is, of course, by no means complete.

294 THE FREEMAN May However, I would like to conclude with one factor that can never be measured, but which is nonethe less very real. This is the factor of uncertainty. In recent years, the United States government has grown so interventionistic that ev ery few months the president is announcing "strong new" economic measures. Who knows what is next? Already we hear congress men calling for a virtual national ization of oil companies. Who is going to invest under such circum stances? To complete the destruc tion of the American economy, the government does not have to ex propriate the means of production. It merely has to make conditions so onerous and so frightful that no one will dare invest in private en terprise. A free market, and the belief that the market will continue to be free, is all the encouragement savers ever need. ® IDEAS ON LIBERTY Sharing the Gains ALL economic gains must be eventually shared. That is a basic principle of such broad application that it might be called a gen eral "law of economics."

This is not socialism. It is the essence of the free economy. Nor is it "redistribution." It is plain distribution, or diffusion of wealth. It works this way: 1. All business is done by agreement of some kind. 2. The agreements are voluntary. 3. Nobody agrees to anything unless he finds it in some way to his advantage. These add together to make the essential reason why economic well-being is more widely distributed in the United States than it ever has been in any other country. For in a free economy, everybody gets a share of the values other people have to offer. But they also have to share a part of the values they themselves have to offer. HAROLD M. FLEMING The Blessingsof Diversity LEONARD E. READ Were all alike:, instead of free, T'would mean the end of me and thee. THERE is an old wheeze that goes something like this: "The whole world is queer but thee and me, and sometimes I think thee a trifle peculiar." The line affixes a bit of humor to a lamentable fact: most people are addicted to conformity. The truth? Were all like thee or me, all would perish.

So, let's make the case for di versity. The first part of the case is easy. Were everyone alike, would we be all men - or all women? There wouldn't even be an Adam and Eve situation, only an uninhabited Eden! Suppose all of us were identical in food preference to those who eat nothing but fish. The fish supply would diminish to the point that all would starve or die fishing. A moment's reflec tion reveals the nonsense of be like-me-ness as related to the strictly physical aspects of our lives - even were all identical to thee or me. I t is when we move from func tions of the body to those of the mind that the case for diversity most needs to be examined. Peo-· pIe, by and large, seem instinc tively to resist the idea of divers ity in thinking. Why do not others think and believe as you or I do? Had a person of my convictions lived in Athens twenty-three cen turies ago, his disagreement with Plato's concept of a philosopher king surely would have disturbed the great thinker, even as you and I tend to be disturbed by those who do not see eye to eye with us.

The philosopher-king idea as sumes an overlord - absolute rulership - someone who will di rect what millions of citizens shall do and how they shall behave. Thinking for self is precluded; the king will do that for us. Until recent times, kingship czar, der Fuhrer, the Mikado, a ruler by whatever label - was gen erally accepted as the only alterna tive to societal chaos. There had to be a ruler - despite the miser able record - or society would col lapse. Why the failures? Plato's im plication is that power hitherto had not been united ·to wisdom in one man. Obviously, kingship is 295 296 THE FREEMAN May not to be trusted to power-crazed shallowpates. Plato's solution? Let only philosophers be kings! Then all of a nation's citizens would be blessed, being the bene ficiaries of the king's wisdom. Which Philosopher Should Have Control? Now, just who is it that quali fies as a philosopher? How desig nated? There are two ways. First is self-designation. Though not aspiring to kingship, Plato no doubt thought of himself as a philosopher. Look around at our contemporaries. Observe the countless thousands, none of whom doubts his own wisdom; each in his judgment the perfect philos opher. And fit for kingship!

The second way to be labeled a philosopher is by popular designa tion. Reflect on those thus ac claimed, ranging from Confucius, Socrates, Plato, Maimonides, Ma chiavelli, Marx, Berdyaev, to sev eral of our time. Go over the list - some 400 - read of their ideas and find one competent to rule our lives. 1 Not one remotely qualifies. No such individual ever existed or ever will. And the genuine phi losopher, at least of our time, would shun rule, even if it were offered! 1 See The Treasury of Philosophy, ed ited by Dagobert D. Runes (New York: The Philosophical Library, Inc., 1955). Granted, each of these philos ophers was in search of truth. Their findings? No two the same! One came upon an idea here, an other there; now and then a bit of truth, occasionally an out-and out error, such as Plato's philos opher-king or Marx's "from each according to ability, to each ac cording to need." The worst that could befall mankind would be to give anyone philosopher the power to impose his limited vision on everyone else - including other philosophers. Each of us should stri ve to live by such wisdom as he can glean, while working to expand his vision. But there is no short cut to the attainment of this objective.

When one first reflects on the blessings of diversity in thinking, he might want to make an excep tion: should not the devotees of liberty look askance at anti-free dom thinking? Of what possible help are Marx and Engels and the countless other opponents? My answer: They are an absolute nec essity to the furtherance of our ideal, to the attainment of our aspirations. Bluntly, there is no way to go uphill expect as there be hills to climb. In other words, we have no chance of moving toward or perfecting the freedom way of life short of obstacles to overcome - now and forever! It is in the discernment of error that 1974 THE BLESSINGS OF DIVERSITY 297 truth comes to light. The art of becoming is composed of acts of overcoming. Let us suppose that no one to day knows any more about the freedom philosophy than I knew some forty years ago. Heaven for bid! What jolted me awake? Not someone agreeing with me; it was the system of wage, price and ex change controls - the National In dustrial Recovery Act. This was not exactly the philosopher-king, but almost as bad: the politician bureaucrat. Knowing that to be wrong, I had to explore, look for, try to discover what is right. The wrong gave me a toehold, as we say; it served as a stimulant, a springboard. But for NIRA or some similar wrong, I might well have remained ideologically disin terested. So, was not the NIRA a blessing of diversity?

Nearly everyone can recall sim ilar experiences, his thought proc esses stimulated by one or two wrongs. But how easy it is to be lieve that a few leaps upward in learning suffice. A momentary awakening and then falling to sleep again ! Worse than falling asleep, however, is to harbor the illusion of journey's end, the thought that one's job is done. During the past four decades, since shocked into awareness by NIRA, I have reacted to every anti-freedom notion that has come to my attention. This has been my "magnificent obsession." The re ward? In all modesty, I am far better informed about such mat ters than I was some forty years ago. Yet, the road looms ahead, and I have much further to go. To highlight the danger of stag nation, let it be assumed that I understand far more than I now do - that I have become better than anyone else! Arrival? Indeed not; whatever the stage, it is only the beginning. However far one travels from his beginning in ig norance, it is but a start toward the infinite unknown.

Hold the fantasy for a moment: that I have become better than all others. Then assume that the thoughts of everyone were identi cal to mine. A better world? No! Such would spell the end of hu man evolution or emergence mankind in a state of stagnation. To seek Truth is to pursue the Infinite. The more one advances, the further into the distance stretches the road ahead. The more one knows, the more he knows there is to know. Human freedom is an aspira tion, never to be perfectly achieved but, at best, only to be more closely approximated. Have no fear of diverse ideas. Welcome them! They are blessings, perhaps in disguise, but steppingstones, none theless. ® Competition: BERNARD H. SIEGAN REZONING to permit the construc tion of a maj or regional shopping center has been requested for a large tract of land located about fifteen minutes from where I live, and some of my neighbors are up set and the usual maneuvering and protesting are taking place. Some local officials have expressed op position because the new shopping center, by creating additional com petition, will diminish the profits of existing businesses within the city. It has even been suggested that merchants make a mass pro test against the proposed center.

There is no doubt that the more business facilities in existence, the greater the competition each will Copyright 1973 Bernard H. Siegan Mr. Siegan is the author of Land Use Without Zoning and many articles on the subject. He practiced law for 20 years in Chicago before moving in 1973 to La Jolla, California where he is an adjunct professor of law at the Uni versity of San Diego Law School. 298 confront. But this is about the worst reason in a free enterprise society to deny anyone access to the market. We live' in a society which is highly dependent upon competition. We rely upon compe tition to protect the consumer and stimulate the introduction of new, more and better products and ser vices. There is no governmental agency available to accomplish these vital tasks: nor can govern ment benefit the consumer and society even remotely as well, as any traveler to the socialist coun tries can confirm. The consumer is king when competition abounds; he is a serf when it is controlled and restricted.

A new shopping center will have to provide something better or different to attract customers and the! older centers may have to change their methods and improve products and services to keep 1974 COMPETITION: KEY TO CONSUMER DOMINANCE 299 pace. For consumers, the result will be some or many lower prices and larger varieties and better se~· lections. Life will be made that much easier and more comfortable for many people. A Competitive Society The concept of open competi·· tion is innate to this country, as evidenced by the antitrust law8 which are intended to make the deliberate elimination of competi· tion a crime. If, for instance, sev eral builders within a city were to agree to build a small number of apartment buildings and to pre vent any others from being built, laws would quickly be adopted, if they did not exist, to dissolve this agreement and possibly even pe nalize the parties involved. This is because such an agreement would give the initiators special econom ic powers.

Zoning accomplishes the same result when it limits construction or development. The owners of ex isting buildings would in either stua tion be able to charge higher rents and/or offer poorer services and/ or avoid undertaking repairs and improvements. But it might be said, perhaps there might be too much, or Hcut throat" competition and we need zoning to save us from such a fate. The answer is that there can never be too much competition from the consumer's vantage point - and everyone is a consumer. Business men who voluntarily enter a mar ket should bear the risk of compe tition; they can take into account this risk when they commit their funds. Moreover, why should those who are part of the market be given preferred status over those who want to enter it? Nor is it possible for anyone to determine the "correct" amount of business competition. There are always many uncertainties in the business world and it is difficult to evaluate precisely market condi tions pertinent to any proposed de velopment. Future economic and population trends are exceedingly difficult to project accurately for anyone area, and this is com pounded by changes in demand caused by the shifting desires and needs of people, all of which may glut or unglut a market. This is a risk that can much better be borne by entrepreneurs than by con sumers.

Those who invest their money have the greatest incentive and are consequently in the best posi tion to estimate this risk, and that includes both the developers and their lenders, for all large projects require major long-term financing. To return to the case of the proposed shopping center - many of the owners of existing busi nesses must contemplate it with 300 THE FREEMAN May as much delight as they would an impending hurricane. Self-interest would dictate opposition to any ad ditional competition. And unfortunately, such self interest has often been a major factor in zoning decisions; busi nessmen have frequently used overt or covert influence to try to kill a proposed rezoning that would create more competition. Would-be developers can also be expected to exert similar efforts and, regret tably, the outcome of the competi tion for the favor of the local pol iticians may determine whether development will occur.

Some contend that this state of affairs must be tolerated because zoning regulations will in the long run provide for better quality, both materially and environmen tally. What such a stand fails to comprehend are the benefits achieved by society whenever new development occurs in a highly competitive market. Consider this example. Because it is not zoned, the apartment mar ket is exceedingly competitive in Houston and there is usually a significant vacancy rate. Yet new buildings continue to be erected even in the face of such difficul ties. Why? Because the owner or developer of a new project believes that he can provide something dif ferent or better than what is cur rently available, and will be able therefore to attract people to buy or rent his housing in preference to his competitors'. He has detected some void in the market and believes he can satisfy it and still obtain a profit able return. This may involve pro viding more amenities, larger rooms, more recreational facilities, more open space, better aesthetics, or perhaps lower rents. It requires skill, ingenuity, innovation and much time and effort on the part of the developer, yet the commu nity is likely to benefit as much or more than he does. In this manner, society is rendered enormously valuable services without cost.

This process has led to the very high standards of living in this country. To restrict it is to sub stantially retard the progress and well-being of our society. t) IDEAS ON LIBERTY A.ntiSocial Behavior THE COVETOUS PERSON lives as if the world were made altogether for him, and not he for the world; to take in everything and part with nothing. CALEB c. COLTON In Quest of JUSTICE MANY THINKERS, jurists, philoso phers and statesmen have searched across the centuries for the mean ing and content of justice. Like many open-textured concepts, the essence of the word has proved elu sive. Justice should be constrained· to a consideration of interpersonal relationships and should exclude relationships between man and the universe. However, such circumscription suffers one potential hazard: it ex cludes man-to-impersonal-object or nonhuman relationships. For ex ample, our categorization elimi nates consideration of justice vis a-vis the hypothetical situation where a man kicks a friendly dog, drowns a kitten, or tea~es a bird.

Upon reflection, the suggested boundaries demonstrate no imped iment to analysis of justice. First, mistreatment of animals belonging to (the property of) anMr. Foley, a partner in Souther, Spaulding, Kinsey, Williamson & Schwabe, practices law in Portland, Oregon. RIDGWAY K. FOLEY, JR. other human being finds inclusion in the human relationships posit ed. If I drown your pet kitten, I exhibit malice toward you in a subtly different way than if I punch you in the nose, but malice all the same. Second, man-non-man relation ships manifest something concern ing the nature of man-the-actor; the characteristics impelling one to kick a dog or to torture a horse generally reveal themselves in other human affairs. Thus, exclu sion of the specific example does not necessarily exclude consider ation of the fundamental attrib utes. Third, human-impersonal object liaisons probably do not deserve consideration within the ambit of the notion of justice. Rather, my treatment of spiders, of forests, of farmhouses, and the like (beyond any incidental human relation ships) concerns my goodness and my essential nature. As such, the matters rather become issues for determination between me and my 301 302 THE FREEMAN May God; in other words, they relate to justice in the broader sense, that is, justice beyond the power of man to effect and affect. Thus, man can affect events in this mil ieu to the extent that he can alter his life and mold his character to conform to the nature of the uni verse, but he has no power to al ter the standards and norms which measure that nature. Justice, as we are concerned with it in this essay, considers only relationships between two or more human beings where the conduct of one can af fect the life of another.

Justice: The Seminal Norm One quality, above all others, dis tinguishes man from other inhab i tants of this planet: he possesses the power to make choices (rea soned decisions between alterna tives) and each choice he makes constitutes a moral choice. Concomitant to this quality ex ists the power of man to affect the lives of his fellow human beings. Man can attract, persuade, or force other men to act in the way he de sires them to act. Man's choices af fect not only the actor but also other persons resident, now or at other times, upon the landscape. In a very real sense, what I do today can expand or limit the choices available to those in my commu nity and to those who may come after me. Thus, we can define justice as respect for free choic'e. Justice de mands that no man interfere with choices affecting the life, liberty, or property of another human be ing by coercion, fraud, or duress.

Each man must be left free to de termine his own destiny, to seek his own goals, to live his own life as he sees fit. No one can effectively live a life for another and none should try to do so. Spoken in an other manner, each individual should always treat other human beings as human beings, never as objects. To treat a person as a per son compels the actor to respect the essential humanity of his fel lows, and that essential humanity can be defined as one's right to choose. Each person exists as a child of God, and deserves that treatment and respect which should be reserved for the Creative En ergy underlying creation, whether termed a personal God or an im personal natural law. Justice obligates man to eschew violence and to stress attraction. 1 Human beings may justifiably em ploy force in limited circumstanc es: to repel invasion, to quell in surrection, to impede the imposi tion of force and fraud upon un1 See Read, Leonard E., "How to Ad vance Liberty" (The Foundation For Economic Education, Inc., Irvington-on Hudson, New York, 1964).

1974 IN QUEST OF JUSTICE 303 willing combatants, and to settle disputes. Writ large, force should only be utilized to parry force. "Might does not make right" un derlies the whole proposition. Moreover, one should only employ that amount of force necessary to discourage or rebuff the violence initially practiced; any greater ap plication represents a coercive in tervention into the arena which must be left unfettered to the choice-making apparatus of free men. Justice Reflects the Nature of Man At least three conflicting views of mankind find current accept ance in political philosophy. For ease of analysis, we may refer to these as statism, anarchy, and vol untarism. 2 Quite possibly, no imperfect hu man being perfectly fits the cate gory of statist, anarchist, or vol untarist. Each of us may profess principles to which we aspire, and from which we fall short. Thus we speak of a statist as one who be lieves in state intervention into the lives of men, to some degree beyond 2 I refer to a voluntarist as one who accepts a limited government, a state employed to discourage coercion and misrepresentation and to provide for common settlement of disputes. "Free dom philosopher" and "libertarian" have often gained favor as synonyms, but at least the latter has been recently co opted by all manner of thinkers, render ing categorization most difficult.

the intervention accepted by the voluntarist which is solely to repel force and fraud. Obviously this appellation does not apply with equal zeal to each person;3 it may seem ill-conceived to apply the identical brand to Marxians, dem ocratic socialists, and to business men who favor subsidies and price controls. Yet each, in his own way, represents the point of view that encourages state action to deprive free men of free choice. For sake of the present analysis, then, stat ist refers to one favoring partial or total state intervention in hu man affairs beyond the prevention of force and fraud, anarchist re fers to one who decries all states and all state activity, and voluntar ist refers to one who believes that the state possesses limited valid functions: the prevention of force and fraud and. the administration of common justice. An individual's conception of justice mirrors his view of the nature of mankind. To the statist, man represents a perfectible being, capable and suitable for molding by the social engineer. Each per son possessing this philosophy, in greater or lesser dimension, sees man as an object, as a creature whose choice may be limited with justification and impunity. To the 3 The use and application of labels in the political spectrum merit separate treatment.

304 THE FREEMAN May extent that he adheres to such a tenet, the statist treats man as something less than human. The anarchist likewise views man as perfectible, but as volun tarily or self-perfectible. Because man can achieve these heights, the state represents an unnecessary appendage to society. Justice would not countenance the use of organ ized force for the anarchist - man must retain a full circle of alterna tives, even to the extent of visiting violence upon his neighbors. While a single paragraph cannot recon cile the pacifistic anarchist view with the concept of private justice and retaliatory force, and while such a subject merits deeper in spection,4 suffice it to say that the anarchist sees man as so perfect ible that no constriction of his range of alternatives accords with justice, so long as the actor re mains willing to accept the physi cal, natural, and moral conse quences of his choice.

The voluntarist holds quite a different view of human nature and occupies a perch midway be tween statism and anarchy. He per ceives of man as fallible and im perfectible, although capable of improvement. Because no person can achieve perfection, or even closely approach that ideal, no in4 See, e.g., LeFevre, Robert, "Justice on Trial," Reason (Vol. 3, No. 11) Feb ruary 1972, page 18. dividual from the mass can, or ought to, dominate the life of an other, equally infinite, individual. Since man retains a dark side, a predilection to violence, and fails to act with perfect reason, force lurks pervasively throughout the world. Force may be reasonably re buffed only by organized force, else man's lot degenerates into civil chaos. Private retaliation invites a misreading of the situation and misapplication of coercive power; misapplication of force invites re taliation when the retaliatory force exceeds that which is necessary to allay the fraud and coercion ini tially instituted. Examples of mis use of private force litter history books: private armies, vigilante systems, and private detectives, acting without restraint of law, seem predisposed to avoid charity and deny recognition of personal rights. Private systems of protec tion and the settlement of disputes depend upon a perfect rationality by at least the vast majority of cit izens occupying a given terri tory.

The voluntarist doubts that man can achieve that station; until he does, man's nature requires a lim ited collective force in accordance with a respect for free choice. A Fundamental Premise: Man in Conflict Almost all individuals, what ever their persuasion on the polit1974 IN QUEST OF JUSTICE 305 ical or philosophical spectrum, agree that human beings conflict and disagree with one another. An imperfect being can anticipate no other result. Some men cannot con quer their sinister side and exhibit a proneness to violence and deceit. Choice, the most individualistic at tribute of human nature, presup poses that choosing beings will pick alternative courses of conduct, and that with billions of persons exercising free choice, some con flict of choice will be inevitable. 5 Most human conflicts resolve by voluntary means. I meet you on the sidewalk and one of us steps aside to allow the other to pass. My stereo disturbs your slumber; I re duce the volume willingly when you ask. Doe and Roe both reach the bargain counter at the same time and each wishes to purchase the last remaining item; the sales clerk makes an immediate choice to sell to Doe, thinking that he appear ed first and Roe, while disap pointed, turns away. Clearly, the more voluntary accommodation possible in society, the better.

Nevertheless, some conflicts do not afford a simple resolution, be5 Such is the nature of freedom that millions upon millions of value judg ments and choices cause basically little conflict. Freedom works better than co ercion because it approaches Infinite Truth. See my essay "Choice or Chains" (April 1974 Freeman) for an examina tion of this phenomenon. cause of the rational difficulty of choosing between the two or more conflicting claims, or because of the imperfect personalities of the par ticipants. The statist tends to view more conflicts as incapable of solu tion by voluntary means than either the anarchist or the voluntarist, and he exhibits no hesitancy in call ing in the troops to coercively de cide each and every issue the way some group in power believes that it should be solved. Such fetters manifest little or no respect for free choice and can be character ized as unj ust.

The anarchist and the volunta rist, on the other hand, believe in the voluntary settlement of dis putes in the widest possible degree consonant with good order. They differ in the mechanism to be uti lized in solution of disagreements irreconcilable by voluntary means. The voluntarist opts for a limited government function - the force ful administration of justice which will settle controversies which the parties cannot settle themselves and which will compel acceptance of the decision. The an archist favors voluntary arbitra tion and private courts, apparently believing that the presumably rati onal parties will accede to the juris diction of these, tribunals and ac cept an unfavorable decision. Pra.c ticing lawyers and experienced litigants display familiarity with 306 THE FREEMAN May recalcitrant parties who refuse to pay judgments voluntarily or to answer questions on cross-exami nation or who disrupt courtrooms with obnoxious conduct. Absent sanctions and an agreement to dis agree as rational beings, voluntary arbitration and private courts offer no compelling answer to the prob lem.

In any event, individuals illus tra ting all phases of the spectrum recognize the need for rules to settle disputes, in either a private or a public milieu, and that such norms must accord with justice. The statist sees more disputes sub ject to arbitrary and coercive de termination than his brethren, but this in no way gainsays that need for rules of decision. The an archist wishes contests adjudi cated by private agencies, but such tribunals must decide on the basis of rules harmonizing wi,th justice. Let us examine certain fundamen tal principles which accord with justice as respect for free choice, rules which can produce a volun tary society upon faithful adher ence, recognizing that one cannot exhaustively state all premises and qualifications appropriate to these norms in so short a space. 6 6 Many of these concepts are open textured and require definition, which will not admit of perfect solution. See Foley, Ridgway K., Jr., "The Myth of the Perfect Solution," 23 Freeman No.

2,104,111-113 (February, 1973). Justice: The Subsidiary Norms • Each man should keep his promises. Freedom to contract with regard to all manner of ac tivity carries with it an interre lated aspect, similar to the fact that individual responsibility serves as the reverse side to per sonal liberty. Every man should be required to adhere to his solemn promises to the extent permitted by external forces and to the ex tent that another human being has justifiably relied upon those promises, if the promise was not initially extorted by force or fraud. Application of this rule does not denigrate free choice: it re spects it. If one voluntarily chooses a course of conduct af fecting another person, the actor has predetermined a result and should not be heard to mulct the other party of his due. One can refuse to contract altogether, but once he enters into a contractual relationship he must be held bound by the terms of the agreement he actually entered, and no other.

• Every individual should pay for harms voluntarily caused. If man receives the right to act freely and to choose his own des tiny, it follows that he must accept the moral responsibility for his choices. One result of fr.ee choice 1974 IN QUEST OF JUSTICE 307 witnesses occasional collisions be tween conflicting human beings. If one voluntarily acting human being causes harm to another per son by virtue of fault, be it an intentional or careless act, the ac tor should be required to com pensate the victim to the extent of his harm, and no more. Problems of causation, fault and amount of damages have plagued legal theorists for cen turies, much as the problems of the implication of promises and the objective manifestations of assent. Mankind cannot fully know and appreciate the interweaving of cause-and-effect, nor can it rec ognize all avenues of fault with out looking inside the human mind and soul, nor can it measure the harm directly attributable to a single act. Each problem can be solved only by finite approxima tion applied by fallible judges.

The principle serves as a lodestar to be sought as an ultimate goal. • Each individual should pay his own way. Every choice carries with it a real cost, sometimes clearly apparent to an observer, sometimes hidden and awaiting analysis. As nearly as possible, each choosing human being should accept the consequences of his con duct, and one consequence is the cost. Homely put, "there ain't no such thing as a free lunch." Someone must pay. A welfare payment or a subsidy puts money substi tutes in the pocket of certain citi zens, but it requires a taking from others in the community. Mini mum wage laws force marginal workers from the market and de prive them of (cost them) their dignity. Examples proliferate. Ap plication of this precept requires assessment of real cost in terms of Bastiat's dictum: The Seen and The Unseen. • No one is entitled to a wind fall. Administration of justice should prevent unjust enrichment.

Just as each man should pay his own way, he should pay no more. If mischance or external forces occasion a loss to one person and a gain to another without a vol untary trade, the office of law should be to restore the parties to their preexisting status. • The c'reator of value should determ,ine its retention and distri bution. Man creates value. He ap plies his mind and his labor (di rect or stored [capital]) to na tural resources and produces goods and services which carry with them a subjective value. Thus, man also assesses value. Nothing material can be said to possess an inherent value absent relationship to a human being. Individuals place value on goods and services; 308 THE FREEMAN May they express that value by the value they have acquired which they are willing to trade for those goods and services. The value discussed, sometimes denoted property, belongs to the creator (owner) or his designate.

Thus, justice must recognize the right to private property in order to respect free choice. An essen tial collateral tenet of justice im pels that retention or distribution or destruction of value must rest with the creator of that value or his transferee or nominee. 7 Man denies justice to the extent that he sanctions nonproducers who dominate or destroy value created noncoercively by others. Just as man must pay his own way, so also must man not be compelled to pay someone else's way. • Each citizen of a state should bear an equal share of the expense of governance. Each individual citizen residing in a territory des ignated a state should bear an equal share of the common burden which includes the expense of ad ministering that state. He should pay for any services directly ren dered to him at his request. Each citizen benefits from the protec tion rendered by the state and 7 See Read, Leonard E., "Justice ver sus Social Justice," Notes From FEE (The Foundation For Economic Educa tion, Inc., Irvington-on-Hudson, New York, May 1972).

from the alleviation of civil chaos and no one can properly claim that one person acquires a greater benefit than another. In addition, any citizen receiving a direct ben efit at his request should pay his own way, including payment for such a service. • No individual or group of in dividuals should initiate force or employ fraud against others. Only one man-concocted limitation upon free choice deserves respect: no man, acting singly or collectively, should act fraudulently or coer cively toward his fellow man. To the extent that he violates this maxim, justice approves applica tion of counterforce by the victim or by society at large, but the retaliatory force must not exceed that amount absolutely necessary to dispel the initial act else the retaliator, individual or state, be comes the aggressor and violates this norm. • Treat similar instances in sim ilar fashion. Anglo-American common-law tradition rests in part on the ancient concepts of stare dec,isis (the matter has been de cided before) and res judic'ata (the thing has been determined previously) . These Latin legal tenets represent application of the fundamental norm that similar situations or disputes shouln be 1974 IN QUEST OF JUSTICE 309 decided in harmony or like fash ion with other disputes of the same nature, involving either the same or different parties.

Similar treatment of similar sit uations finds justification in sev eral reasons. First, the norm rests upon the principle of predictability. Citi zens ought to be able to plan their lives in full knowledge of the con sequences which will attach legally to their conduct. Second, the rule finds support in the concept of reliance. In sub stantive commercial and contrac tual areas of life, where planning performs a salient function, par ties ought to be able to rely upon certain results as a consequence of their actions. Third, earlier decisions contain the accumulated wisdom of the ages. The law builds on past ex perience and should not be lightly disregarded. Once courts of justice carefully consider a case and ren der a reasoned decision, transient causes ought not disturb the prin ciple determined. Fourth, failure to adhere to de cided rules increases the costs of the administration of justice. Ab sent the effective role of prece dent, more cases containing recur rent issues will have to be decided by trial and appellate courts.

Fifth, the sound use of prece dent promotes a government of settled laws, not rule by finite man. A consistent result from case to case follows in the Anglo American tradition as opposed to the civilian or Continental system which disregards stare decisis. Sixth, in any jural system or decision-making context, a natural tendency exists - the human incli nation to look over one's shoulder to discern what was done before. The doctrine of treating like cases in like manner recognizes this tendency by providing an orderly method for use of past experience, a convenient tool for quickly and easily disposing of disputes. Seventh, finally, and most im portantly, adherence to precedent accords with the essential nature of justice, respect for free choice. Decisions once reached upon a ra tional basis should not be lightly overturned. To do so alters our government from one of laws to one of men. A flexible "rule" is no rule at all, but amounts to meas uring "justice" by the length of the chancellor's foot. Respect for free choice impels recognition of the consequences attaching to the operation of that choice-mak ing power, and if these conse quences can flow willy-nilly with out predictability, man denigrates the essential humanity of his fel lows and bears no responsibility for his moral choices. One cannot meaningfully choose unless his 310 THE FREEMAN May choice can affect and effect results. 8 • Adjudge all men equally be fore the law. Interrelated with the concept of deciding similar cases in similar fashion, justice also re quires equality before the law. In those arenas in which law (organ ized coercion) plays a salient role, each man must receive identical treatment. Favoritism does not belong in a just society.

One must scrutinize this norm with caution and avoid the misap prehension so common today. Mod ern society witnesses a. false egal itarianism stemming from misuse of the words of the Declaration of Independence ("all men are created equal") and brought to frui tion during the French Revo lution ("Liberty, Equality, Fra ternity") . Men are not equal; their distinction and their indi viduality represents the vitality of the human race and an essen tial attribute of mankind. Men possess different appearances and diff ering talents, distinct life spans and dissimilar values. En forced equality means enforced mediocrity, where all individuals are cut and stretched to fit Pro crustes' Bed. Coerced egalitarian ism demands application of de structive force to individuals and, 8 See essay cited in footnote 5, op. cit. except in the limited areas of pre vention of fraud and force and administration of justice, justice disparages the use of force.

Equality before the law imposes a burden upon mankind, acting as a coercive state, to provide both substantive and procedural due process to all citizens vis-a-vis in terpersonal and individual-state relations. For example, no man shall be tried for a crime in absentia; each man is entitled to his day in court in both civil and criminal causes; every citizen is entitled to fair notice and a com plete hearing before a competent and unbiased tribunal; rank and station shall not determine appli cation of sanctions; open trials prevail over secret Star Cha.mbers; norms should not apply retroac tively. A host of protective and pre ventive rules assure that each man brought to trial and faced with potential loss of freedom will re ceive equal treatment to other in dividuals similarly situated. Conclusion. Justice lies within. It repre sents an ideal toward which we must strive in our relationships with fellow human beings. If each of us will treat each other human being as ,a person, and respect the essential humanity of that person by respecting his right to free choice, we will achieve justice.

Peaceand Justice DEAN RUSSELL PLATO sought peace and justice in the person of the "philosopher king" whose edicts would be en forced by the warrior class. This search for the philosopher king is still with us today. He's now called the "good man" - and when he gains the power of gov ernment, it's presumed that he'll enforce just laws justly, and will thereby bring peace. For guidance on the use of pow er, and its effect on peace, I rec ommend the famous dictums of Acton and Emerson: "All power [even the power of a teacher over his students] tends to corrupt; and absolute power corrupts absolutely." ". . . means and ends . . . cannot be severed; for . . . the end pre exists in the means .... " Dr. Russell is Director, Graduate Program in Management, of The College of Racine in Wisconsin. For example, if force is used by one person against another, the objective of the user of the force is to use force, i.e., to compel the other person to do something he doesn't want to do. And the means used to compel action by an un willing person must necessarily in volve the use of force in one form or another. Means and ends are here not merely similar; they are the same thing.

Likewise, if a person's objective for another person is freedom of choice, the means to implement his objective can be nothing but vol untary action. Again, means and ends are the same thing. Or as Emerson phrased it, "the end pre exists in the means." Of course, this correlation of means and ends has no bearing on the te~dency of all of us to ration alize and justify our particular 311 312 THE FREEMAN May use of force. And most unfortu nately, it's this rationalization of the act (not the physical act it self) that the user of compulsion prefers to announce as his obj ec tive. For example, the robber claims that he's only getting back what has been exploited from him by society; therefore, his objective isn't robbery but justice. And the president of the United States seems sincerely convinced that he's merely performing his duty to pre serve freedom for everyone when he advocates and enforces con scription. But after all the ration alizations are advanced and tabu lated, this undeniable fact re mains: When one uses force, that's precisely what he has in mind; else he wouldn't use it.

The First Step If means and ends are the same thing (as Emerson and I believe) , and if all power of every kind tends to corrupt (as Acton and I are convinced), then the current efforts for peace and justice in the United States, and in the world in general, are not soundly based. Since these efforts mostly ignore the above postulates, they are no more likely to succeed today than they have succeeded in the past. While the actual fighting by vari ous organized armies may cease temporarily for various reasons (e.g., Israel and Egypt in 196773), real peace is still not gained; and, of course, justice is a matter of opinion. The first step toward peace is for each person to be peaceful. This is a decision that any person can make whenever he wants to. If all persons were peaceful, then peace would exist; and along with it, there would then also exist as much justice (an undefinable emo tion) as we fallible human beings are capable of understanding.

Since peace and justice must nec essarily begin with a unilateral decision by one person alone, I have decided (without consulting anyone) to live as follows: I will never use (or advocate the use of) force or violence or com pulsion against any peaceful per son. I won't even advocate the passing of a law that will force any peaceful person to follow my concepts of how people should live and act. Necessary Controls Of course, I'll still campaign for laws against murderers, polluters of the common water supply, and molesters of children. And I will also continue to advocate compul sory traffic regulations designed to help all of us equally to get to our destinations. Laws such as these, however, are not in any way violations of my pledge toward peaceful persons.

197.4 PEACE AND JUSTICE 313 I will do unto others only what others want done unto them; and if what they want done isn't what I want to do, then I'll at least have the common decency to leave them alone. This philosophy of life grew out of my early experience as an evangelist to whom no one would listen, thus causing me to wish for a law to compel other people to live right, that is, the way I was living and wanted them to live for their own good, of course. In short, my contribution to peace is to be peaceful, and my contribution to justice is to stop A Controlling Power advocating laws to make other people live as I do. If you care to join me in peace - and this con cept of justice - welcome; that will make two of us who have de cided to be peaceful. There's no organization to join, no armband to wear, no action programs of any kind. And the only immediate reward is the pos sibility of an internal peace that sometimes comes to a person when he stops using and advocating compulsion against any peaceful person, even for the latter's own good. ~ IDEAS ON ~ LIBERTY MEN ARE QUALIFIED for civil liberty in exact proportion to their disposition to put moral chains upon their own appetites; in pro portion as their love of justice is above their rapacity; in propor tion as their soundness and sobriety of understanding is above their vanity and presumption; in proportion as they are more disposed to listen to the counsels of the wise and good, in prefer ence to the flattery of knaves. Society cannot exist unless a con trolling power upon will and appetite be placed somewhere, and the less of it there is within, the more there must be without. It is ordained in the eternal constitution of things, that men of in temperate minds cannot be free. Their passions forge their fetters.

EDMUND BURKE, A Letter from Mr. Burke to a Member of the National Assembly in Answer to Some Objections to His Book on French Affairs, VGTV.

A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN LEONARD READ is the very anti thesis of the arm twister. He does not teeter on your lapel to shout in your ear. But his phrases, gent ly repeated in his wisely rumina tive essays, do succeed in grabbing people. There is his reiterative use of the phrase "the freedom philos ophy," for example. Pundits have spent many hours trying to figure out a modern substitute for the once-honorable word "liberalism," which has been stolen by the' col lectivists. The' best the pundits have been able to come up with is the clumsy word "libertarian ism." It doesn't quite fill the bill and I have noticed that people like Professor Ben Rogge of Wabash College, who is himself the com314 plete libertarian, now use the phrase "the freedom philosophy" to indicate their body of beliefs. In his latest collection of free dom philosophy essays, Having My Way (Foundation for Eco nomic Education, $4.00 cloth, $2.50 paper), Leonard Read tosses off the word "dictocrat" on page eleven. It was a new coinage to me, and I placed a check beside it. Further on in the book Mr.

Read made an adjective of it, "dic tocratic," using the adjective three times within three pa.ges. Rather good, I thought. "Dictocrat" cov ers a multitude of characters who try to get their way by force, in cluding the force of seizing other people's money to pa.y for their 1974 HAVING ]\iY WAY 315 experiments. "Dictocrat" brings out the common strain that you will find in Communists, .Social ists, Anarchists-of-the-deed, So cial Democrats, Majority Rule fanatics, Planners, Collectivists, and what.-not, including all the many varieties of Progressive or Liberal (modern sense) who need forgiveness, for they know not what they do. Let me hasten to say that Mr. Read is not being pejorative in his use of "dictocrat." He doesn't pin it on specific people, knowing that to do so would only succeed in alienating possible converts to his own freedom philosophy. Mr. Read has his Marquis of Queensbury code. He uses the word in a coolly scientific spirit. A "dictocratic scheme," to him, is the antithesis of a "free market scheme." That is all there is to it, and it is enough.

Economics and Morality The older he grows, the more Leonard Read thinks that econom ics must be considered a branch of moral philosophy. If one does not have moral scruples in the market place, one will inevitably .distort the processes of production and ex change. If, by using intervention ist compulsions, you take more out of the system of exchange than you put into it, you will be guilty of diminishing productivity and multiplying scarcity. This, to Mr. Read, is thievery. Try as he may, Mr. Read cannot imagine a society totally composed of thieves: pa.ra sites, he says, die in the absence of a host. He is forced to conclude that economics and morality de pend on the same values. Since they do, there is little sense in talking about keeping economics "value free." With morality on his mind, Mr. Read is more concerned with what the interventionist, or dictocratic, philosophy does to bring inj ustice to individuals than he is with the usual statistical expressions of economic thinking. Above-market wages and below-market hours create unemployment, a statistical category. But this is the cold, "value free" way of putting it.

Mr. Read prefers to emphasize that minimum wage laws make the relatively poor suffer. They be come victims of a legally sanc tioned form of theft. The Power of Example Mr. Read would object to any characterization of his essays as sermons. A sermon is a form of intrusion - the dictionary defines it as "a lecture on conduct or duty," or as a "homily." Leonard Read lectures no one; he writes, so he says, to clear things up for himself in order that he may get on with his own life-project of 316 THE FREEMAN May trying to perfect his own under standing. If he can improve him self to the point of becoming an example for other people, then so much the better. But he does not mean to be intrusive. He has found that the surest way of scaring peo ple off is to set out consciously to do the other fellow good. For all his lack of intrusiveness, however, Mr. Read conducts a very subtle pastorate. He preaches the Word by redefining it. As he be comes older he finds himself going more and more back to the roots of language. He cannot believe that it makes sense to let the "meek" inherit the earth if the meek be defined as "timid, shrink ing, apologetic" Casper Milque toasts. But, traced back through Greek to its Aramaic original, "meek" becomes something differ ent. As Gerald Heard has said, the word stands for something oppo site to "overbearing" or "aggres sive." "Meek" suggested itself to the King James translators be cause, in Elizabethan usage, it im plied a "wonderful, inherent, teachability." So the Beatitude should read, "Blessed are the teachable, for they shall inherit the earth." As for the' meaning of "earth" in this context, Mr. Read is reasonably sure that it relates to "man's earthly potentialities."

Learning from Mistakes Mr. Read is always willing to change his mind, if his pursuit of root definitions leads him to be lieve that he has been wrong. Once he believed that it was "unfor tunate" that inequality should ex ist. Now he considers it would be a terrible misfortune if everyone could be made equal. We all ben efit from the discoveries of the gifted. True, people should be re garded as "equal before the law," but this very equality must mean that crooks and murderers will be treated differently than honest men. It is not even true to say that everyone is "equal in the sight of God." The Deity is not to be insulted by implying that Judas Iscariot could be the "equal" of Peter when called before the Heavenly bar. God, says Mr. Read, should not be condemned as near sighted. In talking about willingness to confess past errors, Mr. Read tells a remarkable story about his en counter almost thirty years ago with John Maynard Keynes. He had invited Keynes to oppose J.

Reuben Clark, President of the Church of Jesus Christ of L.atter Day Saints, on the subject of the U.S. foreign aid program. Keynes declined the invitation, saying "My mission is to obtain the Brit ish loan. Were I to stand before 1974 HAVING MY WAY 317 your audience and say what I now think, which is what I would do, I would disparage my mission." This is historically very inter esting. It accords with Keynes's praise of Hayek's The Road to Serfdom. Mr. Read doesn't want to single out Keynes as being alone in the fault of refusing to make public a confession of error. But, in view of the harm that "Keynesian" economics has done the human race, I hope Mr. Read's historical revelation will be read on the campuses where Keynes is still regarded as the master. ~ THE ENTERPRISING AMERI CANS: A BUSINESS HISTORY OF THE UNITED STATES by John Chamberlain, new and up dated edition. (New York: Harper & Row, 1974) 283 pages, $8.95.

Reviewer : John Davenport THE REPUBLICATIONof John Cham berlain's Enterprising Americans comes at an opportune time. Busi nessmen 'all over the world find themselves under attack and thus far, judged by public opinion polls, have had little success in meeting their critics. One reason for this fail ure, it seems to me, is that business is still portrayed by friend and foe as a kind of special interest group entitled to a fair share of profits, just as labor is portrayed as a separate group en titled to its fair share of wages and salaries. Our social philoso phers have succumbed to the di sease of "groupitus" which makes them advocates of ever stronger government measures to "counter vail" the power of highly organ ized and contending minorities. At the end of the road looms some form of the corporate state. This is the Galbraithian view of things and Mr. Chamberlain will have none of it. In his preface he defines business as "creative busy-ness" that includes just about everybody from factory worker and farmer to manager, investor and entrepreneur. From this van tage point he then traces Ameri can economic development from pre-colonial times forward. The result is a rich and many-plied story focusing on the inner dynam ics and motivations of men who transformed a continent into a highly industrialized society which, for all its faults and cur rent problems, still gives its citi zens a better shake than any other society in history.

In the foreground as the tale pro gresses stand certain prime movers, 318 THE FREEMAN May familiar to most college students though all too often portrayed in unflattering terms - Henry Ford, Andrew Carnegie, J. P. Morgan, Rockefeller, and the genius of Edi son. But interwoven in the story are other aspects of America all too often forgotten in our haste to deify, or more often today to villify, the work of the titans. We watch William Pepperrell of Kittery, Maine, transforming the rocky shores of New England into a jumping-off-place for ships and world-spanning trade. We are re minded of the effects in Montana and the Dakotas of Sam Colt's revolver and his development of mass production methods. The du Ponts of Wilmington back a sci entist, Dr. Wallace Crowthers, and we have nylon and the artificial fibers which today largely clothe a nation. Bell Laboratories and Dr. William Shockley perfect the tiny transistor, and lo! - we enter the age of the computer - not to men tion the space rocket and satellite probing the far reaches of Mars and the universe.

It is because Mr. Chamberlain has an eye for such details and interrelated consequences, and be cause he has cast his book in the form of history rather than ab stract argument, that it carries a profound message. The message is that the much-maligned business man, far from being a greedy exploiter, is in fact the essential intermediary between man, the consumer, and man, the producer - between the demands of the pub lic for goods, and the desire of most of us for jobs and productive work. In a complex civilization characterized by the division of labor, someone must play this role, and on the evidence, the business man has played it surpassing well. In the end Mr. Chamberlain's history of what businessmen have done is a spirited defense of the market process which, in support ing the free society, may one day make possible the good society. ~ POPULATION, RESOURCES, AND THE FUTURE: NON-MAL THUSIAN PERSPECTIVES, ed ited by Howard M. Bahr, Bruce A.

Chadwick, and Darwin L. Thomas (Brigham Young University Press: Provo, Utah, 1972), $3.95 paper bound. Reviewed by Bruce D. Porter EVER since Parson Malthus penned his Essay on the Principle of Pop ulation, prophets of gloom by the handful have denounced childbirth as the source of human woes. In more recent ye'ars, however, that handful has multiplied geometric ally (and common sense but arith metically), to make it "common 1974 OTHER BOOKS 319 knowledge" that a population crisis of immense magnitude is at the door, about to thrust civilization to its doom. "In the belief that non-Malthu sian perspectives on population are not receiving the attention they de serve," fourteen top scholars join forces in Popula,tion, Resources, and the Future to refute numerous myths about overpopulation and re source shortages. The: book is a significant contribution to ration ality. The scholars are highly critical of "population myopia" - the in creasing trend to blame all manner of social maladies on the infants coming into the world. Such a catchall diverts our attention from far more significant problems and creates a convenient scapegoat for erring politicians. Drumming up a crisis may only encourage hasty, possibly foolhardy solutions.

Several scholars challenge the Malthusian premise that resources inevitably run a losing race with population. The food supply, for example, has not only kept pace with the birthrate, but since the da.wn of serious agricultural re search in the first half of our cen tury, it has surpassed it, and the Green Revolution is only begin ning. If fully developed and allowed to produce, the world's present croplands could support our grow ing numbers many times over. The' same is true of housing and energy technology. R. Buckminister Fuller contributes an imaginative essay on the potential of engineer ing to handle increased population at increasing levels of affluence. He maintains that improved technol ogy rather than political organi zation will ultimately 'be the key to erasing housing, water and energy shortages. Certain environmentalists have identified overpopulation and "the exploitive system of capitalism" as the two main sources of our pollu tion problems. B. -Delworth Gard ner of Utah State University con vincingly demonstrates that most environmental damage involves public resources and lands, where common ownership eliminates in dividual responsibility for waste.

Contrarily, private ownership of well-defined properties normally works to reduce pollution to neg ligible' amounts. He proposes some unique, ideas on using the free mar ket system to control environmen tal abuses. Another major assertion of neo Malthusians has been that high population density is the major cause of crime, delinquency, civil unrest, suicide, and drug abuse. An analysis of demographic patterns dispels this idea. Our urban riots have typically occurred in a.reas declining in population; the highly crowded countries of England and 320 THE FREEMAN May Holland have among the lowest crime rates in the world. A case can even be made in favor of high density life - that it is good for people, their health and sanitation. The big picture we get is that population is only one of many fac tors contributing to social prob lems, and a minor one at that. "Mass starvation is not made in bedchambers, but in council cham bers." The closing essays of the book deal with the moral questions raised by population control. "Co ercive programs are incompatible with self-direction and personal freedom." In the realm of living, breathing people, there are values more. precious than survival itself.

Should the time indeed come when our numbers reach crisis pro portions (and these scholars agree the time is still distant), people will voluntarily bear less children. It may frighten some to thus trust humanity's future, to the wisdom of free individuals, but a far more foreboding spectre is that of a so ciety planned and ordered and lim ited, but alas! void of the values, digni ty and freedom we have come to take for granted. HANDSOME BLUE LEATHERLEX FREEMAN BINDERS $2.50 each ORDER FROM: THE FOUNDATION FOR ECONOMIC EDUCATION IRVINGTON-ON-HUDSON, NEW YORK 10533 ttle Freeman VOL. 24, NO.6. JUNE 1974 Mises and Fisheron Theoryand History William H. Peterson 323 Without a proper theory, we are unlikely to learn from history. Inflation:Harbingerof MonetaryUpheaval David A. Fyfe 327 The inflation we've exported is coming home to roost as foreign investors buy into America. Are You Concerned? Ernesto E. Blanco, P.E. 334 About the interventions which have precipitated our plight.

The Great Objectiveof a Free People HerbertV. Prochnow 338 Reaffirmng the dignity of man as a creature of Providence. The Puritan Experimentwith SumptuaryLegislation Gary North 341 The customs of a society of status give way to economic practices. SocialismSeeks Its Own Level Melvin D. Barger 356 Government intervention brings a harvest of lost liberty. AnotherCase Historyof aGovernmentFailure Bernard H. Siegan 362 The sorry record of governmental attempts to build new cities. Give ThoughtHow You Give James C. Patrick 365 There is danger that thoughtless giving may harm rather than help. Book Reviews: 371 "Tradition and Reform in Education" by Stephen Tonsor "Walter Knott: Keeper of the Flame" by Helen Kooiman "August 1914" by Alexander Solzhenitsyn "Hoffer's America" by James D. Koerner "How to Teach Children Twice as Much" by Allan E. Harrison "How to Tutor" by Samuel L. Blumenfeld "Our Enemy, the State" by Albert Jay Nock Anyone wishing to communicclte with authors may send first-class mail in care of THE FREEMAN for forwarding.

tt1e Freeman A MONTHLY JOURNAL OF IDEAS ON LIBERTY IRVINGTON-ON·HUDSON, N. Y. 1053·3 TEL.: (914) 591-7230 LEONARD E. READ PAUL L. POIROT President, Foundation for Economic Education Managing Editor THE F R E E MAN is published monthly by the Foundation for Economic Education, Inc., a non political, nonprofit, educational champion of private property, the free market, the profit and loss system, and limited government. Any interested person may receive its publications for the asking. The costs of Foundation projects and services, including THE FREEMAN, are met through voluntary donations. Total expenses average $12.00 a year per person on the mailing list. Donations are in vited in any amount-$5.00 to $10,000-as the means of maintaining and extending the Foundation's work. Copyright, 1974, The Foundation for Economic Education, Inc. Printed in U.S.A. Additional copies, postpaid, to one address: Single copy, 50 cents; 3 for $1.00; 10 for $2.50; 25 or more, 20 cents each.

THE FREEMAN is available on microfilm from Xerox University Microfilms, Ann Arbor, Michigan 48106. Some articles available as reprints at cost; state quantity desired. Per mission granted to reprint any article from this issue, with appropriate credit, except "The Puritan Experiment With Sumptuary Legislation," and "Another Case History of a Government Failure."

Misesand Fisher on Theory and History WILLIAM H. PETERSON SANTAYANA said those who don't know history will be condemned to repeat it. History, then, must be one of the subjects least known or understood by man, as must be economics ..For the drip-drip-drip repetition of government's eco nomic errors over millennia and centuries and even over recent years and months boggles the mind. Perplexed, one asks, Why? Why does bad history repeat itself while history is there for all to read? For insights we can turn to Lud wig von Mises and Antony Fisher. Before so turning, consider some evidence on· current history gone wrong over the past year or so. First, some errors. Arm twisting of commercial bankers to notch down their prime rate. Devaluation of the dollar, the second in fourteen months. Meat Dr. Peterson holds the John David Campbell Chair in American Business at the American Graduate School of International Management in Glendale, Arizona.

controls. Export embargoes on soy beans, fertilizers, steel scrap. Gen eral price freeze. Oil allocation. Gas rationing in a dozen states. Pressure for a crude oil price rollback. And all this and more is layered over economic policy er rors of much longer standing. Meanwhile, repercussions of these errors abound. Inflation ra.ges. Unemployment rises. Pub lic spending swells. Taxes become increasingly onerous. Partisan re criminations reach a crescendo in an election year. The nation's leading labor organization consid ers a resolution calling for na tionalization of the oil industry. Again, one asks, Why? Why price-fixing in this day and age, while history records, for example, the mammoth failure of Diocle tian's wage-price-fixing Edict of 301 A.D.? Why must the evils of printing press inflation go on to day, while Andrew Dickson White's brilliant Fiat Money In flation in France is in print323 324 THE FREEMAN June again, there for all to read ?-.'f Or why should Britain turn yet an other time to a socialist govern ment when the inevitable failure of socialism was abundantly spelled out by John Jewkes' Ordeal by Planning and earlier by Lud wig von Mises' Social'ism?* According to What Theory?

The answer is that there is history and there is history - or, more accurately, there are histori ans and there are historians. His torians may strive to be objective or factual in recording history. Yet probably, recording history is not their biggest problem - al though selecting and arranging, necessarily arbitrarily, the histor ical facts of man's and nature's myriad acts and happenings is it self quite a problem. The biggest problem, more likely, is in inter preting history, in seeking to give the Why of historical events (which brings to mind Acton's famous "advice to persons about to write history - don't") . The French Revolution of 1789 is a fact, by way of illustration. No denying the fact. But why is it a fact? What factors caused the Revolution? And how much weight does the historian ascribe to Factor A, Factor B, Factor C and *Available from the Foundation for Economic Education, Inc., Irvington-on-Hudson, New York 10533.

so on? Here's where interpretation sets in. Here's where the histori ans' theories and values inevitably color and shape history books. The Marxist historian, for example, is almost certain to be influenced by the opening idea of the Commu nist Manifesto, namely: "The his tory of all hitherto existing society is the history of class struggles." The vital, indeed inescapable, connection between theory and history was a major contribution to economic and historical thought by Ludwig von Mises in his Theory and History (Yale Uni versity Press, 1957). Theory, this late and deeply missed giant of the Austrian School noted, was critical in unlocking the elusive Why of history. Historical effects are relatively easy to observe; historical causes are much harder to come by, or at least the true causes are. Many historians and quite a few economists, by way of exam ple, simply write off the Great Depression as the failure of cap italism and completely neglect the impact of monetary expansion and contraction and of massive gov ernment intervention by Presi dents Hoover and Roosevelt. But these two Presidents were, in turn, counseled by advisers who had presumably studied history.

The advisers may well have known the facts of history. But, as Mises 1974 MISES AND FISHER ON THEORY AND HISTORY 325 pointed out, "Behind every fact lies a theory." Did, then, the Pres idential advisers know theory or, more particularly, did they know I the right theory? Judging from the course of the Great Depres sion and subsequent events, I am inclined to think they did not. Who Is Antony Fisher? Antony Fisher probably feels the same way, as he asks propheti cally in the title of his new pro found and provocative book, Must History Repeat Itself? (Churchill Press Limited, 1974).* Mr.. Fisher has seen as well as studied history, even made history, ever seeking out historical cause and effect. He was born in London in 1915, educated in Eton and Cambridge, served as a fighter pilot in the-Royal Air Force, and saw action in the Battle of Britain. He soon put his cause-and effect mind to work. He learned of the broiler industry while on a lecture tour in the early 1950's in the U.S.A., and in 1954 estab lished the pioneering mass production Buxted Chicken Com pany, which dramatically reduced the price of chicken to the British consumer while making record profits. Mr. Fisher became a lead ing critic of the theory and prac*Available at $6.00 from Transatlantic Arts, North Village Green, Levittown, New York 11756.

tice of the British Government's Egg Marketing Board from 1956 until it was at last repealed in 1969. In 1955 he founded the highly 8uccessful Institute of Economic Affairs in London as an independ ent research and educational or ganization, which has by now published scores of scholarly stud ies on the operation or abuse of the free market. Today he is chairman of the Institute's board of trustees. So, as doer and thinker, Antony Fisher has been something of a one-man Manchester School, long 'warning the English people in his time as Richard Cobden and John Bright did in the early 19th cen tury. Cobden and Bright warned of the dangers of protectionism and interventionism - of the dan gers of false theory. With the Irish potato famine in 1845, Parliament suddenly saw the light and switched to a policy of free trade. So Mr. Fisher insists history does not have to repeat itself. He points, for example, to the failure of the rice crop in Bengal in 1770 and the worse economic policy failure of the authorities in imme diately establishing price controls to prevent "profiteering." Prices were thereby precluded from ris ing; food disappeared and fully a third of the population died.

326 THE FREEMAN Jun(; In 1866 the rice crop failed again but, 10 and behold, the Ben gal government somehow remem bered the lesson of 1770. Far from trying to check speculation, the government facilitated it by avoid ing price controls and publishing far and wide information on ris ing rice and other food prices in the province. Rice and other food soon flowed into stricken Bengal and a national disaster was averted. Right theory and right policy saved the day. History did not repeat itself. An Orderly Universe Mises and Fisher thus are one in seeing a cause-and-effect, reason-and-action world. They would agree with Einstein, who once wrote: "I cannot believe that God plays dice with the world." They would agree that the ne cessity to correlate correct theory with historical interpretation is a problem that not only impinges on historians but on virtually every walk of life. The doctor with the wrong theory can lose a patient.

The investor with the wrong theory can lose his investments. The general with the wrong theory can lose a battle if not a war. What, then, is right economic theory and policy? Antony Fishel reflects the free market thinkin~ of Ludwig von Mises. Addressin~ himself to Britain, but very like!) comprehending a larger canvas: Antony Fisher calls for ending al government monopoly and· control Accordingly, over a period oj years he would "demobilize" thE British civil service, denationalizE the post office, cut all tariffs anc subsidies, terminate all exchangE controls, end all forms of direc1 controls over prices and incomes roll back the welfare rolls, makE unions subject to the law of con· tract, adopt Milton Friedman'f voucher system to reintrodUCE choice and competition in school ing, and reprivatize all national ized industries. Can Mr. Fisher, with his self. proclaimed "radical approach,' win this new Battle of Britain? Ii all depends on whose theory pre· vails - Le. which theory, right 0] wrong. In any event, thought h decisive. Choice is critical. And inexorably, history will tell. , IDEAS ON LIBERTY Why History Repeats Itself Some modern zealots appear to have no better knowledge oj truth, nor better manner of judging it, than by counting noses JONATHAN SWIF~ I DAVID A. FYFE • • Harbingerof MonetaryUpheaval INTERNATIONAL monetary crises over the past quarter of a century, culminating in 1971 and 1973 United States dollar devaluations, not only have become fixed fea tures of the financial scene, but seeming national curses as well, defying solution. It is incorrect, however, to offer the general pub lic the misguided notion that these crises take place without reason or warning. Monetary crises have known causes; they are the results of economic cause and effect, as sure in terms of results as any other natural laws men acknowl edge and respect. Economic his tory is filled with crises - cur rencies, and as a result economies, rising and falling over thousands of years from clearly understood, predictable causes.

No monetary crisis can be cate gorized as a curious thing. Insta bility in a monetary unit, or sys tem, may not be well understood by the world's masses; but today Mr. Fyfe is a financial consultant in Atlanta, Georgia. the effects are felt everywhere, here and overseas. Monetary crises affect people directly; a devalua tion anywhere temporarily re structures relative values in goods traded between nations. Within the country devaluing, the very act wipes out and marks down the value of savings and investments on a broad front. Devaluation is little more than the governmental declaration of partial bankruptcy. By fraud, through inflation, the point is reached where govern ment formally requires niJ.ore of its inflated currency units for an ounce of gold, raising the prices for all imported goods. In the United States the fall of the dollar, by devaluation, fol lowed a direct line of annual Fed eral deficits, the scattering of bil lions of dollars overseas, and are 8ulting inflation between 1945 and 1973 which destroyed 57 per cent of the dollar's purchasing power.

In the 23 years prior to 1969 alone, foreign aid expenditures totaled 138 billion dollars - paid for 327 328 THE FREEMAN largely through inflation. By the late 60's, foreigners held some 70 billion of our rapidly depreciating dollars overseas; and, seeing the dollar's value skidding, they ac celerated their run, with our own cash, into United States gold re serves. So we stopped redemption of gold for dollars, but not till half the gold was gone. Now, only $11 billion in gold remains at our "of ficial" devalued price of $42.22 per ounce. When we stopped selling gold for dollars, there was only one course of action left to the holder of dollars abroad: come back in and buy us out. This they did either on the United States stock exchanges or, directly, by setting up their own companies on our soil. We have made all this a little more expensive to do by devaluing. Still, the number of dollars held out against us beyond our shores is staggering. For a failing cur rency , Washington's only answer was devaluation. There is never, of course, any serious talk there about stopping inflation - the real cause of our recent dollar crises.

Cutting the "fie with Gold Our monetary crisis has its roots in a decision of some 40 years ago to cut the ties with gold. At that point, the ultimate end of silver redeemability in our cur rency, and the legislative actions removing all legal ratios of circu lating currency to gold reserves could easily have been predicted When our currency was no longe: directly convertible by a citizel into gold, the bars were down government was free to inflate a will, and has done so ever since The 1933 dollar is worth about 3( cents as of 1973, and the declinl goes on. The recent dollar debacle wa: not the result of any interaction: between wages and prices as caus ative elements in inflation; wage: and prices rise in response to gov ernment deficits and Federal Re serve System expansion of mone~ and credit and are symptoms 0: the disease, but not the causes Some economists link the dollal crises to faith in the free marke"

as a substitute for a "managed' solution. But there has not been ~ free market money for years, an( the so-called "managed" solutionf have brought us to the curren1 sorry state of muddlement an( monetary chaos. Then, graspin~ at straws, some blame a lack oj advance planning in economic ac tivity to insure predictable rela tionships among world currencies Planning cannot accomplish this Elimination of inflation as a roo' cause would in itself impart thl basic stability required to ins urI workable international currenc~ relationships, particularly if cur 1974 INFLATION: HARBINGER OF' MONETARY UPHEAVAL 329 rencies were tied to something of value, like gold and silver. Somewhere along the line the perspective became tilted. Noted economists advocate more controls - control of the divergency of wage/price behavior internation ally, control of the so-called, but nonexistent, wage/price inflation.

To further confuse issues, the in consistency of control policies from nation to nation has been cited as clouding the situation in world monetary affairs. The implications are clear: more controls, plus more uniform appli cation as a solution. This is mere ly to be blind to the results of long years of political control and dis tortion to currencies and econom ies in the so-called "free" world. The controls, and let us acknowl edge the vast quantity imposed within the United States, have brought us to the present stage of near monetary collapse. At this point we are being assured, by some, that more of the same will solve the modern monetary dilem ma. What is needed is no controls, before the economic structure col lapses or "blows out" from the weight of the load. The United States economy has survived a lot of dead weight and meddling with the under lying currency system that supports us all. But the econ omy has never had the invincible strength to survive long-term rnonetary depreciation through in flation, in spite of its productive ga.ins. Today, as a result, values are "out of whack" for goods and services - and, ultimately, hard economic reality will restructure those values.

Scapegoats Sought There are other common errors in addition to that of trying to lay blame for inflation on the wage/price spiral. Convenient scapegoats are found, often la beled as "other divergent factors"; fixed rates of conversion, and cur rency conversion rates which were tied to the dollar. This continues to ignore the underlying result of inflation at home and overseas, the lack of convertibility in the dollar to anything of value, and failure to keep our currency tied to some commodity with high market val ue: gold or silver. Balance of payments deficits seem to be recognized by most economists as a major item in currency crises, which indeed they are. Erroneously, however, both the export of private capital and goods and military expenditures take the blame. This distortion is crucial. The private sector of United States trade has been high ly productive in creating its own surplus. The problem of back breaking deficits has arisen only 330 THE FREEMAN June after the addition of military and foreign aid costs to the trade equa tion. When these foreign aid and military expenses are added to domestic social programs, the total load cannot be met by direct tax ation; inflation has been the literal evil alternative. And the plight of the dollar worsens. By 1974, some sources estimate the Euro-dollar holdings have risen to $100 bil lion. We can only envision a long, continued siege of foreign buy-out in our own land - the exact reverse flow, dollarwise, of what took place immediately following World War II. As the old saying goes, "It comes back to haunt us."

Another weak solution offered, and now in use, was the scuttling of fixed rates of exchange-letting rates "float." But a floating cur rency, by itself, is just as vulner able to crisis when destroyed by inflation as any "fixed rate" cur rency. Until the last several years, the world had fixed rates. Yet, in flationary crises took their appro priate toll, making mockery of rates which were mythical. Surely the most foolish of times in the past few years must have been when the United States declared the dollar to be worth $35, then $38, to the ounce of gold while the free market in gold stood at twice that level. This kind of wishful thinking continues today with the Treasury gold level at $42.22 per ounce while the free market in gold is wen over the $100 per ounce mark and continues to move upwards. Inflation Must End The economic instability caused by floating currency values will not be resolved until inflation i~ mastered. International currenc} fluctuations will not be brough1 under control until inflation h halted. Currency speculation, or all levels, will subside only wher inflation is ended worldwide. In flation will stop only when gov· ernments limit expenditures t< within reasonable levels of taxa tion. Currently, most industria Western countries take betweel 35 per cent and 45 per cent 0: personal income' in taxes, an( even then cannot run a balance( budget at the national level.

One of the most damned, leas understood aspects of. currenc; crises is that of speculation in anl against various monetary unih Speculation is cast as both a vi] lain and a cause. Overlooked is th fact that speculation is a legiti mate function and a stabilizin, force in worldwide money ma1 terse If a government refuses t protect or stabilize the value of it own currency, why shouldn't tb speculator guarantee a level, at price, in order to impart that sb bility to future business transal 1974 INFLATION: HARBINGER Oli' MONETARY UPHEAVAL 331 tions? And why deny business and trade the right to speculate for their own needs relative to future money dealings? Economists who decry specula tion overlook, .conveniently, the fact that currencies rise and fall in relative value to one another because of governmental sponsor ship of inflation. Eliminate infla tion, and currency speculations will abate. Sadly, when some gov ernments prove unable to master their own currency, not only do banks and businesses move to spec ulate against falling monetary units, but other nations holding the falling unit jump in to liqui date any weakening position.

We hear it said that gainers in monetary crises are the interna tional money speculators who thrive on and create the crises. Gainers there are in speculative movements and crises, but it is not true that speculators and their actions create a monetary crisis. The monetary crisis is the child of inflation, born out of govern mental muddling and national banking mismanagement of cur rency and credi t. The seeds of crisis and destruction are sown in government's initial decision to remove value from the monetary unit. When gold and silver back ing and convertibility are repudi ated by government, money ceases to be a commodity in which citizens can have faith. At that point the inflation begins, the crises are foreordained, and speculators ulti :mately will ply their trade. Foremost economists of the day indicate' that the solutions to in ternational currency problems lie in national policies. How true. But 'which policies? Floating currency rates versus fixed rates have noth ing to do with the problem or solu tion. Again, either a fixed or float ing currency may be destroyed by ,governmental inflation. Neither iCan government policies in price and wage controls, union legisla tion, capital flow control, or in ereasing of tax levels be effective in the foray. Existing taxation leve1s are today taking over 43 per Icent of personal income in the 'United States. Taxes on personal incomes and corporations are squeezing out all conventional sources of capital funding for the business community. The question is : Where will the investment Jmoney come from when earning levels are insufficient to provide?

.And at what interest cost on the borrowing? Devaluation Is a Curse The devaluation "solution" re lieves the pressure and penalizes the consumer by increasing the eosts of imported goods. But de valuation is a curse in itself. Gov ernment assumes this to be a cure 332 THE FREEMAN June to the crisis and then, feeling the pressure reduction, begins inflat ing again, usually at a higher rate than took place before devaluing. Thus, the stage is set for the next currency crisis and a future de valuation. With inflation rampant in the Western nations we may in deed see an era of competitive in ternational currency devaluations in response to repeated monetary crises - but only providing that the world somehow staggers on without major economic/monetary collapse. The international up heaval and its effects are increas ing as inflationary rates rise across the globe. The nonsense of the age is em bodied in the statement that today no monetary solution exists. We are told that we must look to co ordination of national economic policies for our salvation in the forming of stable, predictable ex change rates. But such coordina tion of policy is unlikely unless forced, and force is not a moral solution. Central banking mone tary gyrations and manipulation by government, resulting in infla tion, are at the root of the ap proaching catastrophe.

There is a monetary resolution now, just as there has been always. Any nation on earth can stand alone, relatively aloof from the wor ld of monetary crisis, by re turning to a monetary standard backed by and convertible into gold and silver - and by living within its means of direct taxation. It will always be this simple, though a price would have to be paid to re turn to this position. That price is the liquidation of inflated values. Sound Monetary Policy In reality, everything depends upon monetary solutions. As a fu tile response to crisis, the United States has called for a world mon etary system scrapping gold as a peg, with Special Drawing Rights based on "average value" of a cross section of currency values, the SDR to become the worldwide unit of financial accounting. This is a play at the creation of an in ternational monetary house of cards based on the false premise that gold is no longer a realistic standard of value. Valueless mon etary systems are predoomed to fail.

On our own national level we don't even need a predictable eco nomic policy. Rather we must have a fixed, predictable monetary pol icy which, by itself, will provide economic stability. Wage and price controls of either permanent or temporary nature will be, and are, self-destructive. Higher taxes will similarly destroy an economy by draining away capital availability in an inflation. Policies of public 1974 INFLATION: HARBINGER OF MONETARY UPHEAVAL 333 service employment to increase uti lization of the unemployed, anoth er proposed stabilizer, become merely one more element of insta bility and inflation; the public payrolls are now larger than we can afford to carry. Rather than monetary "re straint," this nation will find ulti mately there can be no stability without monetary restructuring on a basis of real value. Our house, monetarily, will be put in order for us if we choose not to do so vol untarily. Economic forces will at some point oblige the adjustment.

There is the possibility of the Fed eral Reserve System precipitating the collapse by turning off the money/credit flow; this would be a repeat performance of actions taken in the latter part of ·1928. Our inflation will have to end. No so-called "cosmetic" surface paint job - continued demonetiza tion of gold, patching up of Bret ton Woods machinery, or Special Dr.awing Rights - will lead to other than continued economic chaos worldwide. Restraints on capital movements, whether insti tuted against individuals, banks, or multinational corporations, will also serve only to tie world eco nomics and trade in knots. United States policy will be effective on the international scene only when our currency once again has "hard" value and we choose to exist, nationally, within our means. At that point the rest of the world could follow the lead or not, nation by nation, to its own liking. At least, under these con ditions, we would stand for some thing worthwhile in the interna tional limelight: financial stability and responsibility.

For what does this country stand now? Our government spon sors our own self-destruction through inflation. This is the era of planned expansion of money and credit through the Federal Reserve System to support mas sive Federal deficits. The resultant inflation is destructive of all social, moral, and spiritual values. His torically, no national sense of unity has ever withstood the corrosive and erosive effects of inflation. In the end, the national brickwork crumbles, the nation's social fabric is ripped and torn apart. If a country's currency has no fixed value, then for those citizens, neither does anything else in life. Prosperity and economic stability can be achieved in any country on earth through the exercise of strict monetary control and the establishment of a hard currency which is convertible into gold or silver. Less than this will only pro duce more of the same: national and international crises, monetary upheaval, economic chaos, and moral decline. {I ERNESTO E. BLANCO, P.E.

AreYou Concerned? I STARED AGAIN at the bundle of nearly worthless paper money in my pay envelope and I wondered how many days it could carry my family into the dreaded month ahead. Suddenly, in the midst of my despair, a flash of anger seized my mind as I recalled the scholar ly analyses from academicians and economists asserting that the econ omy was basically healthy and vig orous. 1 could still hear their deep reassuring voices on radio and TV explaining that economic science was partly based on faith and mass psychology. And as I struggled to understand how a "science" could be based on faith, or how faith or psychology could help me pay my bills, I felt my anger bursting into rage. For years in the past, some peo ple called "progressive" economists had been preaching the political expediency of "deficit financing," 334 "credit expansion," and the print ing of paper money to "stimulate"

progress, and "create funds" for a myriad of "popular" programs at home and abroad. They also preached that, since economics was based on faith, and currency was merely a symbol, it did· not have to represent any real value. Conse quently, the requirements of hard backing for the currency were le gaIly· abolished, and the remaining reserves spent in payments to shrewd foreign countries that re fused to share our mystical eco nomic beliefs. Coins containing silver were removed from circula tion and replaced by worthless metal tokens of similar appearance. I then recalled how inflation, a word I always associated with in solvent and backward countries, started to grow to alarming pro portions. It seemed as if people, sensing the magnitude of the na tional swindle, were attempting to 1974 ARE YOU CONCERNED? 335 even the score by demanding more and more for their goods and services.

The rise in prices provoked a holy wrath among the "high priests" of the economy. Their mystical incantations soon gave way to outright threats and invec tives, until finally they stirred a public clamor for government con trols in an effort to conceal their massive fraud by shifting the blame onto their victims; Le. la borers and producers. Timely and cleverly contrived national "crises" provided the rationale for pushing government controls. The establishment of initial con trols made further controls neces sary. Arbitrary price ceilings ren dered production unprofitable. Businesses failed, or were nation alized "in the public interest." Un;.. employment increased rapidly. Fuel and other critical goods be came scarce. Transportation was choked. Black markets developed despite heavy penalties. And mean while, international commerce dwindled as tariffs and quotas were imposed to improve the "balance of payments."

From Bad to Worse Familiar events? Perhaps, but that was only the beginning. Infla tion,and the inevitable loss of na tional credit, forced a devaluation of the currency in international markets. And as the currency "floated" and sank deeper and deeper, the witch doctors of the "new economics," the "social sci ences," and the "popular media" raised a cry for even stiffer con trols to crush "profiteering," and called for a "sense of social respon sibility," and a "spirit of sacrifice" to readjust to the "new lifestyles of a changing world." The common citizen, like myself, felt as if caught between the jaws of a gigantic vise. On one side in creasing taxes, inflation, scarcities, and unemployment; and on the other side the· specter of total gov ernment control, advocated as "the only solution" to the disaster by those whose insane policies had caused it. Public ignorance, confusion, and intimidation facilitated the impo sition of an intricate machinery of socialist controls enforced by a vast parasitic bureaucracy en dowed with police powers. "Emer gency laws" were passed, and indi vid ual freedoms disappeared. All bank deposits were nationalized, and a "new currency" was issued.

Electric power was rationed to only a few hours per day. The same was done with the water supply. Ration ing booklets and food lines led to riots and widespread insurrections that were ruthlessly suppressed, and soon afterwards, the once pros perous nation plunged into the 336 THE FREEMAN June abyss of a modern totalitarian tyr anny. The Place: Cuba But, don't get any wrong ideas. I am not describing events in Nazi Germany or Fascist Italy. The place was Castro's Cuba in the be ginnings of the socialist revolution that was to push the country back wards more than a century in just a few months. An industrious and progressive people, the Cubans had risen from Spanish colonialism and in the short span of 50 years had become the third richest nation in per cap ita income in the Hemisphere with out forgivable foreign aid pro grams. The Cuban currency was frequently quoted above the Amer ican dollar in world markets, while social and labor legislation were among the most advanced in the world. All that progress, verified by in tern ational records, was wiped out by Castro's messianic socialism in a flash of time. The enterprising Cubans had failed to learn that freedom demands eternal vigilance, and that govern ment regulation of the economy is the surest road to serfdom.

Today, when I look back at the events responsible for the Cuban tragedy, I shudder to see the omi nous similarities with those occur ring in the United States at pres ent. I see the same debauching of the currency through the policies of "new economists" and scheming politicasters striving to "create funds" for partisan and interna tional programs. The same "gallop ing inflation" solely resulting from their fiscal insanity. The same ac cusations of "greed" and "social irresponsibility" leveled against la borers and producers by those who have swindled them. The same sanctimonious academicians pon tificating cures for the "sick soci ety" they have helped to poison. The same legions of parasitic bu reaucrats busily engaged in "fight ing inflation" by taxing and regu la"ting the nation into paralysis. And the same confusion and de spair in the hard-working Ameri can people who see their taxes in creasing, their money devalued, and their jobs dwindling, while in flation soars and essential goods be come scarce under asphyxiating regulations stemming from con trived "crises."

A Contrived Crisis The latest and boldest endeavor of the crisis makers has been to engineer an "energy crisis" in the nation possessing the largest po tential energy resources and the most advanced technology in the world. Public ignorance, and hon est concern for the environment, were abused to the limit by groups of activist charlatans who saturat1974 ARE YOU CONCERNED? 337 ed the country with pseudo-scien tific information and frightening opinions about the ecology, provok ing a flurry of hysterical legisla tion that stagnated fuel exploita tion, refining capacity, and re search. In addition to that, waste ful automotive emission controls, plus the ill-timed enforcement of the use of oil instead of low sulphur coal by power plants, severely in creased the demand· for petroleum products precisely at the time of legislatively obstructed supply. Nu clear energy, if ever mentioned, was equated by quacks to "an atom bomb. in the backyard," and thus, misguided ecologists practically killed the cleanest form of energy available until the advent of solar energy. It is hardly surprising that we now face an "energy crisis"

that not only has dealt a crushing blow to the American economy and to our military preparedness but will empower appointed officials to regulate even further the economic life of the nation. To crown the present irration ality, our free enterprise system has now been conned into arlebili tating collaboration with those whose only purpose is to destroy it, giving rise to the sad spectacle of a powerful but groveling prey in sanely nurturing its implacable foes. Logie and reason have been replaced by "popular" sophisticated fallacies that insult human intelli gence. Yet, few Americans dare ex press their anger lest others con sider them ignorant or malad justed. As a victim of the Cuban trag edy, I don't give a damn about "popular opinions" any more. I found those opinions to be a dis astrous substitute for plain com mon sense. Perhaps I will be at tacked and discredi ted by some of our "citizens above suspicion" for exposing their frauds, but it is high time that innocent Americans stop blaming one another and focus their indignation on those who through their sophistic manipula tion of economic, social, and diplo matic falsehoods have precipitated our present plight. ~ * * * * * The author is a former Professor of Engineer ing at the University of Villanova in Havana, Cuba, and Director of Solar Energy Research for the Cuban Government. In exile in the U. S. since 1960 he has been Assistant Profes sor of Mechanical Engineering at M.I. T.; As sociate Professor of Engineering Design at Tufts University; and Adj. Associate Professor at Rensselaer Polytechnic Institute. Since 1969 he has been in private practice as consultant for the textile industry.

The GreatObjective ofaFree People HERBERT V. PROCHNOW ONCE when I was visiting Asia, I received a cable from the Depart ment of State asking if I would speak to an audience of business and professional people in Cal cutta. This was· an unusual oppor tunity to speak on what private enterprise had meant to the Amer ican economy. With political lib erty and the incentives of private enterprise, our people have experi enced a remarkable improvement in their economic well-being. When I had finished speaking, a highly respected member of the audience arose and asked this question, "With the great eco nomic progress the United States has had, do you believe that the people of your country are any happier than they were before?" This seemingly innocent question was almost certainly intended to Dr. Prochnow is former President of the First National Bank of Chicago and Deputy Under Secretary of State.

338 destroy the merit of the entire philosophy which I had expressed. If people are no happier, why is economic progress important? If the people of India would be no happier with higher standards of living, what difference does in creased economic well-being make? For a moment I was not certain how to answer this question briefly and convincingly. I do not believe that happiness is the real measure of a nation's progress. However, I decided to· accept the test he had chosen. I was in a country with wide spread starvation and malnutri tion, a country in which the life span is far less than in the United States. I was in a country in which a large percentage of the people are illiterate. Within the bounda ries of that country, which is two fifths as large as the continental United States and has over 500 million people, there is widespread 1974 THE GREAT OBJECTIVE OF A FREE PEOPLE 339 poverty, starvation and illiteracy.

1 then said, ·"You and I can agree that man does not live by bread alone. However, a nation with sub.. stantial economic progress·· creates wealth,> and with wealth come grade, 'schools, .high schools, uni versities, and hospitals. With wealth and .economic pro gress come public utilities which supply electricity, gas, sanitation facili ties and pure drinking water." I then asked this member of the audience, "Do you think a father would be happier if he knew his children could have pure drinking water instead of their being ill repeatedly because of impure wa ter? Do you think parents would be happier if they knew their chil dren had schools and were not going to grow up illiterate.? Do you think men. and women would be happier if there were medical schools and. doctors and hospitals so that their life expectancy might be greatly increased? Do you think men and women would be happier if tens of millions did not suffer from malnutrition and starva tion?" I could have added, "Do you think that the people of this city would be happier if the thou sands who slept on the sidewalks last night because they have no homes could find at least modest places for shelter?"

I do not know whether the ques tioner found this answer helpful. However, I know that for the first time .. I saw more clearly what our people have sought to achieve with their economic progress. This js not, as the critics say, simply a money-grubbing .nation, a ~aw, materialistic, society. We make mistakes. We ,somE(times produce unwisely. We make pr<;>ducts at times that serve, little good. We consume some resources wasteful ly. But these are part of the price men and women in a society pay for freedom of choice. This is a small price to pay for such free dom. Human Dignity Affirmed I saw more .clearly what the en tire econ6micsystem is all about. 1 saw the meaning of a hundred million cars and trucks, tens of thousands of miles of railroads .and. pipelines, thousands of fac toriE*;, stores, farms, banks, office buildings, airports, and utilities. As we produce and save and invest, we give man food and shelter. We give him hospital~ for his health, and schools to free him from ig norance. We give him goods and services to improve his economic well-being. What we are really do ing is to reaffirm our deep faith in the dignity of man and in his worth as a human being. We re affirm that man was created by Providence.

In the humdrum of our daily ac340 THE FREEMAN June tivities, we sometimes fail to· rec ognize the spirituality of secular affairs. We are so involved in the day's work, in driving trueks,con structing buildings and highways, running freight trains, laying pipelines, operating computers, plowing fields, dictating letters, maintaining office records, and at tending meetings that we lose sight of the grea t objective of a society of free men and women. Reaffirming the dignity of man, his worth as a human being and as· a creature of Providence - this is the noble purpose for which we strive. This is the deep under lying purpose that runs through our· so ciety. This is the foundation of a nation's·greatness. ~ iDEAS ON LiBERTY The Price We Pay THE OFTEN NEGLECTED aspect of the good intentions of the wel fare state is the cost of all this subsidy and so-called security. Someone· has to pay, and it requires an ever-expanding police force just to collect the taxes. The creative and productive mem bers of society are the ones from whom the revenues of government have to be drawn; there is no other source of goods and services.

But to recklessly tax the fruits of a person's labor is a disservice to that person. To take away. the earnings. from a business is to leave it unprofitable and unattractive and to set it· up for another of the failures that the government will be importuned. to bail out. The higher the rate of taxation upon the most productive, the less their incentive to keep on producing at an extraordinary pace .. This is why growth becomes such an aggravating problem in the welfare state, and why it appears that government spend ing is the only way to achieve future growth and productivity. And this is why a welfare government can't stand to see any potential source of revenue leave the country for more attractive opportunities abroad. PAUL L, POIROT, "Why Capital Wants Out"

ThePuritan ExPeriment SUMPTUARY LAWS, as defined by one dictionary, are "laws regulat ing extravagance in food, dress, etc. on religious or moral grounds." No other aspect of Puri tan. soci.al legislation during the first half century of New England life better testifies to the funda mentally medieval orientation of that culture. Yet the grandsons of these men became the Yankees the sharp· traders, mobile entre preneurs, and practical inventors whose outlook on life was that of Ben Franklin's cre'ation, Poor Ric'hmrd's Almanack. This astound ing transformation from Puritan to Yankee has fascinated histor iansfor many years, and the fate of the sumptuary legislation serves as a kind of touchstone in tracing that transformation. Dr. North, economist, lecturer, author, cur rently is an associate of Chalcedon, an educa tional organization dedicated to Christian re search and writing. His latest book is An Introduction to Christian Economics, Craig Press, 1973. He is the editor-publisher of the Remnant Review, a fortnightly economic news letter.

The early Puritan communities were organic, tightly knit struc tures. The inhabitants were con vinced that aU men need direction in life. No single institution on earth was seen as possessing ab solute sovereignty, of course; their intensely Protestant outlook for bade placing total trust in any hu man organization. Nevertheless, they believed that the various levels of the civil government did have basic responsibilities in regu lating prices, the purchase of land, public utilities, and personal fash ion. The ministers might advise the public officials on such matters, but it was the political authorities who were seen as being ultimately responsible for their enforcement. The Question of Status In the mid-nineteenth century, the British scholar, Sir Henry Maine, characterized the coming of the modern world in terms of the concept, Hfrom status to con tract." Seventeenth-century New 341 342 THE FREEMAN June England fits this outline beauti, fully. Members of the first gen eration of Puritans (1630-60), as well as the second generation (1660-90), were deeply concerned about the threat posed by open, voluntary contracts to the received medieval world view. Considera tions, 01 status were paramount· in their' minds, and it became in~ creasingly obvious to everyone concerned that the New World 'was not going to be a place in which inherited concepts of personal sta tus were going to flourish. There was too much cheap land, too many economic alternatives, too many "callings" - occupations -- for' the survival of traditional status con cepts.

The essence of the Puritan idea of status is found in the Larger Catechism of the Westminster Confession of Faith, that compre hensive body of theology ham mered out by the Puritan' scholars of Cromwell's England in the mid 1640's. The question of status was basic to the Puritans' interpreta tion of the Fifth Commandment, "honor thy father and thy mother." By father and mother, in the fifth commandment, are meant not only natural parents, but all superiors in age and gifts; and especially such as, by God's ordinance, are over us in place of authority, whether in family, church, .or commonwealth . . . . The general scope of the fifth commandment is, the performance of those duties. which .. we mutually owe in our several relations, as Inferiors, superiors, or equals~l There is nothing innately rep rehensible in the··.. ideaL that, ';men should observe distincti'onsarnorig each other; "civility" and basic etiquette· have always required as much. The idea that· superiors ("parents") have duties to infer iors ("children"),· and vice versa, is commonellough. When the So viet Union in the early years of its history attempted to tamper with this principle in f.amily life and in military affairs, the whole fabric of Russian Iif e Was .dis rupted, and these short-lived ex periments in supposedly non-status society were abandoned for the sake of survival. Society never really faces the question of "status or no status," but only questions of what kind of status and the locus of .authority in the enforce ment of status distinctions. It was here that Puritan' New England encountered its difficulties.

The Larger Catechism summar ized the accepted status ethic of Puritan culture. Both superiors and inferiors. were given positive injunctions and negative warnings about respecting the duties and obligations of authority and sub1974 THE PURITAN EXPERIMENT WITH SUMPTUARY LEGISLATION 343 mission. Leaders are to expect the following from inferiors: rever ence, respect, prayer, obedience, love, and honor. Inferiors are not to neglect their duties, rebel, curse, or mock their superiors. Superiors, on the other hand, owe their' in feriors the following: love, prayer, counsel, rewards, chastening, pro tection. The sins of superiors are also listed: "an inordinate seeking of themselves, their own glory, ease, profit, or pleasure," and "in ordinate" is understandably but unfortunately left undefined. Su periors are not to command any thing unlawful from their infer iors, or correct them unduly, or to lead them into temptation, "or any way dishonouring themselves, or le,ssening ,their authority, by an unj ust, indiscreet, rigorous, or re miss behaviour."2 In a family, church, or volun tary society, these injunctions can be more easily applied. But the medieval perspective of the Puri tans can be seen in their unwill ingness to limit the locus of the term "family." They were intent upon transferring the status re quirements of the family to the civil government.

The Fami/istic State A family is a limited entity. Members are born into it and grow to maturity; eventually they die. Sons and daughters leave to form new families, and this alters the relationship between parents and children. Parents grow old and sometimes feeble, so they have an incentive to rear children com petently; their own future survi val may depend upon the maturity and faithfulness of the children. The parents therefore have an in centive to avoid keeping offspring in perpetual childhood. The rela tionships are intensely personal, and therefore bounded by feelings of love, honor, loyalty, and directly threatened by feelings of jealousy, disrespect, or hatred. The civil government, however, is a completely different institu tion, established for different ends, and governed by different rules. Its function is not to father chil dren, rear them, promote their ma turity, or care for them. The state's function is to protect men against violence, both domestic and foreign. Invasions are to be repelled; thieves and bullies are to be restrained. The state is to be ruled by formal laws that are pre dictable, applying to all members of society.3 By its very nature, it is an impersonal structure; it is not to respect persons in the ad ministration of justice. Ideally, men are to be ruled by formal civil law, not by capricious men. Formal law is to restrain the activities of the state itself, limiting its arbi trariness.

344 THE FREEMAN June A Hopeless Conflict of Interests and Lack of Harmony In retrospect, it is not difficult for us to understand why the New England Puritans, no less than their English cousins, would find it difficult to assign limits to a familistic state. It is rather like children setting limits· on fathers, especially when fathers confront their children not merely with the threat of violence, but also with the moral obligation of submis sion. Yet from the 1630's through the 1670's, this is precisely what Puritan leaders attempted to do. They wanted to permit godly men sufficient freedom to exercise their personal callings, for they well un derstood that if a man is person ally responsible before God for his acts, he must· be given wide lati tude in exercising his personal tal ents without interference from other men, including leaders. Nevertheless, they also wanted to insure that the "family of God's people" would preserve its in herited status distinctions, and that peace and harmony would prevail as a testimony to the whole world. As the seventeenth century progressed, they were to find that the two goals were very frequently in opposition, and harmony was not maintained.

Modern commentators must be extremely careful not to read our contemporary views about· status back into the seventeenth century - or at least not back into the first three quarters. There was no public outcry from "oppressed" in feriors, no colony-wide movement to redress grievances. There is little, if any, evidence that the "inferior sort" and their elected representatives, the deputies, were in fundamental opposition to the medieval view of status obliga tions. Puritan society was in reality a society made up of peo ple who in England would have been regarded as the "middling sort" - sons of the lesser gentry, yeoman farmers, craftsmen, and others who had sufficient capital to make the journey. There were servants, however, and these could wind up as members ofa truly lower class, but masters were ex pected (and even compelled legal ly) to provide some capital, usu ally in the .form of tools and training, to departing indentured servants (who could be kept in service no more than seven years) .

Still, in every society there are higher and lower, richer and poorer, and the sumptuary legis lation codified these distinctions. For many years, the subordinate population was willing to acquiesce in what the Larger Catechism re quired, an acknowledgement of their superiors "according to their several ranks, and the nature of their places."

1974 THE PURITAN EXPERIMENT WITH SUMPTUARY LEGISLATION 345 The Sumptuary Codes The Puritan magistrates con cluded, as had leaders in European society for centuries, that it is not always easy to identify members of various classes. In New Eng land, for all intents and purposes, there were three levels - higher, middle, lower - but the law codes only recognized two. Puritan legis lation borrowed a practice of the most familistic of all state struc tures, the military: uniforms. The Larger Catechism listed as one of the duties of inferiors the "imita tion of their (superiors') virtues and graces," but no Puritan leader was so naive' as to believe that such a requirement allowed the "inferior sort" to imitate their superiors' tastes in fashion. Thus, in 1651, both the magistrates and deputies of Massachusetts agreed on the following piece of legisla tion, one that is unrivaled in American history for its sheer medievalism - comprehensive, au thoritarian, and thoroughly hier archical: Although several declarations and orders have been made by this Court against excess in apparel, both of men and of women, which have not yet taken that effect which were to be desired, but on the contrary we cannot but to our grief take notice that intollerable excesses and brav ery have crept in upon us, and es pecially amongst the people of mean condition, to the dishonor of God, the scandal of our profession [i.e., pro fession of faith], the consumption of estates, and altogether we acknowl edge it to be a matter of great diffi culty, in regard to the blindness of men's minds and the stubbornness of their wills, to set down exact rules to confine all sorts of persons, yet we cannot but account it our duty to commend unto all sorts of persons a sober and moderate use of those blessings which, beyond our expec tation, the Lord has been pleased to afford unto us in this wilderness, and also declare our utter detesta tion and dislike that men or women of mean condition, educations, and callings should take upon them the garb of gentlemen, by the wearing of gold or silver lace, or buttons, or points at their knees, to walk in great boots; or women of the same rank to wear tiffany hoods or scarves, which though allowable to persons of greater estates, or more liberal education, yet we cannot but judge it intollerable in persons of such like condition .... 4 Unless a citizen was of a good education, or a military officer, or a civil officer, he could not wear such clothing unless his estate could be valued at £200 or more, according to a "true and indiffer ent value." For a violation of this statute, a ten shilling fine was imposed.

A similar, though shorter, stat ute had been'passed by the Con346 THE FREEMAN June necticut authorities a decade ear lier. 5 This should not be under stood as an indication of Massa chusetts' late arrival in the area of sumptuary legislation. The wearing of lace by social inferiors had been the subject of at least two pieces of Massachusetts legis lation in the 1630's. It was only to be used as a small edging (pre sumably only by the upper classes), and lace in general was prohibited from being worn ex tensively on any garment. 6 Special import taxes were placed on lux ury items, "for preventing the immoderate expense of provisions brought from beyond the seas." Such goods as sugar, spice, wine, and tobacco were included. The tariff was 16% for direct pur chasers, and 33% of the import price for retailers (thus making it more difficult for local retailers to compete in sales with the more distant, and presumably less com pelling, London merchants) .7 Tobacco consumption, which was regarded by Puritan leaders as another unnecessary excess, had been under fire [I couldn't resist] from some of the directors of the Massachusetts Bay Company right from its inception. 8 All four of the Puritan commonwealths - Massa chusetts, New Haven, Connecti cut, and Plymouth - passed nume rous provisions placing restrictions on the sale and consumption of the "noxious weed." These pro hibitions were not really status oriented; they were motivated by a number of fears. One, under standably, was fire. Boston was for ever burning down in the seven teenth century, as .Carl Briden baugh's Cities in the Wilderness reports in some detail. Atone stage, Massachusetts prohibited the buy ing and selling of tobacco entirely, although it was legal to import it for re-export later. 9 Theyappar ently thought it was all right to burn down other cities, if local merchants were to gain some profit iIi the transaction. Plymouth tried to ban its importation in 1641, but repealed the law six months la ter. lO Connecticut's ban is the most amusing in retrospect. It was di rectly tied to the issue of personal health, but in the exact opposite of today's concern: no one under the age of twenty who had not already addicted himself to tobacco was allowed to buy it, unless he had a physician's certificate "that it is useful to him," and he had to pre sent the certificate to the Court in order to obtain a license to pur chase the weed.ll Time-Wasting Taverns, brewers, and liquor re tailers were under restrictions throughout the .century. Indeed, some of these controls are as com1974 THE PURITAN EXPERIMENT WITH SUMPTUARY LEGISLATION 347 mon today as they were in the New England colonies. Men were not to waste precious, time in tav~ erns, the magistrates believed, so they went to' considerable lengths to protect men from their. own weaknesses. Then, as now, licensing was the primary means of control, and it was equally a, source of public revenue. The annual licens~ ingof taverns, said the Massa~ chusetts-, magistrat~s, is ineseap~ able, "Seeing it is difficult to order and keep the houses of public en~ tertainment in such conformity to the wholesome laws established by this Court' as is necessary" for the prevention ,of: drunkenness, ex~ cessive drinking" vain expense, of money, time, and the abuse of the creatures of God.... '?2 Although it seems incredible to~ day, shuffleboard was regarded :;ts, a prim,e danger.~ There were.' not to be scenes 'of elderly ,men· spend t ing a leisurely ,afternoon in -,the park playing this Devil's game.

Such games were a sign of idling - a waste of God's most precious resource, time - and they were es pecially prohibited in taverns and when practiced by servants and youths. The magistrates were will ing to go to' real extremes to stamp out games of chance and shuffle board. 13 These regulations ex~ tended throughout the century, unlike virtually all other sumptu ary laws, indicating a continuity of opinion against "vain pur~uit~." (I t might -be said that at least in New England, shuffleboard was not to be an old man's pastime because old. men were always re garded as fully prod ucti ve until they grew feeble; if a man could work, he was expected to. If shuf flebQard drew tl).e wrath of Puri tan,magistrates, Leisure World or Sun City or retirement centers. in Florida .would, have been regarded by them as nothing, short~f ,Sa tanic - the worst sort of wasteful~ ness of men's productive capaci ties.) As in" so many other cases, one colony did not participa~e in the surnptuarymania: Rhode IslandJ4 But Rhode Island was not a Puri tan commonwealth. Its founder, Roger Williams, ha.d argued for the separation of church and state ...,.... not primarily to, protect the state, but to protect the church!

The Problem 01 Social Mobility The Puritans', emphasis on per: sonal responsibility, thrift, hard work, the moral righteousness of all lawful occupations, careful ac counting (moral and financial), honest dealing, the fulfillment of contracts (covenants), and their concern with the future, both heavenly and (especially from 1630-60) earthly, all combined to provide an atmosphere conducive to economic growth and personal 348 THE FREEMAN June wealth. Another important feature of Puritan thought that has sel dom been recognized is the anti pathy of Puritan preachers to the sin of envy. Samuel Willard, whose two decades of Sunday evening sermons on the Larger Catechism, A Compleat Body of Divinity (1726), stands as the Summa of Puritan theology, saw envy as a direct violation of the law of God. Reset forth this standard to his congregation: they U~ught not to envy, but to rejoice in the pros perity of their neighbors."l5 Willard's lengthy attack on the sin of envy stood as one of the longest -expositions on the subject in Eng lish until the publication, in 1969, of Prof. Helmut Schoeck's crucial study, Envy: A Theory of Social Behavior. Cotton Mather agreed entirely with Willard's analysis: "It will have no good aspect upon us, if it should be so, that a level ing spirit gets so much head among us, that no man shall be in anything sup·erior to his neigh bors, but his very superiority shall make him obnoxious to envious in dignities. . . ."16 Envy, as Schoeck has argued so incisively, restricts the incentives for and impetus to economic de velopment. First, it discourages the free discussion among mem bers of a society of a basic fact of life: time. Men do not discuss their personal futures if their goal is to conceal their aspirations, for tunes, and plans. Yet they must con ceal such matters in a society mo tivated by feelings of envy. Sec ond, under such restraints, inno vationsare unlikely, since no one wants to let his neighbors see how much better off a person is asa result of some advance. 17 Cut off discussion of the future,compro mise men's orientation toward the future, penalize advancement tech nologically and personally, and the society in question will show few signs of economic growth. 18 Personal and Social Growth Puritan preaching, therefore, served as a stimulus to both per sonal wealth in one's calling and economic development for the com munity. Men were to be moderate in all things, and they were not to pursue wealth for its own sake.

This was made clear by a century of preaching, from John Cotton to Cotton Mather to Benj amin Frank lin. Nevertheless, there was noth ing innately wrong with wealth in the Puritan view, however much a spiritual snare and delusion great wealth might become. So when men began to follow the tenets of the Puritan faith, they found themselves steadily increasing in wealth, both personally and cul turally. This was to raise an ab solutely baffling dilemma: how was the fact of social mobility to 1974 THE PURITAN EXPERIMENT WITH SUMPTUARY LEGISLATION 349 be reconciled with medieval cate gories of fixed status, implying defined place .and function? The Puritans were hardly the first people to face this dilemma. The millennium of institutional struggles over monastic reform in the Roman Catholic Church testi fies to the traditional nature of the problem. From the day that St. Benedict set forth hisemi nently practical monastierules humility, hard work, thrift, p·a tience, self-help, discipline-the monasteries that followed his guide faeed the problem. of eco·· nomic growth. The monasteries had a tendency to get richer and.

richer. Then the original ideal of personal poverty was abandoned by certain abbots and monks, and pressures for reform came from the outside. 19 This pattern pre vailed right down into the· six teenthcentury, when Henry VIII confiscated monastic property in the name of a highe'r morality. In 1632, it was one thing for Gov. John Winthrop to challenge Thomas Dudley with respect to the latter's ostentation in adorning his home with wainscoting (a wooden paneling on the walls of a house). He had more justifica·· tion, given Puritan standards, for such an act, for it was, in his words, "the beginning of a plan·· tation."20 Even so, it is not hard to understand Dudley's anger when Winthrop had the frame of his house removed. Dudley - who was to alternate with Winthrop as the Governor of Massachusetts Bay,in the early years, and who regarded himself as the strieter Puritan of the two - objected, and Winthrop, in his own words, "acknowledged himself faulty" in taking this responsibility on him self without having consulted with other magistrates. 21 But after half a centuryhadelaps-ed, we find ministers using the same old "wil derness condition" argument in order to justify the intervention of the civil government in com munity fashions. Sermons deliv ered in the second generation of New England would dwell on the graciousness of God in making New England into a fruitful land, and a few .pages later would revert to the older "wilderness" pattern.

It is unlikely that .anynewlyrich citizen of Boston or some optimis tic social climber would conclude that his, or his wife's, style of dress in some mysterious way con stituted a grave deviation from a hypothetical "wilderness standard" of clothing - not in 1680, at least. Unprecedented Mobility The very success of the Puri tans in overcoming the .limitations of a wilderness disrupted the re ceivedmedieval tradition of fixed or semi-fixed status distinctions.

350 THE FREEMAN June The rapidity of soe,ial .change and the fluidity'of social ,mobility baf fled· Puritan ministers. By medi eval standards, the,' social mobility was unprecedented' and, incompre hensible.' This was especially true of Boston, which was' becoming the'majo,r port ,in the colonies. It was a society inwhich,a,formel' indentured servant' could become a ship owner .,or a wealthy' skilled craftsman. John Hull/one' of the most'respected men: ih New 'Eng land, and surely one "of the Tich est, had raised himself from very modest circumstances. 22 How was a magistrate' to determine some":' one',s social status, ,except in, cases of extreme poverty -or· 'wealth? :Social status', became as much of aproblent for the' second gen~ eration as the administration of a "just price." had been for the first. It was an elusive quality, even as the just price ,. had been an elusive quantitY,which refused to be catalogned or defined in ,writ ten legislation. Yet it ,seemed as though this very elusiveness" hyp., notized Puritan preachers'., They were certain that a proper defini tion could' be found, but the per verse changes going on in New England society kept it concealed.

In their eyes, the evil lay with the overly fluid society and not with the lack of rigor in the definition of status. Changes in fashion, imi tation by members of the lower classes of their social superiors, the increase in affluence of the lower class as a class, this seem ingly perverse" unwillingness of men to' keep, in their original sta tions into which they had been born: here were signs of despair. Puritan commentators were con vinced that ,New England society was in the process of dissolution; God was about to depart from the land. Puritan Preaching Against Pride ana. Ambition By 1674, Cotton,. Mather's fa ther, Increase Mather, was con":' vinced that the continual :violation of the Fifth "Commandment-the status commandment - was the chief sin of his generation. (That someone named Increase could take this position only serves to em... phasize the' irony.) Inferiors were rising up· against superiors in the commonwealth-,- in families, schools, churches. It was not an uprising that he feared, :but this incessant rising ·up."If there be any prevailing iniquity in New England, this is it.... And mark what I say, if ever New England be destroyed, this very sin of dis obedience to' the fifth command ment will be the ruin of the land."23 .' Samuel Willard agreed with Mather. 24 The, problem, as the Puritan divines saw it, was that men were 1974 THE PURIT'AN EXPERIMENT WITH SUMPTUARY LEGISLATION 351 not satisfied with their lot in life.

Daniel Dension's last sermon, ap pendedby another famous preach er of his day, William Hubbard, to Hubbard's funeral sermon for Denison, cities ambition as the curse of the land, along with envy: ". . . Ambition is restless, must raise commotions, that thereby it might have an opportunity of ·ad vancement, and employ envy to depress others, that. they fancy may stand in their way.... "25 Such ambitious.men are unwilling "to abide in the calling, wherein they are· set; they cannot stay· for the blessing, nor believe when. God hath· need of their service, he will find· them an employment, what ever .stands in· the' way of their design, must give place.... "26 The clergy's practical problem was obvious: assigning explicit guidelines that would help the magistrate to decide in any given case whether a man's ambition was of the "restless" sort, or whether the individual was simply exercising newly discovered per sonal talents in some new calling.

To argue', as Denison did, that a fixed calling is basic to God's plan of salvation for each saint, in volved him in a form of feudalism manorialism that was unlikely to survive the acids of the competi tive market mechanism, with its concept of voluntary free labor, the right of private contract, and profit in terms of an impersonal price mechanism. The Boston Synod of 1679 listed pride in apparel and the unwar ranted imitation by servants of the dress of their superiors as ea.rly entries in its catalogue of over a dozen social evils that had brought miseries to New Eng land. 27 Five years earlier, Increase Mather himself had announced the difficulty of distinguishing .the dress of the regenerate from that of the unregenerate. It is a dark 'day· when "professors of religion fashion·· themselves according to the world."28 But given the in escapable and undeniable exist ence of human sin, what could be done to correct this problem?

What are the standards of legiti mate fashion for a godly society? Are they subject to change? Like the standards of economic oppres sion, the just price, and usurious interest, the standards of godly fashion were elusive. Strange Apparel Rev. Urian Oakes struggled mightily with this difficulty. He was convinced that human pride expresses itself in outward garb, "in affected trimmings and adorn ings of the outward man, that body of clay that is going to the dust and worms." Strange apparel is going to be punished, he said, citing Zephaniah 1:8 as proof. Yet 352 THE FREEMAN June some rich and lovely garments are all right (II Samuel 1 :24) : Nor am. I so severe,or morose, as to exclaim against this or that fash ion, provided it carry nothing of im modesty in it, or contrarily to the rules of moral honesty. The civil custom of the place where we live is that which we must regulate in this case.· But· when persons spend more time in· trimming their bodies than their souls . . . When they go beyond what their state and condi tion will allow, that they are necessi ..

tated to run into debt, and neglect the works of mercy and charity, or exact upon others in their dealings, that they may maintain their port and garb; or when they exceed their rank and degree (whereas one end of apparel is to distinguish and put a difference between persons accord ing to their places and conditions) and when the sons and daughters of Sion are proud and haughty in their carriage and attire in an humbling time, when the church is brought low, Jerusalem and Judah are in a ruinous condition, and the Lord calls to deep humiliation: This is very displeasing to God, and both Scrip ture and Reason condemn it. 29 Oakes was preaching to the magistrates of the colony, in a 1673 election sermon, that annual ritual that helped to bridge the gap between church and state. But he did not go into specific details concerning the nature of the re quired legislation - election sermons almost never did - and so nothing was put into operation.

Oakes had put most of the Puri tan theologians' opposition to the flux of modern life into one lengthy exposition. Excessive so cial change breaks down familiar communal standards, which in turn are supposed to help preserve members of differing classes in traditional occupations and in dress reflecting those occupations. The hierarchy of medieval life a hierarchy reflecting a great chain of being from God to Satan -was being shattered by the winds of .change. Men and women were increasingly unwilling in the late seventeenth century to accept the limitations of such arbitrary status concepts on the exercise of their property rights. What was "civil custom"? In a society which had grown frQrn a tiny, rural col ony in an uncharted wilderness to a thriving and productive com ponent of a newly developed Eng lish trade system, civiI custom was indeed the question. Customs were anything but fixed or universal.

And after 1680, clerical opinion no longer carried as much weight in establishing or maintaining older customs. The very fluidity of fashion, where new styles could sweep through the community, re flected the lack of fixed standards, and this fact dismayed the preachers.

1974 THE PURITAN EXPERIMENT WITH SUMPTUARY LEGISLATION 353 Conclusion Status distinctions were sup posed to be respected by members of a Holy Commonwealth; this meant that each status required its appropriate fashions, manners, customs. The problem which the first generation had never been willing to consider was to make itself felt in the 1670~s. In a so ciety in which men are not only free to increase their estates, but in fact have a moral obligation to do so, should men not be allowed to improve their social statuses? If Puritan frugality, the rational use of time and resources, system atic accounting, personal respon sibility, and a future-oriented view of the world are allowed to com bine into an ethos favoring both individual and aggregate eco nomic growth, then social mobil ity, upward or downward, should be characteristic of that society. Yet the Puritan theologians of the second generation did not reach such a conclusion. There fore, given their unwillingness to accept the legitimacy of social mobility on such a scale, they had.

an obligation to spell out the na·· ture of specific legislation, both ecclesiastical and civil, that would define the relationship between status and wealth, and between status and fashion. This was the great stumbling stone for the Puritan oligarchs. The ministers were never able to agree on such rules. The sumptuary laws went unenforced, relics of the first gen eration's confidence in status leg islation. Fashions continued to degenerate, and finally, to the hor ror of many of the pastors, Puri tan saints began wearing wigs! As far as the sermons of the 1670's are concerned, Worthing ton C. Ford's description holds good: "Massachusetts Bay was becoming degenerate, the older generation said. It is always be coming degenerate."3o By the 1680's, the civil magistrates had abandoned the attempt to main tain medieval concepts of social status in an increasingly modern culture. The older Puritan standards of social propriety had become the victims, not of Enlightenment ra tionalism or philosophical skepti cism, but of operational Puritan ism. Like the medieval monas teries, the Puritan commonwealth had prospered as a direct result of Puritan teachings. But unlike the monasteries, the society of late seventeenth-century New England did not heed the call to reform it self. Indeed, the cries for reform were so vague, especially after the defeat of ~he Indians in King Phil ip's War (1675-76), that had any magistrate wanted to listen, he would have had nothing to hear in the way of specific reforms.

354 THE FREEMAN June The saints in the churches were as unwilling to abide by the older standards of dress and social status as those outside the churches who had neglected to "own the covenant" of church membership. Puritan sermons had warned of God's wrath in the face of hardheartedness, but when judgment came - in the shape ·of an Indian uprising - the Puritan military forces were victorious. Success was the one thing that the pessimistic jeremiad sermons of the second generation simply could not deal with successfully. Religious pietism was sweeping the Western world after 1660, in England, the·· Continent, and the Puritan colonies. The former con fidence in· the future about the possibilities for the expansion of God's external kingdom - cultural, social, and political-had faded. Louis XIV, Charles II, and other secular monarchs were ·no longer interested in the expansion of the kingdom of God, but rather. with their own political kingdoms. 31 A religious pessimism concerning the external affairs of the world set in for the next eight decades in New England, from 1640 until the Great Awakening of the 1740's, and by 1680, Puritan theologians and preachers knew that in all likelihood, their· hopes concerning the Holy Commonwealth were not going to be realized.

Cultural and economic Puritan ism, however, still operated, but on a private level. Individual saints saved, planned, built for the future. The Holy Commonwealth, while not so holy as it had been in 1630, was more mature. It had freed men from many of the shackles that had bound· them for a thousand years. A new land was ready for the application of Puri tan hard work and thrift. Political institutions, built as they were on the .doctrine of the priesthood of all believers and the validity of covenants, provided the demo cratic mechanism for orderly transfers of politicaJ power. Eco nomic institations, built in terms of individual responsibility before God, now helped to release the eriergies ofa diligent community of citizens. The old Puritan mis trust of concentrated political power, when coupled with the old medieval tradition of localism, created a hitherto unheard of eco nomic freedom. What was socially inoperative in Puritanism had been largely scrapped by a later generation of Puritans. What re mained was to stand as part of the foundation of the American republic. ~ • FOOTNOTES.

1 Larger Catec.hism (1647), answers 124, 126. I am using the standard edition published by the Free Presbyterian Church of Scotland (1970).

197.4 THE PURITAN EXPERIMENT WITH SUMPTUARY LEGISLATION 355 2 Ibid., ans. 127-30. Direct quote from #130. 3 F. A. Hayek, The Constitution of Liberty (University of Chicago, 1960). 4 Nathaniel R.Shurtleff (ed.), Rec~ ords of the Governor and Company of the Massachusetts Bay in New England (Boston: State Printer, 1853), III, p. 243. I have cited the version approved by, the more democratic deputies; the version approved by the full General Court is almost identical: ibid., IV, pt. I, pp. 61-62. [Cited hereafter as MeR.] 5 J. Hammond Trumball and Charles Hoadly (eds.), The Public Records of the Colony of Connecticut (New York: AMS Press, [1850-90] 1968), 1 (1641), p.64. [Cited hereafter ,as CCR.] 6 MCR, 1(1635), p. 18.3; (1639), pp. 274-75.' . 7 MCR, I (1636), p. 186. 8 MCR, I,PP. 387-:-89, 403. 9 MCR, 1(1635), p.136;(1635), p.180. 10 Nathaniel B. Shurtleff (ed.), Records of the Colony of New Plymouth (New York: AMS Press" [1855J1968), XI, p.38.

11 CCR, I (1647), p. 153. 12 MCR, IV, pt. I (1654), p. 287. 13 MCR, II, pp. 180, 195: III, p. 102; IV, pt. I, p. 20; CCR, I, p. 289; PCR, XI, p.66. 14 On Rhode Island's absence of sump tuary legislation, see William B. Weeden, Economic and Social History of New England, 1620-1789 (1890), I,' p. 290. Weeden provides a summary of the vari ous sumptuary statute's: pp. 226ff. 15 Samuel Willard, A Compleat Body of Divinity (New York: Johnson Re prints, [1726] 1969), p. 644. This was the largest book ever published in the colonies in its day - close to one million words. 16 Cotton Mather, Concio ad Populum (1719), p. 18. 17 Helmut Schoeck, Envy: A Theory of Social Behavior (New York: Harcourt, Brace & World, 1969), pp. 46-50. 18 On the importance of future-orien tation to economic-and cultural life, see Edward C. Banfield, The Unheavenly City: The Nature and Future of Our Urban Crisis (Boston: Little, Brown & Co., 1969) .

19 Cf. Dom Cuthbert Butler, Benedic tine Monachism (2nd ed.; London: Long mans, Green & Co., 1924), pp. 150-55. St. Benedict, was totally opposed to private ownership among the monks: The Rule of St. Benedict (Westminster, Md.: Newman Press, 1952), pp. 85, 87, 127. 20 James K. Hosmer. (~d.),. Wfnthrop's Journal: "History' of 'New England," 1630-1649 (New York: Barnes & Noble, [1908]1966), I, p. 77. 21 Ibid., I, pp. 84-85. 22 Samuel Eliot Morison, Builders of the Bay Company (Boston: Houghton Mifflin, 1930) , -ch. 5., ; ",' , , ' 23 Increase Mather, The Wicked Man's Portion (1675), p.17. Preached in 167'4. 24 Samuel Willard, Useful Instructions for a professing People in Times of great Security and Degeneracy (1673), p. 75. 25 Daniel Denison, Irenicon, attached to.Willi~m Hubbard, The Benefit of Ct well-ordered Conversation (1684), p. 195. 26 Ibid., p. 196. 27 Boston Synod, The Necessity of Reformation (1679), pp. 2-3.

28 Increase Mather, The Day of Trouble is Near (1674), p. 22. ' 29 Urian Oakes, New-England Pleaded with (1673), p. 34. An election sermon delivered in Boston in May, 1673. 30 Worthington G. Ford, "Sewall and Noyes on Wigs," Publications of the Colonial Society of ,Massachusetts, XX (1917-19), p.112. . 31 William M. Lamont, Godly Rule: Politics and Religion, 1603-60 (London: Macmillan, 1969).

SocialismSeeks Its Own ~~~!!!!lLevell~~~!!!! MELVIN D. BARGER SOME MONTHS AGO, a popular news magazine featured on its cover a cartoon drawing· of a shivering and bewildered Uncle Sam holding an empty Horn of Plenty. The pic ture told the story so well that the explanatory heading wa.s hardly needed. It said, "Running Out of Everything." It is certainly a fact that the United States has been running out of lots of things in recent months. There are growing short ages of energy, plastics, clothing, canned food, paper, furniture well, you name it. In 1973, without experiencing a major war or a dis astrous farm failure, the long-time Land of Plenty was suddenly transformed into the Land of Not Enough - and the problem was getting a lot of attention. But it wasn't getting the kind of attention that is likely to solve the problem of growing shortages. Mr. Barger is a corporate public relations ex ecutive and writer in Toledo, Ohio.

356 Few of the experts who comment ed on the .shortages .were willing to put the blame on government intervention or to suggest that the plans for the planned economy weren't working out so well in practice. The distinguished econo mist Paul Samuelson, for example, said that the "reason for these shortages is the brute fact that (plant) cap·acity wasn't added on." He also noted that "industries like shortages because· it's a seller's market." (One hOJ}es that Mr. Samuelson knows that industries are usually buyers as well as sell ers and thus face problems in any kind of·8 market.) There are, of course, a number of secondary causes behind our present shortages. But the pri mary cause of the trouble is that the United States has finally passed a major turning point in its journey toward socialism. The government's role in' the economy has become so extensive and so de197.1" SOCIALISM SEEKS ITS OWN LEVEL 357 cisive that the country is begin ning to experience the typical problems of other countries that have adopted socialism. Britain has had such troubles for years and continues to stagnate and to decline in world influence. It is not difficult to demonstrate that other countries have had similar difficulties under socialist govern ments.

Are Wean Exception? But what about a country such as the United States t which rose to great heights und-era system' that was largely capitalistic,and con tinued to experience· gre.at growth even after the government brought business and industry und-er fairly tight regulations and control? Why can't the United States main tain its present level of production and prosperity even while convert ing intoa largely socialist system? Even if the rate of growth is slowed down or stopped alto gether, why can't the present standard of living be maintained, with perhaps a few adjustments such as a decrease in the size of automobiles and a reduction in some food supplies? The problem with this kind of wishful reasoning is that social ism tends to establish certain levels of output that have nothing to do with the individual goals and preferences of citizens. In most cases, socialism has the effect of lowering output and destroying the balances between production and consumption. At the same time, it must restrict liberty either by direct threats or by persuading in dividuals to forsake their freedom as a means of "promoting the com mon good." If socialism is adopted in a country that has previously had a relatively free market place, the economy .will gradually tend to sink toa level somewhat close to what it would have reached had the country been socialistic from the very start. At the same timet the government win begin to use various means to curb liberty, so that individuals will eventually think and act in the manner of people who have grown up under socialism. To put it bluntly, social ism alway·s seeks its own level,and our present q.ifficulties are prob ably just a sneak preview of much more trouble to come.

In socialism's early years, its devotees insisted that their pro gram would bring greater efficien cies in production and distribu tion. Early socialists often de plored the seeming duplication of facilities .under capitalism; why have two stores across the street from each other when one outlet could be slightly enlarged to handle the needs of the entire community? It was also alleged that many people performed un358 THE FREEMAN June necessary and worthless tasks un der capitalism, but that under socialism, each person would be assigned duties that fitted his per sonalityand interests~ At long last, it was said,. people would work for the common good rather than for' the narrow interests of capitalistic owners. Production Low, but Other . Benefits C/~'imed But socialism in practice .turned out to be far less productive than privately~ow'ned enterprises. ···.This did not, .however, cause socialists to reexamine their entire philos ophy; instead, they .went on to claim benefits other than efficiency for' socialism. Socialists such .as George Bernard, Shaw thought that socialism would provide com,..

plete equality of incomes, while long-time Presidential candidate Norman Thomas believed it would bring social justice and a more equitable use of natural resources such as petroleum and . minerals. In· recent .years, socialists have tended to deplore the· emphasis on high industrial productivity; they like to say that we have now solved our production problems and should be devoting. our resources and energies to the solutions of urgent social problems. One of the major difficulties with socialism, however, is that it immediately becomes embroiled in practical dilemmas' when it takes steps toward, establishing its program. In the United States and, other Western nations, the electorate is never likely to give socialist-leaning candidates a sweeping mandate to completely convert thecQuntry to socialism in a few months or a· few years. This fact. of life has given. the socialists no choice but to s~ek piecemeal changes, to create a "mixed" economybut.- not a,.com pletely soci~list one. These inter ventionist changes have been in troduced in the United States over the past 40 years un~era number of names.

Every change, however, has brought problems that socialists would prefer to ignore. One major problem has been . caused; py at tempts to tinker with the price system. Socialists have. always hated the idea of free market pric ing and have fervently clung to the belief that a managed system of prices and wages would result in a more just economy and a more balanced distribution of resources. They have argued, quite convinc ingly, that monopolies and oligo polies actually make arbitrqry price administration decisions, while labor unions and companies combine to set wage levels. How much better to bring these proc esses under social control by au thorizing the government to estab1974 SOCIALISM SEEKS ITS OWN LEVEL 359 lish wage and price levels in an order ly manner. But the market place has a way of overlooking such arguments. If the government-administered price is too low, there is a rise in con sumption and·a ·drop in production (or at least a temporary withhold ing of goods from the market). If the price is too· high, there isa decline in consumption and an in crease in production. In either case, the behavior of the market is predictable. There is, in fact, al most no economics textbook worthy of the name that would dispute this. This basic, predictable char acteristic of the market place can be observed in the marketing of everything from eggs to used cars.

Shifting the Blame Unfortunately, the failures of price and wage control do not seem to sway a single socialist from his course. Quite· often, the blame for the evil consequences is transferred to businessmen; the energy shortage, for example, has been blamed on the oil companies who seek higher profits· and also want to drive out 'the independ ents. Another characteristic ex cuse of socialists is that additional controls are needed to make the price control system work prop erly. In most cases, the interven tionists are really saying that nothing will work very well until they have an almost totalitarian control over the entire economy. Why won't the socialists con cede that a free market price sys tem is necessary and that they should modify their own program to include it? This concession would undermine many tenets of the socialist faith. The socialists have long contended that the free market place is unfair and results in an inequitable distribution of goods and services.

The advocates of free enter prise, on the other hand, have in sisted that the price system allo cates goods and services through very complex exchanges based on consumers' choices and priorities. They also argue that any other method is bound to result in either surpluses or shortages, usually the latter. Socialism's bureaucratic price control and goods allocation system tends to red uce the total amount of goods and services; it must also restrict liberty in the long run. In other words, the pub lic must do with less material well being and personal liberty if it chooses the permanent price and wage controls that socialists de sire. Malinvestment Another tendency of socialism is to channel investment funds into ill-advised projects that do not add to the productive capacity of 360 THE FREEMAN June the total economy. Malinvestments occur in any kind of economy, of course, but the privately-owned business system has a built-in way of limiting bad investments. A private company usually can raise funds only through stock issues, earnings, or borrowings. If these funds are subsequently spent on losing ventures, the management is likely to be replaced or the creditors will step in and take con trol. Thus, the managers of private business are under constant pres sure to make profitable invest m.ents and capital improvements that will increase their firm's pro ductive capacities. This process benefits the workers by increasing their productivity and real earn ing power, and it benefits custom ers by giving them better goods at lower prices.

But it doesn't work that way in the so-called public sector. Billions of dollars have been spent on proj ects that have simply disappeared into thin air. Additional billions have been spent on ventures that benefit only a limited number of people, "'and do not increase the number of productive jobs. Public funds have been spent on high-rise apartment buildings that had to be torn down in a few years, moon trips that have now fallen into disfavor, urban renewal projects that leveled whole sections of cities, and subsidized industries that continued to 9.ecline. It is argued that these ventures "put money in circulation," but this dubious objective could· have been met simply by passing out cur rency on any street corner. A healthy, productive economy needs much more than merely "putting money in circulation." The money must also be spent on ventures that add to the total wealth and pro ductivity of the country.

The Market, Or Else . .. The conclusion to be drawn is that socialism and misdirected capital investments apparently go hand in hand. It is unlikely that a completely socialistic government will be able to provide sufficient investment funds for industry or to allocate them in the proper way. In the past, for example, Congress starved the United States Post Office of investment funds while spending billions on other projects of an irrelevant nature. This my opic policy, if applied to the entire economy, would result in a drastic decline in productivity in a very short time. There is little evidence, how ever, that socialism is being dis credited by its failures to work effectively in the American econ omy. If anything, the failures of socialist interventionism seem to provide the basis for new rounds of interventions. The delusion still 1974 SOCIALISM SEEKS ITS OWN LEVEL 361 persists that the Government can solve our economic and social prob lems by appointing a "czar" to supervise an ailing industry or by providing funds to support a cer tain cause. It is still not seen that the effect of this intervention must be to lower output and to inhibit the very market forces that can bring efficiency and order into our economic affairs. Neither is it un derstood that socialism cannot maintain the high· standard of liv ing and freedom that was· devel oped by past generations in America. The price we must pay, in this new world of socialist in tervention, is very high in terms of lost liberty and lowered pro ductivity.

The eminent Ludwig von Mises saw the problem with astonishing clarity: The conflict between capitalism and socialism is not a contest between two groups of claimants concerning the size of the portions to be allotted to each of them out of a definite sup ply of goods. It is a dispute concern ing what system of social organization best serves human welfare . . . In this conflict of opinions every body must make up his mind and take a definite stand. Everybody must side either with the advocates of eco nomic freedom or with those of totali tarian socialism. One cannot evade this dilemma by adopting an allegedly middle-of-the-road position, namely, interventionism. For interventionism is neither a middle way nor a com promise between capitalism and so cialism. It is a third system. It is a system the absurdity and futility of which is agreed upon not only· by all economists but even by the Marxians ...

Men must choose between the mar ket economy and socialism. The state can preserve the market economy in protecting life, health and private property against violent orfraudu lent aggressions; or it can itself con trol the conduct of all production activities. Some agency must deter mine what should be produced. If it is not the consumers by means of demand and supply on the market, it must be the government by compul sion.* t1 *Mises, Ludwig von, Socialism, Yale Univers ity Press, New Haven, New Edition, 1959 and 1962.. pp.542-543. IDEAS ON LIBERTY The Test THE TEST for any theory of economics is whether it begins with the fact, or ends facing the fact, that what is not produced can not be consumed. It is The Test that will determine if any economic system can succeed or will fail. J. KESNER KAHN AnotherCase History of a GovernmentFailure BERNARD H. SIEGAN WHY would anyone want to in vest in a losing venture? This is a question that should be considered by the proponents of national land use legislation who are willing to have the federal government spend $100 million annually to obtain "better" land use. The government has a uniquely bad record in ac complishing its programs; still Congressmen continually propose new and more costly ones.

Washington is usually unable to do in domestic affairs what its leaders want it to and say it will. Some of this is obviously due to corruption and incompetence, but probably most is attributable to the nature of the beast. One of the many difficulties is that, except perhaps in emergencies, represen tative government must necessar ily respond to the continual and varied pressures and demands of its citizens, and these can alter considerably the course of its pro grams. Copyright 1973 Bernard H. Siegan Mr. Siegan is the author of Land Use With out Zoning and many articles on the subject. He practiced law for 20 years in Chicago be fore moving in 1973 to La Jolla, California, where he is an adjunct professor of law at the University of San Diego Law School. 362 Unlike corporate stockholders whose influence is limited to the extent of their stock owner ship, individual citizens of the country can have vastly more pow er over its affairs. By participat ing and getting involved in local matters, individuals or groups con stituting small minorities can ex ert substantial influences, even impeding plans and efforts of the highest elected officials.

An excellent case history of the exercise of such powers, and the ensuing problems presented gov ernment, is contained in a short book published last year by the Urban Institute of Washington, D. C., entitled New Towns In town. It was written by Dr. Mar tha Derthick, a senior fellow at the Brookings Institution. The book describes the efforts of President Johnson beginning in the summer of 1967 to build housing develop ments for the poor in various met ropolitan areas on Federal surplus land. The government owned the land, and the legislative authority for funding and development was then in existence. At the helm was a 1974 ANOTHER CASE HISTORY OF A GOVERNMENT FAILURE 363 president personally .committed :to carrying out the program and -will ing to commit the full powers of his office toward that end. He ap peared" certain of success and well he might be, given the circum stances at hand.

New Community Prol?os~/s No .PositiveResults Nevertheless, four years after the program began,' it was almost a complete failure~ Of seven an nounced, proposals for newcom~ munities, three were dead and the future of the others was then in great doubt. In only one ,instance was a'· small· amount of construc tion proceeding. The record of each: of the seven proposals is basically the same. Private citizens and organizations, together with officials at various levels of government responding to the pressures of theirconstitu ents, were able' to prevail over the will of the administration. Another maj or problem was the conflict be tween the different government agencies involved in planning the program and using surplus lands. One of the sites was a 335-acre tract, located a few miles from the White House in Northeast Washington, which the adminis tration initially sought to develop with 4500 units, all but 800 in tended for public and subsidized housing. It was to be a showcase development in. the nation's capi tal, evidencing the country's con cern for its less fortunate citi zenry.

Presumably, ·in the Federal city, the administration would have maximum influenceand'< :impact. But its powers did not extend over local officials and citizens. Strong opposition. soon arose, both from neighboring residents who wanted only middle class housing,.and various other persons and organ .. izations elsewhere in the city who demanded a host of changes, in the plans~ 'A lawsuit was filed to obtain "meaningful" citizen participa tion .. Virtually from the moment the. program was announced, it went straight downhill; even a new school proposed for the com munity becam~ the subject of con troversy as to whether it should be "conventional" or "new and relevant"; and there were of course many opinions on that issue. Dr. Derthick does not suggest that in any of the seven situations there were any "bad guys" seek ing personal monetary gain; al most everyone involved ostensibly desired the best use of the land, but this generally meant adopting only his own preferred plan. Basic ally, the forces that blocked the program reflected the national concerns of that period.

364 THE FREEMAN June Perhaps in certain places some of those particular pressures may have receded over time, but they have been or will be replaced by others; comparable ones will al ways be with us, as well they should in a representative and par ticipatory society. Recognize the scenario? It is a preview of what can be expected to occur upon passage of a na tional land use bill. This legisla tion will involve much more plan ning, regulation and commitment at all levels of government, local, state and Federal. In addition, un like the case of surplus land, the land that will be the subject of the lobbying, jockeying and maneuver ing will be that of private citizens, not government owned. And in finitely more land will be involved than just seven sites. Among other things, this situa tion does not bode well for the right of private ownership, since the owner will be just one of many, many divergent interests attempt ing to dictate its use.

Government clearly has limita tions in carrying out its programs. Certainly legislators should take this into account in proposing new programs. There is absolutely no point in entering a milkhorse in the Kentucky derby. As Dr. Der thick states in her introduction: "The more government tried to do, the plainer became its inability to do very much." t) IDEAS ON LIBERTY Shifting the Slums THE BASIC PREMISE on which the program [urban renewal] was started and the one which maintains its intellectual momentum is that urban renewal eliminates slums, prevents the spread of blight, and revitalizes cities. It is much more likely that the fed eral urban renewal program shifts slums instead of removing them, and, in so doing, may actually encourage the spread of slums and blight. The people who move from the urban renewal area are not really helped by the operation of the program. Some receive payments for moving expenses and advice in finding new homes. But after they move, they still have the same incomes, the same social characteristics, and the same skin color. The only basic change is that they are now living in some other part of the city.

MARTIN ANDERSON, The Federal Bulldozer GiveTImghtHowlbuGive JAMES C. PATRICK ~ AMERICANS give away more. every year than the gross national prod uct of Austria or Greece or Norway ... We give more to our churches alone than the gross na tional product of Chile or Egypt or Israel. You will notice that I have not named the most poverty-stricken nations of the world. Gross· na tional product is often referred to as GNP and it includes every thing that the people of a nation extract from the ground and sell to others, such as coal or iron ore or diamonds or limestone or oil. It includes all that the people pro duce. through cultivating the soil, such· as corn or soybeans or ba nanas or flax or pineapples or rice. rt includes all the services that people perform for each other and collect a payment, such as writing a will or filing a tax return or filling a cavity in a tooth or acting ina television show or giving a manicure or repairing a flat tire or preaching a sermon.

Mr. Patrick is Manager of the Chamber of Commerce in Decatur, Illinois. This article is from a sermon he delivered recently on Lay men's Sunday. Some useful human activities are not included in GNP because there is no direct compensation for them that would make it pos sible to.·measure their value. The services performed by a house wife are an example. Long ago I learned something about how im portant the work is that is done by· a homemaker and I am inclined to rank only a few other careers. on the same plane with the home maker. Possibly a physician qual ifies, but only if he is a good one. A person who can sew a button on a shirt, and have the toast pop out of the toaster when the eggs are ready, and make a Iittlegir l's hair look nice when it is time. to go to school, and bind up a man's ego when he has been chewed out by his foreman or had a contract can celled by an important customer, is certainly part artist and part magician and part angel. And those are only a few of the things accomplished everyday by millions of women in America and other countries, year after year. But normally there is no direct com pensation for such artistry so it 365 366 THE FREEMAN June is not counted in the gross nation al product. The same kind of work performed by a hired hous,ekeeper would be part of GNP.

Preparing and delivering ser mons is normally considered a useful human activity, although some sermons hardly meet that test. But, useful or:' not, a "free" sermon like this on~' does not be come a part of" GNP. The point is' that, while' riot all human activity enters into gross national product, the part that does is formidable in size. And we Americans give .away more than the entire G;NP of quite a number of thewell-kriown nations of' the war ld-some' of them very' pros perous nations like Austria and Norway· and Israel. AmericanPhUanthropy We have been a generous people throughout most of .our history. In 1960 the University of Chicago Press published a book entitled American Philanthropy, by Robert H. Bremner, who found evidence that in the last century there was more giving to' the poor than was thought at the time to be good for them. "The principle of voluntary association accorded so well with American political and economic theories that as early as 1820 the larger cities had an embarrass ment of benevolent organizations."

During the Civil War there was apparently an overabundance of relief to the families ,of servic~ men, oilthe part of:hoth voluntary associations and governments. Mr. Bremner wrote that "oft-repeated warnings of the dangers of un wise giving were forgotten for the moment as community and statewide relief .organizations so licited contributions." Up: to the' middle" of the last century the greater' 'portion of American schools and colleges were established ,by privatephi~ lanthropy. Many were founded and operated by churches but, at the same time, establishing schools for po'or children without religious affiliations became afa\rorite char ity for public-spirited citizens. So many colleges were founded that the number exceeded the demand and over seven ,hundred passed out of existence before 1860. Americans also gave voluntary foreign aid. ,During the 1820's voluntary committees collected and sent assistance to the Greeks and many Greek' war orphans were brought, to this country for' adop tion.

Mr. Bremner relates that "In the autumn of 1832, when the starving people of Cape Verde Islands rowed out to a ship hoping to buy food, they were astonished to learn that the vessel had been sent from the United States for the express purpose of relieving 1974 GIVE THOUGHT HOW YOU GIVE 367 their necessities. Individuals and churches in New England, Phila delphia, and New York had heard of their need and had raised thou sands of dollars for their as sistance." Voluntary Support In the United States we have no direct government aid for church es. It is true, of course, that churches benefit by the exemption of their religious and educational facilities from property tax. They also gain by the fact that contri butions to churches are deductible for income tax purposes. But es sentially, churches have to get along on the gifts that come from their members and others who sympathize with the work the churches do. In colonial days the churches in a few of the colonies did receive government assistance, to be sure, but the period of re markable church growth followed the ending of all establis,hed churches and the cutting loose of all government ties.

Throughout the world there are more than 985,000,000 members of Christian churches. It has been said that since the birth of Christ churches have been built at a rate that exceeds one a day. In Decatur there is one church for every 750 people. If that average is about right for the entire nation, then there must be more than 275,000 churches in the United States. Approximately 134,000 days have passed since the first permanent settlers landed in Virginia and established what became the Jamestown colony, so in this coun try we have created more than two churches a day by our volun tary gifts. We do, indeed, seem to have heeded the admonition in II Corin thians 9:7 that the Lord loves a cheerful giver. To be sure, it is sometimes difficult to raise funds for purposes that some people con sider highly important. But time after time, when a need has been dramatized so that people could understand it in terms of human suffering and want, they have responded generously.

Responsible Giving Generosity can be helpful but it can also be harmful. We should give thought how we give. Chil dren who are showered with toys and other presents sometimes end up frustrated and bored, taking for granted the bounty they enjoy, not interested in any of their possessions, not appreciating the generosity of the givers, and un able to understand that such plenty is uncommon in the world and that many of the world's peo ple are in need. For need has been the common condition of mankind throughout history and still dogs 368 THE FREEMAN June the footsteps of hundreds of mil lions of the people on earth. Only a minority of the world's popula tion has struggled free of the grip of poverty.1 We can help our children and we can help other people too much. We can help· them to their own detriment. Not long ago a letter to Ann Landers discussed in. the newspaper the training of boys to make household repairs. The writer emphasized that a father should teach his sons how to make minor repairs around the house to lubricate appliances, change a washer in a leaky faucet, and the like. Many times, the writer said, it would be easier and quicker for the father to do the job himself rather than watch impatiently while his son fumbles and blunders at the job. But unless the son has the opportunity to perform the task himself, under the father's guidance, he acquires no experi ence and gains no skill.

The ability to spell rather well came tome early in life. Many times my own children have asked me how to spell a word and I have had to stifle the impulse to spell it for them and say, instead, "Well, now, let's hear you try it." Handled that way, most of the 1 Henry Grady Weaver, The Main spring of Human Progress (Irvington, N. Y.: Foundation for Economic Educa tion, 1953) pp. 11, 12. time they come fairly close to spelling the word correctly. At other times I have said to them, "Let's look it up in the diction ary," and then I let them find the word, with a little guidance, if necessary. Self-Help Is Best We do our fellow man no favor if we deprive him of initiative and creativity and deny him the op portunity to develop his self-reli ance. The person who earnestly desires to help the poor "must recognize and respect as an indi vidual the one he would love which means to encourage him but in no way to interfere with that person's capacity, will,··and effort to help himself."2 The best help is that help that enables a person in need to provide for himself.

A few years ago one of our committees in the Chamber of Commerce was considering ways to help the underprivileged young black people in our community. One member proposed giving them some recreational equipment and a black man in our group promptly exclaimed, "Oh, no, don't glive it to them. That injures their self respect and they will not appreci ate it as they will if they pay something for it." 2 Leonard E. Read, Who's Listening? (Irvington, N. Y.: Foundation for Eco nomic Education, 1973) p. 52.

1974 GIVE THOUGHT HOW YOU GIVE 369 As I thought about the matter afterward I remembered how my mother dealt with the hoboes who used to corne to our door during the depression years of the 1930's begging for food. She would never give them a handout until they had done some small odd job to earn it. I have come to understand her wisdom. Emerson said, "It is a low bene fit to give me something; it is a high benefit to enable me to do somewhat of myself." A Chinese proverb says, "Give a man a fish and he will eat today. Teach him how to catch fish and he will eat for a lifetime." Everybody is better off when the person in need can provide for his own wants. William Graham Sumner, the celebrated church man, sociologist, and educator of the last century, pointed out that a human society needs the active cooperation and productive energy of every person in it. "A man who is present as a consumer, yet who does not contribute either by land, labor, or capital to the work of society, is a burden."3 "Every man and woman in so ciety has one big duty," Sumner wrote. "That is, to take care of his or her own self. This is a social duty."

3 What Social Classes Owe to Each Other (Caldwell, Idaho: Caxton, 1963) p.19. The person who fails in this duty throws burdens on others. He does not thereby acquire rights against others. On the contrary, he only accumulates obligations toward them. But people who are helped un wisely corne to assume that they have a right to what others have earned and produced. The history of the human race is one long story of attempts by certain per sons and classes to obtain control of the power of the State, so that they can live out of the earnings of others. And when they do that, they commit an act of plunder, even if they have passed laws to make it legal. Not every legal ac tion is a right action. Right is not determined by a head count. Like truth, it is often recognized and advocated at first by only a minority - sometimes, in the be ginning, a minority of one. Perhaps our greatest error in the field of charity or philanthropy has been to relinquish to govern mental agencies this great re sponsibility, which is at the same time a great opportunity. And possibly one of the serious errors of the churches has been to sup port that action. Government is the organized force of society.

There is Christian merit in giving voluntarily to help those in need. What Christian merit is there in voting to compel everybody, in370 THE FREEMAN June eluding the unwilling, to pay taxes to help the needy? In the process we have created what is commonly called today's "welfare mess" and have developed a welfare syn drome with generation after gen eration living off the productivity of others and contributing little, if anything, to the general good. So we should give thought how we give. Giving can create a class of beggars. Recall the streets of Jerusalem in the time of Jesus. Streets in many cities of the world are still populated by beg gars, and panhandlers are fairly common even in American cities. During the summer of 1973 young Walter Reppenhagen spent the summer in Haiti as a Missions Volunteer working at the Baptist Seminary and the Baptist Hospi tal. Walt is the son of the pastor of Decatur's First Baptist Church and had just graduated from Mil likin University. He wrote a letter back to the members of the church because they had made his trip possible. This passage reveals un usual perceptivity for a person of his youth: "One of the frustra tions that all Americans face is not being able to really help the people as we would like. Giving money away is what many tourists have done. Unfortunately, this has caused an even greater problem in Haiti. Now, it is almost impossible to find a non-Christian Haitian who wants to be friends, just for the sake of friendship. So many have ulterior motives. They want money. They beg, con and plead for it. This factor alone is caus ing many Haitian ministers to leave their country."

So we must give thought how we give. It is vital, however, that we give. And let me say a word about the one who receives our gifts. You may recall that, in Acts 20 :35 the Apostle Paul ap pealed to the elders of the church at Ephesus to remember the words of the Lord Jesus, how he said, "It is more blessed to give than to receive." The act of giving implies that there is to be somebody to receive the gift. What Jesus said was that is is more blessed to give than to receive, not that jt is blessed to give and not blessed to receive. There is no reason to attach a stigma to receiving a gift if the moti ves of the giver and the re ceiver of the gift are right. The right kind of giving is good for the one who receives and for the one who gives. Just be sure your gift helps rather than harms the one who receives it. Emerson said "You will always find those who think they know what is your duty better than you know it." Do not heed them. Think for yourself.

Give thought how you give. t) A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN THE ESSAYS in Stephen Tonsor's Tradition and Reform in EducOr tion (Open Court, $8.95) were written during the several years of the student rebellion that was spawned at Berkeley, California, in the· mid-Sixties, and they tend to vary· considerably in the amount of passion that sustains them. Some of them seethe with a right eous anger; others are coolly ar gued. The four concluding essays concentrate on the special prob lems of Catholic and Christian education, but Professor Tonsor is no special pleader. In most of the earlier essays in the book he extols a diversity that would allow his philosophical ene mies to speak their pieces pro vided, of course, that a balance of Left, Right and Center makes room for alternative points of view. Tonsor does not fear cultural pluralism; he wants to pro mote a society in which children will be able to choose from a wide variety of schools and educational objectives. He does, however, in sist on cultivating the idea of excellence - and this is what uni ties the many disparate sections of the book.

Like William Buckley's Four Reforms, Tonsor's essays accen tuate the procedural. The big basic reform that he advocates would concentrate on returning choice to our educational system, or sys tems. Far from being a pure lib ertarian or antiStatist, Tonsor would permit the spirit of Horace Mann, the philosopher of the pub lic school, to linger with us for a while. He is no ideological enemy of Federal or state support of school systems. Moreover, he champions a. uniform system of 371 372 THE FREEMAN June testing elementary and secondary school pupils in both public and private schools to establish aca demic performance. This means that politicians must still keep an advantage which, in times of con troversy, might confuse excellence with conformity. But, with public education sys tems persisting everywhere, it is, with Tonsor, a matter of making some new beginnings. He wants to see the public school forced into competition with private schools and privately-marketed educa tional services. So, like William Buckley, Milton Friedman and Stan Evans, he is led to the voucher system. This would make pluralism, the widening of choice, an immediate· possibility - and, as new private schools come into ex istence, the fight to keep the poli ticians from imposing their idea of a good uniform testing system on all types of school could be left to the future.

Full-Cost Education Another procedural reform that enlists Tonsor's enthusiasm would be to establish full-cost education. This would tend to weed out the malingerers, the good-time Char lies and the dilettantes who now regard the campus life as a four year vacation. To enable the tal ented and ambitious poor boy to avail himself of a college education, Tonsor would make loans available that could be paid off once the recipient had achieved a certain salary level after his grad uation. Tonsor does not propose to discuss the "how" of financing the loans - he thinks this question would resolve itself once his prin ciple has been accepted by univer sity administrations throughout the country. Along with vouchers and full cost tuition Tonsor would insist on new procedures in adding to faculties. Ever since the New Deal, when young professors went "lib eral" and Statist in droves, our faculties have tended to make ac ceptance of the new Leftist ortho doxies the first requirement for being hired. In the course of time nine out of ten faculty members in almost any university could be counted on to assume that there can be no limits to government intervention, that "society" must always take precedence over indi vidual rights, that centralization in Washington is to be desired, that big business is organized robbery, and even that one must be a Democrat with a big D if one is to be trusted with the writing of history.

Unrepresented Minorities Speaking of his own University of Michigan, Tonsor remarks in one essay that out ·of sixty-nine 1974 TRADITION AND REFORM IN EDUCATION 373 full-time members of its history department "we do not have a sin gle professor whose primary study has been the field of religion in America." As for the economics department, it "does not have a single non-Keynesian among its tenured members." In such an atmosphere, so Tonsor asks, "is it really possible for either the stu dent or the professor to arrive at the truth?" Tonsor is not clear about the ways and means of compelling faculties to replace the homogene ity of the new collectivist ortho doxy with an across-the-board variety of doctrine. He does say, however, that the university does not belong either to the faculty, or to the students, or to any spe cial pressure group in society. Since the "whole of society" owns the big state university, and since trustees are responsible for the private-university, the implication of what Tonsor is saying is that boards of regents or university corporations should step in to com pel the representation of all points of view in the composition of fac ulty departments. This is easier said than done, but if, in the case of the private university, rich or even medium-well-heeled donors were to insist, say, on balancing a John Kenneth Galbraith with a Hayek or a Milton Friedman in an economics department, we would be making a beginning at reestablishing pluralism.

Universities as Dumping Grounds Tonsor, in his preface to his book, identifies himself with the Hoover Institution at Stanford. But when he was at the Univer sity of Michigan he spoke, his piece with a passionate disregard of what the administrative overseers of the institution might think of him. During the period of the campus riots he accused Michigan of being led by men without vision or a sense of America's future. The University "rewards felons and penalizes the orderly." Its benefits were granted on the basis, "not of ability, not even on the basis of a. color-blind equality, but on the basis of an irrationally con ceived demand on public largesse." Broadening his criticism to in clude the college scene as a whole, Tonsor remarked that "for twenty years now our universities have become the dumping grounds for all our unsolved educational, so cial and political problems and university administrations have welcomed the development of this concept of the university as a public dump."

"Do you have an urban prob lem ?," Tonsor asks. Then "take it to the university." "Do you have a psychopathic son or daughter?" Your solution is to "send him to 374 THE FREEMAN June the university." "Do you have a felon on probation?" If so, the "university is just the place for him." The university, in short, has been a place for trying to solve every problem but the problem of teaching. In paying out immense sums for the Federal support of education, the American people have been had. Maybe the first procedural change should be to let the whole higher ed uca tion shebang collapse by withdrawing public support. This would force a new breed of university president to rely on full-cost tuition pay ments, and we would soon have a new dispensation on the cam puses, one that would be prepared to stick to teaching in order to attract the really serious students. ~ WALTER KNOTT, KEEPER OF THE FLAME by Helen Kooiman (Fullerton, California: Plycon Press, 1973), 236 pages, $7.95.

Reviewed by Robert G. Anderson THE SPIRIT of individual enterprise which is so much a part of our American heritage has never been more eloquently demonstrated than by the creation of Knott's Berry Farm. The Boysenberry, chicken dinners, and ghost town of Knott's Berry Farm represent a twenti eth century family accomplish ment unmatched by anything in this era. Walter Knott, Keeper of the Flame, by Helen Kooiman is one of the most moving· stories this reviewer has ever read. It is hard to judge greatness amongst those in our midst, but unquestionably Walter Knott fits the mold. This biography cannot help but give in spiration and faith to all who value individual liberty, and the potential for individual accom plishment that em~rges from a heritage of freedom. The final chapter asks, "What Makes Walter Knott Tick?" His accomplishments as a farmer, en trepreneur, builder, patriot, and philanthropist are legion. But cer tainly among his greatest satisfac tions must be his success as a father. His only son summarizes, "I consider my Dad a great man, but for reasons other than what the general public would consider.

He had one purpose and this great motivation. Money doesn't mean anything to him, but being a great builder did and does, ..." Walter Knott has certainly been a builder. If ever a man began with few of life's material goods, it was this man. As a fast matur ing youngster - his father died 1974 OTHER BOOKS 375 when the lad was six - Walter Knott entered the business world selling produce from his garden ing ventu~es. His love of farming led him into homesteading in the Mojave desert, sharecropping for a rancher in San Luis Obispo County, and finally to a partner ship in berry farming at Buena Park, California. The family worked together, Walter, Cordelia, and their four children, and the story of their achievements is one of the most remarkable testimonials to the free economy ever told. It will surely remain as a classic testi monial of what can be achieved by individuals within a free enter prise, private property society.

Perhaps the most fascinating theme of the book is Walter Knott's recognition of his debt to our heritage of political and eco nomic freedom. Few men have pro vided a more enduring witness to this obligation than this man. His construction of an exact replica of Independence Hall, and the Lib-· erty Bell which it houses, is de tailed fully in the book·- monu ments to remind Americans for years to come of our heritage of free institutions. Walter Knott understands the importance of a. free enterprise society, and he also recognizes that such a society is being eroded away. The chapter entitled "The Farmer Makes A Speech," is rea son alone for the purchase of this book. It provides an insight into the man as a brilliant philosopher, historian, and devotee of freedom. When so much is written today of a critical nature about our country and its people, this book stands out as a refreshing change.

To know what one man and his family have accomplished when free, gives hope to others, and more reason than ever to preserve the system that made it all pos sible. Copies of Walter Knott: Keeper of the Flame are available at $7.95 from the Foundation for Economic Education, Irvington-on-Hudson, N. Y. 10533. ~ AUGUST 1914 by Alexander Sol zhenitsyn, translated by Michael Glenny (New York: Farrar, Straus & Giroux, 1972) 662 pp., $10.00. Reviewer : Martha Treichler IT IS the underlying message of this book that, for a country to be free, everyone in it must accept moral re sponsibility not only for what he does himself, but also for what those around him do. This demands an individ ualism of the sort rarely 376 THE FREEMAN June encouraged by Russian religion and culture. The state church taught the Rus sian people to accept and endure rather than to question and to blame; consequently, they had no faith in the power of their own ac tions to affect their own lives. Re ligious superstition was resorted to by everyone from the peasants to the aristocracy as a way of avoiding unpalatable facts. One could always say, "We must submit to God's will," instead of placing blame where it belonged or accepting per sonal responsibility.

Then there was the political oc topus. Bureaucracy makes people inefficient and negligent because it is inherently unwieldy and subject to corruption and incompetence. As one character says, "Intelligent, practical men don't govern - they create and transform .... " Solzhenitsyn makes the reader sense the rumblings and awaken ings of the revolution. There is, in the university, the optimism, altru ism and naivete of those who felt that getting rid of the Tsar would cure everything. A student de clares that "all we need today is an analysis of the contemporary social environment and material condi tions .... " An older teacher re sponds, pointing out that this "would be so if the life of the in divid ual were really determined by his material environment." The teacher explains, "the environment is always at fault, so all you have to do is change it ... But there is more than environment, and there fore each individual has, perhaps in spite of his environment, a per sonal responsibility for what he does and for what other people around him do."

The social planners of the time were sure they could make Russia a Utopia if only they had power to put their reforms into effect. But Solzhenitsyn has one of his charac ters say, "The best social order is not susceptible to being arbitrarily constructed ... the laws of the per fect human society can be found only in the total order of things. In the purpose of the universe. In the destiny of man." Therefore, "above all, each one of us is called upon to perfect the development of his own soul." Social planners and revolution ists believe otherwise and are, therefore, ineffective. "No revo lution ever strengthens a coun try," says a father to his radical young daughter. "A reasonable man cannot be in favor of revolu tion because revolution is a long and insane process of destruction." There are somber battle scenes, and the author has high praise for the courage of the Russian sol diers who suffered so horribly and died in such great numbers be cause of the incompetence of their 1974 OTHER BOOKS 377 leaders. But he sees "their passive endurance" as a reason for their not having better rulers.

"Russia is doomed to be governed by fools." This book, too late for Russia, is still in time for us if we heed its warning. And if we cannot re verse the trend of corrupt bureauc racy by taking personal responsi bility, why then, like Russia, we too are "doomed to be governed by fools." ~ HOFFER'S AMERICA by James D. Koerner (LaSalle, Illinois: Open Court Publishing Company, 1973), 137 pages, $5.95. Reviewed by Allan C. Brownfeld WHEN The True Believer was pub lished in 1951, the name of its au thor, Eric Hoffer, was unknown. Readers of the book recognized, however, that a powerful and orig inal talent had made its appear ance and were even more aston ished to learn that Hoffer was a common laborer who had been blind in childhood, who had then recov ered his eyesight and had proceed ed to educate himself entirely by his own efforts. Now, twenty years later, after six additional books, Hoffer is rec ognized as a brilliant aphorist and a provocative commentator upon men and events. In this new book, one of Hoffer's close friends, James D. Koerner, himself a distinguished author, attempts to satisfy the curiosity of Hoffer's readers as to his current opinion of things - and to stimulate the interest of those who have not yet encountered him.

In both of these attempts he is notably successful. Why, for example, have we not heard more from Eric Hoffer in recent years? The reason relates to the income tax laws and to Hoffer's feeling that the conduct of the In ternal Revenue Service is inher ently unj ust and tends to stifle all initiative. Hoffer still remembers with some bitterness how much of the income he earned in his best year, $180, 000, went to the government. He states that, "I make more money when I don't write than when I do." At the end of that year he had about $11,000 left and he proposed to make it a. clean sweep and give the rest to the University of Cali fornia to establish an essay prize. Now he tries to shield his estate and his family from taxes by limiting his publication to a book every other year. As he puts it, "I am supposed to lay a tiny little egg every two years. I laid one in 1971, so the next one is now 1973."

Hoffer's is a firm voice for indi vid ualism and for freedom from coercion by the state. As he sees the American past, it was personal 378 THE FREEMAN June liberty - and the heavy burden of work that it imposes on each man - that gave the ordinary American the scope he needed to excel. Whether he used that freedom to build a giant fortune, join a hun dred organizations, cut himself off from much of society, or pursue whatever else he had set his mind on,. it was the combination of free dom and responsibility that, in Hoffer's view, made the American achievement possible. For Hoffer, the freedom to be left alone, to be free of coercion by the state or society, has always been critical. When he first trav eled from New York to California as a young man,he"lookedaround," as he puts it, "and I liked what I saw. This was a country in which you could be left alone . . . This country was made largely by peo ple who wanted to be left alone.

Those who couldn't thrive when left to themselves never felt at ease in America." According to Hoffer's theory, the problem of coping with personal freedom is particularly severe in America because personal freedom is so complete. The burden of free dom, and the ways in which people try to cope with it, is a central theme through all of his writings. Hoffer laments the decline of the work ethic and sees this decline in such phenomena as featherbedding by labor unions, in books full of misprints, in the surliness of clerks. "If we lose the sense of work and purpose," he says, "we will become a weak nation, a poor nation, and we will cease to be a fighting na tion and that will be the end of us." The increase in violent crime in the U.S. is, Hoffer believes, the direct consequence of a disabling fear that has overtaken most Americans. He believes that a sta ble society, like a stable individual, is the product of an equilibrium in which a tendency to crime and vio lence is held firmly in check by a more dominant force. Weaken or remove that force and evil will reign. In a free society that force is represented by the readiness of the majority to resist and punish the minority who are violent and who want to exploit any sign of timidity or weakness.

Hoffer cites the cliche, poverty causes crime, then comments: "That is what they are always shoving down our throats ... Pov erty does not cause crime. If it did we would have been buried in crime for most of our history and so would every other nation on earth." He observes that he has lived for most of his life with poor people who did not commit crimes. "Crimi nals cause crime," he declares, "And the minute we let them get away with it, we are going to have lots more." Hoffer recalls the occasion when 1974 OTHER BOOKS 379 he was a member of the National Commission on the Causes and Pre vention of Violence and a black spokesman appeared as a witness and said such. things as, "We are full of rage" and he replied: "Mis ter, it is easy to be full of rage. It is not so easy to go to work and build something." When a militant white student would appear to com plain about the administration's abridgement of the right of stu dents to dissent, he would heatedly reply, "It is people like you who destroy everybody else's right to dissent. We have more democracy on the waterfront than radicals al low on the Berkeley campus."

To those who ask preferential quotas for minorities he responds that to treat anyone "more equal than equal" is to treat him as an inferior. He finds it astonishing that minorities demanding special attention fail to grasp the elemen tary truth that they are demand ing to be patronized. The arrogance of American "in tellectuals" is a subj ect which brings forth a vigorous response from Eric Hoffer. To Hoffer, the touchstone of the intellectual is not a passion for truth but a pas sion for power, especially power over people. The sine qua non of the Hoffer intellectual is his con viction that he belongs to an edu cated minority whose duty it is to instruct the rest of mankind and if necessary compel them to be better than they are. According to Hoffer, one need not be particularly intelli gent to be an "intellectual." He notes that, "In their hearts Ameri can intellectuals have always hated the ordinary man ... They have never been able to accept the fact that the riffraff of Europe were able to tame the American conti nent and build the world's best and greatest nation largely without the guidance of intellectuals."

That, of course, is just a tiny bit of Eric Hoffer. His book is certain ly a dose of good medicine for America. ~ HOW TO TEACH CHILDREN TWICE AS MUCH by Allan E. Harrison (New Rochelle, N. Y.: Arlington House, 1973), 153 pp., $6.95. ~ HOW TO TUTOR by Samuel L. Blumenfeld (New Rochelle, N.Y.: Arlington House, 1973), 298 pp., $9.95. Reviewed by Melvin D. Barger IT'S NOT HARD to build a case proving that the teaching efficien cy of the public school system is low. Some of the system's most outspoken critics have been teach ers, although teachers' remedies 380 THE FREEMAN June usually turn out to be a self-serv ing mixture of higher pay for themselves, increased Federal aid, lower teacher-pupil ratios, and an expansion of teacher certification programs. The hard-pressed tax payer is becoming skeptical about these nostrums - or at least fed up because so many educational re sources are producing so little in the way of results.

Allan E. Harrison is a maverick, a lone teacher who apparently thinks that present teaching re sources would be more than ade quate if properly used. He was al most forced out of the profession by the boredom and tension he found during his first few days in the classroom. Almost as a means of self-preservation, he improvised a teaching method using capital istic principles in the classroom. It was to get him in hot water with his superiors later on, but he ac complished three things that have eluded other teachers in today's heavily certificated systems. Class room discipline problems became minimal, teachers and students both came to enj oy the classroom work, and students made amazing academic progress that was mea surable by improvements in stand ard achievement tests. Harrison launched the system by organizing the class as a miniature economic community. His class cre ated a monetary system, with each student being "paid" for academic performance and also fined for breaking classroom laws and for other acts of negligence. The stu dents formed companies to offer the specialized services needed in the classroom. A bright student in arithmetic, for example, was the proprietor of the academic com pany in that subject, and could earn money by coaching the slower pu pils. Other students became bank ers, clean-up inspectors, school sup ply vendors, and class time sched ulers. The system became so detail ed that even trips to the restrooms and drinking fountains were sched uled on a commercial basis.

Although a few students balked at first, the Harrison system brought an almost magic transfor mation in the classroom. For the first time, Harrison's sixth graders were part of the' action, with re sponsibilities of their own for the way the class was conducted. They made their own laws and deter mined fines for infractions; thus, violations became crimes against the entire class rather than games to outwit the teacher. Each student could move ahead at his own learn ing p'ace, and could wheel and deal in companies in much the same manner as traders in the commer cial world. Some of them soared ahead to become junior tycoons. Harrison used every problem as an opportunity to teach students 1974 OTHER BOOKS 381 something about the larger society. He permitted individuals the lux ury of going into bankruptcy, but stipulated that they lost rights and privileges in the process. There were penalties for cheating and stealing. When students became destitute, a nonprofit foundation was formed to dispense welfare.

Later on, the "indigent" students were subsidized with monies raised by a graduated income tax. This paved the way for a discussion about the competence of govern ment to solve social problems, with the students finally deciding that individual responsibility was best in the long run. Then the class bully was permitted to become a Communist dictator. He promptly froze all bank accounts, confiscated property, and abolished the voting franchise. He was soon ousted in a bloodless coup. Convinced that his system was working, Harrison obtained enthu siastic endorsements from his stu dents' parents and a few profes sional colleagues. But he encoun tered resistance from superiors and others in the schools. It seemed that practical, workable· ideas are not always acceptable in the public system. Instead, professional edu cators prefer innovations which of fer "a lot of smoke and no fire."

Here and there, however, a few teachers used Harrison's system and reported remarkable improvements in classroom morale and learning achievements. Harrison has other ideas that go against the tide; for example, he doubts that low teacher-pupil ratios have much to do with teach ing efficiency. He would introduce a merit system that would actually encourage larger class sizes. The. key to Harrison's system ~nd educational philosophy is the rediscovery and teaching of self reliance, and he obviously believes that every child already has alar ge capacity for learning that can be released under the right condi tions. Harrison's system and the empha sis on self-reliance are not likely to win many converts among educa tors, but it's something that par ents and other laymen can keep in mind when educational problems are being discussed. The most ne glected teaching resource in every school is the students' own desires to learn and to shoulder individual responsibilities. This priceless re source has been there right along, and can be used whenever some body has the courage to give chil dren adult responsibilities. Harri son developed a system that does this, and there are probably other methods that also work. The ques tion is, Does anybody in the public school system except Harrison and a few other mavericks really care about developing genuine self-re liance in children?

382 THE FREEMAN June HOW TO TUTOR is a related book, in the sense that it deals with further remedies for the educa tional deficiences of the public school system. The book is a detail~ ed guide for. tutors to follow in teaching children the Three R's. A large part of the book consists of lessons that must be learned in an orderly manner. The tutor is given practical instructions for the teac~~ ing of each subject, and is remind': ed of the importance of learning basic rules and other fundamentals that are being neglected in current instruction books. Blumenfeld be lieves that the new teaching meth ods harm the child by not giving him a good foundation in the alpha bet, simple arithmetic, and cursive writing. He points out, for exam ple, that arithmetic has become submerged in the teaching of math; yet it is arithmetic, not higher mathematics, that most peo ple will need throughout their lives.

According to .Blumenfeld, the important ingredients of good tu toring are patience, an understand ing of the young mind, and a knowl edge of the subject you are teach ing. He believes that parents with only a high school education can become good tutors if they are will ing and able to follow his instruc tional materials. Any community has large numbers of persons who could serve as competent tutors, even without formal-teaching ex perience. But Blumenfeld believes that faulty teaching methods in the public schools are causing children to learn some bad habits. He says that children who cannot learn via the deficient instructions in school classrooms tend to blame them selves for not learning; they are in no position to question the in structional methods being used by their teachers. Thus, if they fail to learn, they blame-themselves, and the schools reinforce this view by insisting that the fault lies with the child, not the teaching meth ods. But almost any child can be motivated to learn once he is out side the classroom with its atten dant fear of failure, boredom, and confusion. With good tutoring, the child no longer has the fear of be ing thought stupid, and he is not forced to move on to the next lesson Blumenfeld's book is well-organ ized and presents a logical sequence of instruction in all three general subjects. It will be a valuable guide book for the inexperienced person who wants to become a part-time tutor. Persons who read the book should get a copy of The New Il literates, also by Mr. Blumenfeld, in order to understand the short comings the author finds in present instructional methods. Some teach ers may feel that Mr. Blumenfeld's criticisms of the public schools go 1974 OTHER BOOKS 383 a bit too far. But every elementary school student should master the basic lessons covered in Mr. Blu menfeld's book. If children aren't learning this fundamental mate rial in the classroom, something is wrong, and it is ironic that private remedies such as tutoring are needed to make up for costly de ficiencies in the public school sys tem.

~ OUR ENEMY, THE STATE by Albert Jay Nock (New York: Free Life Editions, 1973, $2.95 paper). Reviewer: Edmund A. Opitz WHEN ALBERT JAY NOCK wrote Our Enemy, The State, in 1935, he was bucking the tide, and he enter tained no false hope that his words would have any immediate effect on the course of human events. But his devotion was to the truth, and he was used to being out of step. So, with clinical detachment he dissected tpe drift away from social power toward state power, fully aware of his thankless task. Why, then, the painful effort of' writing a book? For two reasons, Nock replied. The general reason is that when in any department of thought a person has, or thinks he has, a view of the plain intelligible order of things, it is proper that he should record that view publicly, with no thought whatever of the practical consequences, or lack of consequences, likely to ensue upon his so doing. He might indeed be thought bound to do this as a matter of abstract duty; not to crusade or propagandize for his view or seek to impose it upon anyone - far from that! - not to concern himself at all with either its acceptance or its dis allowance; but merely to record it.

This, I say, might be thought his duty to the natural truth of things, but it is at all events his right; it is ad missible. The special reason has to do with the fact that in every civilization, however generally prosaic, however addicted to the short-time point of view on human affairs, there are al ways certain alien spirits who, while outwardly conforming to the require ments of the civilization around them, still keep a disinterested regard for the plain intelligible law of things, ir respective of any practical end. They have an intellectual curiosity, some times touched with emotion, concern ing the august order of nature; they are impressed by the contemplation of it, and like to know as much about it as they can, even in circumstances where its operation is ever so mani festly unfavourable to their best hopes and wishes. For these, a work like this, however in the current sense impractical, is not quite useless; and those of them it reaches will be aware that for such as themselves, and such only, it was written.

There are two political institu384 THE FREEMAN June tions, Nock held, government and the State. Government is an agen cy of society limited to negative interventions aimed at protecting individuals against force and fraud; governments are estab lished to secure persons in their rights and to punish any trespass on them. The State, on the other hand, intervenes positively in so ciety; it dragoons people into the chase after various national goals, wars on poverty, provides welfare, pays out subsidies, offers cradle to grave security, and so on. Nock was opposed to the State system, whatever name it assumes, but he was not an anarchist. He had no nai ve opinion of human nature and would have never sub scribed to the view that men and women, free of all law and law enforcement, would settle down to live happily ever after in some latter-day Garden of Eden. Keep ing government strictly limited and decentralized, he believed, is the way to preserve our liberties.

The State being what it is, it matters little who holds office and wields its inordinate powers. This truth is dawning on some persons today; but the general public, however disillusioned with politi cians, still has faith in politics as the means of curing all the ills of society and improving the quality of life. Hopefully, people will someday realize that what counts is the overextension of State pow er, not who holds public office. The important thing is to refute statist ideas, whatever their guise, and Nock's book is a big gun in our arsenal. Those for whom this book was written are scattered amongst us in sufficient numbers to warrant this excellent reprinting in paper of Our Enemy, The State. It was eleven years after the first appear ance of this book that Caxton re published it. Arno Press brought out an edition in 1972; and now a group of young people embarked on a fresh publishing venture chose this as their first title. They have added an index and include a Nock essay, "On Doing the Right Thing." The book has an Introduc tion and a Bibliographical Essay by Walter E. Grinder; somewhat tendentious, but spirited. On the whole, a neat package. ~ the Freeman VOL. 24, NO.7. JULY 1974 You Cannot Trust Governmentswith-Your Money Henry Hazlitt 387 The political problem of inflation could be broken by allowing private trading in gold.

Businessand Its Image V. Orval Watts 393 The more government intervenes, the more it strives to blame business enterprise for the consequences. For the Sake of the Poor Paul L. Poirot 409 Poverty serves a purpose, for those who feel pain and react appropriately. Inflation:By-Productof Ideologiesin Collision Wesley H. Hillendahl 413 Concerning the monetary crises which come when government forces individuals out of the market. The Rare Moment Leonard E. Read 426 The problem is to see a better idea, and then pursue it with integrity. There's No Such Thing as a Free Lunch Earl L. Butz 431 The common sense of producing and marketing farm products by a noted economist. Yieldingto Temptation A letter to a pastor about an evil of universal concern. John C. Sparks 436 No More Repeat Performances Bernard H. Siegan 438 The repeal, not the revision, of zoning laws is the way to sound land use. Book Reviews: 441 "We Don't Know How: An Independent Audit of What They Call Success in Foreign Assistance"

by William and Elizabeth Paddock "leftism (From De Sade and Marx to Hitler and Marcuse)" by Erik von Kuehnelt-Leddihn Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

tile Freeman A MONTHLY JOURNAL OF IDEAS ON LIBERTY IRVINGTON·ON·HUDSON, N. Y. 1053·3 TEL.: (914) 591·7230 LEONARD E. READ PAUL L. POIROT President, Foundation for Economic Education Managing Editor THE F R E E MAN is published monthly by the Foundation for Economic Education, Inc., a non political, nonprofit, educational champion of private property, the free market, the profit and loss system, and limited government. Any interested person may receive its publications for the asking. The costs of Foundation projects and services, including THE FREEMAN, are met through voluntary donations. Total expenses average $12.00 a year per person on the mailing list. Donations are in vited in any amount-$5.00 to $10,000-as the means of maintaining and extending the Foundation's work. Copyright, 1974, The Foundation for Economic Education, Inc. Printed in U.S.A. Additional copies, postpaid, to one address: Single copy, 50 cents; 3 for $1.00; 10 for $2.50; 25 or more, 20 cents each.

THE FREEMAN is available on microfilm from Xerox University Microfilms, Ann Arbor, Michigan 48106. Some articles available as reprints at cost; state quantity desired. Per mission granted to reprint any article from this issue, with approprIate credit except "You Cannot Trust Governments with Your Money," "Busi ness and Its Image," "There's No Such Thing as a Free lunch," and "No More Repeat Performances."

HENRY HAZLITT You Cannot Trust Governments with Your Money SOMET'HING is happening today that has never happened before in human history. Every country is inflating. In each of them prices of practically everything have been rising every year. This is another way of saying that the buying power of the cur rency of each of these countries has .been falling every year. As each country has been inflating at a different rate, the buying power of its currency has been falling at a different rate. According to a recent compila tion by the First National City Mr. Hazlitt was a member of the editorial staff of the New York Times from 1934 to 1946, and the "Business Tides" columnist for News week from 1946 to 1966. He is the author of 15 books, including Economics in One Lesson, The Failure a/the New Economics, The Foun dations of Morality, What You Should Know About Inflation and The Conquest of Poverty.

This article is reprinted by permission from the special 30th Anniversary issue of Human Events, April 27, 1974. © 1974 by Human Events, Inc. Bank of New York, in the 10 years from 1962 to 1972 the American dollar lost 28 per cent of its pur chasing power, the German mark 27 per cent, the French franc 35 per cent, the British pound 38 per cent, the Japanese yen 43 per cent. Whe~ we turn to what happened in some of the less-developed countries, the case is much worse. In the same 10-year period the Peruvian currency lost 60·per cent of its purchasing power, the Ar gentinian 90 per cent, the Bra zilian 96 per cent. If we carry the comparisons back 25 years instead of 10, the loss of purchasing power is even greater. In the 24 years between 1948 and 1972, the American dol lar lost 43 per cent of its buying power. And this was one of the best records of any currency in the world. In the same period the 387 388 THE FREEMAN July currencies of Argentina, Brazil, Uruguay and Chile all lost more than 99 per cent of their buying power. In other words, they all bought considerably less than 1 per cent of what they bought in 1948.

If we carry our comparisons forward instead of back, we find no cause for rejoicing. In the pe riod 1948 to 1972 the median rate of depreciation of 24 leading cur rencies was 4 per cent a year. In 1973 this median rate almost ex actly doubled, to about 8 per cent. Consumer prices in the United States in the 12 months ending February rose 10 per cent, the first "double digit" inflation here since the Korean War 23 years ago. Savings Depleted I leave it to the reader to trans late these figures into the depri vations and tragedies they have meant for millions of families throughout the world whose in come has not yet begun to keep pace with these soaring prices. Included in this total, of course, are the millions of the aged, the buying power of whose pensions and savings in many countries has been reduced to a vanishing point. Briefly and bluntly, practically every government in the world has been progressively swindling the majority of its own citizens.

What is more alarming is that a great section of the press and even many so-called economic ex perts are beginning to talk as if inflation were nobody's fault, but some mysterious and perhaps in curable disease. Time magazine, in a long cover story on world inflation (April 8), compares it to "some medieval plague." It speaks of "the uncom fortable feeling that no one quite knows what to do about inflation." "The experts themselves," it goes on, "are not immune from this despair. In the U.S. John Dunlop, head of the Cost of Living Coun cil, asserts: 'I don't believe it is clear that mankind today knows how to control inflation.' " Defeatist Attitude of Trying to Live with Inflation One could cite much more "ex pert" opinion to the same effect. A few weeks ago Prof. Henry Wall ich, the new appointee to the Fed eral Reserve Board, declared that inflation is very complex and has many causes, and therefore the measures to be taken are at best difficult. Even Prof. Milton Fried man, who in the past has written some excellent articles on infla tion, now seems ready to throw in the sponge. He proposes in effect that if we can't lick inflation, let's join it.

On a recent trip, Prof. Fried19'74 YOU CANNOT TRUST GOVERNMENTS WITH YOUR MONEY 389 man was impressed to find that Brazil has introduced escalating clauses into wage contracts, inter est rate agreements, and so on, and yet has been able to reduce the inflation rate· from about 30 per cent in 1967 to about 15 per cent now, and "without inhibiting rapid growth." So why shouldn't we try the same thing? I find it astonishing that the U.S. should be asked to take les sons in reducing inflation from a country whose average rate' of currency depreciation 'over 24 years was 56 per cent a year, a country at a low stage of develop ment, where the' wage level is about one-eighth that in the U.S., and where the government is a military dictatorship. A revolutionary innovation of this nature should hardly be based on an impressionistic snap j udg mente Ronald A. Krieger, profes sor of economics at Goucher Col lege, who has made a careful study of Brazil for the First National 'City Bank, is more than skeptical of the advantages of the plan.

When Brazil introduced 100 per cent "indexing" in 1967: he says, the inflation rate began to fall much more slowly than it had be fore. Putting aside debate about the exact details of what has happened in Brazil, the most likely effect of truly protecting everyone from inflation, if we could do it, would be to remove the pressure on the gov ernment to halt inflation or to slow it down. Certainly the first effect would be to accelerate in flation. How Escalators Work Let us take a hypothetical case. Suppose in a· given year both prices and wages in Ruritania have gone, up an average of 10 per cent. Assume for simplicity that the average wage rise was dis tributed about as follows: the wages of 5 per cent of the workers have gone up 1 per cent, the wages of the next 5 per cent segment have gone up· 2 per cent, and so on up to the highest 5 per cent whose wages have gone up 20 per cent.

The overall average rise is then about 10 per cent, but the wages of half the workers have only gone up· an average of 5 per cent, while those of the upper half have gone up an average of 15 per cent. It is then decreed that the wages of the lower half shall all be raised to the overall average rise of 10 per cent. But when this has been done the overall average wage rise be comes 12.5 per cent. In order to make this increase payable, the money supply must be pumped up further. The same arithmetic ap plies to any other element of cost. The U.S. already has such e'Sca lator p'rovisions to a certain ex390 THE FREEMAN July tent; but they are more to be de plored than applauded. They exist in some union contracts, in Social Security payments, in government pensions, and in food-stamp bene fits. Their effect in each case is to reduce the opposition to inflation. Still another result is to throw index numbers into politics. The U.S. Labor Department wants to increase the number of items in the Consumer Price Index, but union leaders are fighting a broad ened index because it "might tend to show less inflation than the present one," and hence mean smaller automatic wage increases under their contracts.

In brief, insofar as such an es calation scheme is applied, it must increase both the political and eco nomic pressure for inflation. If, for example, wages are to be forced up by a fixed percentage, which, howeve·r, can be easily passed on in increased prices, then employers no longer have either the power or the incentive to hold down costs, and workers lose the incentive to increase productivity. It is in fact impossible to apply such "indexing" universally. It cannot be applied to the money in people's pockets, or in their check ing or savings accounts, or retro actively to private pensions. The chief victims of inflation, the old and retired, will be more victim ized than ever. Coercive Economy The only way of trying to uni versalize the-system is by govern ment ukase, a coercive command economy compared to which ordi nary wage-and-price controls look almost like economic freedom. No true believer in the free market could seriously contemplate such a system. It could be prevented from disrupting production only by making sure that wages were con sistently raised less than prices a proposal which, once candidly stated, would be' unlikely to find acceptance in a democracy.

Finally, such a totalitarian scheme is altogether needless. There is no mystery whatever about how to halt an inflation. The cure is for the government to stop increasing the supply of mon ey. Period. The real problem is not that governments don't know how to stop inflation, but that they don't want to. Their ,excuse is every where the same. If they stop print ing money, they say, they will plunge their country into a reces sion or even a depression, and into an "unacceptable" degree of un employment. And we cannot say that they are wrong. For the level of prices and activity at any given moment is not determined by the existing supply of money, but by what speculators and businessmen ex1971" YOU CANNOT TRUST GOVERNMENTS WITH YOUR MONEY 391 pect it to be in the future. Their expectations are usually built up on the past rate of inflation or even its past rate of acceleration. And when these expectations are disappointed by a halt in the in crease of the money supply, or even a slowdown in the rate of in crease, there will be a fall in some prices and a fall in some branches of activity.

But there is no way in which this consequence can be avoided. It can be postponed, of course, but only by building up to a far great er ultinnate disaster. And the decision to plunge ahead acceleratively is the one that politicians everywhere have decided to take. Apres nous, le deluge. But let's leave the deluge to our successors. Let's prolong our own tenure in office as long as we can, by keeping this thing go ing. Let's express our heartfelt sympathy with the victims, of course, but profess our inability to do anything about it. The nnistake is not to stop infla tion, but to have started it in the first place. The politicians (and, alas, the, majority of the rest of us) have kept it going because of the false theory that nnonetary in flation is necessary to secure and maintain full ennploynnent. What we have not realized is that once we embark· upon this course, the inflation must be· accelerated exponentially in order to haye the same stimulating effect. The infla tion must always exceed expecta tions, whatever they are.

The ultimate result can only be a smash-up. Full employment can only be maintained by a proper coordina tion, brought about by free mar kets, between prices and wages. This means between specific prices and specific wage rates. We have prevented this by wage laws and labor laws which force individual employers to. pay excessive wage rates. Then we try to cure the damage we have done by the mass remedy of chronic inflation. To repeat: There is no problem at aU about how to stop an infla tion. The government must merely stop adding to the money supply. The real problem is not econom ic but political. It is how to get the government to stop. There are few if any cases on record of a government for very long refrain ing from the issuance of more currency when it was not under the necessity of making that cur rency convertible into gold. (Or silver, or at least something else that cannot be increased by gov ernment fiat.) Therefore the pres ent writer has been among those who have believed that inflation will never. be permanently stopped without a return to the full gold standard.

392 THE FREEMAN July But in view of political devel opments of recent yea.rs, above all of the cancerous growth in prac tically every country of the levia than Welfare State, even gold standard advocates a.re now forced to ask themselves: Will even this be enough? Suppose we could succeed in having the gold standard re stored? How long, given present ideologies, would the government keep it? England a.bandoned the gold standard in 1914, and a.gain in 1931. The U.S. abandoned it in the Civil War, again in 1933, and still aga.in, even though we had it in a very diluted form, in 1971. Governments everywhere have now broken faith too often. It may be a long, long time before people again have confidence in any of their monetary pledges whatever. Right to Own Gold But the situation is not hope less. There is one small reform that could do a grea.t deal to re store monetary confidence· and or der. This would be simply for gov ernments (and specifically our own) to .restore to their own citi zens the right to hold gold, to buy and sell gold, and to make con tracts in gold.

Such a simple reform - the mere removal of a 40-year-old prohibi tion - would accomplish several things at a stroke. It would provide a medium by which our citi zens could protect themselves to some extent a.gainst the further ravages of inflation. If private citizens had the right to make contracts in gold, gold would then become a de facto money, in both domestic and in ternational trade, whether le·gally "monetized" or not. It would not necessarily follow that gold itself would be used in every such trans action. Contracts might merely provide that a due date payment could be made in paper dollars or in any other currency, but in terms of the market price for gold on the day of settlement. Such a private currency would be an enormously better protec tion against inflation than any set of arbitrary indexes or escalator clauses. It would be a. step toward freedom, instead of still more gov ernment coercion.

It would have still another ad vantage. As inflation continued, the various paper currencies would go to a greater and greater dis count against the new private gold currency. This would daily empha size· that continually rising paper money prices were not the result of greater and greater greed on the part of sellers and producers, but merely of the increasing worthlessness of the money. That might be the real beginning of reform. ~ V.ORVALWATTS 393 394 THE FREEMAN July FORTUNATELY, Americans seldom think and act from day to day as they often vote at election time. The votes are sufficiently serious in their effects. Cast in great num bers, again and again, they give political power to would-be Robin Hoods and Dragon Slayers who denounce businessmen, especially successful, "big" businessmen, as "princes of privilege," indifferent to the welfare of their fellow men and interested only in quick, per sonal gains, no matter how ob tained.

On non-election days, however, Americans show amazing confi dence in business, even - or per haps especially - in big business. They buy from the shops and stores, including the biggest, ea gerly and happily; and they dis play great indignation if a pur chase fails to perform according to the businessman's promises, as though this were so unusual that the seller must "make it right" as he usually does. Similarly, they apply for jobs and appear to be particularly pleased and proud when they get a job in a big con cern. They entrust their savings to banks, insurance companies, and many other kinds of busi nesses; and in this, too, they ap pear to prefer to deal with the bigger concerns. In short, most Americans - like the people of other countries with certain capitalistic traditions and large remnants of business free dom - know from experience that business enterprises help them get a large and essential part of what they want in life. They know it as humans knew, long before the apple fell on Isaac Newton's head, about the effects of gravity.

Still lacking, however, is suf ficient understanding of business operations in free markets to pro tect them from political 'witch doctors who cause worse maladies than they promise to cure. What "Business" Means We use the term "business" in many ways. It may mean any type of work, occupation, or profession. But when we speak of a business course or business college, or refer to the business office of a factory or university, we use the word in a much narrower sense; and it is in this restricted sense that busi ness is "controversial." In this narrow meaning of the word, business means buying and selling - the marketing of com modities and services. In this sense of the term, little Sally engages in a business transaction when she gives her dime to the store clerk in exchange for a candy bar. When we say that the suc cessfulAmerican farmer must be a good businessman as well as a good farmer, we mean that he 1974 BUSINESS AND ITS IMAGE 395 must know his markets; he must watch his costs and prices as well as soils and fertilizers; and he must adapt .hisoperations to changes in market conditions as he does to changes in weather or new invasions of bugs and bac teria.

As a specialized occupation dis tinct from farming or industry, education or politics, business car ries on the marketing operations: advertising, selling, banking and credit management, speculation, and accounting. The .. specialization is seldom, if ever, complete. A merchant, for example,· may carryon the work of transportation by employing truckers and delivery men; and trucking companies must help market their services by advertis ing. Similarly, every mechanic, engineer, teacher and scientist must engage to some extent in business - in buying and selling. Buying and selling, of course, are merely two ways of looking at the same transaction, and as we shift from one side to the other, we complete our exchanges of goods for g90ds. These exchanges are the aim, or purpose of all commerce, or business. A wage earner sells his services for money; then he uses the money somewhere else to buy commodi ties and services from grocers, shoe stores, dentists, or the teachers of his children. By using money we can split every ex change of goods into two sta.ges, and we can complete the second stage (buyin.g the goods we want for our work) in places far re moved from the place of the first stage (selling our own services or products), and we can complete that second stage with many dif ferent producers or their com mercial agents.

By using money, therefore, and learning to buy and sell, we in crease enormously our opportuni ties for completing exchanges con veniently and economically. Essential For Peace and Progress In fact, without money and the "money-making" specialists we call "businessmen," the high costs of exchanges by barter, trading goods for goods, would make division of labor and exchange impossible ex cept in very simple forms within a small group, such as a family or clan. For this reason, communi ties whose members do not learn to buy and sell for money remain small, isolated, and poor, holding lands which commercial groups do not want or grant them for a time for charitable reasons. Conversely, as people learn to buy and sell, and to respect one another's rights to conduct their business transactions free of mo lestation, they can obtain the ap396 THE FREEMAN July parently unlimited advantages of the division of labor.

Now, division of labor (spe cialization) and exchange of the products are two aspects of coop eration. They are as inseparable as two sides of a coin. We can't have one without the other. And cooperation is generally supposed to be the way of peace and progress. Why, then, are the business specialists, who promote the ex changes necessary for cooperation so often held in less esteem than the farmers, engineers, industrial ists, doctors, and politicians whom they serve? Sometimes, it is true, requests for cooperation turn out to be proposals for someone to give or serve without return. Such a one sided arrangement is an opera tion, not cooperation. Cooperation means working to gether, a pooling of effort for mu tual benefit. In this sense of the term, cooperation is necessary for human progress. But if we are to cooperate, we must bring together and distrib ute our products and services. We should suppose, therefore, that those who specialize in promoting and arranging this pooling and distribution - the businessmen would stand high in public esteem as promoters of human progress.

Consider some of the leading activities of the business world: 1. Market study. Businessmen study what buyers want, what they may want in the future, what may be useful to other persons, what producers can supply, and how producers may supply at the least cost what buyers most want. 2. Promotion and investment. Businessmen persuade producers to exert effort; they persuade sav ers to supply capital; and they guarantee payments as induce ments. 3. Selling. They inform poten tial buyers (most of whom are producers in one way or another, or dependents of producers) as to what is available for purchase, and tell them how the goods may be enj oyable, useful, and beneficial. 4. Accounting. They keep rec ords of their operations in terms of money as a means of comparing costs and selling prices, and they use these records to help them plan their future operations. In performing these operations, individuals find unlimited oppor tunities to use and develop any and every human talent - talents for research, invention, and dis covery, talents for knowing and explaining, talents for speaking and writing, talents for under standing, appraising, and persuad1974 BUSINESS AND ITS IMAGE 397 ing other persons, talents for solv ing problems and making difficult decisions.

Honesty Pays in Free Markets To win the cooperation of oth ers, as business enterprisers must do, the first trait required is that of integrity: keeping one's prom ises, punctuality, paying one's debts, and speaking the truth. For cooperation continues only where there is mutual trust, and trust requires that individuals be trust worthy as well as trusting. Business success also requires fairness, ability to do justice; and the greater the individual's suc cess in winning promotion or building his own business, the more important becomes this sense of justice and the strength of character necessary to act justly. This requires intelligence and un derstanding, for the just man must perceive the indirect and long-run effects of his decisions and acts, so that he will not give a favor to one person at the expense of less than justice to another. Opportunities for success, of course, provide equal opportuni ties for failure; and individual failures to understand and take advantage of the opportunities and rewards for right conduct ex ist wherever we find human be ings. Fraud, weakness, and in justice appear in business as they do in education, politics, family life, and church activities. But in' freedom, the failures are penal ized ; weaklings and the unj ust are held accountable as customers, creditors, suppliers, associates, and employees are free to with draw their cooperation and form new business relationships with the more efficient, prudent, and wise.

Business enterprise in arrang ing, stimulating, and guiding co operation through exchanges in free markets has been therefore, the foundation or wellspring of human progress in every conceiv able way. Humans rise from ani mal levels, in character and ways of living, as they ahandon violence as a means of getting what they want from their fellows and turn to the ways of peaceful, voluntary exchange. And these are the ways of business. Why, then, should the special ized activities we call business be a principal target for attack by intellectuals and politicIans in all eras and nations? No one can supply the final de fense for any social institution, however, necessary or useful it may be. Humans will continue to doubt and challenge because they seek to know, understand, and learn. Skepticism helps keep, with in tolerable limits the useless and uneconomic experiments of curi398 THE FREEMAN July ous, fallible humans. Every hu man advance brings also new problems, new abuses of oppor tunities, and new deficiencies of understanding; and these prob lems, abuses, and gaps in our knowledge give rise to denuncia tions even of progress itself and the ways it comes about.

Business institutions and prac tices are no exception. They must always be subject to continuing study and criticism to correct abuses of new opportunities so that the way may be cleared for new advances. Therefore, I shall list only a few of what appear to me to be the more dangerous and enduring mis conceptions concerning business in general, and suggest answers that may warrant special attention. (J) The Technological Concept and it's Implications Technicians with little under standing of economics and busi ness tend to look upon the produc tion and distribution of goods as a variety of mechanical techniques which experts can teach and direct in terms of hours of robot effort, types of machines, and processes for shaping and transporting spe cified numbers and kinds of com modities and services to specified users and consumers. Knowing the technical advan tages of certain materials, methods, and products, they may resent the restraints of business man agers who must think in 'terms of costs and selling prices, and who know that a business must make a profit to survive and grow.

Thorstein Veblen expounded the technologist's point of view in his little book, The Engineers and the Price System,l written shortly after World War I. In this and in his earlier writings he argued that profit-seeking businessmen were holding back industrial prog ress in order to keep goods scarce and high-priced, and he tried to explain why engineers, not owners and investors, should control pro duction and distribution. His work helped to inspire the "Technocrats," an organization of engineers and others who cam paigned for this idea in the 1930s. These, along with Stuart Chase and other antibusiness writers have had much to do with the denigration of business in the past 40 years and more. This technological concept of economic activities is essentially that of Karl Marx and other so cialists. It is the view that Lenin, Stalin, and the Chinese Commun ists have tried to put in practice, with disastrous results.

In this view, the experts in physiology and psychology can 1 New York: Viking Press, 1921.

1974 BUSINESS AND ITS IMAGE 399 even provide stronger incentives for the general run of producers than those of the price system. These experts can know .better than the layman what work he can do best and with greatest satisfaction; and they know bet ter than the average person what he needs in the way of food, cloth ing, shelter, and even entertain ment to keep him healthy, happy, and industr.ious. In an economy of trusting, co operative producers, directed by scientists and expert technicians, there would be no need for wages, rents, interest rates, fees, profits, or other prices to guide and moti vate producers. There would be no need for advertisers, salesmen, peddlers, promoters, brokers, spec ulators, merchants, or bankers. Producers would deliver every thing consumers might need, either in the right proportions or in such abundance that no one would suffer from shortages.

The abundance would result from shifting to productive pur suits the useless workers who, in capitalism, are employed in com merce and finance. And, supposed ly, any mistakes which experts might make would be less costly than the continuing costs of ad vertising and selling in free mar kets, the wastes of duplication of effort by competing firms, and the losses in output resulting from the desires of business owners to keep goods scarce and high-priced. Why Experts Grow Less Competent to Dictate As many scientists and tech nicians know, the socialist's faith in the "expert" fails to take into account the countless differences between human beings in regard to their abilities, tastes, and in terests. These differences in human capacities and interests, moreover, become greater and more signifi cant as humans progress in knowl edge and control of their environ ment; and they increase, not in proportion to the progress of science and technologies, but far more than in proportion. These differences make more and more difficult the task of the specialist who tries to manipulate other per sons without their active coopera tion.

For this reason, if for no other, each individual must more and more learn to govern himself in a progressive society - to choose his vocations, to pursue self-selected goals, and to choose the means to achieve those goals. The further humans progress, the .less compe tent the "experts" will become in deciding what others should or must do to develop their human qualities. In other words, slavery is profitable, if ever, only when 400 THE FREEMAN July the victims are reduced to a near animal level of understanding. But a citizenry of such a character can build no "great society." Attempts at central planning and direction, therefore, become more costly as the economy pro gresses, as individuals gain in knowledge and opportunity, as they engage in more varied and complicated activities, and as their exchanges of services become more numerous and roundabout. Humans are worth little, if not actually a menace, to masters who try to treat them as sheep or cat tle, as if their imaginations and ingenuity were of little impor tance. One person becomes useful in cooperating with others in pro portion as he is eager to invent better ways of doing what they want done. Then he provides serv ices which they did not know they wanted or needed, and· which they could not possibly describe or or der. What master could have told his slaves a century ago how to make an automobile or airplane, a radio or television set? Even to day, no individual can tell others all of the steps necessary to make even such simple things as a pen cil, pen, or pocketknife. 2 Producers must make number2 Cf. Leonard E. Read, Anything That's Peaceful (Irvington, New York: The Foundation for Economic Education, 1964), ch. 11. "Only God Can Make a Tree - Or a Pencil."

less adj ustments every day in their work in order' merely to maintain output, let alone increase it. These adjustments call for countless decisions. In freedom, these decisions and adj ustments affect the supplies and kinds of goods offered in the markets; prices offered and asked respond to these changes in output but they respond also to changes in the humans themselves. Producers and consumers, sellers and buyers, in turn respond to the price changes and thereby react to the decisions of other members of the economy with little or no need to know or understand the numberless factors which entered into the making of those decisions. Among their other activities, businessmen watch-and anticipate these price changes, publicize them, and help to speed the ad justments. A rising price in free markets is a call to increase out put or to find substitutes; a fall ing price has the opposite effect.

This economic organization of actions and reactions is now com plex beyond any imagining, and it is neither mechanical nor auto matic. The price system is not merely a computer, and it cannot be manipulated like a computer. It is a system only insofar as indi vid uals choose to cooperate and respond to one another's sugges tions, inducements, and state1974 BUSINESS AND ITS IMAGE 401 ments: and attempts to manipu late it by force or fraud are self defeating and destructive. Experience with central plan ning in Russia and Red China shows that market prices are es sential for economic coordination, and the Communist planners get a modicum of economic cooperation only as they permit individuals to profit from their enterprise in ad j usting their techniques to price changes that respond to changes in the informed choices of other producers and consumers. (2) Intolerance For Other People's Tastes Similar to the socialist's notion that technical experts should dic tate to the general run of prod uc ers and consumers is the conten tion that freedom for profit-seek ing businessmen wastes "society's"

resources by pandering to the vul gar tastes of the ignorant masses. The intellectual who likes to at tend symphony concerts, or play chess, or read the writings of Plato, Kant, or Hegel, may scorn the tastes of baseball fans, bowl ers, or movie goers. He may pro pose, therefore, that government take from them money which peo ple use to gratify such low tastes and spend it for the intellectual's better purposes. Businessmen. know that they do not have the power often attributed to them to compel consumers to spend their money in any particu lar way. Nor are all of them with out scruple in their choices of goods which they offer for sale. And we may ask, with Professor Stigler, whether it is any more reasonable to blame businessmen for the tastes of their customers than to blame the waiter who serves a meal to an overweight customer. 3 We should recognize, however, that free markets do actually pro vide incentives for business and industry to cater to tastes for wholesome rather than demoraliz ing products. Consequently, we find tastes rising in eras and na tions notable for the people's free dom to buy and sell for profit.

Profit-seeking enterprise in free markets tends to increase more rapidly the output of more whole some goods because the more effi cient and industrious producers in a capitalistic society are better customers, generally speaking, than the less efficient and less in dustrious. And these producers do not become more efficient and in dustrious by indulging tastes for what is base and demoralizing. If we consider all lines of in dustry in the United States, for 3 George J. Stigler, "The Intellectual and the Market Place," Selected Papers, No. :1 (Graduate School of Business, Uni versity of Chicago, 1965).

402 THE FREEMAN July example, we find that by far the greater part of the business car ried on in private markets with self-supporting producers is in commodities· and services designed to maintain and improve the health, vigor, knowledge,. and pro ductivity of the more industrious and prudent persons. and! their families. Among such items are food, clothing, and shelter, tools, machinery, and equipment, text books, scientific works, the endless number of "how to" books, in formative periodicals, newspapers, and servic~s of doctors, dentists, and teachers. When we find a disproportion ate growth of occupations cater ing to less wholesome tastes, such as for gambling and excessive con sumption of alcohol, we are likely to find that governmental policies are restricting freedom of enter prise in more productive direc tion.s by taxes, wage-hour laws, regulations, .and government-pro tected monopolies, and that wel fare-state policies are encouraging idleness. As the "bread and cir cuses" provided by the emperors of ancient Rome helped debase popular tastes for entertainment in that era, so governments in other ages debase tastes or retard improvement as they restrict in dividual freedom to invest, pro duce, and exchange services, and as they tax the productive and prudent to support the idle and improvident.

(3) Exaggeration of Business Costs and Profits Surveys of opinion have often shown that most persons in all na tions believe that business profits are several times as large as is actually the case. First, they often confuse gross mark-up of a merchant's goods with his net pronto The gross mark-up, of course, must cover the costs of operating his business. Net profit, however measured, is a much smaller figure. Second, statistical estimates of the total expenditures· on·· adver tising, an activity most subject to attack by critics of .business, gen erally involve double counting. For example, figures for total costs of advertising often include most of the costs of publishing newspa pers and magazines, and the costs of maintaining the television and radio industries and providing the programs of information and en tertainment. Similarly, the social ist's estimates of the amount of duplicated effort among competing firms and of excess capacities greatly exagge·rate the facts.

Third, the figures of the United States Treasury exaggerate the amount of business profits. (a) Nearly half of the total profits reported for corpo1974 BUSINESS AND ITS IMAGE 403 rations consists of taxes paid to the United States Government, and another slice of considerable size is paid by dividend receivers as taxes on personal in come. (b) By requiring producers to use original cost rather than replacement cost in calculating the costs of re placing worn-out equip ment, the Treasury forces business owners, in times of rising prices, to report as profits and pay in taxes receipts which·· are neces sary to cover costs and which should not be count ed as profits. Fourth, from one-third to one half of business profits remaining after taxes is reinvested in the business which earns them, and stockholders reinvest part of the remainder, which is paid to them as dividends. When we allow for .taxes and reinvested profits, we find that owners of corporations, which con duct most of the business done in this country, keep considerably less than one-third of their re ported profits for personal con sumption. If we may assume that they pay 20 per cent of their divi dends in personal taxes, their in comes from their stocks has ranged between 2 and 3 per cent of the total national income dur ing the past 20 years. Much of this they return to business by invest ing in new stock issues.

Yet demagogues can easily arouse covetousness. and direct it toward suicidal attacks on busi ness as long as people fail to un derstand the difference between business capital and wealth avail able for personal use, and as long as they fail to understand the dif ference between the way in which a businessman regards his profits and the manner in which wage earners and salaried workers gen erally look upon their own in comes. (4) Misunderstanding of Capital Business capital has value only to the extent that it produces goods for the market or can be used to produce such goods. Sel dom is it in a forPl which the owner can use for personal enjoy ment and consumption. Furthermore, the capital has value only insofar as it can be used to produce goods at a profit. Ignorant and unthinking per sons, noting the stocks of mer chandise and· handsome buildings, may envy the supposed riches of the merchant who owns it. They may conclude, since most others in the community have little wealth, that the merchant has done little for his neighbors, or that he has 404 THE FREEMAN July somehow gained his supposedly great wealth at their expense.

Such envy may be misdirected, and the suspicions are generally unjust. Some of the capital may be borrowed from creditors, per haps from creditors who live in a foreign land. Another part of the capital may belong to partners or stockholders. But a man may be the sole own er of an imposing establishment and be free of debt, yet have no more than his poorest neighbors if the business cannot operate at a profit. The equipment of a losing business may not be worth the cost of scrapping it, and the build ing not worth the cost of demol ishing it, so that neither the equip ment. nor the building has a sales value. In any case, business capital must serve mainly persons other than the owner if it is to have sales 'value; and it is a possible source of personal income to the owner only to the extent that it supplies other persons with goods worth more than the cost of pro ducing them. When, for any of many possible reasons, it ceases to earn a profit, the owner is gen erally unable to use much of it for his own subsistence.

Inability to understand these facts about business capital is a principal barrier to the economic progress of the so-called "underprivileged," or "underdeveloped" nations. The successful merchant's neighbors or the politicians think to enrich themselves by seizing his capital, only to find that it van ishes as they reach for it. And they equally eat into capi tal as they tax profits. The mis understanding of the peculiar na ture and function of business earnings, which gives rise to dis criminatory taxes universally lev ied upon them, is a principal ob stacle to economic progress even in the most capitalistic countries. (5) Misunderstanding of Profits The notion that profits serve mainly as a personal incentive for business efficiency and enterprise not only supports uneconomic tax policies but is a handicap to any businessman who entertains it or whose partners, stockholders, or family persuade him to act upon it.

Consider the effect of this idea upon the thinking of a wage earner, clergyman, or school teach er who hears that the profits of a particular businessman or small group of stockholders amount to many millions of dollars per year. "No one needs so much income," the teacher or clergyman is likely to think, "to induce him to do his best in work such as that of busi ness management." As a result, politicians find widespread support as they take 1974 BUSINESS AND ITS IMAGE 405 half or more of profits and divi dends for "public" use, or when their tax policies compel business owners to make huge donations for nonbusiness purpose ("philan thropies") so that their heirs may retain control of a going concern, or when unions stage a mass hold up to force a profitable company to pay more than free market rates for labor. The individual businessman who uses his profits as most employees use their wages, mainly to buy goods for the personal use of him self and his family, achieves little business success. His business does not grow, his profits remain mod est or small, and his enterprise is likely to exist but for a brief time in a progressive economy.

The flourishing and enduring businesses are those whose owners make use of their profits primar ily as a measure of business effi ciency, a guide for business policy, and a source of the equity capital necessary for growth and stabil ity. Profits are the earnings which remain after deducting the own ers' salaries for their own man agerial efforts, costs of replacing worn-out equipment, payments in to reserve funds to pay for prob able losses, and such interest as their capital might earn in risk free investments, or loans. Most businesses actually return Iittle to the owners beyond sal aries for their personal services and a modest rate of interest on their investment. In fact, many owners continue in business only by taking out of it for their per sonal use less than they could earn as salaried employees in some other firm, and they get no return for interest on their invested capi tal. These businesses operate at a loss, and the, owners make up the deficits out of their own wages and other income.

These are the kinds of busi nesses that are typical of poor countries. Governments of these so-called backward countries per mit few really profitable busi nesses to exist. By taxes, costly regulations, license restrictions, or outright confiscation, they pre vent businessmen from earning or reinvesting profits, and thereby prevent the growth of business capital. This is why these coun tries remain "underdeveloped." Businesses grow only as the in vested capital grows. The owner's capital is sometimes called "equity capital" to distinguish it from the "loan capital" which he may bor row from nonowners by selling bonds or notes. Growth of the owner's equity is necessary for business expansion, not merely in the form of new buildings and equipment, but to guarantee payments to the grow406 THE FREEMAN July ing numbers of employees and sup pliers with whom he contracts to pay fixed wages and prices before he sells the products. He needs equity capital also to guarantee re payment of borrowed funds in case the investments financed in this way prove to be unprofitable.

In freedom, such as the people of the United States enjoyed prior to the great increase in tax bur dens after 1930, business capital grew at unprecedented rates. As a result, the wages and other in comes in this country rose more rapidly than in any other country. How Business Grows This rapid growth of capital came about mainly in the form of reinvested profits 4 • The Ford Motor Company, for example, re invested profits at the rate of nearly 70 per cent, compounded annually, in its first 20 years. In this way the original capital of $28,000 increased to approximately $1 billion. If the founder had paid out in dividends to himself and other stockholders one-half of these profits each year as they were earned, and invested only the remaining 35 per cent, his total capital from this source at the end of 20· years would have been only a little over one per cent as great - approximately $11,000,000 in4 Cf. Carl Snyder, Capitalism the Cre ator (N. Y.: Macmillan, 1940).

stead of $1 billion. For the 20-year period the total dividends also would have been approximately $11,000,000,· only a small fraction of the several hundreds of millions of dollars now paid in dividends to Ford Company stockholders every year. And, of course, the' Company could have produced little more than one per cent as many cars. If present tax rates had pre vailed from the beginning, they would have cut off nearly 99 per cent of the Company's growth. Yet the total tax receipts from the Company for the 20-year period would have been only $11,000,000, instead of the hundreds of millions (more than $600,000,000 in 1965) which the Government now rakes in every year from this one con cern. When we examine the history of other leading businesses in this country, we find that they were similarly built mainly out of profits reinvested by management as they were earned or by stockholders who used part of their dividends to buy new issues of stocks.

Anyone who looks for these re invested profits finds only a small part in the form of currency in vaults or bank deposits. As forms of wealth, he would find them mainly in the buildings, machin ery, and equipment, materials in process of production, and re search laboratories - capital goods 1974 BUSINESS AND ITS IMAGE 407 used to produce commodities and services for persons other than the owners. True, owners of successful busi nesses and their heirs generally use part of their incomes for per sonal consumption: mansions, yachts, costly cars, travel, and en tertainment. But their expendi tures for such purposes have been generally but a small fraction of their profits. Often the amounts were no greater than the salaries they might have earned as man agers for other employers. In other cases they spent part of the in terest on their investments. Those who spent for personal consump tion total sums comparable to the reinvested profits generally had to surrender control of the business.

Successful businessmen are no more motivated by desire for profits than skillful surgeons by desire for fees. Men like Henry Ford, Andrew Carnegie, John D. Rockefeller, James J. Hill, Wana maker, Filene, as well as the lesser business leaders, had the motives of great achievers in art, music, religion, and education - the mo tives of the builder, the architect, the organizer, the mountain climber. They used the profits as indexes of the wants, tastes, inter ests, and capa.cities of customers, associates, investors, employees, and suppliers. They used them as measures of efficiency in their efforts to maximize value at least cost. And as they managed more efficiently, their rising profits pro vided increased means for further increases in productive capacity and business security. Therefore, policies which com pel distribution of business profits to consumers - whether to wage earners, to the families of stock holders, or to governments - may have little effect in reducing the intensity of effort put forth by business leaders, but they do re duce their capacity to do their job.

(6) Statism vs. Business Every increase in the size and cost of government relative to pri vate enterprise increases the temp tation for officials and politicians to foster antibusiness sentiment among the people at large. The cause of the rise in scope and costs of government may be war or threat of war. A natural disaster may causesome mechani calor economic breakdown and provide an opportunity for govern ment to expand its powers and functions. An organized clique may gain office and grant them selves political privileges - govern mental subsidies or restraints on competitors - before taxpayers know or understand what is going on. Whatever the cause may be, every rise in government costs 408 THE FREEMAN July prompts politicians to impose new taxes on places where money is easiest to find. These places are likely to be where individual streams of money converge: the centers of buying and selling, the places of business.

To win popular support for these new raids on business in come, politicians pose as heroic Robin Hoods seeking only to re store to the poor the ill-gotten gains of the rich. To produce in the public mind the appropriate images of themselves and of those whom they propose to tax, they hire speech writers and pay sub sidies to pUblicists and pedants. As the special privileges or wars and rising taxes increase business costs and prices, trade declines. Producers learn to make things for themselves or to do without. As they lose the advantages of specialization and trade, their out put declines, unemployment rises, and pauperism spreads. Tax receipts fall, but the greater the decline, the more strenuously a powerful government may strive to maintain its income by new taxes and higher tax rates. At the same time, it intensifies its efforts to make business enterprise the scapegoat for the mischief wrought by its own policies.

During the past half-century, these antibusiness policies have produced famine and every other form of human misery in Soviet Russia and Red China. The same results, to a. somewhat lesser de gree, followed similar policies en forced with less determination in Egypt, Algeria, Bolivia, Cuba, so cialist India, and other countries. But for a far longer period, we now have authenticated, detailed records of the retreat toward sav agery which followed similar con quests by statists and paternalis tic despots during the 2,000 years preceding the modern era. In par ticular, we should know of the long period of economic disintegration, recurring famines and plagues, and brutalized tastes and manners that, over much of the western world, followed the long war against busi ness from the time of Plato to the rise of new, business-oriented, city states at the beginning of the modern era. f) Reprints of this article available 4-for $1.00; 25 or more, 15 cents each.

For the Sake of the Poor PAUL L. POIROT "That some should be rich," ob served President Lincoln, "shows that others may become rich and hence is just encouragement to industry and enterprise." Four years earlier, shortly before he gained the Republican nomination, he had similarly testified about the desirability of property: "I don't believe in a law to prevent a man from getting rich; it would do more harm than good." And he might wen have said the same about a law to prevent a man from being poor: it would do more harm than good. Abraham Lincoln had known abject poverty and would rise above it to the Presidency. It is not the only way, of course; some of the children of some wealthy parents also have lived worthy lives. And whether it is easier to grow out of poverty or to emerge successfully from a condition of affluence is a moot question. The point is that poverty serves a pur pose. It is painful to a sensitive individual and stimulates him to take corrective action, much as a sense of pain activates one to re move his hand from a hot stove.

However great the pain, it would be far worse to be burned without feeling it. Almost as deadly, for most of us, would be to find com fort - to experience no pain or uneasiness - in a condition of poverty. What's the point of all this? The point is that American citi zens are being burned to death, and we don't seem to know it. We are letting ourselves be persuaded that the only way to get a scarce item is to stand in line waiting for it. And why should we do that? For the sake of the poor, of course! What are we waiting for? Yesterday a roast of beef, today 409 410 THE FREEMAN July a tank of gas, tomorrow a carton of milk or eggs or cereal, a bag of onions or potatoes or apples, or who knows what then will be· the object of greatest intervention for the sake of the poor! If an individual is allowed to respond to his senses, he need not be a genius to deduce that waiting in line is unproductive; it produces poverty rather than more of the goods and services he'd like to have. No man, unless he be one of the least productive among us, could afford to stand in line for a subsidy of less than $3.00 an hour; he could make more than that by working. If necessary, he could pay double the subsidized price of gas and still be ahead on the deal if he didn't have to wait to be served. And the saddest part is that no such price increase as that would be necessary to clear the market immediately.

Government in Business When the man with the gun, the one whom we collectively empower to defend life and property and to keep the peace, interferes with market prici~g· - artificially de pressing the price of gasoline to curb the profits of sellers - the excuse is that the· underpricing is for the sake of the poor. What it amounts to, strictly in terms of price, is a subsidy to the consumer of gasoline, which means that some of the pain of poverty, some of the penalty of failure, has been killed or diminished. The law of the land says that it is 2 cents or 5 cents a gallon less painful to be poor than says the law of supply and demand. Production and consump tion of gasoline is thereby re moved from the world of reality, and instead of gasoline enough to satisfy the demand at the free market price, the artificially de pressed money price creates a real shortage of gasoline and a high extra cost of waiting in line for an unsatisfying combination of gas and subsidy.

Ask yourself the next time you're waiting in line, or check the faces and the behavior of those in the next line you see: Is this the picture of a peaceful and friendly society? It is not. It is a picture of anger and hatred and violence barely suppressed - a sit uation closely patrolled and super vised by armed policemen. Why the policemen? Why, to enforce the law that was enacted to help the poor, the law enacted by the agency of force that was consti tuted to preserve the peace - not to disturb it. Seeds of War Personal liberty and private property are results of peaceful production and trade rather than coercive practices. You have life 1974 FOR THE SAKE OF THE POOR 411 and liberty because I respect you and what is yours. I respect you and yours because I believe you respect me and mine. And out of such a chain of respect comes freedom and a peaceful and pro gressive society. But let one per son break the pattern, bring coer cion to bear against one or more other peaceful persons, and there will be a chain reaction of ensuing disrespect and violence.

Is it a sign of respect for an individual to forcibly prevent his being as poor as he chooses? Not that he chooses necessarily to be poor, but that he chooses to avoid various actions or efforts that could alleviate his condition of poverty. Is he to be denied the freedom to make such a choice and to assume responsibility for the consequences? How is a person to develop a sense of self-responsi 'bility if he is not permitted to experience the results of his ac tions? How is it possible to relieve some persons or groups of the burden of their failures, by the process of governmental subsidy, without at the same time taxing from others some or all of the earnings derived from proper or successful action? By what proc ess can we relieve the poor of their own responsibilities without forcing the producers and savers to be equally irresponsible? Let us bear constantly in mind that we are not so much con cerned here with the possession and use of pieces of paper money or other currency. Our concern, rather, is with the possessi~n and use of scarce and valuable goods and services. In whose hands, un der whose management, would such scarce resources be used least wastefully, most efficiently?

Dividing Wealth Does Not 'Increase the Supply We tell one another that man does not live by bread alone, but are we sure we know what we mean? We see clearly that a loaf of bread may help to sustain life if it is available for consumption. Do we see as clearly that some of the wheat must be saved and used as seed, along with other produc tive resources, if there is to be a continuing and ample supply of wheat and bread? So, we do care - as much as any socialist cares who has bread enough to eat; and if we care enough, we will do ev erything in our power to see that the ownership of wheat is concen trated primarily in the control of those individuals who waste it least and use it most productively and efficiently. It is no service to the poor to forcibly confiscate pri vate property and redistribute it among the least productive per sons in society. For once they consume it today, who will bother 412 THE FREEMAN July -or have the means-to feed them tomorrow?

Still, there tends to be a feeling of resentment against those who earn their living producing the goods and services consumed by the poor. Some of those producers are rich! Sometimes it is highly profitable to have correctly antici pated consumer demand and to be among the first to supply in quan tity what they want. But profits are ephemeral and tend to dis appear or merge into losses under competitive pressure. And in any event, entrepreneurial profit is never something that is added on to the price which consumers pay for an item. Rather, it is taken out of costs, and goes to the most efficient producers of that item. The least efficient producers barely break even, may even suffer losses for their efforts to supply goods and services consumers want. The point is that the property accumulated in the hands of the so-called rich through the market or business process (as distin guished from the opulence of polit ical rulers and· kings) is not nec essarily and probably not primari ly a result of profit-taking. Sav ings may originate in many ways.

A man may save some of what he earns as wages. Studies of indus trial production indicate that industries on the average in the United States payout in wages, directly or indirectly, about 85 cents of every dollar received from sales. So, if wage earners want to save, theirs is the biggest chunk of the pie from which to draw. The next largest chunk goes to creditors, savers who lend the re sources needed to provide the buildings, tools, and other capital required to carryon the business. Creditors earn interest - not profit - on the capital they lend. Hope fully, the owners or stockholders may earn some profit for the en trepreneurial risks they assume; but many of them lose their in vestment, too, or fail to earn as much as if they had put that amount in a savings bank at interest. So, some of the property of some of the rich may represent an accumulation of profits earned. But it is far more likely that most of the property of the rich will have come about from saving and wisely investing or lending what had been earned in wages. And surely that must have been the formula Abraham Lincoln had in mind when he cautioned against "a law to prevent a man from getting rich." He was a friend of the poor. (j THE FACT that man ha.s endured ideological conflict since his be ginning on earth is the central theme of the great scribes of all civilizations that have left records of their existence. While the pre domina.nt focus has been on moral philosophy, these ideological con flicts have ranged far and wide.

They have pervaded the formal institutions of the church, govern ment, commerce, finance, agricul ture, education a.s well as culture and the arts. In the present age the struggle centers on the law, the rules by which contemporary civilizations are ordered and un der which individuals conduct Mr. Hillendahl is Vice President of the Bank of Hawaii. This article is reprinted by per mission from his paper at a March 1974 semi nar sponsored by The Committee for Mone tary Research and Education. By-Productof Ideologiesin Collision WESLEY H. HILLENDAHL their daily affairs with each other. Whether man will be free to pursue his life and God-given des tiny in an orderly environment in which government plays the do mestic role of impartial umpire, or whether his life will be con trolled in every detail by the dic tums of an omnipotent materialis tic bureaucracy is the central theme of today's conflict. Indeed, this is the essence of the catas trophic collision of economic thought of the 19th and 20th cen turies. Upon the outcome of this collision will depend man's way of life for generations to come. In simple economic terms, will the market place exist to serve the in dividual a.ccording to his choice, or will the market and the individ ual be under the control of the state?

413 414 THE FREEMAN July Ideological Roots of the Free Market Economy It is doubtful that a totally free market economy ever existed -·one that is completely free of state in tervention of one sort or another. And only in a few brief periods of recorded history has man been suf ficiently motivated· to assert him self to the degree required to grasp control of the market place from the ha.nds of the rulers. 1 Such an event occurred in 1776 in America, but it was far from spontaneous. The spirit of '76 had been brewing for centuries in Europe. Its unique significance may be brought into focus by a brief review of several historical events. In this review, the essential distinction between the legal framework and the eco nomic system must be kept in mind. It is all too easy to confuse the economic activities of a people with the legal framework under which they live, particularly today as government becomes increas ingly involved in the economic af fairs of its citizens.

The first of these historical in cidents occurred on June 15, 1215 A.D. One recalls that King John of England was an oppressive tyrant. English noblemen and freemen be came so incensed at the king's dis regard for their rights that they pursued him to Runnymede where he was "convinced" to sign a docu ment called the Magna Carta. This summit meeting produced a docu ment which provided the concept of trial by jury, no taxation without representation, and the Writ of Habeas Corpus. It provided the fundamental restraint on govern ment in the form of written law known throughout much of the world today.2 By 1628, the British King's dis regard of individual rights won 400 years earlier became so insuf ferable that Parliament refused to vote any money to run the king dom, a.nd King Char les I was forced to sign the Petition of Right. This document provided the essential ingredients of per sonal security by restricting con ditions relating to the levy of taxes, boarding of troops, declara tion of martial law, trial by jury, and arbitrary imprisonment; with out these rights, an individual can not enj oy personal security.

In 1689, Parliament rebelled against King James Irs tyran nical belief in absolute monarchy. Out of this action came the Brit ish Bill of Rights. Political liberty had triumphed in England, and with it a degree of economic free dom unknown before. The profound significance to Americans of these early limita tions on government is easily re cognized, for in the first eight amendments to the Constitution of the United States, we find the in1974 INFLATION: BY-PRODUCT OF IDEOLOGIES IN COLLISION 415 fluence of the Magna Carta, Peti tion of Right and· the English Bill of· Rights. It was George Mason, the Vir ginian, 3 more than any other in dividual who forged the basic structure of limited and divided powers of government found in the United States Constitution and Bill of Rights. These are re strictive documents in the sense that they place more constraints on government than had ever pre vailed in the past. The intent was to fragment political power, and to provide major obstacles to the reassembly of that power. In the wake of the centuries of tyranny, and the sacrifices of untold thou sands of individuals in their strug gle for freedom in England and Europe, the founders of the Repub lic were hardly likely to construct a government which could be cen tralized easily at the expense of in dividual liberty. The principle of separation or subdivision of pow ers, as championed by men such as Mason, is still history's most ef fective stumbling block for ty rants. However, the Constitution was not perfect, and it was George Mason who foresaw the fatal flaws introduced by compromise that ul timately became' the avenues by which much of it has been struck down.

In 1850, a French statesman, economist and author, Frederic Bastiat, espoused the theme of lim ited government at a time when France was turning to Socialism or total bureaucracy, following the French Revolution in 1848 which had coincided with the release of Marx's Manifesto. Bastiat empha sized the essential spiritual ante cedents in the framework of eco nomic freedom. He commenced his book, The Law, with the following: "We hold from God the· gift which includes all others. This gift is life - physical, intellectual, and moral life. . .. Life, liberty, and prop erty do not exist because men have made laws. On the contrary, it was the fact that life, liberty, and property existed beforehand that caused men to make laws in the first place."4 It is all but forgotten by many today that the State is not the source of liberty and property; these are inalienable rights that come from God.

Bastiat expressed the issue clearly: "What, then, is law? It is the collective organization of the individual right to lawful defense. Each of us has a natural right from God - to defend his person, his liberty, and his property; and by extension it follows that a group of men have the right to or ganize and support a common force to protect these rights con stantly." He concluded, ". . . since an in416 THE FREEMAN July dividual cannot lawfully use force against the person, liberty or property of another individual, then the common force - for the same reason - cannot lawfully be used to destroy the person, liberty, or property of individuals or 'groups." In Bastiat's eyes, any form of state intervention in the affairs of the individual is not only illegal, it is immoral and con trary to God's law. Thus did Bastiat so eloquently summarize what had evolved over hundreds of years - the legal framework of the constraints on government that make it possible for ea.ch of us to order his own life, and to offer his service in the man ner called "free enterprise."

Here then are the moral and spiritual antecedents of the Ameri can system as codified in the law forming the framework of the free market economy. Being all but for gotten today under the pressure of the conflict, these principles are restated here because they consti tute the raison d' etre for any meaningful monetary and econom ic reform. Accomplishments of the Free Market Having established a Republic under the legal framework of lim ited government, what could man accomplish in the free market? In the beginning the focus was mainly on the family, the commu...; nity, and the job of survivaL By 1840, 70. per cent of the people in the United States still lived on farms, while more than 90 per cent grew their own food. Not satisfied with devoting most of his energies to the drudgery of surviv al, the free individual American possessed of a drive to better him self undertook an unprecedented change in his wa.y of life.

The age-old concept that man's material wealth is limited, which had arisen out of the fact that hu man energy had never been effec tively augmented, gave way to the principle that material wealth could be expanded to an almost un limited extent by multiplying lim ited natural resources and limited human energy by tools using non human energy.5 During the 1800's, a massive re construction of the application of labor was brought about through the invention of a host of machines which permitted the augmenta tion of human effort by non-hu man energy. Initially, wood and, whale oil were the principal sources of energy. These gave way in time to petroleum products, the use of which doubled decade a.fter decade until early in the 20th cen tury. In agriculture, the first signif icant invention, the steel-bladed plow, occurred in 1841. In rapid succession came the power reaper, 1974 INFLATION: BY-PRODUCT OF IDEOLOGIES IN COLLISION 417 the steam thrasher, and the hay ing machine. Then in 1884, the first combine and the first tractor appeared. All of the things which we take for granted today were marvelous inventions in those days.

Can you visualize yourself pitch ing hay or performing some other type of hand labor on a farm be fore being rescued by these mar velous machines? After the turn of the century, a whole succession of specialized tools and machines were developed which bring food all the way from the farm to the home refrigerator. As a consequence of these labor saving inventions, the 70 per cent of people on farms in 1840 had been reduced by one-half by the turn of the century. Continuing advancement to World War II brought the proportion of people on farms to 18 per cent. Today, only about 5 per cent of the population live on farms, and farm labor ac counts for only 4 per cent of the nation's labor force. At no time in history nor in any other country has there been such extensive productive application of man's in ventive genius; and the process .seems endless. Economic freedom has, by sim i! ar processes, provided an enor mous expansion of physical and mental productivity, and offered the incentive to develop the vast array of items that have become the underpinning of our standard of Iiving. We've had the incen tive to solve disease and sanitation problems, provide housing for the entire population, develop great centers for preserving and trans mitting our accumulated learning, and transfer goods via a vast pro duction, distribution and market ing mechanism unknown in his tory.

The Roots of the Control/eel Economy At the heart of the notion that the economy must be controlled by the government are several well re cognized themes: (1) the concept that society is made up of two classes, the oppressed and the op pressors, the "class struggle", (2) the concept of "exploitation" of man by man, and (3) the concept that the controlled order is inevit able as the consequence of the in exorable increase in impoverish ment caused by the development of capitalism. Hence, by revolution as advocat ed by some, such as the secret League of Just Men who had com missioned Marx to write their Manifesto, or by evolution as ad vocated by the British Fabian Society or the ADA, "... It is nec essary to emancipate society at large from exploitation, oppres sion, class distinctions, and class struggles." The economic and political meas418 THE FREEMAN July ures by which collectivists intend to convert society .generally in clude :6 1. Abolition of private property and the rental thereof to individuals by the state.

2. A heavily progressive income tax. 3. Abolition of all right of inheritance. 4. Government control of credit by means of a monopolistic central bank. 5. Government control of communi cations, transportation, and means of production. 6. Abolition of distinctions between urban and rural areas by redistri bution of population. 7. Free government schooling. These features of the welfare state, Socialism, the planned econ omy - call it what you will-are recited, not as we recited the roots of the free market which are all but forgotten, but because they are so conspicuous in today's econ omy that we are inclined to over look what they really are - the legal framework for the very an tithesis of the free market which this country's founding fathers envisioned. Ideologies in Collis;on Both Marx and Bastiat express ed concern for the common man under the tyranny which had pre vailed for centuries in Europe and England. But Marx advocated as a substitute for the monarchy a new form of tyranny - a. bureauc racy supported by a synthetic ma jority rule; whereas Bastiat and his English counterparts correctly envisioned that only by placing all forms of tyranny in the chains of restrictive law could man arise out of repression.

Hence, the industrial revolution in America, operating under the aegis of a Constitutional Repub lic providing maximum freedom for the individual and a minimum of exploitation, bore fruit as no where else in the world. Instead of the exploitation and oppression, anticipated by Marx, has come the emancipation of the masses seen in the visions of the founding fathers. However, while vast economic changes were occurring through out the western world and in America in particular over the last century, government was also un dergoing a transformation of ma jor proportions. From an incon sequential power over economic af fairs during the 19th century, the Federal Government today has be come the most powerful bureauc racy on earth, and has regressed into a massive engine for control and redistribution of people and wealth, largely as Marx and his colleagues had advocated. Much of what government has undertaken domestically falls with1974 INFLATION: BY-PRODUCT OF IDEOLOGIES IN COLLISION 419 in the prescribed limits of the role of referee. However, the main thrust of government activity in recent years has gone far beyond the prescribed limits. F. A. Hayek, in The Constitution of Liberty,7 foretold the consequences of prac tices which have developed under persistent pressure to do away with those limitations on govern ment which were erected for the protection of individual liberty.

"This conflict between the ideal of freedom and the desire to 'cor rect' the distribution of incomes so as to make it more 'just' is usually not clearly recognized .... But the ultimate result . . . will necessarily be, not a modification of the existing order, but its com plete abandonment and its replace ment by an altogether different system - the command economy." Hayek is one of the few writers who correctly recognized the mixed economy for what it is - an unstable transitional condition be tween the free market economy and the bureaucratically controlled society. Inflation in the Transitional Period While those who champion the sanctity of individual liberty and the ideal of the free market de plore the transition, socialist schola,rs are' inclined to want to get on with the work of erecting the bureaucra.cy and eradicating all vestiges of their bogy man, "laissez faire" enterprise. Be that as it may, it is the contemporary status of this transition that in vites our closer examination. Spe cifically, our concern is the phe nomenon of inflation in the mixed economy as a manifestation of the transition.

Because many qualified econo mists have demonstrated the es sential monetary nature of infla tion, we need not restate here the distinction between money and credit expansion and the resultant rise in wages and prices, nor go into the fine points of monetizing debt. There is a prevailing notion that in the transition period dur ing which functions performed by the private sector of the economy are transferred to government, in flation will persist as long as the still strong private sector and the growing public sector fight for the limited amount of capital. However, many economists seem only recently to be grasping the fact that as the transition pro gresses, so must monetary infla tion proceed at an accelerated rate. The long-standing argument that the manner in which government debt is funded is a determining f actor in inflation, seems inade quate to explain the evident fact that inflation is accelerating.

The problem is that too much 420 THE FREEMAN July attention has been devoted to na tional income analysis while ignor ing the nation's balance sheet. An examination of practically all meas ures of balance sheet liquidity or cash reserves reveals that the pri vate sector of the economy is being progressively starved of funds by rising taxes and increasing costs of nonproductive overhead caused by governmental interventions. Expanding Government Empirically, the record in the United States shows that so long as all governments combined took in direct and indirect taxes less than 25 per cent of personal income, some discretion existed as to what rate of monetary inflation could be undertaken at any given time. However, once government ex panded beyond the range, as it did years ago, the economy embarked on a one-way street; and as gov ernment grows progressively larg er at the expense of the private sector, so must inflation proceed apace to accommodate the credit re quirements of the economy.8 Government spending having ex panded to more than 43 per cent of personal income, this progres.. sive expansion of credit is neces sary to avoid collapse as the level of borrowing must also accele·rate in lieu of diminishing residual pro fits and retained earnings.

Ultimately, as government proceeds progressively to confiscate all earnings, one might expect monetary inflation to reach pro portions experienced in France in the 1790's, Germany in the 1920's, Russia immediately after the so called revolution, and Hungary in 1946. However, before hyperinflation of such proportions would be gen erated, it is more likely that an at tempt toward the conversion to a totally controlled economy will be undertaken under the guise of some combination of "emergen cies." Many of the mechanisms to achieve such a conversion have been on the books for many years. 9 A.nd Congress delegates additional "emergency powers" to the bu reaucracy as each new ucrisis" is engineered. Meanwhile, unforeseen develop ments such as the projection of the Middle East conflict into the otherwise inevitable domestic oil shortage may produce profound and undefinable effects on the fu ture timing and nature of the con version, not only in the United States, but worldwide. It is clear that the Arab nations have admin istered the coup de grace to the faltering International Monetary Fund, and that the role of gold is about to achieve a significance in world monetary affairs virtually inconceivable in the United States only a few years ago.

1974 INFLATION: BY-PRODUCT OF IDEOLOGIES IN COLLISION 421 Inflation in the Controlled Economy It is not our purpose here to en ter into a theoretical discussion of inflation under Socialism, but rather to suggest two thoughts. First, utopian goals of inflation free prosperity for all, as envision ed by the planners of the multi national political economy, may be quite unrealistic. The end product of the transi tion from the free market to So cialism even in America may well produce vastly different results than .expected. Simply stated, a bureaucratically controlled econo my is incapable of maintaing a lev el of production adequate to sustain itself. In the absence of the profit motive, people will not produce at their capacity, and in the absence of a mechanism to retain and uti lize savings, the machinery of pro duction will either run down or wear out. Even more significant is the underlying moral issue. Let us heed Garet Garrett's words :10 When in the conquest of power and for political ends a government delib erately engineers inflation ... the people will lose control of [govern ment] ... and finally, the revelry of public money, which for a while seems to cost nobody anything, brings to pass a state of moral obliquity throughout society. The monetary de bacle is relatively unimportant. The moral debacle is cancerous and pos sibly incurable.

Who, then, under the controlled economy will have the incentive to continue to produce the economic abundance from which has been drawn the hundreds of billions of dollars of foreign aid designed to prop up untold socialist experi ments in a hundred or more coun tries, the numerous unsupportable and uneconomic public infrastruc tures,* the vast nonproductive, self-defeating bureaucracies set up in many so-called developing na tions to divide the free loot? Can Russia Survive? But of even greater significance, what will be the fate of the USSR, the greatest socialist experiment of all time? This question may sound strange in the context that the USSR is presented to us as an economy based on such a highly advanced technology that it poses a vast military threat to which we must respond by spending over $80 billion annually on armaments. Under the Czar, Russia was well advanced into the industrial rev olution, and at the turn of the century, was the world's leading * All too frequently American taxpay ers' dollars have been used to provide in frastructures which to date have done little to improve the status of the average citizen of developing nations; instead, the benefits have accrued largely to the prof its of multinational corporations which have located plants in these low-cost la bor markets.

422 THE FREEMAN July oil exporter. But such prerevolu tionary developments are por trayed as insignificant in terms of the Soviet's achievements of the past 50 years. However, the record shows that present day Soviet technology is synthetic - it has all been im ported. Based on ten years of re search into official documents, Antony C. Sutton, research fellow at the Hoover Institution on War, Revolution and Peace, developed grounds for his widely quoted tes timony before the Republican Party National Convention in 1972. In Sutton's words: "There is no such thing as Soviet technol ogy. Almost all-perhaps 90-95 per cent - came directly or indi rectly from the United States and its allies.' In effect, the United States and the NATO countries have built the Soviet Union. Its industrial and its military capabil ities. This massive construction job has taken 50 years, since the revolution in 1917. It has been carried out through trade and the sale of plants, equipment and tech nical assistance."ll Sutton also quoted Ambassador Harriman: "Stalin paid tribute to the assistance rendered by the United States to Soviet industry before and during the War. Stalin said that about two-thirds of all large industrial enterprises in the Soviet Union has been built with the United States' help or tech nical assistance."

The West Helps Russia In his three volume work, W est ern Technology and Soviet Eco nomic Development 12 covering 1917 to 1965, Sutton demonstrates on an industry-by-industry basis that the West has contributed under contract essentially all the plants and technology which comprise the Soviet military-industrial com lex today. Of great significance is his statement that it has been shown Russia has never suffered from a dearth of competent technical and scientific personnel, rather the bureaucracy is incapable of trans lating the endeavors of individuals into productive. results. The power of his statement is that it is not theoretical, but is based on the observed record. Its significance lies in the application of Garrett's observation regarding the cancerous moral debacle which occurs under bureaucratic control. In basic English: People cannot be forced to produce, effectively without personal incentives to do so. And Socialism demonstrably fails to provide these essential incentives.

In my opinion, the death of the free market in the United States would come not as a sudden de1974 INFLATION: BY-PRODUCT OF IDEOLOGIES IN COLLISION 423 pression, but rather a, gradual sinking into stagnation in activity characteristic of controlled econ omies. The drying up of that enormous production by which much of the so-called free world is subsi.dized would also cause the sta.gnation to extend abroad. Fi nally, the stream of technology upon which the Iron Curtain coun tries have relied for 50 years would dry up, and the Soviets, for the first time in their existence, would be cast free to sink or swim on their own. Socialism Precludes Inflation? The second thought I wish to examine more carefully is the notion that inflation is a product of sound monetary practices, ir respective of the type of economy or political framework. Let us not forget that one of Napoleon's first acts was to restore the gold stand ard in France.

As to the alleged freedom from inflation in a, world under Social ism, we may turn to economist Benj amin Anderson: 13 By 1921, Lenin had reached the conclusion that pure communism would not work, and the New Eco nomic Policy announced by Lenin in 1921, frankly acknowledged a partial return to capitalism. The reestablish ment of capitalism in Russia involved the redevelopment of a money held as closely as possible at a parity with gold. In the years that followed, Rus sia had repeated slumps in the value of its currency, but always resisted them, and finally turned decisively toward heavy gold production, recog nizing the need of gold both for inter national use and as an elelnent of strength in the do'mestic currency situation .... Russia could never make its paper money a "thing in itself" created by the state and held fixed by the state's fiat. Currently, the Soviet Union holds gold in such high esteem that the first of four nuclear pow er plants was recently activated to power gold dredges and other mining machinery at the Soviets' principal gold mining center of Bilibino in Siberia.

Hence, it would appear that in the totally socialized world, civ ilization would descend into stag nation for an untold period of time. If such economy as remains in the world is to be free of infla tion, it could be accomplished only by recourse to that perennial bar barian, gold. The Solution - A Moral Issue Although we are far down the road, this dismal outcome of the ideological collision need not occur - indeed, we must not permit it to occur. However, mere monetary constraint will no longer provide an effective, answer because of the balance sheet liquidity p.rob424 THE FREEMAN July lem. Restoration of a sound gold convertible currency is a move in the right direction; but if Ander son's observations regarding the Soviet Union are valid, such a move will not, in itself, eradicate the bureaucracy. Only by attack ing the ideological roots of Social ism can the tide be turned in practice. This means checking the growth of government and the spawn of monopoly industries which through the centuries have always fed on centralized power.

This means returning. government to its constitutionally authorized role and restoring true competi tion to the market place. In the final analysis, the issue is a moral one: Are enough people willing to exercise sufficient indi vidual initiative, responsibility and integrity to do the job? In the abstract, this seems to be a reasonable challenge. But in practice, how many businessmen who espouse free enterprise for their own businesses will give up the practice of using their influ ence with their legislators to limit competition or otherwise gain eco nomic advantage through the leg islative process? How many businessmen will sacrifice profits in a genuine com passion for their fellow man by giving up their lucrative business with the bureaucrats of countries who have sent millions of their citizens to their death in slave labor camps? How many businessmen will vol untarily undertake the necessary expenditures to control their fac tory effluents in the interest of cleaning up genuine environ mental health hazards, or will do the same for their employees by minimizing work hazards?

How many labor union leaders will acknowledge tha t they can obtain more jobs and better work ing conditions for the rank and file union members by allowing companies to make higher profits for capital formation rather than by extracting maximum wage and fringe benefits at the bargaining table? How many able-bodied people who are racketeering on welfare will voluntarily go back to work? How many legislators will stand in the face of the pressures of those bent on selfish gains and stop the legal plunder? And of equal importance, how many leg islators will stand for election on constitutional principles instead of offering even more legal plunder? How many government bureau crats will voluntarily husband public funds, trim dead wood from their departments, and phase out unnecessary operations? These are examples of individ ual human actions. Ludwig von 1974 INFLATION: BY-PRODUCT' OF IDEOLOGIES IN COLLISION 425 Mises, who was acknowledged to be the greatest contemporary champion of the free market, has shown that economics is the ag gregate of individual human ac tion. Whether a society is basically moral or immoral in total depends on the degree of morality of the actions of each individual in it.

Inflation is the aggregate, result of legal plunder - as such, it rep resents the epitome of immorality. In a totalitarian society, the problem of inflation, like any oth er, can be controlled at any time by government decree, but only at an unmeasurable cost in loss of personal liberty. In a free society, control over inflation can be ac complished only when its underly ing causes are held in check by the predominance of individuals motivated by moral principles and acting with economic responsi bility. Only when sufficient people rec ognize the moral nature of the problem and are willing to act accordingly will the surge toward the command economy be reversed. I - Footnotes1 Weaver, HEmry Grady, The Main spring of Human Progress, The Founda tion for Economic Education, Irvington on-Hudson, New York. 2 Mussatti, James, The Constitution of the United States, D. Van Nostrand Com pany, Inc., Princeton, New Jersey, 1960.

3 Mason, George, Architect of Consti tutional Liberty, Education Information, Inc., P. O. Box 2037, Fullerton, California. 4 Bastiat, Frederic, The Law, The Foundation for Economic Education, Irvington-on-Hudson, New York. 5 Hackett, Warren T., How We Pros per Under Freedom, Citizens Evaluation Institute, Washington, D. C. 6 Marx, Karl, Communist Manifesto, Henry Regnery Company, Chicago, Illi nois, 1965. 7 Hayek, F. A., The Constitution of Liberty, University of Chicago Press, Chicago, Illinois, 1960. 8 Hillendahl, Wesley H., Big Government's Destruction of the American Econ omy, Bank of Hawaii, Honolulu, Hawaii, April, 1973. 9 Executive Order 11490, Assigning Preparedness Functions to Federal De partments and Agencies, Federal Regis ter, Volume 34, No. 209, Part II, October 30, 1969. 10 Garrett, Garet, The People's Pot tage, The Caxton Printers, Inc., Caldwell, Idaho, 1965. 11 Sutton, Antony C., National Suicide, Military Aid to the Soviet Union, Arling ton House, New Rochelle, New York, 1973.

12 Sutton, Antony C., Western Tech nology and Soviet Economic Develop ment, 1917 ... 1965, Hoover Institution of War, Revolution and Peace, Stanford University, Stanford, California, 1968. 13 Anderson, Benjamin M., Economics and the Public Welfare, D. Van Nostrand Company, Inc., Princeton, New Jersey, 1949.

The Rare Moment _ LEONARD E. READ The rare moment Is not worth caB:)ablleof SeE~JnltJ« WHEN IS THERE "something worth looking at"? Any time! There are good things to see at all times, in all places, and by all individuals. It's a matter of personal choice; and how varied are these value judgments of individuals! For in stance, there are, many who are more attracted to the labor-saving device known as thievery than to anything else. They think stealing is a procedure "worth looking at." Pause, here for a moment. Some of us think of thievery - whether carried out by individuals or prac ticed collectively "from each ac cording to ability, to each accord ing to need" - as very low on the scale of values. Why? Simply be cause our judgments differ from, and are presumed to be at a high er level than, those of the thief. But we must be careful in con demning persons whose value judgments are, in our opinion, lower than our own. For implicit in such an attitude is the claim that we are superior.

426 After all, who is any of us but an imperfect mortal! If we de mand that others see things as we do, we are opening the door to the possibility that we should be forced to look at only what a gov erning majority of others believe to be worth looking at. And bear in mind that no two of~'us have the same judgments; indeed, one's own values change from one day to the next. So, we need the flexi bility to cope with constant changes. I would let each decide for himself what's worth looking at and suffer the penalties of his errors or the blessings of his righteousness. Man's ideas as to what's worth looking at range from pornog raphy to sunsets, from Picasso to Raphael; from the Pyramids to the Jungfrau; from ancient ruins to the TajMahal; from Soviet Life to the Holy Bible; from atoms to galaxies; from Bach to rock. Ideas and ambitions range from state socialism to individual 1974 THE RARE MOMENT 427 liberty; from a square meal to an elaborate symphony; from quiet repose to strenuous executive ac tivity; from a decent burial to a voyage of exploration over un chartered seas; from the' cheapest fiction to the purest science or philosophy; from thinking for self to imitating others - you name it!

Krutch is right. The rare mo ment is not the moment when there is something worth looking at. What could ·be more common? Every moment of one's life af fords that opportunity. Beyond the flash The rare moment is when we are capable of seeing - that rare glimpse into the mystery of that which is observed. Most people only look at a flash of lightning; they see nothing of its miraculous nature. While no one knows what it is, there have been a few who see beyond what meets the eye; they have seen enough to generate and harness electricity to our use. This kind of seeing -- insight occurs only in the rarest of mo ments. Many of us look at a sunset and are, overcome by its beauty. How few of us" even today, perceive that the sun does not set? Many see no more than was seen by the first man on earth. How many, before or since Copernicus, have understood that the setting of the sun is an illusion, rather that the earth is rotating? Rare moments, indeed.

Another example of a rare mo ment: Ever since man first set foot in Switzerland, that majestic mountain, the Jungfr au, has ranked high among the beauties of nature, truly worth looking at. People' by untold thousands have stood at its base looking up in awe. Around the turn of' the cen tury an entrepreneur had a vi sion' a moment of seeing: Why not multiply what's worth look ing at? Make it possible for the thousands to go atop· the Jung frau that they might see the beau ty from that vantage point! Some twelve miles of tunnel was bored through the rock, a cog railroad installed, and a .wonderful hos telry built within,· the mountain near the top. Private enterprise! No government subsidy! Just one of those· rare moments of seeing which is more in evidence when man is free and self-responsible. Near the top of the list of things thought to be worth look ing at is wealth-material afflu ence. The aggregate of the mo ments spent in seeking wealth staggers the imagination. But note how rare the moments when individuals are capable of seeing the· preconditions for gaining affluence, a society of free and self-responsible individuals with 428 THE FREEMAN July government limited to codifying and inhibiting destructive ac tions. If government thus per forms, people are free to act crea tively as they please. And there is no other way to material well bein.g.

Not seeing for themselves, the masses listen to false prophets, persons who promise that we can spend ourselves rich, that pros perity derives from dictatorial control over wages, hours of la bor, exchanges, prices, and so on. They hear the promises but can not foresee the consequences of the methods to be used. Wrote Ralph Barton Perry: "Ignorance deprives men of freedom because they do not know what alterna tives there are." An affluent so ciety cannot prevail unless indi viduals see that their economic well-being stems from the general practice of the principles of pri vate ownership, the free market, and limited government. In Search of Power Perhaps the power to run the lives of others tops the list of things a majority believe to be worth looking at. Rare, indeed, are the moments when these in dividuals are capable of seeing the futility of their way. Were I the wisest philosopher or politician who ever lived, there is not one of these meddlers who believes I could run his life better than he.

But he, unwise, has no doubt about his powers to run your life and mine. Why unwise? The very first step in wisdom is an aware ness of how little one knows. Nor do such people see that power corrupts them! Most of us doubtless have the potential to see ever so much more than we customarily perceive. We rarely see more than we wish to see. As unique individuals, we tend to specialize, to focus on the details from a particular point of view. Such focusin.g gives us more intimate knowledge of the tree, the trunk, the root, the twig, the Ie·ai, the miracle within the single cell. I have my special in terest, you yours, things we see more clearly, while neglecting many other possible vistas. The danger of too narrow a speciali zation is that we can't see the forest for the trees. The· "forest" worth looking at which most intrigues me is a vi able society, one featured by har monious relationships, one in which the individual may proceed, unobstructed by others, toward a realization of his creative apti tudes and potentialities. If a per son fails to overcome his own ob stacles - frustrations, supersti tions, imperfections, ignorance, no will to strive - that's his problem.

But if the obstacles are put there 1974 THE RARE MOMENT 429 by others - if the individual is compelled to live as others dictate - that is everyone's problem. Freedom is everyone's business! We Need freedom Because We Are Interdependent Why is freedom everyone's busi ne'ss? It is because my freedom depends on yours and vice versa. There is but faint appreciation of the high degree of specializa tion in contemporary society, of how dependent each of us is on the others. In short, we are now interdependent beyond recall ; there is no turning back. This is to say that we, in our age, are at once soc'ial and individualistic be ings. And if we fail or refuse to recognize this fact, all will fall together. Of course, the individualistic side of this coin - being one's best self - is a, problem of the first magnitude. Each of us must wrestle with this personally. Many, I suspect, see this. It is the social side of the coin they fail to see.

How can ordinary mortals, such as you and I, fulfill this aspect of life? The formula is simple. Never do unto others that which you would not have them, do unto you. If you wouldn't have others con trol your life, then never try to control anyone else. If you wouldn't have others hinder you from producing, freely exchanging, owning the fruits of your own labor, competing, traveling, then don't inhibit these practices among your fellowmen. This is all one has to do to fulfill his role as a social being. Merely heed the oldest, wisest, and simplest maxim ever written! Finally, is there a prescription for removing our blindfolds? Is there a mode of conduct or dis cipline which would open up new vistas, permitting you and me to see more than we now do? I am just beginning to see that the an swer is integrity. For years, I have been defining integrity as the accurate reflec tion in word and deed of what ever one's highest conscience dic tates as right. This may not in fact be right but it is as close to righteousness as one can get.

My definition stands; but I see now that my preachments - words - have been better arranged than my practice - deeds. It is my prac tice of integrity that must be im proved. To illustrate this failing on my part: I have, written that each of us should await discovery, that if there is anything in our garden worth looking at, it will be de tected by others.! Do I heed this? 1 See the chapter, "Await Discovery," in Having My Way (Irvington-on Hudson, N. Y.: Foundation for Economic Education, Inc., 1974) pp. 40-44.

430 THE FREEMAN July Only with the greatest difficulty! Impatience tends to govern me, more or less. I can hardly wait till others find out how good I think I am at this or that. This nagging urge is a .common trait and accounts, in no small measure, for the urge to reform that plagues humanity. Out of such a garden grows nothing but weeds. When I cannot believe and abide by my own admonitions, am I to expect better of others! Seeing and doing must become one and the same. To see the right with out doing it is to live without in tegrity. How Integrity Helps Why is it that integrity removes the blindfolds, improves seeing? Some of the reasons are apparent. I repeat, while one's accurate reflections in word and deed may not in fact be truth, they are as close to truth as one can get. Even though we err, our devotion to integrity leads toward that which is right; this is the only road to truth.

Those truth seekers who prac tice integrity themselves are drawn to integrity in others. This virtue has a magnetic quality. Are not the persons to whom you listen those who manifest integ rity? When others are being drawn toward your honest reflections, your light tends to brighten. Their attention is an encouragement, a stimulant, .to put your best foot forward. .In a word, integrity works its attractions back and forth among us; and the rare mo ment becomes a. more common ex perience. Wrote Charles Simmons: Integrity is the first step to true greatness. Men love to praise [it], but are slow to practice it. To maintain it in high places costs self-denial; in all places it is liable to opposition; but its end is glorious, and the uni:.. verse will yet do it homage. ~ IDEAS ON L$ LIBERTY To Find Meaning SUCH MEANING as there is to life on this earth is found in tending our own plot of ground, in tasting the fruits of· our own labors, in developing our own skills and perceptions, in sharing with others freely, in doing that which is appropriate to our talents, in striv ing to fulfill our ideals for ourselves, in the pleasure of a job well done, in the company of friends we have chosen and Who have chosen us, in bringing up our own children, in short, in sitting under our own vine and fig tree.

CLARENCE B. CARSON The Flight From Reality There's No Such Thing asa Free Lunch EARL L. BUTZ IN THE OLD DAYS the king called in his three wise men to tell them he'd become interested in econom ics. "But," he said, "it sounds con fusing and complicated. I .want you togo out and boil it down for me in a way that I can under stand." Nine months later they came back and reported they had com pleted the job. They said they had condensed all of economics into a single book of 200 pages. The king said, "That's too long. I don't have time to read that much." He· had the chairman beheaded, and told the other two: "Now I want it boiled down." They came back in 30 days and said they had economics boiled Dr. Earl L. Butz is Secretary of Agriculture of the United States. This article is reprinted by permission from the March 1974 issue of The American Farmer. Copyright American Farm Bureau Federation, 1974. All rights reserved.

down into a single chapter of 20 pages. The king said, "That's too long. I don't have time for it." He had the chairman beheaded, and turned to the remaining wise man: "You know your job. Now, boil it down." "Yes sir, Mr. King!" This wise man came' back in three days: "Mr. King, I think I have it. I have boiled down the entire subject of economics into a single sentence of eight words." The king said, "That's fine'. I have time for that. What is it?" "There's no such thing as a free lunch." I tell that story because I think those eight words sum it up pretty well. Economics is a description of what you and I, and others like us, do in order to get our share of the things that are in the real life around us. Unfortunately, there are a lot 431 432 THE FREEMAN July of people around - you know them and I know them - who think that there is such a thing as a free lunch. Take the role of the Federal government - Uncle Sam, if you will. Some people look on him as a kind, benevolent old gentleman who hands out free gifts. They look on him as a child might look at a grandfather.

Take most any state or local project. If there's work or money involved, it's easy to say: "Let's have the Federal government do it." You see this happening all the time. Maybe it's a new court house in the county seat, or a sewage plant, or just one of many things: "Let Washington do it." There's only one way the gov ernment can do anything - that's with your money. The government is not a form of voluntary giving; it is a form of compulsory giving. You lose your home or your· land if you don't pay your taxes. There's nothing benevolent about old Uncle Sam when it comes to you paying the tax bill. There's no such thing as a free lunch. The next time you see a head line saying that the Congress has voted a $1 billion project, just fig ure that on the avera.ge this is about $5 out of your pocket and out of the pocket of every other member of your family. "But," somebody says, "we're just talking about our own little community project. If we don't get that Federal money, somebody else will use the money. This project costs only a. few thousand dollars.

That's a drop in the bucket com pared with what the Federal gov ernment spends on other things." You've heard that, or something like that, many times, I'm sure. Fact is, most everything the government does is, of itself, a drop in the bucket. However, when you add up all the little drops, it makes quite a bucketful. And the bucket is spilling over. We're already spending about 34 per cent of our gross national prod uct for government - Federal, state or local. That means that we have given to the government one third of the decision-making pow er over how our money is spent. A Drop at a Time Builds to a Flood There are many things that we want and need to have the govern ment do. The problem develops when it seems so painless and easy to add "just one more." That's how we got the 34 per cent - by adding "just one more." We have direct control over the dollars that we spend individually; however, we lose direct control over our dollars when we pay them out as taxes. The control then becomes diffused and political and hard for 1974 THERE'S NO SUCH THING AS A FREE LUNCH 433 anyone of us as an individual to do very much about.

If you don't think so, pick up the newspaper almost any day. Chances are you can read one to several stories about this or that proposal to launch a government project of some kind. Each one is a proposal to spend. more of your money. Some are worthy causes, but how much "say" do you have in deciding whether you want to pay more for each of these pro jects? The farther away from your local government the decision gets, the harder it is for you to exercise control. That's why the Federal budget has been balanced only -'+ of the past 20 years. That's why in flation is eating us up. That's why we ought to reverse the trend in this country and return more gov ernment to local decision-making. That's why we should ask about every public project, "Is it worth what it costs if we had to pay for it directly?" Even then there are problems. If your local government is mak ing a capital improvement of some kind, you'll probably find you can't save tax dollars in the budget ahead of time and pay cash. You'll probably have to borrow, float bonds, build up a debt and pay for the project twice through interest payments. There's no such thing as a free lunc'h.

When the Rich Are Gone All right, but we run out of the rich pretty quick. The great bulk of the tax load comes out of the pockets of ordinary people. There's no other way. If we held every rich guy by his heels and shook out all his money, it would still be a drop in the bucket. Tax the corporations? When you tax them, they have to get the money somewhere, since it is strictly illegal for them to manu facture money. When the corpora tion is taxed, the corporation tacks the cost onto the price of the ar ticle you buy. When you buy Cor poration X,Y,Z's handy dandy little gizmo, you pay the corpora tion's tax. A corporation, then, is a. tax col lection agent for Uncle Sam. That kind, benevolent old gentleman is a wily old cuss who has his hand in your pocket in a way and at times when you don't suspect it. There's no such thing as a free lunch. Take ceilings on prices. We,'ve heard a lot about them in the' la.st few months. Inflation has been chasing prices of many things up the trees. It happened on food last summer.>Housewives not only com plained; some of them became ac tivists and picketed. They demand ed that "something be done."

Well, the government is also a listening post. When somebody in 434 THE FREEMAN July political office hears the chant loud and clear from back home, he fig ures he'd better do something or he won't be around to hear the chant the next time. The urge for personal survival in Washington is a powerful instinct. It's the pri mary political instinct, you might say. Last summer, in response to the cry from back home, controls were put on food. All of a sudden, the market was telling farmers not to produce. as much. The market after all is nothing more than a sounding board for the desires of people. You might call it an echo chamber. Each day people all around the country, by spending their money, say, "I want more of that." The price goes up. Or they say, "I want less of that." The price comes down. Each person, including you and me, whispers something to the market each time we make even a little decision about how we spend our money. Those little whispers, billions of them a day, echo back from the market echo chamber. It shouts back that nationally we want more of' this, or more of that, or less of it.

Stock markets reverberate. Cor pora tions shake. The little store down at the, corner quivers. All before the loud echo of those bil lions of little decisions that we make every day. Let's say the market thunders that it wants more of' something the price goes up. But the house wife fusses that "It's already too high priced." So the government puts on a ceiling. Well, that doesn't make any more of the product. We go right on making all those little decisions, each of us, that put the price up in the first place~ Now that the price isn't going up any more, as a result of the ceiling, we buy even more of it. Pretty soon, there's not enough to go around. We keep right on buying-but the fellow who makes it is getting a wrong signal. The market is telling him not to pro duce as much. The price isn't at tractive any more. His costs keep climbing, but the price for what he makes doesn't. So he quits. Or his banker makes him quit. There is less of the product around.

Controls Substitute Ration Stamps for Money There's only one thing you can do then - ration the product with ration stamps. If you don't, there won't be any of it down at the store when you get there. People don't like that. What good is a controlled price if the product isn't there to buy? What controls do is substitute government ration stamps for our dollar bill ration stamps. Instead of you and me setting the price by 1974 THERE'S NO SUCH THING AS A FREE LUNCH 435 our own decisions with the way we spend our dollar bills, we let the government make the deci sions by parceling out ration stamps to us - so many for each one of us. The same for each. That's the bureaucratic way of being fair. So controls, then, which set out to do us a favor, end up discour aging production, instead of en couraging it. The ration stamp cure for the disease of low, supply makes more of the disease by dis couraging production. There's no suc1h thing as a free lunch.

Another common principle is tha t most everything has a cost benefit ratio to it. The item has a benefit, or we don't want it. And it has a cost, or we can't get it. That's the way it is with anything where there isn't enough to go around. You can walk out and look at the moon. It's pretty on a clear, crisp night, and you can take in all of the scene you want to; it doesn't cost you a cent. Unless maybe you wear glasses, which I do. Then even looking at the moon isn't free. The point is, if something is scarce, and practically everything is, it has a cost. Whether you pay that cost or not depends on how you look at the benefit and whether you have the money to pay. Most everything has a cost-ben efit ratio. You can't escape it. Are we going to have completely clear air and not enough energy? Are we going to poison coyotes - and maybe some birds while we're at it - and have enough wool and lamb; or are we going to listen to the howl of more coyotes at the cost of less lamb?

Are 'we going to feed DES to cattle and perhaps have a residue in some beef livers in an infini tesimal amount which has never been known to harm anyone's health; or are we going to avoid even one particle of DES per tril lion in beef liver and pay more for beef, since it costs more to raise it without DES? Are we going to disrupt a nar row strip of tundra and disturb some wildlife in remote parts of Alaska, while tapping the rich oil supplies there, or are we going to have gas rationing? Are we going to have' well-planned forest har vests and reforestation, or are w'e going to look at the undisturbed wilderness and hoard resources? For every benefit, there is an off setting cost. There's no such thing as a free lunch! ~ JOHN C. SPARKS to Temptation This letter to a close friend, the author's pastor, clearly concerns all of us. IN MORE than one of the discus sions in your adult church-school classes and in your sermon "talk backs," you have strongly main tained that the church should be in the middle of whatever impor tant is going on in the world. I have not disagreed. Perhaps the only question or doubt in my mind concerns the capability of certain church spokesmen to speak out logically, rather' than emotionally, on secular issues. However, this is a general criticism. In you, I have confidence.

It seems logical to me that you would want to unmask the immor ality and dishonesty of an evil that has long existed and is widely practiced today. Yet, it is of a kind that is easy to overlook or misunde·rstand. My concern here is with one of the fundamental rules of mankind - moral and re ligious - the admonishment against stealing. Hardly anyone disputes Mr. Sparks is an executive of an Ohio manu facturing company and a frequent contributor to Th'e Freeman. 436 the evil in unlawfully taking prop erty owned by another. Theft at gunpoint or' the burglarizing of a home is wrong; and few persons, professional churchmen or others, would try to rationalize such acts into moral or religious acceptabil ity. This is not the stealing to which I refer. There is another method of tak ing property owned by someone else that is strenuously debated among political theorists. It is felt by a great number of people that property can be taken lawfully, via the democratic process of majority rule, and that this method does not violate either moral or reli gious principle. On one point, most theorists seem to agree: that the property, either stolen, or redis tributed via majority rule - which ever the point of view - is identi fiable, and the act is perpetrated openly in accordance with printed tax law widely dispersed and avail able to everyone. It is no secret that personal income tax rates are steeply progressive. Even though 1974 YIELDING TO TEMPTATION 437 I disagree with such "redistribu tion of private property" and would wish that clergymen everywhere would perceive the moral error, this kind of appropriation of prop erty is not my subject here.

The special kind of stealing that is the deep concern of this letter, a form of theft for which no poli tician wants to a.ssume, responsi bility, is inflation. Inflation is a process by which the Federal government increases the quantity of paper money so that it may p,ay out or spend more than it receives in revenue. Citi zens expect the Federal govern ment to maintain the integrity of the monetary unit, but history re veals how difficult it is for the con trolling politicians of this or any other nation to resist the' tempta tion to buy votes. They recognize tha t votes place them in office and votes keep them there. One way to be' popular and to win votes is to pass out benefits to people. But benefits have to be paid for, either by taxing the peo ple: or by printing paper money (inflating the currency). Taxation is not considered a good way to win popularity or votes. Conse quently, politicians seem to prefer inflation rather than direct taxa tion as their source, of revenue.

Then, to compound their dishon esty, they point to others as scape goats. They would have the people believe that farmers, merchants, manufacturers, doctors, hospitals, colleges and all other sellers of products and services are "profit eering"-just as though, at a given signal, people everywhere in all fields of economic activity decided to hike' prices. This, of course, is sheer nonsense! Counterfeiting may be a universal temptation, but government alone has the motive, and the power, to arbitrarily ex pand the money supply. When the printing presses double the money supply, it follows as night follows day, that prices will tend to double. The Federal government is the culprit, and the enormity of the "crime" - if measured either in dollars, number of participants, or harm done - makes the scandals of Watergate, special privileges, and tax avoidance and evasions look like penny-ante affairs. Any one can measure the dilution of his personal purchasing power by comparing current prices with those paid ten years ago. Yet, no one can measure exactly how much has been confiscated by inflation - the innumerable errors in judg ment, malinvestments, wasting of resources and other unwise deci sions. The total loss or' waste has to be enormous when we consider the disruption of economic signals, destruction of the intent of con tracts, misunderstanding of his torical statistics so badly needed 438 THE FREEMAN July for intelligent decisions, the mis leading of individuals and com panies into inappropriate invest ments and capital expenditures that seriously harm the very struc ture of our working lives.

Of all the harmful results of in flation, probably the most deplor able is the wiping out of lifetime savings of people as they approach retirement. Their savings are as surely stolen by the inflationary activities of politicians as by any one who might have burglarized their safe-deposit boxes. A dou bling of prices tends to cut the value of savings in half, and each subsequent doubling halves what value is left. Thus have the poli ticians of some other countries in this century wiped out all savings of the elderly in those countries. The act of inflating is despic able and dishonest, and the politicians who alone perform the act deserve the finger of scorn. Some may say that inflation is only an economic problem - not a moral problem. That would be like say ing that the theft of Widow Jones' cow, or her safe-deposit box, is only an economic problem. It is that certainly, but the focal point of the problem is the immorality of stealing and its -effect on the helpless victims.

Now, back to your contention that you and the church should be in the midst of whatever goes on in the world. Inflation is a univer sal evil that needs repetitive air ing from pulpits throughout America. I hope you will give it the thought and action it deserves. ~ BERNARD H. SIEGAN Copyright 1974 Bernard H. Siegan Mr. Siegan is the author of Land Use Without ZoninA and many articles on the subject. He practiced law for 20 years in Chicago before moving in 1973 to La Jolla, California, where he is an adjunct professor of law at the Univer sity of San Diego Law School. IF THE SUBSTANCE is the same, changing the brand· will not alter the effect, whether it involves cold remedies, cleaning agents, or zon ing regulations. That, in essence, is the answer to most new schemes presently being proposed to solve the problems of zoning. They are fundamentally the same, except 1974 NO MORE REPEAT PERFORMANCES 439 only for those seeking the end of zoning.

Many persons, of seemingly good intentions, are hotly in pursuit of that certain special zoning sys tem that will remove the errors and evils of the existing one. Just about everyone with any knowl edge of the subject will readily acknowledge that zoning has been largely a failure and something should be done. Still, despite the strong and vehement attacks on zoning by planners, lawyers, and writers, they usually reject scrap ping it, insisting instead upon some new variety of regulation. The schemes differ in name and form, but not in substance, for the prime ingredient is government control. Impact zoning, performance zon ing, incentive zoning, zoning for quality, balanced community zon ing, ecologically sensitive zoning, are some of the titles. And there are more. Under each, there would supposedly be better and sounder planning, more and better hous ing, more open space and environ mental protection, and so forth and so on, all basically a repeti tion of representations made in the past in support of zoning, and with the same probability of suc cess.

What the new schemes ignore is that the existence of government controls largely accounts for the problems. The same group of plan ners and politicians that have so dismally performed in the past are scarcely entitled to a repeat per formance. Failure should not be rewarded. Politics and political ex pediency would remain the con trolling factors, and that spells no change whatsoever. The terms and intent of a law are not really as important as how it is applied - and often intention and application differ radically. When a certain zoning law clearly states one thing, and fifty scream ing constituents insist it should be interpreted or applied differ. ently, the' politic.ians who must de cide are certainly placed in a dilemma. After long years of per sonal experience, I submit that many if not most politicians ·will do what is in their own best in terest; and if that is contrary to the law, so be it. I do not doubt that many would vote the earth is flat if that were politically expe dient. Watergate is neither the first nor last time politicians and officeholders will engage in moral or legal' corruption.

Nor does the judicial process of fer adequate relief. In some states such as California, the judges rarely overturn municipal zoning decisions. Regardless of a state's laws, however, any potential plain tiff must have considerable funds and be prepared for a long strug440 THE FREEMAN July gle with a municipality that may, in good or bad conscience, carry the case to the highest appellate level. Years of litigation may be in volved, during which the property cannot be used for the purpose de sired. But the expenses of owner ship continue. Taxes, constantly rising, must be paid. And, with the current cost of money, interest payments, especially on vacant land, can be quite substantial. Con sequently, even when the facts are highly favorable, the largest or most affluent developers may not find such litigation to be a reason able business risk. The only meaningful change is to eliminate zoning and rely on the effective and efficient forces of the market place to control the use and development of land and property.

There will be difficulties and in equities, but far fewer than pres ently· exist, and many such situa tions can be met with a limited number of specific laws directed at specific problems such as, for ex ample, a parking ordinance. The example of non-zoned Houston is available for all to observe and study the results of a different and remarkably successful ap proach to the regulation of land use. This is also a timely moment to look at the difference between a regulated and a non-regulated market. President Nixon imposed wage and price controls in August 1971 in response to a virtual groundswell of opinion demanding that action. Today, less than three years later, whatever groundswell there exists is for a reverse course. The folly and· disaster of controls in that area have been fully dem onstrated. The follies of zoning are much less dramatic; they do not make the nightly TV news and are not experienced daily at the super mart. But they are well docu mented in the' literature, even by those favorable to the concept.

Within recent years, almost every major law journal in the country has published an article highly critical of zoning practices. The Harvard and Yale-journals have contained pieces contending that all or most of zoning is unconsti tutional. I t is difficult to find a stronger indictment than the report made in 1968 by the professional organi zation of planners, the American Society of Planning Officials (ASPO), to the Presidential Commission on Urban Problems. Con clusions reached in turn by that commission as well as those of two other Presidential and several state commissions were equally devastating to zoning practices. Only the termination of zoning will remove these problems. ~ A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN WILLIAM AND ELIZABETH PADDOCK have written a sockdolager of a book in We Don't Know How: An Independent Audit of What They Call Su~cess in Foreign Assistance (Iowa State University Press, $9.95 cloth; $4.95 paper). What it proves, with on-the-spot evidence gathered often with feelings of great reluctance about hurting well-meaning idealists, is that our foreign aid program has been largely a bust, bringing virtually no permanent improvement to any body. It might be an overstate ment to say that $150 billion have gone down the drain since the U.S.

started to shore up what is euphe mistically called the free wor ld, but surely, on the basis of what the Paddocks have learned by the most careful sort of digging,the money would have done every body much more good if it had been left in the pockets of Ameri cans at home to buy bananas, cof fee, oil, rubber or whatever else the "undeveloped" countries have to sell. William Paddock and his wife make a team. They are both B.S.'s from Iowa State University, which means that they have farming in their bones. An authority on corn, William once headed Guatemala's corn improvement program, work ing with the U.S. mission in Gua temala itself with interludes at an Iowa State University experiment station. His wife, a home eco nomics instructor, spent some time as a Care volunteer distributing food in rural Honduras and as a ghetto social service worker in Guatemala. They knew something of the world of foreign aid from the inside before they started a 25,OOO-mile trip through Mexico 441 442 THE FREEMAN July and Central America to inspect programs which the administrators of development organizations con sidered especially effective. In the course of a year of wandering in the field away from capital cities in Guatemala, Honduras, Salvador and Mexico, the Paddocks not only held more than two hundred pre arranged interviews but also talked with everybody they ran across, from government officials and merchants to peasants, doc tors, lawyers and Indian chiefs.

What they took in through their eyes and ears startled them. Once in a while they hit upon a develop ment that had had effective re sults, but when some actual good resulted it was usually in a quite unforeseen way. Normally, how ever, the proj ects, whether they were undergirded by the Peace Corps, the Inter-American Devel opment Bank, AID (the Agency for International Development), or even the Rockefeller Founda tion, suffered from a lack of carry through, inability to preserve meaningful records, and a tunnel vision that would disgrace a mole. The Rubber Fiasco It was at Los Brillantes, a "model" station near Chocola in Guatemala, that the Paddocks first learned about the pattern of for eign aid. The Paddocks knew from a previous stay in Guatemala that rubber seedlings had been distrib uted to the Chocola area farmers over a five-year period. Some 27, 000 acres had been planted to rub ber. But, to the Paddocks' amaze ment, the whole proj ect had trailed off into nothing. The reason: no continuity. The farmers, so the lone remaining U.S. expert told the Paddocks, were only inter ested in planting rubber as long as AID provided money on easy terms. When the original loans were used up (one farmer re ceived $884,000), the project went dead. What the Paddocks couldn't figure out was why the news of the collapse of the rubber experi ment hadn't yet reached AID headquarters in Washington.

Thirty minutes down the road from the scene of the rubber fiasco the Paddocks visited some beauti ful buildings at Chocola which had once housed the local direc tors of the U.S. International Co operation Administration, AID's predecessor. The chairs, type writers, desk and furniture were still there, but human activity had apparently ceased. Chocola, so the Paddocks surmised, was another illustration of the big tragic shortcoming in our development work. AID had no memory of what its predecessor agency had done. The law of politics is that when ever there is a new foreign aid program, or a new set of admin1974 WE DON'T KNOW HOW 443 istrators, the old .slate is wiped clean. A long-time AID friend told the Paddocks, "Every morning we wake up and laboriously reinvent the wheel." Saving the Seed Corn So it went in other areas in Guatemala. Deane Hinton, a U.S. AID mission director stationed at the Embassy, told the Paddocks that the local agricultural school at Barcenas had the most effective AID program in the country. The Paddocks went and had a look. In the meantime Deane Hinton moved on to Santiago in Chile to head up a different program. Mr. Pad dock didn't have the heart to write him that he had found Iowa corn seed sitting in a storeroom at the Barcenas experiment station where it had been put in storage ten years ago. A faithful Guate malan was keeping the seed col lection intact, "just in case some day someone wants to use it."

In Washington Jack Hood Vaughn, Sargent Shriver's suc cessor as head of the Peace Corps, told Mr. Paddock about the legen dary exploits of one James Port man in EI Salvador. Portman, according to the reports, had rev olutionized the little nation's to mato industry. He had shown the farmers how to mulch their rows for moisture conservation. He had introduced contour terracing. He had started tomato, pineapple, watermelon and banana clubs. He had showed the girls how to can pickles. He had given haircuts to demonstrate a sure way of dis couraging lice. But when the Pad docks visited the scene of Port man's supposed triumphs, they found no evidence of a tomato in dustry. A few townspeople did re call that Portman had planted some tomatoes in a church gar den, and had had a second garden elsewhere. He had used cow dung as fertilizer. But when a store keeper asked Portman how to get rid of insects that were devouring his tomatoes on the stem, Port man had said he "did not know anything about tomatoes, only corn."

In checking the whole thing out, the Paddocks learned that Port man was liked· in EI Salvador be cause he was "young and attrac tive." But Portman himself had written: "Do not believe every thing you read about James J. Portman and EI Salvador. R. Sar gent Shriver in the early days was a little too eager as far as public relations were concerned." Some Good Results The Paddocks did find good things on their 25,OOO-mile trip. They found a boom in Monterrey. The reason: three local families had made good use of their cap444 THE FREEMAN July ital, amassed out of a transport business that had made good con nections with the railroad to Texas. At San Pedro, in Hon duras, there was prosperity. The reason: the United Fruit Com pany paid an average daily wage of $4.97, which stimulated worker training in the whole area. United Fruit is called EI Pulpo, meaning the Octopus, but it does know how to grow bananas. The company brings in thirty-five per cent of Honduras's foreign exchange, so, as the Paddocks put it, "one-third of Honduras's share of the twen tieth century is paid for by com pany acti vity."

If EI Pulpo had been broken up into small plots when the first winds of "land reform" began to blow, who would have heard of San Pedro, or even of Honduras itself? The Paddocks tremble to think of it. The Paddocks looked into the Rockefeller Foundation, which has sustained Dr. Norman Borlaug's experiments with rust-resistant wheat in northwest Mexico. This wheat, along with "miracle" rice, is credited with setting the so called Green Revolution in motion. The Paddocks give Borlaug's p1ant research good marks, but they give even better marks to the Mexicans for learning how to ap ply irrigation and fertilizer to their wheat acres. The "green revolution" is un deniably worth having, but the Paddocks worry about its advan tages being eaten up by rocketing population growth. They sadly conclude that it will take a lot of EI Pulpos to support the new mil lions that continue to encroach on the limits of the food supply all through Mexico and Central America. What is particularly ominous is that EI Pulpos, being capitalist in organization and mo tivation, aren't liked. The masses, bemused, don't know their best friends.

~ LEFTISM (FROM DE SADE AND MARX TO HITLER AND MARCUSE) by Erik von Kueh nelt-Leddihn (New Rochelle, N.Y.: Arlington House, 1974, 653 pp., $12.95) Reviewed by Allan C. Brownfeld THE TEACHERS of poJitical science used to tell their classes that po Iitical philosophies ran along a straight line from left to right, that Nazism and Fascism occu pied the far right portion of the spectrum and Communism the far left. Happily, most teachers of polit ical science have finally moved away from that simplistic, and false, notion. As for the rest, a reading of the recently published 1971,- OTHER BOOKS 445 volume, Leftism (From de Sade and Marx to Hitler and Marcuse) by Erik von Kuehnelt-Leddihn, should - as the common phrase of the day has it - expand their con sciousness. Dr. Kuehnelt-Leddihn is an Austrian scholar who reads twen ty languages and has taught at many universities, including Beaumont College in England, the Georgetown Graduate School of Foreign Service, and who, during the period when the Nazis occu pied his country, was head of the History Department at St. Peter's College in New Jersey. His book is lengthy and learned, but not beyond the general reader's com prehension.

What he has done in this vol ume is range across the centuries to show the links between the per version of de Sade, the revolu tionary mystique of Marcuse and the brutalities of Stalin, Hitler, and Mao. The purpose of the book, writes the author, "is to show the character of leftism and to what extent and in what way the vast majority of the leftist ideologies now dominating or threatening most of the modern world are competitors,- not enemies." He makes a powerful case, for example, that Hitlerism was a movement of the' left, not the right. "At heart Mussolini was always a socialist," he writes. "Hitler, on the other hand, had never formally belonged to the Socialist Party, although he had drunk from almost the same ideo logical sources. His Weltanschau ung too had been largely fathered by the image of the national so cialist laborites." He notes that official utterances declared that Nazism stood firmly on the left, and reveals. Hitler's Hgenuinely leftist turn of mind," showing that the economic order under the Nazis was thoroughly socialistic, and reminds the reader that be sides the Jews, the groups most hated by the Nazi leaders were royalty and nobility.

The difference between the "left" and the "right" is essen tially related to their divergent views of the nature of man and the state. It is a common characteristic of the left - socialists (national and international), as well as more moderate welfare-staters and 20th century liberals, according to the author, to view man as "Individ ual subject to the will of the ma jority. He is a mere number of the democratic process who can be added or subtracted. He is em bodied and personified by the "lea der" or by a delegate. The indi vidual is nothing, the 'People' everything. The individual is a mere fragment of the 'collective masses'." Those on the right, to the contrary, view man as "A per446 THE FREEMAN July son with an intransferable des tiny, unique, created in the image of God ... endowed with an im mortal soul." More simply put, the left views man as a means to some other end, the right views man as an end 'in himself. All leftist ideas, from the most extreme to the more moderate, reject individual ism and urge collectivism.

What the left has done since its modern creation at the time of the French Revolution is, writes Dr. Kuehnelt-Leddihn, to exploit "the envy . . . among the masses, cou pled with the denigration of indi viduals, but more frequently of classes, races, nations or religious communities. . . . The history of the Western world since the end of the 18th century cannot be written without this fact con stantly in mind. All leftist 'isms' harp on this theme, Le., on the privilege of groups, minority groups, to be sure, who are ob jects of envy and at the same time subjects of intellectual-moral in feriorities. . . . They ought to conform to the rest, become iden tical with 'the people,' renounce their privileges . . ." Such forced conformity has taken different forms. Hitler killed Jews. Stalin killed land lords. The French Revolutionaries insisted that all Frenchmen have a common language and the J acobin clubs began a crusade against all languages but French - Provencal, Breton, German, Flemish, Basque.

"We get a hint," writes the au thor, "that the French Revolution was not only a forerunner but an ideological steppingstone to the slow growth of Nazi ideas." The totalitarian attitude of the left is clearly found within the French Revolution. The speech of Saint-J ust on October 10, 1793, for example: "You have to punish not only traitors, but even those who are indifferent: you have to punish whoever behaves in the Republic in a passive spirit and does nothing for her, because ever since the French people has mani fested their will, everything out side of the sovereign is an enemy." Similarly, Robespierre spoke of "collective liberty" and on Febru ary 7, 1794, said that, "The Gov ernment of the Revolution is the despotism of liberty against tyranny." Looking back at the Reign of Terror in France, at the Nazis, the Fascists and the Communists, the author declares that, "The all powerful state is a creation of the leftist mentality .. : two wishes of the leftist find their fulfillment, the extension of government and the dependence of the person upon the state which controls his destiny from the cradle to the grave. Every movement of the 1974 OTHER BOOKS 447 citizen, his birth and his death, his ma.rriage and his income, his illness and his education . . . ev erything is to be a matter of knowledge to the state."

All of these tyrannies, the au thor writes, have come about in the name of the collective "will of the people." He quotes Salvador de Madariaga who said that West ern civilization rests on two deaths - the death of Socrates and the death of Christ. He notes that, "Indeed the crucifixion was also a democratic event. When Our Lord was brought before Pilate a.nd told him· that He had come as a witness to Truth, the gov ernor, a true agnostic, asked Him, 'What is truth ?' And without waiting for an answer, he passed Him by and consulted 'the peo ple.' The vox populi condemned Our Lord to death as it had Socra tes more than three centuries ear lier." What most Americans forget, Dr. Kuehnelt-Leddihn believes, is that democracy and freedom do not necessarily go hand in hand. Democracy rests on two pillars: majority rule and political equal ity. Freedom, however, has nothing to do with democracy itself. The repression of 49 per cent by 51 per cent. or of 1 per cent by 99 per cent "is most regrettable, but it is not 'undemocratic'." Liberals, in the classical sense" correctly understood this point. Liberalism did not answer the question, as democracy does, "Who should rule?" but, "How should rule be exercised?" The reply is, "Regard less of who rules . . . government should be exercised in such a way that each citizen enjoys the great est possible amount of liberty."

Dr. Kuehnelt-Leddihn believes that the U.S. Constitution was "a serious attempt to establish a mixed government with demo cratic, aristocratic, and monarchi cal elements, a government of checks and balances." He quotes a, letter from John Adams in which he insisted that democracy would inevitably evolve into olig archy and oligarchy into despot ism, a. notion he shared with Plato and Aristotle. The fact is that tyranny came to Germany through the demo cratic process. By July, 1932, Dr. Kuehnelt-Leddihn notes, the twc big totalitarian parties, the Nazh and the Communists, held 31! seats in the Reichstag out of 60 - an absolute majority whic' proves that more than half of a Germans emphatically rej ecb parliamentary democracy. TJ: means that the democratic repu lic uncompromisingly demand by Wilson was the basis of tJ slavery in Germany, the dl through which tyranny entel Hitler declared that, "Ther( 448 THE FREEMAN July more that unites us than divide3 us from Bolshevism . . . above all the genuine revolutionary men tality. I was always aware of this and I have given the order that one should admit former Com munists to the party immediately."

Goebbels had stated unequiv ocally that he "paid homage to the French Revolution for all the possibilities of life and develop ment which it had brought to the people. In this sense, if you like, I am a democrat." Dr. Kuehnelt-Leddhin under stands that total power, whether in the hands of one man or a majority, is an evil and that freedom has always been lost as a result of it. The real business of those who seek to learn from the past is to diffuse power so that no matter who rules, individual free dom can be preserved. The Western world, however, seems to be moving away from its traditional belief in individ ualism, and more and more looks to the state as the answer to all problems, making a false god of politics. For those who are inter ested in considering where a trip down that path will lead, this book will be a valuable road map. HANDSOME BLUE LEATHERlEX FREEMAN BINDERS $2.50 each ORDER FROM: THE FOUNDATION FOR ECONOMIC EDUCATION IRVINGTON-ON-HUDSON, NEW YORK 10533 the Freeman VOL 24, NO.8. AUGUST 1974 What Are You Worried About? Ralph Bradford 451 The fate of our nation depends upon you and me and how we use our talents.

Th'e Taking Issue Berna,rd H. Siegan 464 ... nor ~hall private property be taken for public use without just compensation. Price Competitionand Expanding Alternatives Gary North 467 The moral imperative to maintain the conditions of freedom if we would enjoy its blessings. A Proper Distrust Government without limits is unworthy to be trusted. W. Allen Wallis 476 Those Fellows with Black Hats - the Speculators John A. Sparks 478 A word in defense of the ones who speed up the market process of adjustment to change. The Business of UnderminingBusiness Some business practices strike at the roots of free enterprise. M. L. Zupan 490 The Energy Crisis: AlternativeFutures John B. Kizer 495 Many things are possible if scarce resources are privately owned and managed. Book Reviews: 501 "The 12·Year Sentence" edited by William F. Rickenbacker "Law, Legislation and liberty. Vol. I: Rules and Order" by F. A. Hayek "The Libertarian Alternative" edited by Tibor R. Machan "The Economics of Energy-What Went Wrong and How We Can Fix It" by Roger LeRoy Miller "The Time It Never Rained" by Elmer Kelton Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

the Freeman A MONTHLY JOURNAL OF IDEAS ON LIBERTY IRVINGTON-ON-HUDSON, N. Y. 1053·3 TEL.: (914) 591-7230 LEONARD E. READ PAUL L. POIROT President, Foundation for Economic Education Managing Editor THE F R E E MAN is published monthly by the Foundation for Economic Education, Inc., a non political, nonprofit, educational champion of private property, the free market, the profit and loss system, and limited government. Any interested person may receive its publications for the asking. The costs of Foundation projects and services, including THE FREEMAN, are met through voluntary donations. Total expenses average $12.00 a year per person on the mailing list. Donations are in vited in any amount-$5.00 to $10,OOO-as the means of maintaining and extending the Foundation's work. Copyright, 1974, The Foundation for Economic Education, Inc. Printed in U.S.A. Additional copies, postpaid, to one address: Single copy, 50 cents; 3 for $1.00; 10 for $2.50; 25 or more, 20 cents each.

THE FREEMAN is available on microfilm from Xerox University Microfilms, Ann Arbor, Michigan 48106. Some articles available as reprints at cost; state quantity desired. Per mission granted to reprint any article from this issue, with appropriate credit, except "The Taking Issue."

WhatAreIbu WORRIED About? RALPH BRADFORD "I can't understand people like you," the man said. He was a per son of middle years, who spoke pleasantly and courteously, but a bit accusingly. "What upsets you so? What are you worried about?" I had just addressed a U niver sity Club audience, followed by a question and answer session. My subject had been "Our Lives and Goods," (see The Freem,an, Feb ruary, 1974) and upon that theme I had tried to construct an argu ment for limited government, the free market, and the unabridged right of a man to the "goods" he has created. Apparently it was my summation of the denials and dangers of supergovernmentalism that had aroused my inquisitor. "Look," he said, with a kind of patient exasperation in his voice, "we are living in the greatest age of all human history. The achieveMr. Bradford is well known as a writer, speaker, and business organization consultant. He now lives in Ocala, Florida.

ments of science are fantastic in scope and consequence. We have put men on the moon, and we are already starting to explore Venus and Mars by means of unmanned probes. As for invention, well, you have only to utter the word 'com puter' to summarize its achieve ments." He paused for breath and I broke in. "But what," I said, "has all this to do with your question?" "I'll get to that in a minute," he answered. "Indeed, what I am say ing is all really a part of my question. I remind you that we live amid comforts and luxuries that were undreamed of a few generations ago, even by the very rich. We have extended education to every social and economic level. Our standards of living are high. Our government has ameliorated the condition of the poor. We have established a system of old age pensions. All this, of course, has cost money, yet we are not hard 451 452 THE FREEMAN August up. If you say taxes are high, or that the cost of living has gone up, I reply so have wages and sal aries."

I had been waiting for him to run down, and at last he did - not, apparently, for lack of argument in his forensic arsenal, but be cause he wanted to get back to the question he had first propounded. "Faced with all this," he said, "I simply can't understand your attitude. Amid all this dazzling evidence of progress, prosperity and general well being, what in the world is it that upsets you so? What are you worried about?" Freedom in Jeopardy Well ... it was a stumper - not that its content was new or for midable, but because of its timing. Other people were waiting, and I was already late for a subsequent appointment. What quick answer could I make to such a question? What would you have said - as suming that you did not secretly half agree with him? I could only attempt a kind of symbolic re sponse. "I'm worried," I told him, "be cause the loaf of bread for which four years ago I paid 26 cents, and which now costs 52, may soon be priced at a dollar or more. And I am also concerned that some day soon I may be required to secure permission from a Washington bureau before I can travel here to address this organization."

I was trying thus on the one hand to convey the threat of ruin ous inflation and on the other to indicate the menacing nuisance of Big Brotherism, both of which are the result of a naive reliance upon the supposed omniscience (and the actual power) of govern ment as a social agency. I was re membering the steady erosion of the American dollar in my life time - the pair of shoes I used to buy for $8 which now cost $60 with the result that I no longer wear that brand; the shirt that once cost me $2 for which I must now pay $10.50; the steak dinner I used to get for $1.50 which now sets me back at least $7.50 - on the rare occasions when I am steak-hungry enough to think I can afford it. More. realistically, I often recall the thick and juicy hamburger, with all the trim mings, that was once available at Dinty Moore's place for 15 cents, and compare it nostalgically with its anemic present-day counter part for 95 cents!

But if my erstwhile questioner were here now he would no doubt remonstrate thus: "Your income is higher. All wages and salaries have gone up proportionately." And I would in turn ask him: "But what of the millions of people who are on fixed incomes - retirees, 1974 WHA T ARE YOU WORRIED ABOUT? 453 pensioners? How have they fared in all this? To be sure, social se curity payments have gone up somewhat, and are being increased again this year - at the expense of us all; but what of the man who worked and saved and made what he thought was prudent provision for his less productive years? In terms of what it will buy, his care fully accumulated capital has shrunk by nearly a third in the past few years, and by nearly two thirds in the past thirty." Inflation in France In his introduction to Andrew D. White's essay on Fiat Money Inflation in France,* Henry Haz litt points out that under inflation the real purchasing power of sav ings is constantly eroded, that all savers are cheated, that thrift is discouraged, and that the source of investment is dried up. Thus inflation not only robs the frugal citizen by destroying the value of his money, it also injures th~ economy by diminishing the flow of investment capital.

In passing we may observe that the financial condition which ob tained in the France of 1790 was the classical precondition for a deliberately-induced inflation; namely, a long-continued period of * Republished by the Foundation for Economic Education. Copies available $2.00 cloth; $1.25 paperback. debt accumulation by reason of governmental spending in excess of revenue (known today by the deceptive euphemism "deficit financing") and allowing the debt simply to go unpaid. Eventually a time came (as it always does) when to prolong this unbalanced condition could lead only to gen eral economic collapse; and it was then that the General Assembly came up with the decision to "cure" the situation by the issu ance of four hundred million livres (the equivalent of about 395 million francs) in paper notes called assignats. They looked good, beca use they were to be "secured" by a mortgage on the vast church properties that had recently been seized by the state. Moreover, they bore interest at 3 per cent.

They were launched with great fanfare and received with general acclaim. And of course there was an immediate response in the economy. Some payment was made on the public debt; pressure on the treasury was relieved; credit was revived; trade increased. The rosy predictions of those who had favored and sponsored the assign ats seemed to be on the way to fulfillment. But it took only seven years for the beautiful bubble to burst! The tragedy of the assignats has been well and frequently told, and it is not my purpose to dwell on it here 454 THE FREEMAN August - except for these brief moments while I hold it up as a horrible example. The story can be sum.. marized quickly. In the first place, political human nature being what it is, a single issue was not enough. If one dose of that magic medicine worked such wonders, let's have some more of the stuff! We must get out additional and bigger issues of that healing pa per! So the original issue of 395 million francs was soon doubled, trebled, quadrupled, by subsequent issues. Before long the assignats themselves were retired and super seded by other bills known as mandats - which soon proved to be equally valueless. In only seven years (by 1797) twenty five hun dred million mandats had followed 45 thousand million assignats down the economic drain!

In terms of the American dol lar, the collapse of this paper air castle meant that a bushel of flour which cost only 40 cents in 1790 cost 45 dollars five years later. Other drastic changes during that five year period were these: a pound of sugar - from 18 cents to $12.50; a pair of shoes - from one dollar to forty dollars; a head of cabbage - from 8 cents to five dol lars - and so on. Did wages and salaries also go up, as my inquiring friend as serted? Undoubtedly - but that nluch? And anyway, what of the frugal Frenchman who had been carefully "putting something by for a rainy day?" He, of course, and thousands like him, were com pletely wiped out. And so were a lot of people farther up the eco nomic scale. This is illustrated by the preserved record of a well-to do manufacturer who had retired from business in 1790 with the equivalent of 317,000 francs, and only six years later found that his property was worth only 14,000 francs. The present-day Ameri can counterpart of that experience would be for a man to have saved up $63,400, only to find that in six years' time its value had shrunk to $2,880.

"Not Worth a Continental" But we don't have to reach so far back for such examples - nor so far away. Paper bills issued during our own Revolution were known as Continentals; and what became of them is still memorial ized in the phrase, "Not worth a "Continental." More recently, many elderly Germans remember what happened to the Weimar Republic mark of the early nineteen twen ties, when it took a million marks to buy a loaf of bread - or maybe two million by three o'clock the same afternoon. Still closer to our times, the French franc, which had long been five to the dollar, shrank after World War II until it was 1974 WHAT ARE YOU WORRIED ABOUT? 455 over 300 to the dollar; and during the same period the Italian lire dwindled until it was peddled by bell hops at 600 or more to the dollar. Do you suppose French and Italian wages ever caught up with that much inflation? And what of Argentina? It is a rich ,and beautiful country, very similar to our own in climate and natural resources. My first visit there was in 1947. The peso was still strong at four to the dollar.

I went back in 1951; and in that time, after only four more years of Peron ism, the peso had shrunk to twenty to the dollar. And of course it continued to plummet until by 1968 it was well-nigh worthless at 350 to the dollar. All this, of course, practically wiped out the sJavings of the Argentine middle class. But "this can't happen in the United States." Who says it can't? The same kind of, people who said it couldn't happen in the France of 1790 or the Germ,any of 1920 or the' Argentina of the nineteen forties - people who, like my in qUIring friend, calmly disregard the lessons of history and believe we can continue, year after year, to urge or to allow the Federal government to spend more than is realized through taxation, and still avoid the disaster of crippling, if not ruinous, inflation. The deadly process is a little slower and less dramatic with us, but it is under way nevertheless. It is already happening!

And that is what I am worried about. But it is not all. Big Brother I also fear the implications of Big Brotherism. This I expressed earlier, in the idea that I might presently be .required to secure a travel permit in order to go someplace to fill a speaking en gagement. I do not think such a requirement is imminent. Cer tainly lean now proceed unmo lested about my lawful occasions. But it is by no means fantastic to speculate upon such a possibility such a probability, one might say, if the steady march toward com plete governmentalism is not halted. Ours is an increasingly· govern ment-oriented society; and the tendency in any such society is ever toward more central regula tion, not only of economic opera tions but of individual affairs. Already some leaders of what might be called the Post-Keyne sian clique are openly speculating upon how much a citizen should be allowed to save, and how much should be taken away from him for public works and other "social benefits." Such speculation pre supposes a governmental elite of sufficient wisdom to set aside the 456 THE FREEMAN August workings of the free market, and of enough power to force great masses of people to accept a wholly arbitrary and quite fallible direc tion of their lives.

But this is America.! We have no dictators or revolutionary tri bunals to push us around. We do as we please within the law. We are not victimized by the State. We are the State. Well ... that being the case, I sometimes wonder why it is that I can't buy a new car unless it is equipped with a seat-belt device that won't let the car be started until the belt is properly buckled up. Understand, I have no quarrel with seat belts; I am concerned with Big Brother ism. We have complete freedom, except, of course, that I am for bidden to own or use gold coins. Nobody can take my property away from me, except that a planned inflation has deprived me of something like half of my life savings. I can engage in any oc cupation or business I like, except that lam forbidden to set up in the lucrative enterprise of deliver ing letters, because that is a gov ernment monopoly. Small things? Or straws in the wind? What do you think?

We are not here dealing with mere fear-born fancies. Conditions of excessive direction and of out right repre,ssion exist in many parts of the world, alas, and not merely under communism. I well remember the complaints I heard in Copenhagen some years ago about government interference in a very down-to-earth matter. Like Amsterdam and some other Euro pean cities, the Danish metropolis is a place where seemingly the whole population moves on bicy cles. Yet at that time the individ ual could not purchase that every day necessity without first obtain ing a permit from a designated bureau of the government. And in SW,eden, with its vaunted "Middle Way," I found great resentment and some distress because, since housing was a state monopoly, young people wishing to get mar ried often had to wait months be fore they could even apply for an apartment, and sometimes several years before they actually got it.

Some Swedish moralists even at tributed the great increase of pre marital sex partnerships to this bureaucratic housing restriction. Expected Under Communism In the communist world one ex pects this sort of thing - regula tion and regimentation not only of behavior patterns that affect the economy, such as the purchase of bicycles or the renting of apart ments, but of social attitudes and even of mental exercises. Yugo slavia, freer than most communist regimes from this kind of tyranny, 1974 WHAT ARE YOU WORRIED ABOUT? 457 nevertheless sees the former trusted lieutenant of Josip Broz serving a long prison sentence be cause he dared disagree - in writ ing! - with parts of "Tito's" pro gram. And of course the persecu tion of literary dissenters in com munist Russia is not limited to the dramatic expulsion of a Solzhen itzyn, but has long been practiced, and in much crueler form. As for China, what could be more drearily awful than to see millions of young people flaunting "a little red book and mouthing the not-so-original "thoughts" of Mao ? Well, yes, one thing could be worse - to reflect upon what happens, once a "cul tural revolution" is unleashed, to anyone who does not wave the little red book!

The worst of such terrorization is not so much in the degradation of intellect with respect to ideol ogy and dogma, as in its general effect upon the attitude and be havior of average people. Once, while Peron was at the top of his power in Argentina, I was in Lima, Peru to attend a hemi spheric business conference. There was still a pretense of complete freedom of opinion and expres sion in Buenos Aires; yet in Lima I saw a prominent Argentine busi nessman support a resolution which struck at the very heart of progress through freedom of en terprise under representative government. It was opposed by the U. S. delegation, and by nearly all the Latin American representa tives. Moreover, it was totally out of keeping with what we all knew of that man's philosophy. Yet "he stoutly defended it; and when he was privately reproached about it, he pointed out that the Argentine delegation was dominated by sev eral representatives of the Peron regime, and said quite frankly that he didn't dare oppose them if he hoped to continue in business when he got home.

An Argentine Experience An even more subtle demonstra tion of intimidation was offered on another occasion in a Buenos Aires hotel where my wife and I had spent some days. Enroute down on the ship, and while there, we had enjoyed pleasant contacts with a Methodist Bishop and his wife from Oklahoma. Ready for departure, we were all chatting in the hotel lobby. An American min isterial friend of the Bishop's, who lived in Buenos Aires, was there to bid him goodbye. He asked me if we were going on the same plane with the Bishop to the west coast, and I, thinking to make a cute reply with a scriptural flavor, said: "Oh no; I'm playing Joshua to the Bishop's Moses, and will first go down into Patagonia to spy out the land." A harmless wisecrack - but, 458 THE FREEMAN August believe it or not, at the phrase "spy out the land" the clergyman was visibly startled and looked around apprehensively, to see if anyone else had heard me! Such is the conditioning of repression.

Such is the involuntary response to ruthless Big Brotherism. I should record in passing that this sort of fear tended to dimin ish as one got farther away from Buenos Aires, where it all cen tered in the Casa Rosada. In Bara loche, for example, far west and high up among the Andean ridges, I had a long talk one day with a local businessman who told me quite openly that he belonged to the opposition, and said that his attitude was well known. How ever, although he hated Peron, he insisted that conditions of repres sion had been exaggerated abroad, and that police-state methods were actually no worse under Peron than they had been in earlier years under one of the so-called "constitutional" Presidents. As to that, I was not impressed, because I recalled that the great old news paper La Prensa had been ruth lessly seized, silenced, and con verted into a Peronista Party organ. (A present-day parallel would be for Richard Nixon to take over by force the New York Times and compel it to become the Pravd,a of the Administration.) But whether by Peron, or by whomever, the fact was that the people of Argentina had been periodically subj ected to police state methods of intimidation, and I was a witness to some of the oblique results.

A Frightening Trend Far away and long ago? Yes. But the spirit of central direction, of repression, of you-do-it-our way-or-else, is by no means dead in the world. It lives ghoulishly in Russia at the present moment, as it does also in China and Yugo slavia; and it thrives elsewhere, too - in Albania, in Czechoslova kia, Bulgaria, Romania, Hungary, and in several of the "emerging" countries of Africa, where adven turous dictators have seized pow er. Sometimes it is evidenced by acts of raw violence; sometimes it reveals itself in the capricious ad ministr:ative laws promulgated by irresponsible bureaucrats. But the effect is always the same: at best intimidation, at worst, terrorism and abuse; at best irritating bu reaucratic interference, at worst banishment, imprisonment - or death. Inflation that eats and cheats and robs; Big Brotherism that nags and torments and kills. That's what I'm worried about. Are you?

Well . . . if you are, you can do something about it. At least you can make a beginning; for as 1974 WHAT ARE YOU WORRIED ABOUT? 459 Rome was not built i~ a day, the destructive effects resulting from several decades of superstatism can not be neutralized overnight. It will be a long and difficult proc ess, the more so, perhaps, because it must start, and continue, with some .uncompromising self-analy sis. Every concerned person must ask himself whether he really un derstands the forces at work, and whether he himself is in any de gree responsible for them. But first of all, don't panic! Mine is not a heedless and irre sponsible voice crying "Fire!" in a crowded theatre. So walk, don't run - not to the nearest exit (for no exit from this country leads to any place better or half so good) but to some quiet corner fit for contemplation, there to consider a little of history, a bit of elemen tary economics, and a small analy sis of human nature.

Enroute to that corner, take heart. The theatre is not about to burn down; neither is the country in flames. Our America is durable, enormously endowed by nature, fabulously rich - the home of a resilient and resourceful society. We have done much to weaken it, but it has survived our most de structive efforts, and the end is not yet. Consider first our history, en capsulated for brevity. After the period of adventurous exploration, our part of the Western Hemi sphere was settled by people who were eager for wider opportunity and greater freedom than they or their fathers had .known in the older world. When at .last our new nation was established, it was based on a passionate· belief in that same freedom as a necessary condition for human happiness and progress. Inherent in that be lief was the spirit of initiative and self-reliance as to personal status and welfare, and a strong philos ophy of minimal· government as to political institutions.· This was epitomized in Jefferson's famous formula: The best governed are the least governed.

Erosion of Freedom As the decades went by, this concept was gradually diluted by the intervention of an imaginary self-interest. That is where "hu man nature" entered the equation. Ideally men want freedom of ac tion (within recognized and for mulated rules called laws). Ideally they want a government that pro tects them from aggressors, pro vides a situation of security and stability . . . and then lets them alone. But they also want favors, advantages, special privileges, and always "something for nothing." Thus the citizen who wants the government to provide "security" for his old age; thus the farmer 460 THE FREEMAN August who wants the state to subsidize his crops; the businessman who wants the treasury to underwrite his developments or guarantee his investments; the labor leader who seeks the advantage of a special status under the law; the local booster who wants Washington to spend nine zillion dollars for this, that, or the other installation of doubtful necessity or merit. In short, thus an importunate army of people who almost without ex ception are wont to excoriate the government for its alleged or ac tual extravagances, but who de mand loudly that it meet their special "needs" - and who see no inconsistency in their ambivalent attitudes.

These diverse interests and countless others inevitably breed politicians who thrive by catering to the various groups or "blocks" identified with such demands; and the end result is a burgeoning ad ministrative bureaucracy which soon adds not only its heavy cost but its self-perpetuating energy to the general thrust toward debt accumulation and concentrated power. All this is done, often with out conscious guile, in the name of motives so noble and humani tarian that to oppose or question them is to be branded as unpro gressive, unrealistic, lacking in social vision, and generally unde sirable. It was Pascal, I believe, who said: "Evil is never done so thoroughly and so wen as when it is done with a good conscience." It is to be understood, of course, that we are not here concerned about the basic protective func tions of government. Obviously an organized society must have laws and sufficient governmental ma chinery to enforce them. Obviously also, a growing nation will require new laws now and then, and modi fications of old ones to meet chang ing conditions. It would be hope lessly doctrinaire to expect a na tion of over 200 million people to need only the laws and require only the governmental machinery that sufficed for its primitive or agrarian period. Even the "thou shalt nots" necessary for the ordi nary protection of life and prop erty must be increased to cope with the proliferation of criminal ity born of institutionalized cu pidity.

Nor is this a plea for the un bridled exercise of whimsical per sonal "freedom" such as now seems to titillate the fancy of certain types of younger social "philos ophers." Quite the contrary, one of the primary functions of gov ernment is to prevent such indul gence by a few from diminishing the freedom or invading the rights of others. Man, unfortunately, (or perhaps we should say fortunate ly), has never been free from the 1974 WHAT ARE YOU WORRIED ABOUT? 461 consequences of his own greed; and government, even under the least amount of Big Brotherism, must exercise certain restraints in the interest of justice for all. A so ciety that operates under law must have the governmental machinery necessary to enforce the law and administer those functions en trusted to it, or enjoined upon it, by the basic law or constitution under which that government ex ists. A Question 01 Solvency So much for a glance at history and human nature. What of solv ency and its part in the affairs of men and governments?

Hardly anyone will dispute the value of personal solvency. The man or family that constantly lives beyond his or its means is soon in trouble. Quite apart from the matter of reputation and stand ing in the community, credit for such people begins to get tight and soon is not to be had at all, which is both a commercial in convenience-and ultimately a social handicap. Nearly everybody, what ever his political beliefs or eco nomic philosophy, recognizes solv ency - that is, the ability to live within one's income, pay one's debts, and save something for emergencies - as the minimal con dition for a satisfactory fiscal ex perience. To adopt the old Micawber formula of spending a little less than is earned is still the goal of most people in their pri vate lives. But many, alas, do not apply that same simple principle to gov ernmental finance. Even business men who are careful to keep their operations solvent, often see noth ing amiss in having their govern ment go deeper in debt year after year, with a resultant and cumula tive cheapening of the currency.

Moreover, some who profess to study and teach economics as an academic discipline have gone over to the big-spend-and-never-pay-it back philosophy; and the attitude of such economists reached what for me was a climax of absurdity when, in justifying one of the many grossly unbalanced Federal budgets of recent years, they said in effect that it was okay, because it was a full-employment budget, based on what employment would have been that year if only it had been up to where it ought to have been! And so more billions were heaped onto the staggering debt of over 400 billions, and the al ready overburdened taxpayers will again be penalized, more paper will be issued, the currency will be further diluted, and .... But at this point faint, distant voices seem to break into my musings: What nonsense you are 462 THE FREEMAN August talking, Messieur! These assignats are as good as gold! ... Hey, what are you, Mister - some kinda arn,ti American or something? Why man, these Continentals are per fec'tly sound money.. .. Liber Gott! How you talk silliness! Do you believe our good Herr Ebert would let these marks become worthless? . . But Senor, our peso is as good as .the silver for which our country was named.

More! - It is as good as gold! Why Gold? As good as gold ! Why that hope ful refrain? Gold was demone tized in this country some 40 years ago, yet in everyday speech it is still cited as the standard of ex cellence. That is because across many centuries of human experi ence that yellow metal has been a symbol of value and stability. Per haps it is not possible at this ad vanced stage of inflation to per suade people to stop relying on periodic doses of unsupported pa er money. That is part of the look to-Washington syndrome. But it is equally impossible for a concerned person to stop trying! In their hearts and out of their own life experience, people know, they really do know, that there is no substitute for value, given and received, in human exchanges. Yet over and over again mankind, of different races and languages, all over the world, have sought eco nomic ease and a societal paradise in high-sounding governmental pro grams aimed at improving the conditions and quality of life. And time after time s:uch programs have failed because, however hope fully they may have been started, they become based ultimately upon the principle of governmental in solvency. And that leads inevita bly to the abandonment of sound money and finally to ruinous in flation.

What can you do? What can I do? We can· first of all consider whether we ourselves have been responsible citizens or importunate mendicants. We can stop looking to Washington for the solution of every problem. We can cease say ing "there ought to be a law" and begin thinking "there must be a basic principle - let's find it." We can realize that the good life is not to be achieved through Fed eral bankruptcy. We can know, and keep saying, that safety for all is grounded in solvency for all. We can study the history of hu man progress to learn how and why the voluntary market mechan ism better serves the ends of so ciety than the methods espoused by the devotees of coercive Big Brotherism. We can learn from the lessons of history that the most fundamental of all market principles and practices is to let 1974 WHAT ARE YOU WORRIED ABOUT? 463 the market be free - to let those who exchange goods and services (and that, one way or another, is near ly all of us) choose and use as money the most trustworthy marketable item available. This, over the long course of civiliza tion, happens to have been one of the precious metals, usually gold or silver. That, of course, is be cause the supply of these metals is such that no man or group of men can arbitrarily increase or decrease it to an extent that will materially injure or inconvenience others. The point here is that a government, no less than an in dividual, must have some trust worthy, non-fluctuating, non-flap pable, medi urn of exchange.

That greed and rapacity exist and must be curbed; that there is crime that must be detected and punished; that society should be protected from its enemies, whether within or without - all this goes without saying, since that is the end and aim of govern ment. Hence organization, hence police, hence the military; and hence a certain amount of bureauc racy, and expense . . . and taxes! Such things are the price we pay to avoid barbarism and escape anarchy. But the price, in such terms, should be kept at the mini mum required for the government to do its job. As for us, we can know and constantly proclaim that the bright and cherished ideal of a better society and a richer life for all will not be served in the long run by having more govern ment, but less. Here in this America we still have the best hope of Earth. It is far from perfect, but it shines and glows beside its nearest rivals on the world stage. It has been, and is, the scene of vast achieve ment, growth, invention and so cial progress. But it begins soon its third century of national life and it has already long outlived many nations that were great and powerful when it was born. How we live our lives may determine its fate. Will it continue as a world exemplar, with solvency and free dom as its base, or will it become a kind of terrestrial White Dwarf a collapsed star in the galaxy of nations? ~ IDEAS ON LIBERTY Frighteningly Similar THE WORLD of the Roman Empire in the first two centuries is almost frighteningly similar to modern North America in its ex cesses and in its wealth and, above all, in its devotion to material istic success at the expense of the spiritual and the intellectual.

w. G. HARDY, The Greek and Roman World TheTakingIssue BERNARD H. SIEGAN THERE IS a small clause in the Constitution of the United States which does not frequently claim public attention, yet its impor tance cannot be overestimated. It is part of the Bill of Rights con tained in the Constitution and it is the one that protects the indi vidual against government greed. I refer to that last clause of the Fifth Amendment to the Constitu tion which reads as follows: "... nor shall private property be taken for public use without just com pensation." This is known as the "taking clause," for it prevents govern ments from taking away or con fiscating the property rights of the individual. There would seem to be nothing extraordinary about a rule in a non-totalitarian society that re quires government to pay for propCopyright 1973 Bernard H. Siegan Mr. Siegan is the author of Land Use Without ZoninA and many articles on the subject. He practiced law for 20 years in Chicago before moving in 1973 to La Jolla, California where he is professor of law at the University of San Diego Law School.

464 erty it takes or acquires from its constituents. It places the govern ment in the same status as any stranger to the property - and after all, government consists of a great many strangers. It is a pro hibition against theft by govern ment in a sense comparable to in numerable other laws that prohibit theft by any of its citizens. Under the terms of this clause, the courts have upheld as legal many laws which deprive owners of valuable property rights. Still, over the years, even as there has been this erosion of property rights, the clause has tended at least to prevent outright confisca tion of property and many zoning and other regulatory laws have been invalidated. It costs more money to buy property than to take it - and this obvious fact has been a cause of concern to those who believe that government can use the property more wisely than its owner. A pri vate group, The Task Force on Land Use and Urban Growth, in a widely distributed summary re1974 THE TAKING ISSUE 465 port and book, recently expressed concern that the taking clause will make excessi vely expensi ve the land use policies they would like adopted and consider in the pub lic interest. They propose that more land be restricted for open space and for other purposes they believe desirable, and find the taking· clause to be a serious ob stacle to these objectives. The task force therefore has suggested that the whole taking issue be recon sidered and that henceforth de velopment rights for private prop erty rest with the community, rather than with the property owners.

How Freedom Is Lost Similar arguments can be made with respect to any scarce resource or commodity - and we may ex pect other "task forces" to pro ceed on other fronts. There are always some benefits to be derived by taking from some and giving to others. Two members of the task force are high officials of major banks and I am confident they would agree that re'gulations lowering the-hank rate from 10 per cent to 2 per cent would certainly benefit many. But such regulations would also destroy our banking system which benefits the vast majority. The inevitable results of in cre,asing the number and amount of such controls i~ to terminate the freedom of the individual to acquire and own property - in all likelihood the freedom considered most important by most of the people. Nor is it fair that the burden for providing the presumed wel fare of others should be borne by the owners of only those proper ties used for public purposes. The accident of ownership and. location would select those persons in so ciety to carry the burden of pay ing for benefits that will accrue to others. It amounts to a rather crude way of redistributing wealth on a most unfair and irrational basis.

The taking clause not only serves the equitable and moral concerns I have set forth, but it also furthers very functional val ues in our society. First, when things cost nothing, there is no limitation upon their acquisition. This being a time when many municipalities and individuals would like to curtail future growth, they could quite readily do so if there were no cost involved in restricting much of the balance of their land for parks or open space. A great amount of land would thereby be removed from development or production to the detriment of business, employ ment, industry, agriculture, hous ing, etc.

466 THE FREEMAN August Opportunity Costs America, as a land of parks and open space, would also be America, the land of worse housing and higher rents. Budgetary consid erations at least curb an insatiable government appetite and operate in the interest of a more efficient and equitable allocation of our re sources. Second, the incentives of our society for owners and developers to own and use land for productive purposes would be destroyed. Why own land or contemplate using it if it is subject to confiscation at the whim of government? Or if one does own land zoned for cer tain purposes, he would rush to use it before the politicians changed their minds. At the very least, a more chaotic market would result. The Bill of Rights in our Con stitution has often thwarted the Private Property aims and desires of government and its officials, and that is exactly the effect the authors intended: to protect the individual against the might of government.

True to form, the taking clause worries officials of the Council on Environmental Quality, the fed eral environmental agency that has been considering land use legislation. In what appears to be a strong effort to minimize the le gal importance of this clause, the Council has published and distrib uted a 329 page book titled The Taking Issue, that perhaps might more appropriately have been en titled The Stealing Issue. The book fails to mention that the major victims, in addition to those who own certain properties, would be those who benefit from a system allowing private ownership - and that in the final analysis, includes just about everybody. ~ IDEAS ON LIBERTY BARBARISM has its earmarks, and the acquisition of property through conquest or superior force is notably one of them. Civili- ' zation, too, has its earmarks, and the orderly disposition of prop erty through the medium of deeds, leases, wills, and other con tractual arrangements is not only an earmark of civilization but an absolute prerequisite.

EDWARD P. SCHARFENBERGER The aec:mSHfe U1:1P€:tus source, "cunell" in a small I"IIrA!"'U·U·\III't'iinn tion of the ae!mana, eSCJec:mallV for WE USUALLY think of Karl Marx and Friedrich Engels as the two major critics of the coming of modern capitalist methods of pro duction. Yet in terms of their im pact on the thought of mid-nine teenth century European life, the founders of "scientific socialism" were o~ small importance. It was Lenin and the Bolsheviks who made Marx's thought, in retro spect, the pinnacle of criticism, the touchstone of anticapitalism. It was not Marx or the radicals who sat in Parliament and pro duced the famous Sadler Report of 1831-32, that massive, detailed, 1 Max Weber, Gener"al Economic His tory (New York: Collier, [1927] 1961), p.230. GARY NORTH and highly biased enquiry into factory conditions in Britain, but rather conserva tive critics of the New Industrialism, and their tem porary allies, reforming liberals.

Engels used these reports - the so-called Blue Books - to write his book, Conditions of the Work ing Class in 1844, the study which was to convert Karl Marx to a theory of class struggle. 2 2 The Sadler Report was followed by two other reports that were far less in cendiary and far less critical of the fac tory system, but few historians have ever heard of them, let alone read them: First and Second RepoTts of the Commission on the Employment of ChildTen in Fac tories (1833) and SupplementaTy RepoTt (1834). Unlike those who testified before Sadler's committee, these men were under oath. Dr. North, economist, lecturer, author, currently is an associate of Chalcedon, an educational organization dedicated to Christian research and writing. His latest book is An Introduction to Christian Economics, Craig Press, 1973. He is the editor-publisher of the Remnant Review, a fortnightly economic newsletter.

467 468 THE FREEMAN August Marx, of course, had no use for reforming liberals like the poli tician-businessman, Michael Sad ler, but he did understand why traditional conservatives would join with socialists in their cri tique of capitalism. In Marxian terms, the conservatives were representatives of the old feudal order, an order that was being relentlessly, ruthlessly crushed by the new techniques of capitalist production. Theirs was a dying order, Marx believed; the bour geois capitalists were everywhere triumphant. Conservative reac tionaries and soft-hearted ameli orating liberals, he argued, could do nothing to reverse the forces of production and the direction of historical forces, but their crit ical pamphlets served Marx well as sources of data for his pamph lets. Capitalism did serve one use ful purpose, as far as Marx was concerned: it was crushing the reactionary feudal past. Robert Nisbet has commented on this bit of historical irony: This is why the indictment of cap italism that comes from the conser vatives in the nineteenth century is often more severe than that of the socialists. Whereas the latter ac cepted capitalism at least to the point of regarding it as a necessary step fronl the past to the future, the tradi tionalists tended to reject it outright, seeing any development of its mass industrial nature - either within cap italism or in a future socialism - as but a continued falling away from the superior virtues of Christian-feudal society. It was what the socialists accepted in capitalism - its technol ogy, modes of organization, and ur banism - that the conservatives most despised. 3 Price Competition The feature most hated by the older producers was capitalism's relentless service of the poorer buying public. The division of la bor is limited by the extent of the market, Ada.m Smith had correct ly observed, and in order to use the newer, more specialized tech niques of production, capitalists had to broaden their markets. The most efficient means of gaining access to new markets was price competition. All the British troops that marched off to India and the Far East in a quest for new mar kets in the day of England's "glory" never matched the mar ket-broadening effects of a 25 per cent discount at home. The pro ducer who could not match this discount steadily was forced out of the market, that is, was forced to give up control of scarce eco nomic resources that could better be used to satisfy the demands of 3 Robert A. Nisbet, The Sociological Tradition (New York: Basic Books, 1966), p. 26.

1974 PRICE COMPETITION AND EXPANDING ALTERNATIVES 469 the public in· the hands of more efficient producers. How could poor, uneducated buyers compete against the en trenched wealth of the English landed aristocracy? How could their meager purchase's compete against the wealthy man's com petition for the services of pro ducers? How could some dust covered miner hope to bid scarce economic resources away from the men of wealth? Simply be cause there were so many of them! As capitalist techniques of production steadily increased the output of the laboring classes, the poor became slightly but steadily less poor. A few penI)ies here, a few yards of cloth there, multi plied a million times over: no aristocracy on earth was rich enough to withstand this relent less economic pressure of slightly less poor men, when so many of those men were being created by the labor markets of England. As individuals they were poor, espe cially before 1840, but they were not so poor as they had been in 1780, and here was the new fact of life for producers using the older methods of production. Men who could not afford fine wool suits could now afford a cheap cotton one, and very rapidly it became obvious to English entre preneurs that it would pay more dividends to start producing hundreds of thousands of cotton gar ments than a few thousand high priced wool or silk ones.4 "The outstanding fact about the Indus trial Revolution,"wrote Mise'S, "is that it opened an age of mass production for the needs of the masses. The wage earners are no longer people toiling merely for other people's well-being. They themselves are the main consumers of the products the factories turn out.... There is in the market economy no pther means of ac quiring and preserving wealth than by supplying the masses in the best ·and cheapest way with all the goods they ask for ."5 Because capitalism, with its free mobility of labor, its right of voluntary contract, its em phasis on personal responsibility, and its supporting ethic of thrift and planning, opens new oppor tunities for men once locked in a far narrower universe economi cally, it is resented. A society that places considerable· emphasis on considerations of personal and family status - name, rank, fam ily heritage - doe'S not react fa vorably to the nouveau riche "com moners" who, through a special skill of being able to produce for a mass market through cost-cut4 Ludwig von Mises, Human Action (3rd rev. ed.; Chicago: Regnery, 1966), pp. 618-19.

5 Ibid., p. 619.

470 THE FREEMAN August ting and future-predicting, have become fabulously wealthy. They may be rich, but the only way they can gain status in the old world's terms is to marry the daughters of high status,falling income nobles and aristocrats, or give employment to younger sons in a primogeniture (eldest in herits all) system. As ancient families went fur ther into debt to finance their way of life, they had but two choices: become productive themselves in terms of the new mass market de mand, or sell their land to those who were. The costs of ownership became too high for many of them; they could no longer tie up hundreds of acres of land in the face of the relentless competition from those millions of little peo ple who kept bidding up the price of productive land by their in creasingly large (in the aggre gate) ability to purchase goods produced by the land. Aristocratic Resentment It obviously was not the poor man who bought the great estate of some noble. Instead, it was the entrepreneur who was serving the needs of the public. The process had been going on for centuries.

Sir Thomas More in the early 1500's resented the herds of sheep that were replacing poor families that could no longer compete in an era when manorial production methods were not prod ucti ve enough. But with the nineteenth century, the techniques of produc tion became fully' capitalist, and the counter-capitalism of the lit erary conservatives intensified accordingly. Southey, Carlyle, and Ruskin joined the chorus of con tempt. Indeed, it was Carlyle who dubbed the new science of polit ical economy with the name which has stuck, the dismal science. What served as the economic liberation of a, whole class of peo ple, these men saw as a form of bondage, the grinding servitude of the factory, with its time schedules, long hours, routinized production, and child labor. What they resolutely refused to see was what would have been the fate of these masses under the old system of production: famine and death.

It was Ireland, not England and Scotland, that suffered the famine of 1848-50, and it was Ireland which had not seen the, "plague" of factory production. John Ruskin, the conservative literary critic, summarized the case against capitalism. Ironically, his words have been put on mass produced cards and inserted into mass-produced picture frames for display on the walls of the' highly popular Baskin-Robbins ice cream parlors (31 flavors): "There is hardly anything in the world that 1974 PRICE COMPETITION AND EXPANDING ALTERNATIVES 471 some man cannot make a little worse and sell a little cheaper, and the people who consider price only are this man's lawful prey." They Agree with Ruskin The feudal guild members who threw shoes into factory machin ery, the Luddites, today's trade union members on the picket lines, the government-licensed profes sionals earning $100,000 per year: all agree in principle with Ruskin.

The price-cutting entrepreneur who makes a product available for a wider market is the great threat. The man who trims his costs, or finds a cheaper substi tute that is preferable to buyers at a lower price, is seen as a cunning thief. Yet in the middle of the last century, he was mak ing products available to men who could otherwise have never dreamed of buying something as fine as the item being offered. A cotton garment that could be laun dered simply gave a man an oppor tunity to attend church or a wed ding or a funeral with a dignity he had never before known. And that, perhaps, was his great sin in the eyes of the old feudal aristocracy the sin of pride on the part of so cial inferiors who were steadily becoming less inferior economi cally. The status world of the mid dle ages was being shattered by the world of free market contracts. The Threat of Debasement Conservative social critics saw not only the hard conditions of the factory system - hard in compari son with the life of social criti cism, but not in comparison with low productivity subsistence (or less than subsistence) farming but they also saw the initial effects of mass-produced goods.

They were che'ap in price and cheap in quality - again, in com parison to the quality standards of the educated social critic. Those who did appreciate the new clothes, better housing, and pref erable working conditions seldom wrote tracts; they simply went to work and spent their money. Un doubtedly, there was a' standardi zation of production. However, as the productivity of laborers in creased, and as their wages in creased, this standardization was left behind for those coming up Irish immigrants, for example and variety began to be an eco nomic possibility. This indicates the nature of capitalism's powers of social transformation. At first, price competition expands the market. New groups gain access to goods not previously available to them, either because prices were too high before, or because the prod ucts did not even exist. As par ticipants in the production proc ess, workers add to other people's 472 THE FREEMAN August wealth. Producers are buyers; step by step, as output per unit of input increases, as a result of the specialization of production, the wealth of all the participants increases. The initial expansion of buying alternatives itself expands as productivity increases. Some producers may specialize in pro ducing for this newly improved buying public; others may branch out and aim at the still excluded buyers -. the next level· down.

Henry Ford's Model T - avail able in any color, as long as it's black-makes the automobile avail able to the masses. But as every one's wealth increases as a result of capitalist methods of produc tion-distribution (the two are basically the same process), large numbers of men want some other color. Ford himself failed to rec ognize this phenomenon of mod ern capitalism, and his resistance to change - in this case an up grading of quality and choice led to the triumph of General Mo tors. Today, as the most recent figures indicate, General Motors' share of the auto market in Amer ica has fallen below 40 per cent, indicating that it, too, must shift its production standards to meet people's needs.G (The public, bur dened by a shortage of fuel, needs smaller, cheaper cars; enG So much for the "indestructible monopoly" theory! ergy, it should be pointed out, is an area of government control and influence, and it is becoming an area of relatively decreasing pro ductivity as a result - back to the Model T universe, it seems.) Consider the advent of the color television set. In 1956, RCA made a color television available to those who could afford some $1500 (1956 prices) - a 16-inch, not very re liable product. A few people bought them. Steadily, the price has come down, yet the quality of the sets has gone up. Today, a Japanese Sony set, some 17 inches in size, costs less than $500 (1974 prices), and is so far advanced in terms of picture quality that the two products can hardly be com pared. Price competition and qual ity competition can proceed to gether, and do; but the initial breakthrough technologically, while financed by the elite, be comes a mass-consumption prod uct only through price competi tion. (This, as Hayek argues so forcefully, is an important func tion of rich elites: the trying out of new products, helping to finance their initial construction, before the bugs are worked out tech nically.7) How many workers in 1830 could have afforded to spend money 7 F. A. Hayek, The Constitution 0/ Liberty (University of Chicago Press, 1960), pp. 44-45.

1974 PRICE COMPETITION AND EXPANDING ALTERNATIVES 473 in a Baskin-Robbins ice cream parlor? Ice cream was not even invented; the rage began at the end of the nineteenth century. Most workers could not have af forded it. Today, on any Saturday afternoon in the summer, ice cream houses specializing in high quality, "high" price ice cream are probably as crowded as the "cheap" frostee shop across the street. (Those who buy vanilla in the multiple-flavor shops subsidize those, like myself,who will eat nothing but peppermint-stick; the vanilla is far cheaper to produce, yet it is sold at the same price as the 30 other flavors. The one flavor frostee shops cater to those who just don't like the other 30 flavors that much, or at least those who don't like to pay the freight for the other 80 and their buyers.) Even the most expensive tri ple scoop ice cream cone in the "ex clusive" and "elitist" ice cream parlors costs only a tiny fraction of a middle class worker's daily income, in contrast to what the same ice cream cone would cost, proportionately, in some underde veloped nation, where ice cream really is a luxury good. It is mass production, which involves price competition, that ha.s created the mass wealth that makes possible· the relatively cheap ice cream of the officially pro-Ruskin, anti-free market philosophy, 31-flavor stores. (Presumably, the chain really does not know the origin of Ruskin's philosophy. Ideas, how ever, do have consequences - seri ous consequences in a culture that seems to be headed from contract back into status. 8) MCiSS Culture One feature of free market life which receives far too little atten tion from most of the market's de fenders is the problem of mass culture. Ortega y Gasset's Revolt of the Masses spelled it out. In a culture that is officially demo cratic, and which grants to the common man enormous influence - because its methods of produc tion grant him enormous, histori cally unprecedented wealth - how can that culture maintain its spirit ual, educational, intellectual foun dations? Wilhelm Ropke, probably more than any other free market economist, concerned himself with this question. Does the most effi cient technique actually serve men best in each and every instance?

Were the conservative cultural critics correct in pointing to the debasement of their culture? Does mass production lead to the crea tion of a mass man - a man who neither understands nor appreci ates the benefits of. the ma.rket? 8 Morris C. Shumiatcher, "Status: End Product of Welfare," The Freeman, May, 1972, pp. 297-315.

474 THE FREEMAN August Ropke's Humane Ec'onomy and Schumpeter's Capitalism, Social ism and Democracy set forth the problem very well, but the answers in both books are pessimistic. Pro fessor Mises did not often write about this question, but in the one case where he did, he was rather pessimistic: Whatever is to be said in favor of correct logical thinking does not prove that the coming generations of men will· surpass their ancestors in intellectual effort and achievements. History shows that again and again periods of marvelous mental accom plishments were followed by periods of decay and retrogression. We do not know whether the next genera tion will beget people who are able to continue along the lines of the gen iuses who made the last centuries so glorious. We do not know anything about the biological conditions that enable a man to make one step for ward in the march of intellectual ad vancement. We cannot preclude the assumption that there may be limits to man's further intellectual ascent.

And certainly we do not know whether in this ascent there is a point beyond which the intellectual leaders can no longer succeed in con vincing the masses and making them follow their lead. 9 Today, in fact, the problem is as 9 Mises, The Historical Setting 0/ the Austrian School of Economics (New Ro chelle, N. Y.: Arlington House, 1969), p.38. much the fault of the failure of the leaders to understand basic principles as it is the fault of the masses. The free market is not some fully autonomous, self-sup porting, self-generating, self-sus taining mechanism. It is the prod uct of acting, thinking, planning men. If they do not know how the economy works - and no serious economist has ever argued that all participants must understand it in order for it to work - then there is only one defense possible: the majority of men must, on principle, leave their fellow men free to act, think, and plan. They may not grasp the nature of the process by which the actions of productive individuals are fused into a coherent, self-correcting economic system. They may not understand the theory of marginal utility. They may not be able to spell out the theory of free trade.

But unless they are willing to affirm that principle which every man can grasp - that each man is responsible for his actions, and that therefore each man should be given the right to work. out his salvation with fear and trembling :...- then the magnificent construct known as the free market economy will, in the· image of "Mission Impossible," self-destruct. There are no economic fruits without moral roots. By focusing on economics as if 1974 PRICE COMPETITION AND EXPANDING ALTERNATIVES 475 it were the "science of wealth" rather than the science of human action and human choice, the clas sical economists did a great dis service to the cause of freedom. They made the case of the con servative anti-market critics that much more re'asonable. There is more to life than material con sumption; there is more to life than the question of economic effi ciency. Economic man was an in telIectual construct, but too many economists and too many readers of economic literature failed to see that this construct was and is limited. It can explain some fea tures of life; it. can hardly ex plain them all. The economic man was a stick man, and he made a marvelous target for the critics of capitalism, both conservatives and socialists, who saw their opponents as narrow-minded, materialistic, immoral, uncharitable, destructive churls.

Expanding Human Choice The defense of the market should be made in terms of its implications for human choice. The free market expands human choice. It enables men to become more productive. In doing so, it increases their power and there fore their responsibility. At first, it may seem to limit men's choices - only black Model T's - but in reality it has expanded themblack Model T's rather than no car at all. As productivity in creases, men's options increase. Since they have increased their range of options, they have simul taneously increased their obliga tions. Like all blessings, this too is a burden. Sadly, some modern economists, at least in their published ma terials, are as naive as the nine teenthcentury economists. They seldom consider the grave politi cal and sociological implications of increased wealth. They do not understand that in today's world, a productive worker (from jani tor to scientist) who fails to acknowledge the restraints moral restraints - necessary to preserve a free market economy, is like a child playing with a loaded pistol. He is armed (with the vote) and should be considered extremely dangerous. He has the power to vote for men promising to relieve him of his responsibili ties - thereby relieving him of his power and wealth, he never seems to understand. Men seem to resent the burdens of responsibility as they grow more wealthy, and this is the surest guarantee that they will not grow wealthy forever.

Men make choices. They have ideas. They are responsible. If their ideas are such that they are convinced that the political au thorities can best handle the re476 THE FREEMAN August sponsibiilties of life, then their ideas will lead them into bondage, precisely because they are respon sible and they do have the power of choice. Pontius Pilate had the power of choice. He chose to "wash his hands" of all personal respon sibility, as if power can be so lightly abandoned. Ropke and Schumpeter were quite correct· in their concern for our society: mass man, especially State-educated mass man, has been granted wealth beyond the dreams of Pilate (who never had the opportunity to see reruns of the Beverly Hill billies in full color). Economic efficiency, in and of itself, guaran tees nothing morally or culturally. It only guarantees that more and more men will possess greater and greater options. We should nei ther underestimate nor overesti mate the blessings of efficiency. I) AProperDistrust w. ALLEN WALLIS THOSE who distrust governments are right. For governments every where undertake to do many things that cannot be done by governments - least of all by democratic gov ernments - and they even under take to do some things that can not be done at all, either by gov ernmental or nongovernmental means. Governments readily prom ise good incomes, good health, good morals, good taste, and good reMr. Wallis is Chancellor of the University of Rochester. These are excerpts from his remarks at the 124th Annual Commencement, May 12, 1974.

lations among individuals. They promise equality, justice, toler ance, and safety, as well as peace, progress, prosperity, and purity, and even truth, goodness, beauty, and salvation. They attempt to protect us from our own follies from the folly of smoking tobacco or marij uana, from the folly of watching indecent movies, from the folly of selling too cheap or buying too high, from the folly of buying too cheap or selling too high, from the folly of wasting our money, from the folly of failing to 1974 PROPER DISTRUST 477 fasten seat-belts, from the folly of buying pills i:p. containers that can be opened by children or arthrit ics, and from the folly of setting the wrong temperature on the. laundry machine. The list is end less in number, infinite in detail, and growing exponentially. It is a striking paradox that the more people distrust the govern ment, the more powers and respon sibilities they heap upon it, many of the new powers being designed to counterbalance other powers that the government already has.

The more powers the government has, the more ruthless, corrupt, and pervasive become the efforts to control those powers, the more numerous and harmful become the failures of the government, and the smaller becomes the respect We Owe It to Ourselves and confidence that the govern ment receives or deserves. The appropriate remedy for ex cessive governmental powers, for abuses of governmental powers, for ruthlessness and corruption in gaining control of governmental powers is not to create new gov ernmental powers but to disman tle those that now exist. Return the power to the people. Give each individual the right and the re sponsibility for making his own free choices and decisions. Inevit ably, some individuals will make unwise decisions, even decisions that harm other people; but in the long run the harm done in this way is likely to be neither as great in the aggregate nor as hard to cor rect as the. harm done by over-gov ernment. f) IDEAS ON LIBERTY INDIVIDUALISM suggests the idea that if a living is owed a man, he is both the creditor and the debtor. He must collect and he must pay. All he has a right to expect from society is that it will not intervene between cause· and effect to his prejudice. To be as sured of this he must be assured against political interventions. He is entitled to all he produces, but outside himself there is no power that can ethically produce for him.

E. C. RIEGEL, Planned Prosperity JOHN A. SPARKS Those Fellowswith Dark Hats the Speculators the witch was to medieval man, the caIOn~aU~)t is to the socialists and the to most pOln~C:lar1IS and statesmen: the of eviL" Hans F. Sennholz ONCE AGAIN the guns of public criticism are trained upon specu lators. Legislative committees are hearing testimony about their ac tivities; governmental officials are denouncing them. Why are specu lators so often under attack ? Bor rowing from the old-fashioned western - why are speculators in variably portrayed as wearing black hats? One reason for the tarnished image of the speculator today is the widespread misunderstanding about who speculators are. To many people, a speculator is a crafty, cold, professional, standing against a Wall Street backdrop. Granted, a gathering of specu lators would include professionals. But, just as clearly, it would in clude many amateurs. Several years ago the occupations of perProfessor Sparks is Chairman of the Division of Economics & Business Administration, Hills dale College, Hillsdale, Michigan.

478 sons who held futures contracts on the New York Sugar Exchange during a typical day were dis closed. Of the nearly 1700 specu lators who owned contracts, only about 12 per cent could be termed professionals, Le. connected with the sugar industry or other pro fessional speculation. The remain ing contract holders were house wi ves, retired persons, engineers, retail proprietors, and members of other occupational groups.1 A re cent survey of traders in frozen orange juice concentrate futures showed that "executives, engi neers, accountants, doctors and the like accounted for some 40 per cent of the long side of the mar ket.":! Admittedly, in terms of business volume, professional speculators outdistance amateurs. But the professional image of the speculator obscures the fact that many ordinary people fall into this category. (An attempt can be 1974 THOSE FELLOWS WITH BLACK HATS - THE SPECULATORS 479 made to see every human action from the viewpoint of the uncer tainty inherent in it. Every act could therefore have a speculative dimension; every actor could be said to be a speculator. However, as used hereafter, the word spec ulator refers to the narrower con cept of a promoter, pacemaker, venturesome leader, whose eager ness, drive, initiative compel eco nomic improvements.) Before one sets out to brand speculators as "bad guys," one should be aware that he unknowingly may be out fitting his own friends, neighbors, and, perhaps, himself in black hats.

The Common Image Many are uninformed about who speculators are, but even more people misunderstand w'hat they do. The following picture of spec ulators is a commonly held one: Speculators actually do very little; they do not work for a living in the traditional sense. They keep strange hours. They sit staring at stock ticker tapes, money market quotations, a company's annual report, or the fi nancial page of the newspaper. They operate on the basis of hunches and great doses of luck. They are little better than gamblers. Speculators are not producers of goods. They do not add to the total wealth. Instead, they merely take a cut off the top of what others produce. They are parasitic, enriching themselves at the expense of others. 3 In trying to analyze the preced ing portrait, it becomes clear that many of the assertions are mere gossipy bits of "conventional wis dom." Consider the charge that speculation involves very little work of the traditional kind, un orthodox hours, and peculiar man ners of behavior. Speculators in stocks, bonds and commodities are indistinguishable from other busi nessmen on the basis of their hours. Moreover, one's schedule says nothing very conclusive about whether one "works" or not. What counts is the worker's ability to prod uce the end product, not the regularity of his hours. 4 Are odd business mannerisms really dis played by speculators? The asser tion is little more than a vulgar occupational slur undeserving of recognition or response. After one studies the speculator, it becomes apparent that most of what he does is purposeful, reasonable, and understandable. Only to the un initiated or ignorant do the actions of speculators seem bizarre.

Lucky Guessers or Information Gatherers? Another subtler plaint against speculators is the claim that their unorthodox hunch-playing disqual ifies them as true "workers." Hon est mental effort, say these critics, 480 THE FREEMAN August is work, but, just as certainly, "lucky guessing" is not. The most glaring problem with such a posi tion is its gross inaccuracy. Few, if any speculators rely solely on chance or hunch. Professionals, especially, consult elaborate infor mation sources before making final decisions. Economists often say that they incur "trading costs." There are market indexes to con sult, price-earnings ratios to fig ure, and laboratory findings on new ly developed products to re view. One international speculator illustrated the breadth of his search for information when he said: "One has to know exactly what is going on, whether Mr. Nasser has a cold, or whether Mr.

Dayan is aggressive, or whether the discount rate in Holland is about to be raised .... So one has to watch everything, even if it is unimportant at first glance."5 Alertness to information is the speculator's lifeblood. G About two years ago there were times when soybean speculators anxiously awaited news from such unlikely sources as Peruvian fishing vil lages. The reason? Shortages of soybeans had developed. Fishmeal competes with soybean meal as animal feed. The fish "crop" has to be assessed in order to give speculators some idea of the value of existing stores of soybeans. 7 Speculators demand all sorts of data, from evanescent market ru mors, to sophisticated professional analyses - all in an effort to make their evaluations of the future more "scientific." Despite ambitious information gathering, the "good guess" and the "right hunch" play an im portant part in speculation. Ama teurs and professionals alike ac knowledge the influence of intu ition on their actions. In numerous instances "cold hard facts" are hard to come by, if they exist at all. Take for instance just two questions to which speculators must try to give answers: What will low temperatures do to the Florida citrus crop? Will the Wankel engine replace the conven tional piston engine? Informative data are slim. The answers exist in the realm of the highly un certain. It is in just such circum stances that the speculator must rely on his sensitivity to the fu ture. As others possess musical ability, a way with words, or athletic prowess, the successful speculator is likely to be the own er of a keen intuitive sense. Uti lized, this intuitive ability per forms a profound service to all members of the economic com munity. Intuitively guided judg ments help to allocate, conserve, and distribute scarce economic re sources, so that consumer satis faction is maximized. The specu1974 THOSE FELLOWS WITH BLACK HATS - THE SPECULATORS 481 II lator should be recognized for his significant role as a "future-shock absorber" or even a kind of eco nomic sage. (The word "speculate"

is derived from the Latin word "spec ere" meaning "see.") One would expect high regard for the gift of intuition. On the contrary, an undercurrent of disrespect for this part of the speculative de cision is widespread. Respectable Gamblers? A related but slightly different charge is that the speculator is little more than a gambler. What is the difference, it is said, be tween putting money on the run of a horse and putting money on the future price of wheat? Are not speculators merely respectable gamesters? That both gambling and speculation contain elements of uncertainty cannot be denied. But, the similarity ends there. The gambler risks his money on arti ficially contrived uncertainty. He does not transact his business with real-world hazards. The unknowns which he confronts are the crea tions of the casino, the slot ma chine, and the gaming table. They are brought into existence to di vert and entertain.

The speculator, on the other hand, operates in the world of naturally existing uncertainty. While the enig~as of the dimly lit future hold his fellows immobile, the speculator clearly discerns un noticed opportunities for profits and alertly exploits them. 8 Where as the gambler is attentive to the world of artificial indeterminacy, the speculator keeps an economic vigil over the real, uncontrived future. Therefore, to use gambling terminology to describe specula tion is confusing and inaccurate. Yet, even a noted financial review encourages the continuation of such a practice when it illustrates an article about orange juice spec ulation with the picture of dice being rolled out. of an overturned orange juice can. 9 Do Speculators Provide Useful Services? The gnawing question which un derlies many of the complaints already mentioned remains: What useful service do speculators pro vide? One well-known defender of the speculator's activities, Frank H. Knight, has described him as an uncertainty bearer .10 According to this view, the speculator bears unmeasurable risks, that is, un certainties, while the insurer bears measurable risks. The distinction can be shown by an example. Sup pose that a businessman opens a retail clothing store. An insurance company will be able to provide him with fire insurance on his building, for the likelihood of a fire disaster is a measurable risk.

482 THE FREEMAN August The distribution of the outcome in a group of instances is known. The premiums paid by the cloth ing store owner and other busi nessmen are calculated to cover losses which occur. However, if the retailer seeks ins urance against his inability to sell the store's merchandise to customers, he will find the insurance company unable to write the policy. The possibility of a business loss is an uncertainty because its occurrence is so unique as to be unmeasur able. It is "risk" which the insurer cannot calculate and therefore can not bear. This is exactly the sort of burden which the speculator shoulders. Returning to our ex ample, if the retailer wants to avoid bearing the uncertainty of profitable resale, he may be able to convince the distributor to "sell" him the goods on consign ment. If the distributor consents to consign the merchandise, he becomes a speculator. By agreeing to take back the items which re main on the retailer's rack at the season's end, he bears an uncer tainty. More commonly, of course, the retailer will not rely upon an other to bear the uncertainty of whether or not his goods will sell.

Instead, he will assume a specu lative role by purchasing the mer chandise himself. Perhaps the most lucid analysis of the speculator's activities has been advanced by Mises ll and ex panded by Kirzner.l~ The specu lator, according to this view, is an entrepreneur who is alert to hith erto unnoticed profit opportuni ties.l:~ He is attentive, watchful, vigilant. He "anticipates better than other people the future de mand of the consumers"14 and acts accordingly. When the price which the consumer will pay for the end product promises to be higher than the total factor costs, then latent profits exist. The speculator per cei ves these unrecognized oppor tunities and exploits them. Using the Austrian approach, one can re-analyze the earlier ex ample of the clothing retailer. If he an ticipa tes that the prices which customers will pay for suits, ties, and shirts will be great er than his factor costs, and acts upon that belief, he becomes a speculator. Others are free to pur chase the factors and reap the profits, but they are not entre preneurially alert to the opportun ities which are apparent to the retailer-specula tor.

The Austrian explanation points out that the speculator profits only when he correctly anticipates future constellations of demand and supply in the market. 15 His activities reorient production toward those goods and services for which consumer demand is more intense and away from less 1974 THOSE FELLOWS WITH BLACK HATS - THE SPECULATORS 483 intense demands. In essence, the speculator is an untiring expediter of desired economic production. It is clear that while the Knightians emphasize uncertainty bearing, the Misesians emphasize entrepreneurial alertness. How ever, both positions cast the spec ulator in a favorable light. Both view him as beneficial. Both con clude that his contributions to the economy would be sorely missed if he suddenly failed to function. So far the speculator has been discussed in general. He has been found to have an important and benevolent economic role to play.

The bulk of modern anti specula tive opprobrium, however, has been directed at specific kinds of speculative activity, especially, money speculation, land specula tion, and commodity speculation. They therefore deserve separate consideration. Money Speculation Money speculators, in the opin ion of many, are the worst of the black-hatted ones. Their treatment during the German hyperinflation is .typical. Government officials and the press villified speculators who fled from the mark to other currencies. These pecunious ones, warned the newspapers, had gained a vested interest in the mark's continued depreciation. They were beseiging the foreign exchange mar kets, claimed the state bank president. They put personal interests above country, offered another source. 16 But, attacks on speculators have not been limited to foreign soils or other times. In response to the August, 1971, "monetary crisis,"

our own President said: ". . . the speculators have been waging an all-out war on the American dol lar .... Accordingly, I have di rected the Secretary of the Treas ury to take the action necessary to defend the dollar against the speculator. I am determined that the American dollar must never be a hostage in the hands of the international speculators."17 What activities would inspire such sen timents? What do money specu lators do? Essentially they buy and sell the currencies of different coun tries. When the speculator expects the value of a currency to go up, he purchases it - goes "long" in it. On the other hand, if he expects the exchange rate (value) of a currency to fall, he will go "short" in the currency by selling it in the forward market (futures mar ket) , or exchanging it immediately for other more promising cur rencies. How does such rational trading qualify speculators for black hats? Actually in untroubled times, when only moderate changes in currency values are called for, 484 THE FREEMAN August speculators are largely able to avoid criticism. Their activities are regarded as tending to dimin ish the gap between the highest and lowest exchange prices. Dur ing these times, observers do not lose sight of the fact that ex change rates are determined as much by the "bulls" of the market as by the "bears."IS Even those inclined to view speculators with distrust consider mild speculative activities as benign and "stabiliz ing." However, if monetary poli cies of rapid inflation are em barked upon and, consequently, speculators' positions become in creasingly pessimistic, then their denunciation can be expected.

Speculators are causing the de cline, it will be charged, or if they are not the cause, at least spec ulators are sending exchange rates to unwarrantedly low levels. No Coercive Power To the first charge - that the short-selling speculator causes a decline - it can only be said that short sales are the short seller's forecast of the demand for a cur rency. However, the short-selling speculator has no power to coerce the agreement of others who are buying and selling in the market. 19 "Speculation does not determine prices; it has to accept the prices that are determined in the market. I ts efforts are directed to correctly estimating future price-situations, and to acting accordingly."2o What of the assertion that spec ulators "pile on" to falling prices, thereby driving them to low lev els? When depreciation becomes so clear that many amateurs enter the market, exchange rates may be temporarily depressed to a point that is not found to be justified when subjected to the seasoned reflection of the profes sional. Readjustment upward will be aided by the actions of experi enced speculators who will help to return the currency to a realistic value. 21 I t has been noted that during severe currency declines the ranks of speculators will be swelled by amateurs. A portion of these neo phytes will be businessmen who seek a haven for their capital, safe from the ravages of paper money depreciation. Capital con version of this sort is also attacked by the government as harmful to the nation. But, the avoidance of capital destruction, even when it involves deserting the currency of the realm, is a. benefit to the nation's capital fund, not a detri ment. Those who take precautions to conserve capital are not the foes of their fellow citizens, but their benefactors. 22 Recriminations against money speculators are "side shows" pre sented to divert attention from 1974 THOSE FELLOWS WITH BLACK HATS - THE SPECULATORS 485 real causes. The speculative activi ties of the black-hatted ones come under attack because they are irri tating thorns in the sides of gov ernmental money managers. These officials wish to continue their pa per money profligacy without being called to account by the forces of depreciation. It is pre cisely because the speculator ex poses the bankruptcy of their shal low schemes that he is labeled the "cause" of the decline. Conven iently ignored by the authorities are their own inflationary excesses which actually precipitate the downward revaluation of the na tional currency. The arbitrary, fickle activities of the state bank, including the artificial "bull" ma neuvers to support its own cur rency's value, are the prime causes of decline and depreciation.

Land Speculation Land speculators have always managed to inspire a great deal of invective. Undoubtedly, some distrust is due to the notoriety which fraudulent land schemes have received. To the fair-minded it should be obvious that legiti mate land speculation and land fraud are entirely different things. But, if the aura of fraud which often surrounds land transactions is dispelled, there nevertheless re mains a residue of suspicion about land speculators. No small amount of this lingering distrust is at tributable to the prevailing view of western land sales in the United States during the eighteenth and nineteenth centuries. One of the themes emphasized by the most widely read authority on the subject of the western lands is the detrimental impact of "spec ulation" and "land monopoliza tion." According to his writing, large scale speculators "preyed" upon the land, "engrossed" land, outbid settlers, and so forth. They preceded the settlers to the Amer ican frontier, purchased the "best lands," virtually forcing settlers to buy at their prices. Moreover, the black-hatted ones were the per petrators of fraudulent schemes designed to add blocks of land to their already monopolistic hold ings. 23 Fortunately, interpretations which oppose the prevailing anti speculative position are being ad vanced by such economic histor ians as Douglas C. North. He points out several things. First, speculators should not be regarded as having been primarily large scale dealers. "Many a farmer bought more land than he could possibly cultivate, with the idea of holding it for a rise in value-."24 Speculators should not be regarded as having been members of a separate entrepreneurial class in conflict with an agrarian class as 486 THE FREEMAN August is implied by the prevailing view.

Instead, entrepreneur and agra rian were often one. Next, even though land specula tors themselves were far from "public spirited," their actions were economically beneficial. The reason for this is relatively simple. The speculator purchased what he believed would become productive land. The price he offered was higher than prices offered by other bidders who failed to see its high yield potenbial. His purchase re moved the land from commitment to inferior productive uses con templated by the other bidders. If the speculator were correct in his forward-looking valuation, other purchasers would soon appear who would be willing to pay a higher price for the parcel precisely be cause they expected to use the land in a highly productive way. Un intentionally, the land speculator helped to shift land resources to their most fruitful uses and away from less fruitful ones. 25 The charge of "land monopoliza tion" by speculators is an un founded one. "There is no mean ingful sense in which a monopoly of land existed at any time in the nineteenth century. In fact, avail ability is the one clearly evident characteristic of the opening up of the public domain. There were immense amounts of land continu ously available from a large number of different sources."26 How ever, large tracts of land were put beyond the reach of settlers by Congress. Of the public lands ap propriated between 1789 and 1904, over half of the acreage was re served either to the Federal gov ernment or granted to the states and railroads. 27 The policies of the national legislature, not the ac tions of speculators, came the closest to creating large land hold ings in the hands of a few. For tunately, the railroads and the states sold off tracts of land into private hands, thus assuring their economic use.

Finally, the claim is made that speculators regularly engaged in fraud to obtain land. Though there is no justification for fraud, it is a fact that many of the illegal transactions were encouraged by the gross unworkability of the government land laws. The basic theory underlying the laws was that ownership should be awarded only to actual occupiers of land parcels and even then there was a limit on the parcel size. 28 In many instances continuous occupancy required by law was not econom ically justified. Consequently, spec ulators, settlers, and others par ticipated in fraudulent schemes which appeared to comply with the land laws in order to obtain larger parcels than would be allowed to a single "occupier."

1974 THOSE FELLOWS WITH BLACK HATS - THE SPECULATORS 487 By prior agreement, some set tlers made -homestead "entries" and then sold immediately to spec ulators. With the cooperation of land officials, "dummy entries" were often made for homesteaders who did not exist. The land was then assigned to speculators. 29 In Nebraska a house on wheels was moved from claim to claim to ful fill the house building require ment. 30 One need not condone fraud to appreciate the economic benefit which resulted from the creation, by speculators, of land units which were a productive size. Whenever land is able to be owned by people and wherever there are changes in land values, there will be speculative profits and losses made. Nothing short of destroying the right to buy and to sell will deter men from alertly purchasing parcels which they consider underpriced or selling those which they consider over priced. Ultimately, opponents of land speculation must favor re strictions on the very rights which are the essence of ownership.

Commodity Speculators In ever-increasing numbers ob servers are blaming speculators in commodities - those raw products which are traded on organized markets-for the increasing prices. About fifty different commodities are traded worldwide today, rang ing from Idaho potatoes to soy bean meal from platinum to ply WOOd.31 The modus operandi of a commodity speculator is similar to that of other speculators. He evaluates the likelihood that fu ture prices will. be different from current prices and buys or sells accordingly. His buying and selling generally accomplish several benefits. First, he bears the uncertainty of future prices so that others who do not wish to shoulder such a burden may escape it. For example, a wheat farmer may decide to sell his wheat crop to the grain eleva tor owner. By so doing the farmer makes a decision to allow the grain elevator owner to take on the un certainty of future grain prices.

Though the farmer's investment in labor, land, and capital contains a genuine element of speculation it self, nevertheless, at the harvest he may wish to allow another to take up the speculative burden. On the other side of the sale, the grain elevator owner buys because he is alert to what he believes will be higher future prices. Secondly, if a catastrophe re duces the expected supply of a commodity, the speculator may re move from the market a portion of the commodity in anticipation of higher prices. By speculating, he is helping to moderate the current 488 THE FREEMAN August use of the good and to allocate the reduced supply into the grain scarce future. His trading helps to mitigate the effects of commod ity shortfalls on the consumer. Perplexingly, commodity traders draw criticism from the very groups which they benefit - con sumers and primary producers. The consumers of products which contain raw commodities often ir rationally blame the speculator for being the primary cause of the reduced supplies. The truth is that being merely a buyer or seller, he neither increases nor decreases the total amount of the commodity.

He merely spreads the good over time. 32 Primary producers, such as far mers, who sell to the speculator, often begrudge him the profits which he receives when the price of the commodity rises. Such a position is grossly unfair. The original sale was presumably con summated because the producer and the speculator perceived the future configuration of prices dif ferently. As the future became the present, the speculator's view was borne out. However, that is surely no proper reason to deprive the speculator of his profits. The pro ducer's brazen covetousness is re vealed by his unwillingness to support the logical converse of his position. He is not found to advo cate his own indemnification of the speculator who experiences losses when commodity prices dip. Recently the prices of commod ities have been more volatile than usual. Predictably this behavior has been ascribed to the evil ma chinationsof speculators. In real ity, several factors have influenced commodity prices. (1) New inter ests, foreign and domestic, have sought commodity futures con tracts as hedges against the shaky state of national currencies. (2) Gigantic government to govern ment commodity deals have helped to send markets into gyrations which would be the envy of any private "manipulator." (3) infla tionary monetary policies have compounded the uncertainty of fu ture commodity prices. Character istically, instead of seeking to stabilize the purchasing power of the domestic currency, instead of trying to encourage the adoption of a sound international money, congressional committees are seek ing to create a new Federal agency similar to the Securities and Ex change Commission to police com modity trading. 33 Controlling the black-hatted ones is seen as a sig nificant part of the answer to commodity market fluctuations.

Conclusion It is not necessary to attribute personal goodness to the indi vid ual speculators of the past and 1974 THOSE FELLOWS WITH BLACK HATS - THE SPECULATORS 489 the present. Their motivation was and is self-gain. However, by their efforts as alert entrepreneurs, they have continually perfected the operations of the market; they have borne the burdens of the uncertain future. In essence, they have constituted the very sen sitive fingers of the invisible hand. It is time that they be allowed to escape the moral stigma under which they have labored, to with draw from the dark shadow of obloquy, and to don white hats! ~ - Footnotes 1 Example referred to in Armen A. AI chian & William R. Allen, University Eco nomics (Belmont, California: Wadsworth Publishing Inc., 1969), pp. 160-161. 2 Arlene Hershman, "The OJ Play: Tough and Tangy," Dun's, April 1971, p.55. 3 This layman's concept of a speculator is a composite of student comments, news paper accounts and conversations of the author with noneconomists about specu lation.

4 John C. Sparks, "Production Unlim·, ited," IX Essays on Liberty (Irvington on-Hudson, New York: Foundation for Economic Education, Inc. 1962), pp. 257 271. ' 5 "The Arcane of Arbitrage," Business Week, November 22, 1969, p. 140. 6 Israel Kirzner, Competition and En trepreneurship (Chicago: University of Chicago Press, 1973), p. 68. 7 "Speculators Whet Their Appetites," Business Week, July 11, 1970, p. 19. 8 Kirzner, p. 39. 9 Hershman, p. 55. 10 Frank H. Knight, Risk, Uncertainty and Profit (Boston: Houghton and Mifflin, 1921), Chpt. VIII, "Structures and Meth ods for Meeting Uncertainty." 11 Ludwig Mises, Human Action (New Haven: Yale University Press, 1949), pp. 286-297. 12 Kirzner, pp. 30-87. 13 Kirzner, p. 39. 14 Mises, p. 288. 15 Ibid., p. 29l. 16 Hans F. Sennholz, "Hyperinflation in Germany," Freeman, October, 1970. 17 Richard M. Nixon, "Executive order No. 11615 and Related Documents," Spe cial Report, Bureau of National Affairs, August 15, 1971.

18 Ludwig Mises, The Theory of Money and Credit (New Haven: Yale University Press, 1953), p. 253. 19 Richard A. Posner, Economic Anal ysis of Law (Boston: Little, Brown and Company, 1972), p. 200. 20 Mises, The Theory of Money and Credit, p. 253. 21 Ibid., p. 255. 22 Sennholz. 23 Paul W. Gates, "The Homestead Law in an Incongruous Land System," XLI American Historical Review (July, 1939), pp. 652-68l. 24 Douglas C. North, Growth and Wel fare in the American Past (Englewood Cliffs, N.J.: Prentice-Hall, 1966), p. 125. 25 Murray N.Rothbard, Man,Economy and State II (Princeton, N.J.: D. Van Nostrand Company, Inc., 1962) pp. 512 513). 26 North, p. 132. 27 Ross M. Robertson, History of the American Economy (New York: Har court, W orId, 1955), p. 217. 28 Rothbard, I. p. 151. 29 Robertson, p. 218. 30 Gilbert C. Fite and Jim E. Reese, An Economic History of the United States (Boston: Houghton-Mifflin Company, 1965), p. 316.

31 Stanley W. Angrist, Sensible Specu lation in Commodities (New York: Simon and Schuster, 1972), p. 26. 32 Alchian & Allen, pp. 149-158. 33 "A Governor for Those Volatile Commodities," Business Week, February 23, 1974, p. 32.

M. L. ZUPAN ing Business IN THE April, 1974, issue of The Freeman, Roger Donway considers and dismisses Irving Kristol's con tention that since the free-market must allow anti-market views it, so to speak, "contains the seeds of its own destruction." A similar but far more subtle danger to the free market pervades our society. The attitude to which I refer is epitomized starkly in a commercial sponsored by the American Sav ings and Loan Association: "This bank is for the business side of me and this bank is for the human side of me." Perhaps this seems harmless enough; after all, the savings banks are just trying to improve their "image" and to em phasize that their goal is really to be humane in the popular sense of that word - to help humanity. But there is a widespread practice Ms. Zupan has majored in psychology and phi losophy and hopes to do graduate work in economics or law, or both. She is editorial as sistant for book reviews in Reason magazine.

490 here, merely illustrated in this ad vertisement, which deals two blows at the very roots of free enterprise. The first danger is a separation between the business and human functions of certain individuals, and thus between business enter prises and other human activities. The second danger lies in the no tion that the way to sell a product at a profit is to promulgate the idea that the business is eng-aired in a humanitarian program of im proving the general good. These two ideas not only are contrary to the best interests of both producer and consumer, but also are at cross purposes with each other. For the first leads to putting busi ness outside the moral realm, and the second to an impossible con ception of business morality. The division of human beings into "businessmen" and "others," or the separation of the business1974 THE BUSINESS OF UNDERMINING BUSINESS 491 man's role as such from his human (all other) capacities, supports the popular myth that those en gaged in producing and selling goods are authorized. by "the sys tem" to do anything in order to make a profit. Thus, free enter prise, its critics say, allows for and even promotes, dishonesty,ex ploitation, theft (of trade secrets, for example), irresponsibility, stinginess, or whatever, as long as making a buck is the result. This is the force of Irving Kristol's dismay with the moral philosophy underlying the free enterprise sys tem. If he could profit from it, there is, according to Kristol, no moral restraint which could keep the entrepreneur from investing in anti-market literature.

But this is not so. Donway ably pointed out one problem with this view, and I would like to exhibit another. Any individual engaged in the various facets of financing, planning, producing, and selling goods and services is - cannot be other than - a human being. What follows from this is that the gen eral moral principles which are valid for all human beings are equally valid for businessmen. Of course, different ones may apply; for instance, the businessman may never have occasion to exhibi t courage as might a soldier, nor may the steel worker have occa sion to practice the virtue of truth in advertising. As long as there is human action, all human virtues are valid, however relevant to dif fering circumstances, occupations, and the like. The Role of the Law I want to point out that this im plication of business action as human action does not furtherim ply that "there ought to be a law."

That is, the moral uprightness of businessmen ought not be the sub j ect of special legislation, any more than there should be special laws concerning how you behave during your leisure time, in social interaction, toward the ones you love, and so on. To enact such laws is to destroy freedom, to under mine the foundation of morality. The function of law is not to force morality - a contradiction but to protect people's rights. To put it another way, the law ought to ensure the cond,itions for free enterprise by making explicit each person's sphere of action and by assuring proper recourse for harm done. Thus, with respect to busi nessmen, the law should allow each to produce whatever he likes, but not allow him to force people to buy or use his product. The law, then, would concern itself with such matters as enforcement of contracts, compensation for injury due to faulty labeling, violation of property rights (including, con492 THE FREEMAN August ceivably, air and water pollution) ; but it would not engage in forcing producers to solve the ills of so ciety. (A pernicious example of the latter is the recent legislation requiring Detroit auto makers to install pollution control devices, rather than holding the consumer accountable for damages resulting from his activities.) Perhaps this attempted separa tion of "business" and "human"

can be traced to the popularity of sociological theories which explain all human action in terms of di verse roles. Thus, while at the of fice one part is played, at home or at a party another, and never the twain shall meet. Although this may help us understand why "the separation is attempted, it does not excuse it or make it any less harmful. The perpetuation of such a view plays right into the hands of those critics of free enterprise who believe that the latter depends upon and promotes immoral or, at best, amoral behavior on the part of those involved. The second ruinous attitude commonly espoused and promoted by businessmen these days is that their reason for existence, and their value, derives from their de vising, investing in, producing, and selling products in the inter est of helping humanity. This is the utilitarian argument: s'ince your being engaged in making a profit will also benefit most peo ple by providing them with goods and services, you are allowed to do so; as a matter of fact, it is down right virtuous for you to do so.

Whether or not making a profit ought to be tolerated or condoned, per se, it is accepted as a neces sary function of increasing the general good. Guilty Until Proven InnocentI The danger lies in the payoff, which we witness today on all fronts. For if profits are not justi fiable, but only tolerable, and the proper goal for everyone, includ ing businesses, is to ensure and work for the good of everyone else, then profits may be denounced and expropriated when the greater good would seem to call for that meaSUre. So when prices get too high, controls on profits can be justified; in the "energy crisis" the "obvious" guilt of the oil com panies lies in their having made profits; IBM must prove to the courts its innocence in actions in relation to competitors because it has shown a profit. Thus, a crucial maxim of the American legal sys tem has been reversed when it comes to" business enterprises: guilty until proven innocent.

There is, however, a justijic'a Uon of profit-makin'g which does not rest on such a notion of the common good. It is as right for 1974 THE BUSINESS OF UNDERMINING BUSINESS 493 the entrepreneur, the manufac turer, the reta.iIer, and any others involved in producing and selling goods and services to make a profit as it is for the members of the "working class" to hire themselves out for wages, for writers to charge for their services, for peo ple to buy homes, and so forth. In short, the justification of profit is simply the right to private prop erty, the right of every human being in virtue of being human. Survi val as a human being (that is, as a rational, morally account able agent) requires that each exist in some place and procure some things,. the place and the things we designate by the term property. It is right and good that human beings act so as to secure their own survival; and this is a fundamental moral justifica tion of the right to property.

Of course, there are man.y ram ifications and details to be covered before one would have in hand a comprehensive argument for the right to private property. The point here is .that such an argu ment exists; it does not rely on any "happiness of society" justi fication of free enterprise. The right of the individual is justifi cation enough. I am not denying that the common good will be served by a free economic system; what I want to point out is that the common good cannot serve as an adequate justification, since it leaves the door open to serious en croachments which undercut the very foundation of that system. Everyone Loses Since the idea that profits take away from the common good is so prevalent today, it might be ar gued that the businessman, just in order to survive, must create an image of being in business to help all. In the short run, perhaps, there is not much to say to this argument except that it is a pro liferation of unrealities. But in the long run, reiteration and pro motion of this attitude can only work to the detriment of the polit ical framework in which business can flourish. It would thus work against the best interests not only of business, but also of consumers.

Perhaps I seem unduly harsh on American businessmen; I recog nize, however, that to a large ex tent they have merely acted to ac comodate themselves to the over all climate. They are unloved by many who benefit from their exis tence; they have been badgered as no other segment of society. Thus, during the recent energy scare, the press made .(or conveyed the public's) accusations against the oil companies, but offered little op portunity for rebuttal. The oil companies were obliged to pay for advertisements in order to get a 494 THE FREEMAN August word in edgewise, and were promptly maligned for doing so. Moreover, since they did this de fensively, to protect their interest, they were dismissed as acting from ulterior, "selfish" motives. Nevertheless, it clearly cannot help for businesses to go along with all this. The long-run consequences are devastating; no good can come of further miseducating the public - or public officials.

Moreover, businessmen may be properly criticized for their fre quent complicity in chipping away at the foundation of free enter prise. I have in mind here calling on government for tax breaks, price supports, subsidies, licensing to prevent entry of competition, and so on. Many seem not to real ize the inconsistencies involved; but for every measure instituted by government to "help" some in dustry, a comparable amount of freedom is lost. The farmers com plained bitterly when price con trols were set on beef; but before the year was out many were eager ly supporting the government's buying of "surplus" beef in order to sustain prices. So, the problem is not simple; it is not just consumers or the in telligentsia or the press, but busi nessmen themselves who fail to understand the nature of free enter prise. Needed is a return to the fundamental principles of the free mar ket, and this is unlikely to happen without a consistent ef fort on the part of businessmen to practice and preach those princi ples.

It should be noted in conclusion that this is a moral imperative. Since it is good and right for them to be free to work for profit, to reap the benefits of their own. in genuity, labor, risk-taking, then it is wrong for them to rely on the government (that iS,on the tax payer) to share the burden. To do so is not only wrong, but will lead to the demise of the system which leaves each individual free to work for his own diverse ends (which may, of course, include cooperative ventures). And this implies a further moral impera tive: it is right for all, business men included, to consistently act so as to preserve that system. And it is wrong to call on government for handouts, just as it is wrong to promote business by catering to prevailing sentiments and myths. How can the businessman claim to be so unj ustly accused if he persists in tightening the noose around his own neck? ~ The ENERGY CRISIS: Alternative Futures THE First Law of Thermodynam ics tells us that the energy content of the universe is constant and energy is always conserved. What one really means when he speaks of an energy shortage is that there is a shortage of useful energy, which is an altogether different notion; useful energy is a rela tive concept, not an absolute one like energy.

Henry Grady Weaver points out (The Mainspring of Human Prog ress, 1947) : "Nothing is actually a 'natural resource' until after men have made it useful to hu man beings. Coal was not a na tural resource to J ulius Caesar, nor crude oil to Alexander the Great, nor aluminum to Ben Franklin, nor the atom to anyone until 1945. Men may discover use for any substance. Nobody can know today what may be a natural resource tomorrow. It is not na tural resources, but the uses men make of them that really count." This is the reason we can never Mr. Kizer is president of Scientific Appraisal, a firm specializing in economic, scientific, and psychological consulting. These remarks are from a recent speech be fore the Ohio Chapter of the American Institute of Real Estate Appraisers. JOHN B. KIZER run out of natural resources in cluding, of course, energy ( that is, at least until the death of the sun). Thus, the real reason the United States has led the world in the Age of Power is that individ uals have had the freedom to cre ate new sources of energy and devices for its more effective use.

These obvious points are chal lenged by those physical scientists who are trying to develop what they call a new science of futur ology. Such is the Club of Rome which publishes the magazine The Futurist. This group has also pub lished two books The Energy Crisis and The Limits to Growth which have been best sellers and frightened many people into be lieving that we must go back to the horse and buggy days because it is impossible for life to get progressively better. There are many errors in these books pointed out by many people but the fundamental assumptions are also in error, that is, that we have only a limited amount of en ergy resources. The advocates of this point-of-view could create a self-fulfilling prophecy as their 495 496 THE FREEMAN August advocacy of a return to the days of low energy consumption obvi ously cannot be accomplished with out governmentally restricting personal energy consumption. Peo ple will not give up their Cadillacs voluntarily. And it can easily be seen that the governmental con trol of all energy destroys the freedom and incentive of individ uals to develop new energy re sources; thus none are developed and we have a Limit to Growth, a self-fulfilling prophecy. But as long as men have the freedom to invent and to discover, it is un likely that there will be any per manent energy crisis or shortage of natural resources as new ones will always be created.

This is not to say that there cannot be short-term energy short ages; as a matter of fact one of the alternative futures I would like to discuss below is just this situation. Saving the Environment Most experts agree that one of the proximate causes of the en ergy crisis is the environmental movement. This movement led to the delay of the Alaska pipeline, to the installation of anti-pollution devices on automobiles that greatly reduce gas mileage and to the in stallation of industrial anti-water pollution equipment which re quired a great amount of energy to install and takes a great amount of energy to maintain. The problem with much of the anti-pollution legislation is that there is still a gre·at deal of debate about whether the dumping of pollutants is harmful enough and great enough to justify the mas sive social cost which it entails. Let us not forget the mercury pol lution example in which it was recommended that one eat fish not more than once a week because industrial dumping of mercury into the rivers and seas was caus ing the mercury absorption by fish to rise to danger_ous levels. It was later discovered that the mer cury level in fish is lower now than it has been in the last 80 years, even though the dumping of mer cury into the waters by industry has increased. Thus, we have noth ing to fear from so-called mercury pollution at all. At any rate the environmental movement has given the government justification for greater controls on energy and how itis used, thereby destroying the very· conditions favorable for solving the energy crisis.

There are some solutions to the pollution problem, however, that maintain conditions favorable to discovery and incentive and hence a way out of the energy crisis. One way is to refine our definition of property rights. Oscar Cooley developed this idea in the June, 19J,,7 THE ENERGY CRISIS: ALTERNATIVE FUTURES 497 1972, Freeman. Cooley's explana tion is hased on the fact that the problem of pollution is usually considered to be the primary ex ternality of the modern market economy. Most proposals attempt ing to solve the pollution problem have at least tacitly assumed that the externalities involved are in eradicable; thus these proposals have almost exclusjvely involved nonmarket solutions to the problem. Harold Demsetz as long ago as 1967 had suggested that a redefi nition of private property rights has often, historically, served the purpose of internalizing, that is, bringing within the market mech anism, externalities of all sorts; Cooley applied this insight to in ternalize the externalities caused by pollution.

The Case for Private Property Cooley's argument can be para phrased as follows. Because of the impossibility of making interper sonal utility comparisons, the question of what constitutes a pollutant must necessarily be given a subjective answer. To use Cooley's example, if a pri vate property owner decides to dump sewage into his pond, .he is, in es sence, deciding that the highest and best use of the pond is as a cesspool. Although an external ob server might look upon this use as a polluting use, unless he is willing to purchase the property to convert it to another use, the use to which the property is being put must be assumed to be the one which maximizes social utility. The implication of Cooley's argu ment is that private property, by definition, cannot be polluted. Cooley then argues that since pri vate property cannot be polluted, the conversion of public property to private property is the tech nique by which the externalities of pollution might be internalized. Al though Cooley recognizes that cer tain aspects of the pollution prob lem might not be solvable without further technological innovation (for example, the invention of the parking meter was necessary be fore the owner could ration park ing spaces via market pricing thus eliminating the divergence be tween private and social costs), he believes that the problems of water pollution could be solved im mediately by selling the inland bodies of water to private owners.

Obviously, one of the assumptions of Cooley's argument is that only technical externalities, and no theoretical ones, exist; thus, any externality can be brought within the framework of the market mechanism with a suitable tech nical innovation. This particular idea would not solve the air pollu tion problem, but some equally clever idea might do the job.

498 THE FREEMAN August This redefinition of private property rights is one alternative future which would not only alle viate the energy crisis immedi ately but would also create the conditions for a discovery likely to solve it. Other Interventions Behind the Energy Crisis Some of the other obvious causes of the energy crisis include so called consumer protection laws, wage and price controls, and land use legislation. Our system of tax ation also has helped create the "energy crisis." The corporate in come tax has been especially im portant in this respect because of its negative effect on investment. Not only is possible expansion capital from earnings destroyed by taxation, but also young and growing corporations are taxed and hence penalized more than corporations with accumulated wealth, thereby giving larger cor porations a competitive edge. As new and vital corporations are an essential part of a free market economy, this type of tax tends to destroy free enterprise, thereby halting economic progress. Also, as any businessman will say, a corporate tax lessens efficiency be cause the government bears part of the loss in any inefficient in vestment, this being a common method used by corporations to lessen their tax burden in a profit able year by taking over a com pany which shows a loss.

The personal income tax also has the effect of distorting the choice of an individual between present and future consumption, favoring the former. As with the corporate income taxes, personal income taxes reduce an individ ual's incentive to invest, as he knows the government will absorb some of the gains. No matter how original and creative some of the economic ideas to ameliorate the energy crisis, obviously, any final solu tion must be a technological one. We must develop new energy sources. We have a limited quan tity of fossil fuels and even a rela tively limited quantity of uranium in comparison with what our en ergy wants are likely to be in the next few centuries. If we reduced our energy con sumption, our actual standard of living would not decline nearly so much as some believe. Some peo ple find it paradoxical that de creasing our energy use could ac tually increase our productivity per unit of other resources. The communications engineer well knows that the "noise" in a chan nel increases proportionately more than the negentropy flow with in creasing power. For example, a horse can convert about one horse1947 THE ENERGY CRISIS: ALTERNATIVE FUTURES 499 power steadily for 10 hours a day and the average horse is about 20 to 25. per cent efficient. However, since horses presently in the U.S.

work only 800 to 1000 hours a year, they are only 6 to 7 per cent efficient. A man working 50 hours a week for 50 weeks a year de livers only one-fourth as much en ergy as a horse, but the horse consumes 10 times as much en ergy. Thus, a man is two and one half times as efficient as a horse and the use of the horse consti tutes a waste of potential energy. The horse is used, of course, be cause of the rate at which it can deliver energy; during a limited growing season this greatly in creases the amount of land pre pared for growing. Another way of saying this is that the hoe culture is more effi cient in terms of energy than the plow culture and it is preferable so long as energy is in short sup ply and labor is abundant. This is the case in a low-energy society being transformed from a high technology society such as ours. Many people are supposedly shut out of work because they have only low-technology skills in a high technology society. These people could be returned to productivity in a low-energy society; thus, total productivity could conceiv ably even be increased if our ener gy use were lowered. In this type of society inventions which allow for more intensive cultivation of limited resources· would be valued and developed rather than inven tions which are power-dependent.

An example of this type of inven tion would be new fertilizers. The point I am trying to make here is that even if we assume the worst - that we shall discover no new energy sources - under no cir cumstances will we return to the primitive low-technology life from which we have come, that is, as long as we have freedom. But I think we -will develop those new energy sources. Candidates for new energy sources include nuclear fusion, wind power, solar power, tidal power and hydroelectric (gravita tion) and geothermal. Nuclear fusion, which is the source of the energy of the sun and stars, as well as the hydrogen bomb, could be a nearly unlimited source of energy if we could con trol it. It depends simply on com bining two heavy or deuterium nuclei into a helium nucleus. The helium nucleus has less mass than the two deuterium nuclei and the missing mass has been trans formed into energy according to the law E=:mc 2 • Solar power also offers tremend ous opportunities, as ten tiInes as much energy from the sun reaches the surface of the earth each year 500 THE FREEMAN August as all the energy contained in all the coal reserves of the entire world. It seems likely that the next few years will bring great ad vances in the use of all this solar energy.

Geothermal power is now only a speculation. There is a tremend ous storehouse of energy under the surface of the earth as evi denced by geysers and volcanoes; however, at present, we have no idea of how to harness this en ergy. Some even more speculative ideas for new energy sources in clude using the principle of the Foucault pendulum to obtain en ergy from the rotation of the earth. How this might practically be done is not known at present but is, at least, a theoretical pos sibility. Also a pendulum moving through a magnetic field (such as the earth's) will generate an elec trical current. Again, the principle is sound but no appropriate tech nology exists. Another possibility - which I have further explored in a recently published work - indicates that even the motion of the earth around the sun or a satellite around the earth might be used as a means of generating electri cal energy. This may be the en ergy-cultivating technique which first leads to practical results.

Blessing in Disguise The energy crisis may be a blessing in disguise in that it has prompted many scientists and en gineers to begin thinking anew about promising sources of en ergy. One might say that our society based on fossil fuels is analogous to the primitive food-gathering society in which there was a lim ited amount of game to kill and a limited amount of fruit to pick. Similarly, our fossil fuels seem limited. But how more limited life must have seemed for the primi tive food gatherer who did not realize that just around the corner was the invention of agriculture and a civilization based on culti vation. To me this seems to be analogous to the situation we are in. Today we are a society of energy gatherers feeling limited by the quantity of energy we can gather. I think the future holds for us a new age and civili zation, a civilization based by an alogy on energy cultivation in which we no longer are dependent like the food gatherer on the en ergy sources which occur naturally, but rather we shall actively create new useful energy by means of one or more of the previously mentioned techniques. To live at a time which may be the turning point into a new civilization may be the good fortune of us all. t) A REVIEWERiS NOTEBOOK JOHN CHAMBERLAIN The 12-Year Sentence IT IS NOW some thirty years since I first read Isabel Paterson's dras tic attack on the compulsory public school as a model of the totalitar ian state. I thought at the time that Mrs. Paterson's fierce logic was a little out of place. After all, we had plenty of private schools around in theN ineteen Forties, and our private universities had not yet succumbed to the habit of running to Washington, their tin cups in hand. My feeling was that as long as competition between public and private systems existed, all would be well.

Time, however, seems to be proving the case for Isabel Pater son. With our parochial schools foundering, and our colleges trad ing in their institutional integrity in return for Federal cash, the State-supported and State-domi nated system is winning all down the line. Education is not improved thereby: the mediocre mass holds back the students of distinction. With a quota system of "ethnicity" being substituted, via "affirmative action," for excellence as a cri terion of pupil acceptance, the diploma means less and less. The State has not yet outlawed the high school or college teaching of such things as free enterprise economics or a biology that tells the truth about individual varia tions, but there is a subtle pre sumption in our school lounges and on our campuses that political solutions must be sought for all our complex problems. We are be coming a standardized people, ready to accept "controls" with out bleating. When the ultimate in flationary blow-off comes, we will be doormats for our first dictator.

It will be done by way of "Welfar ism"; our Fuhrer, taking a tip from the late Huey Long, will do as Fascists do but will call it Pro gressivism. The end results of a State-stand ardized educational system are be coming more and more apparent even to some of our professional "educationists." What was wildly heterodox when Isabel Paterson was writing is now being accepted as common sense by a wide variety of scholars and legal critics who want a pluralistic society to pre vail. These scholars and critics are fortunate in having a few inde pendent foundations such as the Institute for Humane Studies and the Center for Independent Edu cation around to support their 501 502 THE FREEMAN August ruminations by underwriting sym posiums. So we have a good book at hand: The 12-Year Sentence, edited by William F. Rickenbacker (Open Court, $6.95) . The book con sists of papers prepared for an education symposium held in Mil waukee, Wisconsin, in the Fall of 1972, with an added introduction by Professor Benjamin A. Rogge of Wabash College.

The Coercive Intrusion Professor Rogge sets the scene by conjuring up the stuff of our daily headlines. Day in and day out we are subjected to bitter contro versy over busing, sex courses, so cialist indoctrination, school pray ers, the educational role of prop erty taxes, the place of "relevance" in curricula, etc., etc. None of these controversial topics would be par ticularly bothersome if it weren't for the fact that schooling is com pulsory from the ages of six to sixteen. With the State absorbing most of the available education money, few parents can afford to pick private schools that can really educate children without regard to specious standards of relevance or whatever. So an overwhelming proportion of our younger popula tion is now being subjected to what Ben Rogge calls "the coercive in trusion of the collective into the life and mind of the individual." Professor Rogge says the whole subject of compulsory schooling is "ripe for rethinking," and the con tributors to The 12.,.Year Sentence make a good beginning at the job.

Murray Rothbard, delving into the historical origins of the idea of compulsory attendance at State supported schools, tells us about the Saxony School Plan devised by Martin Luther and put into prac tice through an edict drawn up by his disciple Melanchthon. The Saxon and Wiirttemberg systems created under Lutheran influence were the models for the Prussian system of compulsory s,chooling. In America, Calvinist Massachusetts (unlike Pilgrim Plymouth) enacted a compulsory literacy law for all children. The law gave judges the power to seize the children of recalcitrant parents and "appren tice" them for State instruction. Horace Mann in Massachusetts It was the Massachusetts system that ultimately triumphed through out most of America. Mr. Roth bard traces the careers of the "educationists" through their school journals. Horace Mann, the editor of the Common School J our nal, became the first secretary of the Massachusetts Board of Edu cation, and his annual reports dur ing the 1840s promoted the "free"

compulsory line throughout the whole country. What Horace Mann did in Massachusetts, Henry Bar1974 THE 12-YEAR SENTENCE 503 nard did in Connecticut, Calvin Wiley in North Carolina, Caleb Mills in Indiana, and Samuel Lewis in Ohio. These are the big names in the adaptation of the Prussian system to the United States. It was all done in the name of "de mocracy." But it was a "democ racy" with an unconscious totali tarian ingredient. The idea, in the words of Samuel Lewis, was to take a diverse population (the new Irish, the German 'Forty-eighters,' etc.) and mould it into "one peo ple." As Mr. Rothbard says, the moulding was not an easy process. "The pesky Catholics," he writes, "often insisted on establishing their own parochial schools." But quantitatively, the Horace Manns achieved a great success. In 1922 the State of Oregon actually passed a law prohibiting all pri vate schools and compelling all children to go to public school.

This seemed the culmination of a dream, but it was interrupted by the U.S. Supreme Court in 1925. In the Pierce v. Society of Sisters decision, the Court declared that "the child is not the mere creature of the state." Mr. Rothbard notes ironically that the Ku Klux Klan, in pushing for the aborted Oregon law, had made common cause with the Horace Mann educationists. The Pierce decision, so Mr. Roth bard says, points the way to a fundamental choice: "it will," he writes, "either be Pierc'e and lib erty or Horace Mann and the Ku Klux Klan." Reducing the Options Other contributors to The 12 Year Sentence - Gerrit Worm houdt, Robert Baker, E. G. West - are concerned lest the American people be cheated out of a choice by the economics of the situation. Our Supreme Court decisions and our statute laws and judicial inter pretations may protect the public in its ultimate right to choose be tween a State-supported system and a private system of education, but when government taxes virtu ally everybody at a high rate to support public schools there is little left for the private school.

Our inflation has made a bad situ ation almost incredibly worse. Our courts have actually twisted the First Amendment out of shape in regard to the "freedom of re ligion" clause. It is a negation of "freedom of religion" when a State refuses to refund money, via vouchers or remission of taxes, to citizens who consider it part of their religious duty to send their children to parochial schools. For money reasons, then, Mr. Rothbard is not likely to see any big showdown between Pierce and Horace Mann and the Ku Klux Klan. The latter are winning by 504 THE FREEMAN August default. The private school main tains its legal right to exist, but who can afford the luxury of sup porting two sets of schools simul taneously? The fight was lost in Britain, ac cording to historian E. G. West, through negligence. As Britain became more wealthy in the Nine teenth Century, individual enter prise responded by developing pri vate education. But the State school people had the better propaganda.

The individual, in Britain, never managed to fight. We'll need many more sympo siums and books like The 12-Year Sentence to keep the U.S. from going the way of Britain. There is a formidable educationist hier achy, guaranteeing jobs and tenure to teachers, to overcome if the private school is to be saved. Tax remission would be only a begin ning. But the case against com pulsion in education is now being cogently stated, and that, at least, is something. ~ LAW, LEGISLATION AND LIB ERTY. Volume 1: RULES AND ORDER by F. A. Hayek (Univer sity of Chicago Press, 1973), 184 pages, $7.95. Reviewed by Henry Hazlitt DR. HAYEK'S great treatise, The Constitution of Liberty, appeared in 1960. In the years since then he has continued to explore at an even more basic level the problems with which it dealt. The present small volume, Rules and Order, is proj ected as the first of three. It is to be followed by a second vol ume dealing with The Mirage of Social Justice, and a third treat ing The Political Order of a Free Society.

Dr. Hayek may seem to be go ing once more over the same ground as he did in The Consti tution of Liberty. In certain re spects he is. If he had known when he published that book that he was going to proceed to the task attempted here, he confesses, he would have reserved that title for this successor. It is only in the present book, he adds, that he addresses himself to the ques tion: "What constitutional ar rangements, in the legal sense, might be most conducive to the preservation of individual free dom ?" The outstanding thesis of this book is that "a condition of lib erty in which all are allowed to use their knowledge for their pur poses, restrained only by rules of just conduct of universal applica tion, is likely to produce for them the best conditions for achieving their aims." In explaining this thesis, Dr. Hayek elaborates more fully his contention, which will be familiar 1974 OTHER BOOKS 505 to his past readers, that both eth ics and law had their origin in the tendency of men to develop prac tices and follow rules without clearly being aware of the social purposes served by those rules.

"Man acted before he thought and did not understand before he acted." The rules on which men acted developed over generations of experience. Those societies in which individuals followed supe rior rules increased their chances for survival. Thus there evolved beneficent practices and institu tions which, as the eighteenth century philosopher Adam Fer guson put it, were "the result of human action but not of human design." Both ethics and law in their origin emphasized the enormous importance of acting on principle. It was only when men did this unswervingly that they could de pend on each other's actions; that they could avoid conflict, maxi mize peaceful cooperation, help further each other's purposes, and therefore best further their own. A few other eighteenth-century philosophers, outstandingly David Hume, recognized this. But in the nineteeth century the refusal to recognize as binding any rules of conduct whose justification had not been rationally demonstrated became an ever-recurring theme.

As a striking illustration of how this led to immoralism, Hayek quotes from a talk given by Lord Keynes in 1938. Speaking about the time, 35 years before, when he himself was twenty, he said of himself and his friends: "We entirely repudiated a per sonal liability on us to obey gen eral rules. We claimed the right to judge every individual case on its merits, and the wisdom, expe rience, and self-control to do so successfully. This was a very im portant part of our faith, violently and aggressively held, and for the outer world it was our most ob vious and dangerous characteris tic. We repudiated entirely cus tomary morals, conventions, and traditional wisdom. We were, that is to say, in the strict sense of the term, immoralists . . . we recog nized no moral obligation, no in ner sanction, to conform or obey. Before heaven we claimed to be our own judge in our own case." To which he added: "So far as I am concerned, it is too late to change. I remain, and always will remain, an immoralist."

The reader will recognize in this passage an ominous key to the present. It is the spread of precisely this attitude since then to ever-widening circles that helps to explain the moral and political decay in the last few decades, ranging from politicians in the highest offices who proudly call 506 THE FREEMAN August themselves "pragmatists" down to such lunatic-fringe movements as the Symbionese Liberation Army. Again and again Dr. Hayek em phasizes that "Freedom can be preserved only by following prin ciples and is destroyed by follow ing expediency." The direct effects of any interference with the mar ket order will be clear and visible in most cases, while the more in direct and remote effects will mostly be unknown and therefore disregarded. When we decide each issue on what appear to be its in dividual merits, we always over estimate the advantages of central direction. Dr. Hayek applies his principles to ethics, politics, and law: "Law in the sense of enforced rules of conduct is undoubtedly coeval with society; only the observance of common rules makes the peaceful existence of individuals in society possible." Law is older than legis lation. Our forefathers thought of law as something existing inde pendently of human will; not as something to be invented, but something to be discovered.

There is not space here to elab orate Dr. Hayek's theme, or to enumerate all his contributions. I must content myself with saying that his analysis of the origin, nature, and function of law is one of the most profound and enlight ening ever written. I have only two criticisms of this book. One is that Dr. Hayek's exposition is conducted too re morselessly on a highly abstract plane. One longs for concrete illus trations or examples, which are almost never offered. This unre lieved abstractness has long been a defect of Hayek's style; but in his earlier books, notably The Road to Serfdom, he more than atoned for it by his gift for pithy aphorism. Here he holds on to his sentences too long and over stuffs them with subordinate clauses. This makes for more difficult reading than even the profundity of his thought can justify. My second criticism is one of substance. Dr. Hayek is adamantly opposed, quite properly I think, to what might be called ad hoc util itarianism. He wishes to empha size the importance of acting in flexibly in accordance with prin ciple, with established rules. But he admits that ethical and legal progress has been made possible only by the constant "improve ment" of these rules. Yet he never specifically asks, what is the cri terion for deciding how a partic ular rule is to be improved? It is not merely consistency with other rules. Is it not, in fact, whether a proposed modification is likely to have more desirable social re suIts? And is not this a utilitarian test? Is it not at least a form of 1974 OTHER BOOKS 507 "rule utilitism?" A judge in striv ing to interpret and perfect the common law, no less than a moral philosopher, must have some cri terion in mind. Dr. Hayek rightly rejects all ad hoc applications of utilitarianism, but he seems to me possibly to have lost sight of the need for some utilitarian test for rules or laws themselves.

But I do not wish to overem phasize either of these objections. Compared with Hayek's contribu tion they are minor. This is a book of cardinal importance. It helps to lay more solid philosophical foun dations for ethics, law, legislation, and liberty. ~ THE LIBERTARIAN ALTERN ATIVE: Essays In Social and Political Philosophy, edited by Tibor R. Machan ( Chicago: Nel son-Hall Company, 1974) 553 pp. $12.50. Reviewed by Allan C. Brownfeld The Libertarian Alternative, a selection of essays in social and political philosophy, fills an im portant gap in the literature of American thought. Thirty prominent exponents of liberatarian ideas argue from their individual perspectives for the restructuring of collectivist institutional, cultural, and intel lectual elements to achieve the libertarian alternative of a free so ciety, based on individual rights and functioning through a free economy.

In an essay which introduces the reader to libertarianism, Pro fessor John Hospers declares that, "The political philosophy that is called libertarianism is the doc trine that every person is the owner of his own life, and that no one is the owner of anyone else's life; and that consequently every human being has the right to act in accordance with his own choices, unless those actions in fringe on the equal liberty of other human beings to act in accordance with their choices." Political theories, both past and present, argues Hospers, "have traditionally been concerned with who should be the master (usually the king, the dictator or govern ment bureaucracy) and who should be the slaves, and what the extent of the slavery should be. Liber tarianism holds that no one has the right to use force to enslave the life of another, or any portions or aspect of that life." To those who agree that the rights of life and liberty are in deed essential, but who denigrate the right to property, Hospers re plies that, "the right to property is as basic as the other two; in deed, without property rights no other rights are possible. Depriv508 THE FREEMAN August ing you of property is depriving you of the means by which you live ... The right to property is not the right to just take it from others, for this would interfere with their property rights. It is rather the right to work for it, to obtain noncoercively, the money or services which you can present in voluntary exchange .... If one is not free to use that which one has produced, one does not possess the right of liberty."

In an essay entitled "The Ana tomy of The State," Professor Murray Rothbard argues that the collective term "we" has "enabled an ideological camouflage to be thrown over the reality of political life. If 'we are the government,' then anything a government does to an individual is not only just and untyrannical; it is also 'vol untary' on the part of the in dividual concerned. If the govern ment has incurred a huge public debt which must be paid by taxing one group for the benefit of an other, this reality of burden is obscured by saying that 'we owe it to ourselves.'" "'We' are not the government . . . the government does not in any accurate sense 'represent' the majority of the people, but even if it did, even if 70 per cent of the people decided to murder the re maining 30 per cent, this would still be murder and would not be voluntary suicide on the part of the slaughtered minority ..."

In an essay concerning "Skin ner's Behaviorist Utopia," Dr. Bruce Goldberg rejects the Skin nerian thesis that man does not possess free will and is, instead, merely a result of his conditioned responses. For Skinner, the only alternatives are "good control" and "bad control." To this, Goldberg responds: ". . . this is simply the product of a bit of sham reason ing. What, one wants to ask, do you say about the possibility of establishing a society in which people are not subject to a rigid conditioning process in the hands of 'behaviorist' engineers, but in which they are able to encounter many and diverse influences and make up their own minds about which they regard as the more im portant and which the less?" Skin ner would reject it. Goldberg, affirming man's unique individ uality, believes that anything else would deny man's humanity. Discussing "Involuntary Mental Hospitalization," Dr. Thomas S.

Szasz poits out that persecution of men and women for religious differences, or on the basis of race, may have been eliminated in mod ern Western society only to be replaced by a new kind of perse cution. "Modern liberalism," he writes, "allied with scientism, has met the need for a fresh defense 1974 OTHER BOOKS 509 of oppression and has supplied a new battle-cry: 'Health.' In this therapeutic-meliorist view of so ciety, the ill form a special class of 'victims' who must ... be 'helped' - coercively and against their will, if necessary - by the healthy .... In the therapeutic state toward which we appear to be moving, the principal require ment for the role of big brother may be an M.D. degree." Contributors to this collection include Henry Hazlitt, F. A. Har per, Milton Friedman, Nathaniel Branden, Joan Kennedy Taylor, Anne Wortham and Yale Brozen. In seven areas of concern they make penetrating analyses of the relation of justice, liberty, and the individual; the interaction of states and societies; the failure of contemporary statism; the dy namics of free societies in for eign affairs; the response of eco nomics to a free market; and the prospects for and obstacles to libertarianism.

On matters of foreign affairs the libertarians appear especially weak and dogmatic, seeming to misunderstand the very real na ture of totalitarianism as repre sented in this century by Nazism, Fascism and Communism. Accept ing a seemingly utopian conception of man as good, and as being cor rupted by such institutions as the state, many libertarians would dismantle our military defenses and, in effect, leave us naked be fore our enemies. They would soon learn that such an approach would not enhance freedom, but would destroy it totally. Other than this serious blind spot, the thoughtful material in this volume is a welcome addition to a growing debate within the nation about the need to redis cover the dynamics of a truly free society. Libertarianism has much to contribute to that debate, and this volume, edited by Tibor R. Machan, represents a significant survey of a political and social en tity which, its supporters believe, "may represent the wave of the future."

~ THE ECONOMICS OF ENERGY - What Went Wrong and How We Can Fix It by Roger LeRoy Miller (New York: William Morrow & Co., Inc., 1974, 131 pp.) $4.95 Reviewer: Robert M. Thornton BUSINESSMEN, in popular mythol ogy, are all in favor of free enter prise. Not so! Like most other peo ple, they are tempted by political favors that will spare them the challenge of cOlnpetition. They de nounce "unfair" competition and argue persuasively that the priv ileges they want are really for the benefit of consumers! We must re510 THE FREEMAN August sist these flimsy arguments and insist on really free enterprise ... for the consumer's sake! This is the main thrust of Dr. Miller's excellent little book which teaches some important general truths about economics while ana lyzing the "energy crisis." There is a "crisis," he explains, because we have not had a free market for energy; government interference has distorted the market and as a result we suffer from "shortages"

of energy in its several forms. We hear congressmen denounc ing oil companies when it was the government itself that extended privileges to the industry. With equal duplicity the oil companies now protest government interfer ence, although in the past they have sought government favors. Government supported the price of petroleum products by controls on the import of inexpensive oil; and it kept the price of petroleum prod ucts down by enforcing price con trols on the industry! Naturally we get a mess. As to the evils of an international oil cartel, Miller wisely notes that the urge to "cheat" is unbearable in such situ ations and that only government can enforce cartel allocation re strictions to hold down supply and keep the price high. Another government policy that helps bring on an "energy crisis" is the use of fixed rates for electricity instead of charging more during peak periods. The regula tors save us from paying the true costs of our actions - the expenses for expanding facilities and re ducing environmental damages.

Also, the Federal Power Commis sion has kept the price of natural gas so low that it encouraged high consumption and discouraged ex ploration for new sources. Conservation, writes Miller, does not mean limiting the use of a re source but correctly determining what we are to use and when we should u~e it to maximize the bene fits. He stresses the importance of private property rights because when no one owns a particular re source, there is no incentive to use it economically. Several measures have been re commended to "fight" the "energy crisis." One is price controls, but these are effecti ve only in creating disruptions in the economy; they get people to respond to distorted price incentives. By not allowing the prices of refinery products to rise, they take away incentives to increase supply or reduce demand. Rationing has been suggested, too, but no system would be fair and would lead only to black markets and an expanding bureaucracy.

Higher taxes on fuel would have the same disadvantages as price controls and rationing plus they would put more of our money into 1974 OTHER BOOKS 511 government hands. Setting lower speed limits means more fuel used by trucks than when they are per mitted to operate at efficient rates of speed. Also, a reduced speed limit means more trucks will be needed to haul the same amount of goods and that in turn means greater fuel demands. The only answer is the free market. Miller scoffs at the idea of try ing to achieve self-sufficiency re garding energy needs. Prosperity comes from being able to buy where cheapest and to enjoy the benefits of free trade instead of suffering the high costs of pro tectionism; specialization rather than autarchy means more for everyone. One would like to see this easy to-read, relatively inexpensive book widely distributed. It makes so very clear that the free market is not a system designed to benefit only businessmen but one that benefits all of us. We must insist on the free economy for the con sumer's sake.

~ THE TIME IT NEVER RAINED by Elmer Kelton (Garden City, New York: Doubleday & Co., Inc., 1973) $6.95, 373 pp. Reviewed by Robert M. Thornton THE HERO of Elmer Kelton's fine contemporary novel is Charlie Flagg, a Texas rancher past mid dle age. It is man against the ele ments as Charlie fights to save his herds during a six-year drought, and at the same time live with the social changes of his time - rela tions between father and son, white Americans and Mexican Americans, ranchers and towns people, citizens and government. A true hero he is, too, not afraid to take an independent stand for what he knows is right and risk everything to keep his integrity. He was no saint, no unreal char acter from the storybooks but a real man with all that implies, both bad and good. He could be unreasonably bull-headed and can tankerous. With all his tolerance and fair-mindedness, he still suf fered from a prejudice that ex pressed itself in a mild form of paternalism. The story does not have the conventional happy end ing; but, unlike some modern works of fiction, it leaves the reader joyous, not despondent.

One puts down the book with tears in the eyes, yet a smile on the face.

512 THE FREEMAN August Men and women such as Charlie Flagg and his wife founded and settled this country and made it prosper by taking the bitter with the sweet and accepting responsi bility for themselves. Such per sons seem to be in short supply today, which may explain why our nation "ain't what it used to be." This independent, yea-saying-un to-life spirit must be recaptured by Americans if we are to have a rebirth of liberty in the ."land of the free." At a time when more and more people not only accept government handouts but demand them as a right, it is good for the soul to read a story, albeit fictional, of a man who refused to go on the dole and willingly faced the conse quences of being his own man. , HANDSOME BLUE LEATHERLEX FREEMAN BINDERS $2.50 each ORDER FROM: THE FOUNDATION FOR ECONOMIC EDUCATION IRVINGTON-ON-HUDSON, NEW YORK 10533 the Freeman VOL. 24, NO.9. SEPTEMBER 1974 RewardingFailure A national policy that is a sure road to disaster.

uSpeak for Yourself,John" Revisited Presume not to live another's life for him. Richard C. Renstrom Ridgway K. Foley, Jr. 515 522 What Is Philanthrophy? Charles R. LaDow 526 If private charity is demeaning, how may we describe governmental redistribution? Makers or Takers Why it is wrong to count on the promises of socialism. Roger Donwa.y 532 The BeleagueredBusinessman Perry E. Gresham· 536 The case for business needs to be made as long as antibusiness groups are advocating socialism. Reflectionson Gullibility Leonard E. Read 545 The better we see our blessings the less vulnerable we are to "cost less" panaceas. PoliticalFreedom Is Not Enough We need liberty as well as democracy! Miller Upton 549 Freedom'sBounty Carl A. Keyser 560 The importance of personal freedom for economic development and growth. The Enigma Ralph Bradford 564 The testing of America by citizens who are doing their utmost to destroy it.

Book Review: 573 "The Fellow-Travellers: a Postscript to the Enlightenment" by David Caute Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

the Freeman A MONTHLY JOURNAL OF IDEAS ON LIBERTY IRVINGTON·ON·HUDSON, N. Y. 10533 TEL.: (914) 591·7230 LEONARD E. READ PAUL L. POIROT President, Foundation for Economic Education Managing Editor THE F R E E MAN is published monthly by the Foundation for Economic Education, Inc., a non political, nonprofit, educational champion of private property, the free market, the profit and loss system, and limited government. Any interested person may receive its publications for the asking. The costs of Foundation projects and services, including THE FREEMAN, are met through voluntary donations. Total expenses average $12.00 a year per person on the mailing list. Donations are in vited in any amount-$5.00 to $10,000-'-as the means of maintaining and extending the Foundation's work. Copyright, 1974, The Foundation for Economic Education, Inc. Printed in U.S.A. Additional copies, postpaid, to one address: Single copy, 50 cents; 3 for $1.00; 10 for $2.50; 25 or more, 20 cents each.

THE FREEMAN is available on microfilm from Xerox University Microfilms, Ann Arbor, Michigan 48106. Some articles available as reprints at cost; state quantity desired. Per mission granted to reprint any article from thisis5ue, with appropriate credit except "Rewarding Failure."

RewardineFailure RICHARD C. RENSTROM JIM AND MARY ANN are a typical hard-working middle-class Ohio couple. Both hold down full time jobs, and feel they must in order to support their five children on their $11,000 combined annual in comes. They live in a modest home and pay their bills promptly, but find it impossible to save anything. Across the street is another family. This family lives in a pre tentious home and drives an ex pensive luxury automobile. The father, however, is unemployed, which allows the family to receive $194 worth of food stamps each month plus the benefit of other social services. Unusual? No, unMr. Renstrom of Caldwell, Idaho, writes from many years of experience in various Federal and state programs dealing with the "disad vantaged." less you are aware that he is un employed because he was caught embezzling funds from his em ployer's till! A little further east, in New York, two brothers decide to buy homes for their families. One brother is industrious and goes to night school to qualify for a pro motion at his factory. The other brother drinks excessively and makes little effort to hold a steady job. In order to buy their homes, the first brother had to pay a steep interest rate and make a substan tial down-payment, while the sec ond brother discovered tha t he qualified for low-income housing which would cover most of his expenses and interest charges.

Across the country, in Idaho, 3 young mother with one child de515 516 THE FREEMAN September cides to divorce her husband. The family income is low enough to qualify her for the services of a taxpayer-supported "legal aid" lawyer to obtain the divorce. The divorced mother then receives wel fare payments. She bears two more children, both illegitimate. With the birth of each child she also receives an increase in her welfare allotment. Meanwhile, back in Chicago, a young lady seeks one of the many government grants or loans avail able to college students. Though an honor student, she finds that the modest sum her middle-class parents have saved for retirement disqualifies· her from any scholar ship help. Her friend, who is a mediocre student, has no difficulty at all in qualifying for several government grants. The earnings of the two families are about the same. But instead of trying to save for their old age the p~rents of the second girl have· spent their money on a beautiful home with fine furnishings, fancy cars, many vacations, and a high-stepping social life.

Further west, in California, a divorced mother of three decides not to work, which means that she may receive welfare, food stamps, free medical care, legal aid, rent subsidy, free school lunches, and other social services. For her to support such a standard of living would require a job paying $11,500 per year. Since there is small chance of her get ting such a job, she just sits - at the taxpayers' expense! The Cumulative Impact of Various Programs To the vast majority of hard working middle-class Americans these may seem like shocking sit uations. But the piling of one social program upon another has created a situation where such occurrences are becoming common place. The world of social pro grams has become so immense in recent years that no one person or bureau can ten just how many people are receiving these welfare handouts. The best educated guess is that in excess of thirty million people will receive some sort of a handout this year.

Proof of this is the cost, with social programs now being the largest portion of the $304 billion budget proposed by President Nixon for 1974-75. Total outlays for social welfare by Federal, state, and local governments are expected to exceed $200 billion this year - a fact attested to by the staggering tax load being borne by the middle-class wage earners of America. Perhaps the most tragic part of this mazeof social programs is the theme that has emerged in recent 1974 REWARDING FAILURE 517 years - a theme of rewarding fail ure. By rewarding laziness, im morality, a disinclination toward self-improvement, divorces, and even crimes, our society has put itself in the position of punishing the hard-working middle-class cit izen who pays the taxes and keeps his own house in order. Reeling under such an oppressive tax bur den, many middle-class workers are beginning to ask if perhaps our nation has made a mistake and gone down the wrong road.

The Economic Opportunity Act The mistake as they see it was the Economic Opportunity Act of 1964 - a landmark piece of legis lation that started this nation down a different path. With the "war on poverty" seemed to come a new philosophy - one of reward ing failure and punishing the tra ditional virtues of hard work and a sense of personal responsibility. The negative income approach came into use. If your income is above a certain figure you do not qualify, and if below, you do. An individual is not responsible for his own failures; it is a "cold and cruel society" which is at fault. For his failures and for society's transgressions against him, the "disadvantaged" would be show ered with program after program as well as a liberal infusion of cold cash. It has taken several years for these many programs to develop, of course, but it begins to be painfully clear to the middle-class American that he has come out on the short end of the deal. Take the popular Food Stamp program, for instance.

Dnder the guidelines, any fam ily with an income below a certain level and with no more than $1500 of liquid assets can receive the stamps. The program thus starts right off by punishing thrift. If you save a little for your retire ment you are punished; con versely, if you spend all your cash on wild parties or just the simple luxuries of life, you are rewarded. The stamps are purchased - the purchase price depending on the monthly income. Recipients can deduct taxes, some housing costs, medical expenses, and work ex penses when they compute their monthly income, so that a family of six can earn well over $700 a month before they are ineligible. With the increased price of food, this "free food" program has brought many angry responses from housewives across the land. "My husband works ten hours a day to feed our family," one wom an says, "yet the bars and pool halls are full of lazy men whose families are receiving stamps."

Another woman echoed an oft repeated comment that "the only 518 THE FREEMAN September people hauling steak and prime ribs out of the store these days are the rich and the food-stamp people. The rest of us middle-class people are lucky to afford ham burger." Perhaps the most shocking part of the food stamp scheme is that there are no criteria, other than income, to qualify. A man can lose his job because of committing a crime and qualify, hippies living in a commune on drugs with no desire to work can qualify, as can any bum in the country. Nowhere is there any need to work or even actively seek work in order to receive food stamps. Now~ere is this change of phi losophy more apparent than in our ever-expanding welfare rolls. We now have "welfare rights," which brought a sharp reply from one taxpayer I interviewed who said that "no man or woman has a moral right to charity, either through the tax system or from private sources. Welfare is a priv ilege, not a right."

Why Struggle? There are many shocking stories about the welfare game. Perhaps the most absurd is the case of one young lady who was put through a six-month medical sec retary's training program at the taxpayers' expense. She worked for several months after she graduated, only to quit her job and go back on welfare when she found it financially to her advantage to do so. As the employment service counselor later told me, "Noone should be denied the right to fail, but nobody should be paid to fail" ! The story of welfare recipients bearing illegitimate children and then receiving increased payments is well-known, of course. I wanted to find out if there was any way this could be stopped. "We can counsel them and offer birth con trol methods," one case worker told me, "but there is no way we can actually stop them from re ceiving increased benefits." The woman is thus rewarded for her immoral conduct, and society coughs. up more taxes to pay for her failures.

There are, of course, many other OEO type programs, all of which have a built-in criterion of rewarding failure. The Job Corps and the Manpower Development and Training Act are two which provide training opportunities for youth and adults. Not just anyone can qualify, of course, since it is first necessary to fail. The best way is to drop out of school or to loaf at the job. This brings up the question of just what percentage of poverty is caused by things within a per son's control and what percentage by outside forces. So I interviewed 1974 REWARDING FAILURE 519 dozens of counseldrs, job replace ment specialists., and case workers to get the answer. Laziness The answer they gave came through strong and clear: the single greatest cause of poverty is still laziness! Case worker after case worker voiced the same view that low incomes usually result from not trying very hard. The ones I interviewed agreed that society has an obligation to help those who are truly helpless, but there was also unanimous agree ment that our maze of social pro grams is encouraging an over whelming percentage of low income people to shun hard work and thus continue to qualify for the ever-expanding programs available.

In order to qualify for MDT A or Job Corps training a person must be below the income cri terion and preferably a school drop out. Once qualified, the re cipient is eligible for training that will cost anywhere from $1500 to over $4000 per year - all at the taxpayers' expense, of course. To struggling middle-class taxpaying parents who haven't failed, this may come as a bitter pill as they face the costs of keeping their own children in college. College costs have skyrocketed in recent years, of course, but what really hurts is the change in emphasis from "merit" to "need" to qualify for financial aid. It used to be that the students who dug in and got the grades received the financial aid. Now the emphasis is on helping low-income students, regardless of their ability, grades, or motivation. Under the Basic Educational Op portunity Grants program a stu dent can receive up to $1400 in a direct gift from the government each year, and there are other Work Study and Student Loan programs available. Students from middle-income families who might have saved a little for retirement need not waste time applying for these, however, since the complex formula used to determine "need"

will rule them out. The old Amer ican virtues of hard work and thrift are once again punished, and the "new" virtues of lazines8 and profligacy are rewarded. This change in scholarship phi losophy has had a profound effect upon our college campuses. "There is no such thing as a middle-class student on our campus any more," the admissions officer of a small private Western college told me. "All we have now are the rich and the poor - the middle-class family is gone from our school. I guess they are too busy paying taxes so the 'disadvantaged' students can attend," he said.

520 THE FREEMAN September Free Lunches This new theme of rewarding failure has even permeated the primary school system, where some of the students receive "free" lunches while the majority do not. "I don't object to a school lunch program," one mother of five told me, "but I just don't think it's fair that my husband and I both have to work hard to support our family and then pay taxes so that the children of lazy parents get free lunches while we have to send cold lunches with our kids because we can't afford the expense of five hot lunches each day." Many people I talked to felt the same, the consensus being that everyone should receive a free lunch rather than discriminate against those parents who work hard to support their families. School administrators also seemed to be in agreement that programs with negative qualifying criteria are destroying incentive to im provte one's lot in life.

Nor do the school programs end here. One of OEO's most signifi cant programs is the Neighbor hood Youth Corps - a program to put jobs into the hands of "dis advantaged" students. To qualify for these part time jobs a student must-you guessed it-come from a low-income family. No one ob jects to giving these kids a chance, of course, but is it fair to the middle-class student who wants a job and can't get one? Many Youth Corps supervisors told me the same story - jobs go begging for applicants due to the lack of motivation on the part of the dis advantaged, yet they can't give the job to a highly motivated middle class student who is desperately trying to earn money for college. "It's crazy," one school adminis trator told me, "when we punish the highly motivated middle-class kid whose parents pay the taxes by denying him the chance to fill one of these empty Youth Corps slots that are going begging."

Free Medicine Perhaps the biggest giveaway of all, however, is Medicaid. This medical care program for the dis advantaged provides a spectrum of free medical services far more comprehensive than any combina tion of Medicare, Blue Cross, and your pocketbook. Dental care, eye glasses, prescriptions, and even office calls are all covered, which prompted one physician to tell me that his "disadvantaged" patients were receiving better medical care than his own children! The. only way to qualify, of course, is to not earn very much. One hesitates to say anything against medical care for the poor, yet there was surprising agree ment among the medical and social 1971,- REWARDING FAILURE 521 people I interviewed that Medi caid, piled on top of all the other social programs, is destroying the incentive to improve one's income. As one physician told me, "Medi caid alone is not the problem, but rather it is all these things com bined that makes it so attractive to remain a low-income family."

These other things include such goodies as free legal help for any thing from criminal defense to divorce, along with representation to gain welfare "rights," rent sub sidies, low-income housing where the government pays all but one per cent of the interest (tem porarily suspended by President Nixon's orders), day care centers, free transportation,public health clinics, special education classes for teaching minority-group his tory and culture to those who re fuse to be "Americanized," and m~ny others - all paid for by hard-working middle-class citizens who are legally barred from the benefits of such programs. Where It All Ends This proliferation of poverty programs has placed such a tax burden on American middle-class families that they are bound to question a policy of rewarding failure, especially at a time when the price of everything seems to be going out of sight. Perhaps the greatest tragedy of all, however, is not the cost in dollars, but rather the subsidized encouragement of failure, immor ality, and irresponsibility. This new philosophy blinks at the real ity that plain old laziness is still the single greatest cause of pov erty in all the land. Present pro grams are wasting the taxpayers' dollars on people who lack the ability or desire to achieve the goals of such programs.

The present mind-boggling maze of Federal poverty programs is causing immense frustration among Americans who feel their traditional values of hard work, thrift, morality, self-improvement, and discipline are being punished. Let us not forget that America was built by hard work, not wel fare. Rewarding failure and pun ishing the traditional American virtues is not going to solve our problems - it is only going to lead us down the road to mediocrity. We need to redirect our re wards toward those people who make an honest effort to improve themselves, and away from pro gra.ms that encourage the recipi ents to remain on the-dole. We should maximize the opportunities to succeed through personal en deavor and open competition in the market, and above all, we should quit rewarding failure. ~ II ()WlA~,Jb 4 Revisited RIDGWAY K. FOLEY, JR. SEVERAL YEARS AGO, Leonard E. Read explained the function of the Foundation for Economic Educa tion, Inc., in a little pamphlet entitled "Speak for Yourself, John." As always, his message contained great merit: too many Americans recognize that the na tional situation is faltering badly but "they leave the task of speak ing out to organizations and pro fessionals and, by so doing, gain a false sense of discharging their social responsibility."1 Mr. Read's salient message and historical title started my think ing along a different but related path. Too few individuals in mod ern society speak for themselves - they prefer to descant and act I Read,Leonard E., "Speak for Your self, John" appearing as chapter 19 in the book, To Free or Freeze. (The Founda tion for Economic Education, Inc., Irvington-on-Hudson, New York, 1972).

Mr. Foley, a partner in Souther, Spaulding, Kinsey, Williamson & Schwabe, practices law in Portland, Oregon. 522 for others, to bind their fellow man and to restrict his choice. In so doing, they render their neigh bor less of a human being. A litany of the mundane but eternal acts of speaking for others boggles the mind when viewed in the glare of searching analysis. I band together with like-minded souls and use the coercive force of government to ban highway ad vertising in the form of billboards, all in the name of ecological sanity and environmental beauty. No matter that some travelers along the freeways which crisscross our nation find billboards illuminating, educational and relaxing. No con cern that the farmer along the road may put the income from the signs painted on his barn to good use, like buying penicillin for his enfeebled wife, or educating his children. I choose to speak only incidentally for myself; I assume the arrogant pose of expounding for the weary traveler and the embattled farmer.

1974 "SPEAK FOR YOURSELF, JOHN" REVISITED 523 Meddlesome Neighbors Again, I gather with my neigh bors and either directly or indi rectly vote to impose an income tax increase upon all persons within a given category for the laudable purpose of donating funds to the underprivileged. No matter that the coerced "donors" may pre fer to choose their own charities. No concern that the recipients of the largess may feel demeaned by being made objects of welfare (one can give and receive assist ance more gracefully and humanly sans bureaucracy). I speak for all - mulcted and demeaned, creative and needy - when I choose the cou;rse which I demand that th~y follow. A third example from the my riad ones which abound these days: I plunder the liberty of others by prohibiting them from engaging in pursuits which ap peal to them and which neither coerce nor defraud others. I close movie houses showing X-rated films to adults; I impede farmers from exceeding an arbitrary grain or beef allotment; I bar Ameri can citizens from fleeing fiat cur rency into gold; I demand that homeowners with septic tanks hook up to a sewer line. In each example I speak for others, and bind their actions as surely as if I chained them.

Notice that when we tax or regulate those less potent than our selves we often do so in their name and for their own good. We as sume, like little dictators, that we know better than anyone else how their lives should be lived. We are so certain that we, and only we, know what constitutes goodness, rightness, justice and truth. Bib lical testimony applied an apt label to people like us: righteous. The term came to encompass the pe jorative sense of self-important little creatures unaware of their own finiteness. My words have been chosen carefully to this point: for several paragraphs I have employed the first person singular; the last paragraph I switched to the first person plural. Two reasons for this grammatical choice merit ex amination. First, I use the word "I" ad visedly, for no one of us lives without sin in this regard. Each of us, even the strictest libertarian, harbors secret projects within his breast which "justify" a suspen sion of the rules. Damn all the taxing authorities and their petty schemes, but salvage the local art museum operated at public ex pense because I think it is so worthwhile that it must survive and it cannot survive without coercive exactions.

The moral? Each of us must constantly guard against the very 524 THE FREEMAN September human tendency to make excep tions and each of us must seek consistency as his banner. Each erosion of freedom, no matter how slight, chips away at our vital transcendent rights, our human ness. No liberty stands alone. If I may make an exception for my art museum, you may make an excep tion for your import duties, and the fellow down the street may argue for a law which requires gun registration. Second, I switched to the term "we" in order to emphasize that man tends to salve his conscience when he performs unjust and im moral lootings by committee. Somehow, it doesn't seem so evil to deprive a citizen of his life, his liberty, or his property if "all of us" do the' trick together. Yet, in final analysis, each man must bear full responsibility for the conse quences of his own acts, no matter if they are performed in the name of a politburo, a committee, a cor poration, or a state. Thus, I tax, spend, and destroy if I support the policies, elect the officials, hesitate to criticize, stand mute, or benefit from this organized corruption. I can't hide under "we" for "we"

is just a "bunch of 1's." Self-Exemption An additional noteworthy fact appears when we deliver more than a cursory glance at the problem: we are really speaking for a neigh bor alone in most instances and not for ourselves. We tend to leave ourselves out of the picture. The man advocating increased aid to dependent children most often fa vors the collection of funds by means of an income, sales, or prop erty tax which will fall more heav ily, or totally, upon someone else. He may possess the purest motives and the most desirable goals but he wants someone else to pay. I do not contest the right of a wealthy politician to give away his estate to needy orphans; I rather resent it when he gives away m,y estate against my will and raises his own salary in· the process. Perhaps we tend to forget why we should speak only for ourselves and not for others. Simply stated, not one of us possesses any innate gift which enables him to deter mine the destiny of another human being. Each of us can run his own life better than any other person, better than Albert Einstein, bet ter than John Stuart Mill, better than George Washington. Picture the most brilliant and incisive in dividual you can conjure up; he still falls short in capacity to gov ern the life of another individual because of his finity, his inability to creep into the mind and soul of the other. Anyone who has ever acted as executor, trustee, guar dian, attorney, or fiduciary can 1974 "SPEAK FOR YOURSELF, JOHN" REVISITED 525 attest to the difficulties inherent in managing the business and per sonal decisions of his ward.

Consider what transpires daily when we arrogate to ourselves the power to speak for those who have not given us authority to represent them. On the one hand, one, who speaks for another as sumes unwarranted control over the life and liberty of his subject. At the same time, he tends to as·· sume that he is entitled to greater worth and stature than those lowly persons who are benea th him. On the other hand, the object of such intervention starts to feel alien~ted and demeaned; he be comes less of a human being be cause others deprive him of one essential element of humanness: the meaningful power of choice and control over one's own life. Feeding and care of hungry dere licts may constitute a worthy goal; the acting individual gains greater meaning and lives a higher life when he helps others by virtue of his own decision than when he acts under duress and compulsion. True charity exists when I help my neighbor in need; false charity appears when my neighbor steals my property to give, like Robin Hood, to the "poor."

Furthermore, enforced choice creates an alienation and anonym ity all its own. When we purport to speak for our neighbors, we do not think of them as human beings, as friends, as relatives, but rather in an abstract sense. When I participat~ in these acts, I limit my hrother's freedom, not just the liberty of some faceless stranger. In final analysis, each of us should speak for himself alone and not for others in society when there is no voluntary agreement with those others to allow us to represent them. We should be proud of our choices and willing to live with their consequences, but we should avoid at all costs the arrogance which encourages us to declaim for others. ~ IDEAS ON LIBERTY Leo Tolstoy FROM THE DAY when the first members of councils placed exterior authority higher than interior, that is to say, recognized the de cision of men united in councils as more important and more sacred than reason and conscience,. on that day began the lies that caused the loss of millions of human beings and which continue their un happy work to the present day.

CHARLES R. LADow What Is PHILANTHROPY? SINCE THE STATE has, in our time, assumed the status of the chief philanthropic institution in the nation, it is well that we should reexamine the roots of the word, philanthropy. Casual inspection of any dic tionary gives us a definition: "Love for mankind; good will to all men ;-opposed to misanthropy." The source is, of course Greek: philos (loving) + anthropos (man). Older Webster Interna tionals gave "human being" as an alterna tive to the generic sense of "man." Indeed, the Greek origi nators of the term used it either generically, or in the individual sense, as we do, from Homer on ward. Liddell and Scott's Greek English Lexicon informs us that Homer even used anthropos in re ferring to the dead. In consider ing philanthropy, it is important Mr. LaDow, of San Diego, recently retired as a teacher of social studies in high school. 526 that we should distinguish be tween our use of the term, man, in the generic sense, or as indicat ing the individual; or as a collec tive or distributive noun. Do we mean, by philanthropy, "the love of mankind," or "the love of hu man beings 1"

This is no quibble. Technically speaking, Latin scholarship has demonstrated that ens (some thing) and unum are interchange able terms, which may be predi cated of one another, Le., "one is something, or something is one." To put it in ordinary words, any thing which is not individually distinguishable may be imagi nary; but it is not real to human perception. Not to keep this in mind is to make communication impossible. We don't know what we are talking about. Only God, or his chosen ministers, could love mankind in the purely generic sense.

1974 WHAT IS PHILANTHROPY? 527 Common sense also validates this truth. None of us ordinary mortals can realize love which is unapplied to individuals, whether it be God, self, another person, or any number of individuals. To love "mankind" is to be out of touch with reality, as far as human af fairs go. Any affection must have an object. Of course, it is possible to love a principle, such as humaneness or godliness, and one may fasten love upon anything imaginable. Anything possible to the mind of a person may be a real object of love - to him. But here we reach into the ineffable. Tragic though it may be, this must be a lone1y vigil. It is out of the concourse of human philanthropy. Look to the Individual Practical philanthropy must look upon anthropos (man) as a distributive noun. In so doing, it cannot look upon people as mem bers of classes, races, or any other form of collective entity, except in an accidental sense. For this very good reason, the Goddess of J us tice is blind. Justice is even-hand ed. Each person must stand, equal and alone, before the bar. Quotas or class discriminations have no place here, pro or con. Genuine philanthropy requires that each individual receives the love and treatment he deserves. To do otherwise is to rob the more de serving.

One must be blind indeed not to recognize the difference in quality of persons. Also, he must see that such differences exist without re gard to race, class, sex, or any other generic classification. Dis crimination with regard to such individual differences is the first requirement of survival. One should not marry a murderer or employ a thief, regardless of what other categories might fit such persons. It is unlikely that one could love without the capability of hatred, or even know the differ ence. The viability of any society rests on the quality of discrimina tion shown by its citizens. By shunning the evil and rewarding the good and productive, they edu cate one another. Where this proc ess works well, the need for police is minimized. Citizen acts of terrorism (ex treme misanthropy) are inevitable signs of ubiquitous government. When the state absorbs moral con trol, the moral controls of society become powerless. Most persons do not care, nor do they dare, to intervene in a drama in which they are not cast. People· only love and tend a society of their own voluntary making, as demonstrat ed by the widespread decline of patriotism. Even the resort of the young to communes is part of this 528 THE FREEMAN September alienation. Lack of respect .for parental and other authority, in cluding business leaders, is func tionally connectable to their ac ceptance of the state as patron.

Although the vigilante spirit and lynch mob are not unknown to self-policing society, the inevi table arising of terrorism in the police state, apparent worldwide today, is vastly more terrible and destructive of the philanthropic spirit. The Greeks Had Two Words Collectivizing anthropos did not begin with Karl Marx. As pointed out, the ancient Greeks were some what ambiguous with the term. Plato's leaning toward the Spar tan model is well known. Para doxically, Marx admired Aristotle, who was systematically critical of Plato's collectivist system of "ideas." Such disparate thinkers as St. Augustine and Rousseau contributed to the intellectual col lectivization of man. But, in the past hundred years the process has accelerated to the point where very few intellectuals seem to un derstand clearly that a person is an individual. Hence, the bio-chem ist, Roger J. Williams has found it fitting to remind us, in his re cent book: You Are Extraordinary.

Since this mental aberration has spread worldwide, it is difficult to find living examples of a society of responsible indi vid uals larger than a household. The ultimate excuse for the pol iticization of philanthropy is that society has grown too complex for individualism to be counted. As Leonard Read has pointed out, this· argument is false, both in fact and logic. The division of la bor in industrial society has placed burdens of responsibility on the individual beyond any comparison in history. Likewise the part which each individual plays in the economic world is vastly simpli tied by business organization, up on which government is mainly parasitical. Whenever the political managers get sufficiently fouled up in sharing-the-wealth programs and directing our lives, they indi cate that they know where the skills are by calling businessmen to Washington to straighten out the me~s .. Anyone should know, by now, that politicians are the last persons who should be allowed to control an economy, especially in the name of philanthropy. The in creasing complexity and differen tiation in the ways people ex change goods and services indi cate a need for greater decentrali zation; not for further centrali zation of power. Big business rec ognizes this by increasing resort to sub-contracting factors in pro duction. Government, on the other hand, becomes more centripetal by 1974 WHAT IS PHILANTHROPY? 529 the hour, in power and function.

The hoary nineteenth century fear that corporate monopoly must inevitably destroy opportunity for the individual entrepreneur is still parroted by charlatans and the ignorant; but anyone who troubles to look at the facts will see that small business flourishes as never before. Government, itself, is the one true monopolist. Hence the whole antitrust machinery of gov ernment, aside from cases of real fraud, is counterproductive, rep resenting a needless ultimate add ed cost to the consumer and tax payer. This imposition is vastly aggravated by the failure of poli ticians to apply the same stand ards to labor unions in "restraint of trade" which are so grievously, if unevenly, applied to corporate business. In this, as in the whole field of government control of pri vate exchange, politicians can lay no claim to philanthropic function. The bill for their power-struggle is an onerous burden placed on the fundamental anthropos: the con sumer. Together with government made inflation, this is clearly re flected in a galloping rise in the price structure: a strange philan thropic outcome!

The System at Fault It should be needless to point out that these strictures on the heartlessness of government "giving" are not intended to apply to any particular member of the bu reaucracy. Truly philanthropic in dividuals may be found in any sys tem. No doubt there are humane guards (so far as they are allowed to be) even in Russian prison camps. However, there is a basic misanthropy in any non-discrimi nating system of collectivism. Not to recognize the uniqueness of the individual is a mark of indiffer ence, if not hatred. As any observ ant cowboy can tell you, there are even personality differences in a herd of cattle. This writer has also encountered members of the bu reaucracy discussing among them selves its heartlessness toward beneficiaries. There is no way in which gov ernment. can be philanthropic in the distributive sense. Abjured by the most basic rule of law that public funds may not be appropri ated to private benefit, it must see that its beneficences are only ap plied on a categorical basis. One must fall within the parameters of an abstract class in order to enjoy anyone of the benefits. Since, in real'life, few persons fit into neat categories, either in their needs or deserts, anyone who has dealt with the public bureaucracies has felt the twinge of their uneven per formance. Even necessary crimi nal laws often present the face of inj ustice in their enforcement.

530 THE FREEMAN September This may be borne; but heartless philanthropy is a contradiction in spirit which must be offensive to anyone with sensibilities. Since the whole charade of government philanthropy has been built upon the assumption that private char ity is demeaning, it is an exercise in futility. In private charity, one is, at least, looked upon as an in dividual. Furthermore, he knows that any gift is voluntary and not wrested from someone else by force. Health Care Intervention Governmental intrusion into health care is another example of philanthropic futility. Coincidental with the development of Medicare and Medicaid have come skyrock eting costs of medical services. Anyone acquainted with the law of supply and demand will know the relation of the former to the latter phenomena is causal. Public goods have the attraction of free goods and invite over-consumption of scarce resources. As it hap pened in England, liberal politi cians now are urging a national health program. Having made health care too expensive for the average citizen, government now considers taking the whole respon sibility out of his hands. Not only would this hamstring individual judgment and genuine philan thropic action in one of our finest professions; but the quality of service and cost to the ultimate consumer would fall and rise (re spectively) in dramatic fashion.

The costs might be hidden in taxes or inflation; but they would be there to all but the indigent. In quality of care and other costs of living, even the indigent would suffer from such an un-philan thropic move. The economic sham bles of England's welfare state should be warning to us in follow ing her march toward totalitarian controls. Since Protagoras and Aristotle, realistic philosophers have agreed that "nothing exists apart from particulars." So, in philanthropy, they have recognized that there must be a particular giver and a particular receiver in any real philanthropic act. Of course phi lanthropists may act in concert, and may even be enclosed as the "fictitious individual" of incorpo ration. However, private philan thropy, however organized, has the magic ingredient of. free and will ing donation. Each individual vol unteers his contribution to the benefaction. Each person who ben efits may know it as a freely given gift. Just as there is no love but particular love, there is no philan thropy but the private kind of free and willing exchange. Widespread recognition of this truth is evi denced by the happiness with 1974 WHAT IS PHILANTHROPY? 531 which private philanthropists go about their work and the gen erally gratifying nature of all their relations. The dreary bu reaucracy of public charity stands in sharp contrast, as it always has.

He who loves everyone, in truth loves no one. No institution is, of itself, capable of love. It seems un necessary to point out such evi dent matters. However, the recent lack of sophistication concerning ontology and etymology often finds one in a state of wonder. As Albert Jay Nock noted so many decades back, people are losing touch with reality. They can be convinced that government can be philan thropic, even when its record is documented with the grossest swindles, inequities, and downright absurdities. As Nock point ed out so simply, "No nation can afford to support all its . idle peo ple." By putting us into huge debt and inflating the currency, our politicians have attempted to do just that. At the same time, phe nomenal growth of private philan thropy indicates the failure of their efforts. (Were they success ful, it should be "withering away," like capitalism, in the Marxist model.) That private philanthropy is still so robust is an earnest of the spirit of the American people.

There is no doubt of their wide spread philanthropy. Let us order our politicians to giv~ philan thropy back to the people. Only they know how to use it. Only they can even exercise it. ~ IDEAS ON $ LIBERTY A Meaningless Attempt IF WE NEED LAWS to make people treat men of other faiths and races as friends; if we need the police power of the secular state to take money from men for human need; if it is believed that the only hope of a city of God is to seek the alternative of a collectiv ized mass leveled to the lowest common denominator of mentality and ability - if all this be the limit of our hope for mankind, then even such activity is sheer futility, for even if such an effort could be achieved it would have no meaning at all for mankind. This rejection of personal responsibility would prove only that it is possible to make men live like whipped dogs, and the proving of it would be hell.

RUSSELL J. CLINCHY. "Charity: Biblical and Political"

MAKERS ROGER DONWAY or TAKERS UNTIL quite recently, it was con sidered a sophisticated criticism of capitalism to dismiss it as having succeeded. From David Riesman to Daniel Bell, the prophets of abund ance were most laudatory about the ability of free enterprise to meet people's needs. The enrichment made possible by capitalism was described in terms so glowing, in deed so utopian, that most capital ists would hesitate to use them. These theorists did not, how ever, draw the conclusion that capi talism is a good thing. Rather, they drew the conclusion that capital ism had been a good thing - in an age of scarcity. But since capital ism had eliminated scarcity, and given us ·abundance, it was no longer useful. Indeed, by a kind of economic Peter Principle, they rea soned that capitalism was incap able of dealing with the conse quences of its own success. Capitalism was an idea whose Mr. Donway deals as a free lance student and writer with the social implications of certain philosophical issues.

532 time had gone; now a new idea was needed to deal with the results. Specifically, these sociologists as serted that abundance required a "consumer's ethic," in which peo ple would be free from all the con straints against consumption, in cluding economic constraints. The policy of the future would have to be: severing the capitalist tie be tween production and the ability to consume. More recently, of course, abund ance has not been the social prob lem uppermost in the liberal mind. The New York Times warns us editorially (April 7, 1974) that we are entering "An Age of Scarcity." The carefree days, apparently, are over; conditions like this winter's gas and oil shortage will become more frequent, even standard. One might think, then, that we would hear a chorus from the Left de manding the return of capitalism, the magical eliminator of short ages, the system born of scarcity and limits.

But apparently not so. Mr. Allan 1974 MAKERS OR TAKERS 533 C. Barnes, a vice-president of the Rockefeller Foundation, hastens to remind us that, after all, HAn In,.. quiry into the Nature and Causes of the Wealth of Nations was writ ten in a time of comparative plenty." Daniel Bell had said that the justification for capitalism was "the Malthusian injunction for prudence in a world of scarcity," and "the bending to niggardly na ture." But now Stephen Shepard of Business Week tells us that "the United States was a 'cowboy econ omy,' with a frontier ethic of limit less resources." Pay Attention to Need The objection of the scarcity theorists seems to be that the free market does not recognize need as such. If a good is less plentiful than before, capitalism simply lets the price rise until it reaches a level where the quantity of the good demanded at that price is equal to the quantity of the good offered at that price. The system recognizes no intrinsic shortage or shortfall.

Paul Samuelson acknowledged that this is a logical alternative for dealing with limited resources, but the consequences of it, he said, are illustrated by the millions of deaths which occurred during the Irish potato famine. What we re quire for an age of scarcity, accord ing to these critics, is a more selfconscious economic system, one which is responsive to people's needs, rather than one which bases people's comsumption merely on earnings. The policy of the future will have to be: severing thecapi talist tie between production and the ability to consume. The connection between produc tion and consumption is thus the common enemy of these two at tacks - and the real enemy, one suspects. It is therefore necessary, in answering these critics, to un derstand the source of that connec tion, and the error in trying to abolish it. A Vital Connection One may begin by observing that, outside a social context, the connection between production and consumption exists as a natural fact: production is the only means of assuring oneself the goods a man needs to live. And indeed those who believe that the world owes them a living do not generally try to col lect that debt from the world of nature; they look instead to the world of men.

For within a social context, the connection between production and consumption is not nearly so clear. Other people are capable of produc ing the needed goods, and these goods can be acquired from them. Why does the acquirer have to en gage in any sort of production?

534 THE FREEMAN September Why is it not sufficient that some one else has produced the goods he needs? We might begin to answer those questions by asking this more gen eral question in return: how is it that we can acquire goods from other people at all? It is, on the face of it, an odd thing to happen. After all, if other people produce goods as a means of achieving their desires, why do we expect that they will hand those goods over to us? If they need the goods, why do they get rid of them ? It sounds para doxical. Of course, people do get rid of things they need, and even of things they desperately need. The world is filled with hungry people who are throwing their food to the wind. Such people are called sowers. And they are not consid ered irrational, because by throw ing away their food, they can count on getting back what they desire more. So, too, it is reasonable to expect that a person will hand over his goods to. us, if his doing so is a means for getting back what he desires more. And that is just what it is in a free trade, since both sides set the terms, and both sides can insist on the terms being lived up to.

Trade, then, is a means of ac quiring goods from others, and a means that it is reasonable to expect will work. But trade is not a way of separating consumption from production. For in order to engage in trade, one must have something tradable, something either produced or acquired. Since our lives have beginnings, and since we consume goods as well as trade them, it cannot be the case that the source of the goods we trade is always an earlier trade. Ultimately, all trades must be rooted in production, on both sides of the exchange. Is there, then, a,ny way of "set ting free" consumption? Is there any method of acquisition which does not involve production on the side of the acquirer? Trade involves it, as we saw, because of our need to obtain the consent of the pos sessor of the goods. A method which obtained goods without the consent of the possessor would not have this problem. And indeed, co ercive acquisition is a way of sep arating consumption from produc tion: takers need not be makers.

But it is important to ask wheth er this way can be counted on? Can the person who tries to obtain goods by coercion reasonably ex pect that his actions will be the means to consumption? A faulty Method I think that he cannot. Ludwig von Mises pointed out that men act only in the expectation that their 1974 MAKERS OR TAKERS 535 action is the means of bringing about the future state they desire. Production makes sense, therefore, only if the producer can count on having disposal of the goods he produced. If he does not have dis posal, wha tever else may happen, the goods are not, for him, a means of accomplishing his desires. Thus to the extent that others, the tak ers, can count on controlling the producer's goods without his con sent, the would-be producer has no motive for production. Precisely in those circumstances where coer cion can be anticipated, the coercer cannot count on there being any goods to take.

I believe this is what Ayn Rand meant by writing the following words for her character Henry Rearden: If you choose to deal with men by means of compulsion, do so. But you will discover that you need the vol untary cooperation of your victims, in many more ways than you can see at present. And your victims should discover that it is their own volition - which you cannot force - that makes you possible. Obviously, the point applies not only to individual thieves, but also to social systems based on coercion, to what Sir Henry Maine called "a society of status," and what Her bert Spencer called Toryism. None of these systems can be counted on to work; they are attempts to sur vive on a wing and a prayer, with out the wing, and without a prayer. Socialists, of course, have long claimed that their system had a Midas touch, and would flower to unimagined heights. I have argued here that socialism, or any coercive system, has a Tantalus touch; the goods it reaches for recede before it. It is amusing in this regard that Robert Kilroy~Silk ends his book Socialism Since Marx by urging us to socialism with a quote from Robert Browning: "... a man's reach should exceed his grasp." For the socialist, it always will. ~ IDEAS ON LIBERTY To Buy or Not to Buy THE NATURAL ORDER of things requires that the maker shall pro duce his goods and display them for the inspection of the buyer who is, at all times, free not to buy. The right to buy or not to buy is vital to economic well-being and, of course, to personal liberty.

SIR ERNEST BENN. "Rights for Robots"

PERRY E. GRESHAM The Beleaguered Businessman THE DECLINE of the businessman's power, prestige, and self-esteem is a salient fact of our times. National heroes of business and industry have fallen by the pens of sociologists, economic histori ans, welfare workers, environmen talists, consumer crusaders, re form politicians, and a spate of futurists. The unions and the gov ernment regulators have reduced the freedom of action and the power of the businessman. Ford, Carnegie, Mellon, Rockefeller, and Morgan are names which once in spired awe and admiration, but today they are held accountable for many social ills such as cor ruption of the environment and the neglect of social costs of pro duction. Their descendants turn from their heritage in business and industry to pursue fame in politics, for there is the focus of the new prestige. The late Joseph Schumpeter foresaw the devaluation of status Dr. Gresham is President Emeritus and Chair man of the Board, Bethany College, Bethany, West Virginia.

536 for the tycoon and the corporate executive. He had watched the businessman give way time after time without a struggle. The in dustrial executive has no title, no uniform, no ceremonials to honor him as a hero. He slips into his office at the back of the building lest he be seen on the way in. He dodges the society editors lest he be photographed in some holiday resort and accused of wasteful idleness when he meets the negoti ators at the bargaining table. Even his children have turned on him and call his life style a rat race which even when won leaves the old man a rat. When he re tires, he loses all identity and be comes a forgotten man. While he is in the fray, he does not defend himself very well. Since his leader Mhip is in the areas of finan~e, production, management, admin istration, and organization, he tends to be much less articulate than his critics. The president of a vast corporation, says Schum peter, has none of the glamour of a military leader, but "He is be1974 THE BELEAGUERED BUSINESSMAN 537 coming just another office worker - and one who is not always dif ficult to replace."!

Daniel Bell explains the debased status of the business executive in terms of the end of an era. As the ind ustrial age peters out the role of the businessman declines in social value. The university and the scientific community, with the help of the politicians, take over. "The husbanding of talent," he says, "and the spread of educa tional and intellectual institutions will become a prime concern of the society; not only the best talents but eventually the entire complex of prestige and status will be rooted, in the intellectual and sci entific communities."2 This point of view is proclaimed by the academic community as both sensible and long overdue, but the analysis may be somewhat touched by preference and hope. The industrial society is not yet over, and the talents of a business executive may be just as essential to the next stage of political econ omy as they are to this one.

The plight of the businessman may very well derive from outside attack and from his inside inepti tude at defense rather than from 1 Schumpeter, Joseph A., Capitalism, Socialism, and Democracy, (New York: Harper & Row, 1950) p. 133. 2 Bell, Daniel, The Coming of Post Industrial Society, (New York: Basic Books, Inc., 1973). the inexorable forces of a deter ministic world. The attackers are strong and resourceful, and they have put the exemplars of business on the defensive. Who are they? "The Scribblin Set," as the Duke of Wellington called the literary intellectuals, have always been on the attack against busi ness for the obvious reason of self-interest. Praise of business gets them nowhere, but blame of bu~iness brings praise and ap plause. Popular writers from Karl Marx to John Kenneth Galbraith have made socialism look good and capitalism look bad. Radical environmentlists in search of vil lains have lashed out at the busi ness community with more anger than understanding. Consumer crusaders sometimes appear to be more intent on the destruction of business than they are on the pro tection of the people. College and university professors, starved for power, assume that businessmen actually have affluence, prestige, and power at their command. The academic mind assumes that a professorial brain trust could take over if businessmen were put down. The new breed of news casters, enchanted by the left, are easy on the critics, but hard on business. Some bureaucrats hope to wrest power from the business community to enhance their own positions. Politicians know that 538 THE FREEMAN September businessmen have few votes, and that the critics of business have many. Even some labor leaders have forgotten the wise counsel of Samuel Gompers who said, "The company that does not make a profit is the enemy of the work ing man." All these and many oth ers threaten business just at the time the businessman most needs understanding .and help.

Failure of Nerve The businessman can say. with Pogo, "We have met the enemy and they are us!" None of the assailants has impaired the cir cumstance of the business com munity as much as has the busi nessman himself. He is like Con rad's young woman who might have been raped had she not so promptly complied. Quite apart from human error which drew headlines when big steel raised prices, and when big autos faced a consumer crusader, the corporate executive has protested too much, hired professionals to plead his cause, capitulated, and settled for a position of centrism trying to make a buck on the right and four bits on the left. Afraid of the hard right which might throw him into the headlines or into the hands of his adversaries in union and government, he appeases the soft left without realizing that his cowardice amounts to treason. IHs attempts at rational economic answers for his critics are inef fective against the political bias.

His adversaries believe what they wish to believe, and the media supports them. The opinion polls measure the effect of the media more than they measure reasoned opinion, and they ,thereby, serve the interest of the enemies of business. The late T. V. Smith said: "No man is an S.O.B. to himself." He went on to say that when he was young, he thought some very obvi ous S.O.B.s would be grateful to him for his understanding when he applied the appropriate title. As he grew older, he realized that each man - quite apart from not being an S. O. B. - is actually a hero to himself. Yet the business man has sufficiently flagellated himself, ,and suffered flagellation at the hands of his enemies, until he is no longer a hero - not even to himself. His self-blame may deny the philosopher's declaration. He cannot throw himself into the battle as would a military leader; he cannot compromise away his problem as do the politicians; he does not understand the sociologi cal nature of the case against him, with the result that he either lashes out with overkill or gives his case clean away. He, being a sensitive human being, and nudged by his wife and children, is fired 1974 THE BELEAGUERED BUSINESSMAN 539 with the same do-good impulses that inspire all sorts of social service proj ects only to see them turn back against him.

Business leaders use up so much ammunition on each other that they run out before-they feel the full attack of the enemy. The once strong united defense of business interests has vanished as the in terests of business have diverged and have become conflicting if not contradictory. The small entrepre neur may feel more threat from the big corporation that sets his prices and wages than he does from the attackers. The hired ex ecutive of a vast corporation may find more difference with the fac tory owner who defends his own plant and interest than he does with the public sector bureaucrats who are themselves employees of a giant monopoly. The industrial community, however, has one large thing in common - the leaders know that socialism will do theIn in. Strategy for Survival Thomas Carlyle once said, "Be honest and there will be one less scoundrel in the world." Some changes are indicated for the American businessman, and these changes begin with himself. He must change his beliefs, his atti tudes, his habits, and his opinions - not just his image. Even his manners need some reform. The self-assured aggressiveness by which a few break the queues at the airport, hotel, or restaurant, preempt a taxi by petit bribery, or disregard the rights and feelings of others by preoccupied self importance, creates some antipa thy toward the total community of mostly honorable and cultured bus iness people. Rudeness and boor ishness can be accepted more read ily from those who carry less re spon.sibility.

The beliefs and values of the businessman are important factors in the survivil of the productive industrial community, upon which American economic well-being de pends. Critics who have been se duced into a lotus-eating mental ity assume affluence when scarcity is the much more likely prospect. Moderates who are concerned not only with the quality of life but also with the necessities of life see the businessman as friend and benefactor-which he is. The prac titioners of industry, commerce, and finance are challenged to re think, revise, and renew their faith. Greed is no longer an ac ceptable goal for business, even though it was extolled by Mande ville and practiced by many in times past. Fear of loss is a pow erful business motive, a minimal profit is essential; but the goals of business are much more compli540 THE FREEMAN September cated than the stereotype of greed would indicate. Profit must con tinue to be a major motive if business is to perform its func tion. Without profit, the firm must die and everybody loses, but the stereotype of maximum profit as the sole objective is no longer ap propriate - if, indeed, it ever was.

The businessman cares about society and hopes to be regarded as a benefactor and friend of man. He feels pride in the people who work with him and for him. He has ego identification with his firm and cares about its health and its survival. He cares about the environment and his fellow con sumers as much as do his critics probably more. But he has not been able to state his faith in con vincing· terms - largely because he has been busy with other things and has professed what his critics expect him to believe and cherish. He wants his firm to grow, but he has not been obsessed with eco nomic growth as charged. He longs for a freedom from crises brought on by government interference, which he cannot anticipate. He has enough difficulty dealing with crises brought on by technical and social change. Business as Servant The business organization can be "socially responsible" without attempting to deal with "social problems" which are not part of its business. Peter F. Drucker said it well - organizations are socially responsible "when they satisfy society's needs through concentration on their own spe cific job."3 The corporation has no business tryipg to manage the private affairs of a community, or, for that matter, the private affairs of its own employees.

Robert Greenleaf has suggested the self-image of "servant" for the businessman and also for the corp oration. This venerable concept from the Judeo-Christian tradition could restore the dimension of dig nity and honor which has been lost. The man of business affairs has talked a great deal about ser vice without the correlative impli cation that he is himself a "ser vant." Any truly effective leader is a servant. A dictator may be able to force performance, but he does not truly lead even though he gains compliance from his subjects. The servant leader, however, internal izes the needs and interests of those for whom he works - his col leagues, his customers, his com munity, his country, and the whole family of man on this little planet. The servant leader finds meaning in his work and a sense of satis faction in service to his fellow 3 Drucker, Peter F., The Age of Dis continuity, (New York: Harper & Row, 1968) p.206.

1974 THE BELEAGUERED BUSINESSMAN 541 man. He becomes a hero who be lieves in what he is doing - a new man sensi tive to the changing times and willing to cherish and defend new values and old ones alike. The Need to be Informed Canny ignorance could once suc ceed in business, but the new busi nessman must know something. The executive who reads nothing outside his field except thrillers and Playboy or The Wall Street Journal is asking for the new socialism. The going literature of economics and politics would be much more realistic if its market included the business community. Sociologists writing for sociolo gists, economists for economists, political scientists for their own colleagues - even teachers for teachers - bring on a state of af fairs wherein bias becomes ac cepted as truth since the so-called experts accept it. Such bias would soon be exposed if business leaders read the books and responded. An informed businessman can sense the threat to those he serves in time to act with understanding as well as with decisiveness and sound judgment.

Knowledge is now so vast that nobody can acquire it. An inquisi tive mind, however, together with an enlightened philosophy of voca tion can enable an intelligent businessman to accumulate enough information for the conduct of his affairs. A fine sense of honor and responsibility together with a gen uine dedication to service can pro vide the beleaguered businessman with a defensible philosophical base from which he can exert his influence on the shape of the future. The beleaguered businessman would do well to recognize that ra tional answers about the standard of living will convince none of his critics. The charges against busi ness are frequently more political than economic. The new socialists are much more interested in a new social order than in any of their specific charges they bring against business. The environment, the minorities, the so-called "social costs" of business are all impor tant to them as they are to the businessman; but if business were to do its utmost in all these areas, the new socialists would continue the attack, because their concern is for a new society wherein the business private sector has been subordinated, if not completely socialized.

Socialist Ob;ectives The business goals of a more abundant life through economic growth and a still better standard of Iiving are consigned by the new socialists to the limbo of outmoded 542 THE FREEMAN September bourgeois values - the real goals for them are a new style of life based on equality, interpersonal re lations, group concerns, art, love, and· freedom from authority. The more hidden goal is for a shift in the balance of. power in their favor. Their faith in getting a new kind of government to bring these things about may seem naive to the businessman, but it is a firm conviction on the part of the true believer. The businessman be lieves what he wishes to believe, and socialists - old time Marxists or new time charismatics - believe what they wish to believe. Politics deal in power and preference. Their arguments are more ration alized than rational. The business community must close ranks and marshall its strength, or lose the values which capitalism and freedom have brought to America. Theory for survival has been written already by Friedrich Hayek, Milton Fried man, the late Ludwig Von Mises, and others. No successful refuta tion of their economic logic and observations has appeared - yet the public opinion tide runs toward the left. Business is not without numerous political sup porters once the mutual interest becomes apparent. The blacks, the poor, the young of modest means, farmers, and laboring people who sense their deeper interests, are not about to eschew economic growth in favor of a reduced and more primitive life which has great appeal to the .opulent and romantic young. The populist pow er in America is interested in economic gains - not in more art, more governmental control, and more government ow.nership. They turn to government in the hope of economic gains - not in political agreement.

The Doctrine of Liberty The doctrine of liberty can thrill the hearts' of the many when and if it is set forth with clarity and persuasion. The post-industrial doctrine of equality has much less appeal when once it is fully under stood. The young may march in behalf of a utopian promise of equality of results, rather than equality of opportunity, but they soon reject the idea when their liberties are thereby threatened. They soon discover what thought ful and realistic people have al ways known - that people are dif ferent in strength, mind, skill, and aspira tion the same as they are different in athletic ability, age, and strength. The Platonic doc trine of justice - "each having and doing what is his own" - is a per sistent and defensible idea. Nobody can better expose the unworkability of bureaucratic and political power and control than 1974 THE BELEAGUERED BUSINESSMAN 543 can the businessman who has tried to operate under the arbitrary and uninformed efforts at regulation.

The evils of big corporations look quite benign when measured against the inept, lethargic, unpre dictable, and sometimes corrupt performance of government, whether in Russia, China, welfare democracies, Cuba, Chile, or our own bungling efforts at a managed economy. The ablest and best pub lic servants complain more bit terly of their bureaucratic system than do the grousing and disen chanted employees of the com mercial system. The men who manage successful business enterprises and thereby serve by supplying needed goods and services benefit their fellow human beings in several additional ways. They plan the venture, as semble capital, provide employ ment, bring leadership to the com munities in which they operate, support hospitals, universities, art galleries, music, social welfare agencies, and pay taxes - do they ever pay taxes! When I buy a car from General Motors, I pay a pretty steep tax on it; the materi als that go into the car were taxed; General Motors pays a whopping tax; dividends from my stock in General Motors are taxed again; the money I use to buy the car has already been taxed; the dealers are taxed, and each employee of General Motors is taxed on what he is paid. A thoughtful and dedi cated employee of General Motors is not only a servant leader, but also a public benefactor. Instead of going on the defensive when the corporation is charged with self-service, influencing the gov ernment, using the government for research and development, plus aggregate demand for its products, the corporate executive could very well feel quiet pride in his public service. To supply people with goods, services, and gainful em ployment is worth far more than to provide them with welfare payments.

Multinational Opportunities Multinational corporations are adding a new dimension of glam our to vocations in business. These giant enterprises are somewhat comparable to the rising domestic corporations at the turn of the century. They are, to be sure, sub ject to the political instability of host countries, and they are sub ject to the military power of the host government, as well as to the embarrassment of revolutions, dic tators, radical politicians, and mis guided hostilities of some seg ments of the public. They can only lose in a political confrontation. They have, however, what the host country needs - capital, expertise~ organization, and a host of tal544 THE FREEMAN September ented executives. This provides considerable leverage. The tech nostructure elite of the multina tional corporation offers an excit ing new opportunity for a career in business. Such an elite may serve as the best hope of peace and prosperi ty in the decades ahead.

Multinational oil companies ex emplify the predicament of the beleaguered businessmen. They have been accused by consumers, politicians, bureaucrats, pundits, and professors of engaging in sub versive activities such, for exam ple, as profit-making at a time when capital is absolutely essential to new exploration, and when bor rowed capital is almost prohibitive in cost. While much of the attack is politically motivated, much of it results from a lack of economic perception. The consumer resents high profits of the oil industries. He feels he has been robbed when he is poor and they are rich. Oil company executives have been less than shrewd in meeting the crisis. They have misunderstood the political nature of the problem - even those who are astute enough to sense trouble. Irving Kristol has wisely suggested that businessmen must learn to think politically as well as economically if they are to survive in this hostile climate.

The Best Offense The time has come for business leaders to defend themselves, their functions, and the political econ omy in which they can work. The so-called "post-industrial age" will not eliminate the talented man ager and his merited rewards. Some bungling politicians and bu reaucrats will continue to make socialism unattractive to thought ful people. The future is not yet determined, and those who believe in the unalienable rights of "Life, Liberty, and Property" have equal opportunity to state their case. The beleaguered businessman can sustain the attacks, and emerge with more legitimate strengths and more honorable functions if he can become aware, think more clearly, develop a true and effective theory, enlarge his sense of re sponsibility, and be worthy of the hero role he now attempts to defend. The late Adlai Stevenson quipped cleverly: "Eggheads of the world unite. You have nothing to lose but your yolks." Young business people on the campus have called themselves the Sons Of Business, and have used the acro nym, S.Q.B.s. I now call to their older counterparts: Sons Of Business unite! You have nothing to lose but your acronym! I LEONARD E. READ ~JE lFl1IEXClill(Q)]Nf§ on Gullibility WE LIVE in an age when supersti tion flourishes and quackery abounds. This is a credulous gen eration eager to swallow any polit ical nostrum - the more' absurd the better. I fully concur with this opinion by Professor W. A. Paton: As an adjective to describe pres ent-day attitudes, aims, and popular proposals for dealing with current economic problems, real or pseudo, the term "gullible" is a much more appropriate label for our society than "good" or "great."1 Very few, indeed, are those among us who have any aware ness of the current gullibility - a blindness pervades the population.

Short of a more general realiza tion of this intellectual insensi tivity, our society is doomed; it must fall into a shambles. Sensing this formidable situation, as does 1 See "The Gullible Society," The Freeman, March 1974. Professor Paton, is assuredly the first step in gaining any relief. However, two more steps would seem to be necessary: (1) discov ering the cause of gullibility, and (2) finding its remedy, if there be one. In my view, insensitiveness is the cause of gullibility. A recent experience: Ahead of me in the check-out line at the supermarket was a woman with many items in her basket. She paid with govern ment food stamps, totally insensi tive to the fact that I would be in terested, as one who was financing her purchases. Utterly numb as to gratitude! And most taxpayers, in my place, would have been equally insensitive to their role in paying for that food. I do not know what the total bill might have been for the food the woman had in her basket. Nor do I know precisely the value of the food stamps she receives each 545 546 THE FREEMAN September year. But I did find, upon doing a bit of research, that the total U.S.

food stamp program that cost $85.5 million in 1965 is projected to cost $7.2 billion in 1975. Was I gullible, were all of us gullible in allowing the small beginnings of a program that would expand by 8,400 per cent in ten years! And how many Americans are expected to be riding that $7.2 billion gravy train in 1975? The number, I am informed, will be 16,000,000. So if the woman in the supermarket is typical, she will be carrying $450 worth of groceries past the check-out counter, for stamps, in 1975. In double-checking my estimate of taxes to be paid in 1975 - and calcula ting the impact on me of a $7.2 billion expenditure - I find that, in effect, I will be paying for about half of that woman's food stamp purchases. And I do not know her! Should I or should I not be giving some strange woman $225 worth of groceries a year? Do I know if her need is greater than that of any other customer?

Or am I simply being gullible about food stamps and many other welfare programs, programs to which I am insensitive, since I do not know the real need for such handouts or know the effect of those handouts on either the re cipients or the other taxpayers who will help foot the bill? How account for this two-sided gullibility - exhibited equally by those who feed at the public trough and those' who are forced to keep it filled? Doubtless there are unfathomable reasons - faults and shortcomings interacting on each other - too complex for clear cut analysis. Were there a single cause, we might readily overcome this insensitiveness; alertness then would be a possibility. How ever, if a few likely causes can be identified, they may help us see our gullibility and bring some helpful responses from me, you, and some others; any switch would have to be an individual attain ment. The Roman, Horace, some twen ty centuries ago, offered one reason which can hardly be questioned: "Adversity has the effect of elic iting talents which in prosperous circumstances would have lain dormant."

Prosperous circumstances! Nev er in the world's history have any people remotely approached the prosperity we Americans have ex perienced, and we are generally flabby in consequence. Gullibility is noth!ing more nor less than tal ents lying dormant. This appears to be an accurate diagnosis of our condition. Free market, private ownership, limited government practices have been more nearly approximated in 1974 REFLECTIONS ON GULLIBILITY 547 the U.S.A. than elsewhere. As a consequence, there has been the greatest release of creative en ergy ever known: goods and serv ices have flowed in unprecedented abundance to the masses as if manna from Heaven. Merely reflect upon the material things - tens of thousands - which are available in exchange for do ing relatively little, if anything. 2 Note the countless persons who enj oy a fantastic affluence and do nothing at all. When people get it into their heads that their pros perity is a natural phenomenon, as a sunrise, for instance, requiring no. talents on their part, talents fail to evolve; in a word, they lie dormant. These people see nothing simply because they are unaware that there is anything to see.

No Faith in Charity Another likely cause: an aston ishing loss of faith in J udeo Christian charity. Indeed, few in today's world are aware of what it is, let alone the wonders wrought by its practice. That woman at the check-out line had no more gratitude for her some thing-for-nothing food than the average taxpayer has gratitude for the privilege of filling the 2 See "Confessions of a Rich Man" in my Let Freedom Reign (Irvington-on Hudson, N.Y.: The Foundation for Eco nomic Education, Inc., 1969) pp. 50-56. trough. Grover Cleveland; in veto ing a handout to .drought-stricken Texans, wrote: The friendliness and charity of our countrymen can always be relied up on to relieve their fellow-citizens in misfortune. . . . Federal aid in such cases encourages the expectation of paternal care on the part of the Gov ernment and weakens the sturdiness of our national character, while it prevents the indulgence among our people of that kindly sentiment and conduct which strengthens the bonds of a common brotherhood.

The Congressmen who approved that appropriation doubtless did so with the best intentions. They, as distinguished from President Cleveland, were insensitive: to charity as a character-building means to deal with misfortune; they could think only of govern ment handouts. This calls to mind a verse packed full of wisdom: Oh, were evil always ugly; What a boon to virtue that would be! But oft it wears a pretty face'; And lets us cheat unknowingly. It is an observed fact that when ever government preempts any activity, that is, when coercion takes over, voluntary ways are not only forgotten but faith in their efficacy ceases. How many, for in stance, believe that mail could be delivered ever so much more effi ciently if left to the free market? Only a person now and then! Sim548 THE FREEMAN September Harly with charity. When govern ment moves in, charitable prac tices tend to wither away. Your neighbor is hungry. Today? That's the government's problem, we say.

Suppose the government had not intervened. What would you or I do? We would share our loaf of bread! Were government handouts looked upon as ugly, charity would thrive. But because they are well intentioned and thus have a pretty face, we cheat each other unknow ingly, insensitively. Re'sult: gul libility! What possibly can be the cure for this gullibility? What can re store alertness? Ass uredly, the answer lies half-hidden or it would be generally known and observed; few would label themselves, or like to be labeled, gullible. An obvious answer to gullibility is thinking for self rather than imitating platitudes, plausibilities, popular cliches. But that is too obvious. The real question is, what can inspire or encourage one to do his own thinking? What is the over looked formula? Here's mine: Count your bless ings! Until now I have looked up on this as the remedy for perhaps the greatest of aU evils: covetous ness or envy. I am now convinced that it is also the cure for gulli bility.

For this practice to have any meaning, to affect one's intellectual demeanor, it would have to be a daily exercise - in a word, ha bitual and systematic exploration. At first blush, at least to those who have not reflected on their blessings, this is no more of a challenge than a daily repetition of the alphabet, so few blessings are most people aware of. What I am suggesting is the discovery of one or more hereto fore unknown blessings every day of one's life. There aren't that many? Their number is infinite, a world without end! They include every bit of wisdom since the hu man race began; they range from soaps to soups to tissues to dish washers, from raindrops to bath tubs, from pets to friends past and present, from atoms to red blood cells to galaxies, from elec tricity to sunbeams,. from blades of grass to' the· shade of trees, from hot and cold running water to still lakes and wavy seas, from paintings to all the beauties of earth and the heavens. They in clude all the freedom each of us possesses to be his creative self.

The daily exploration of one's blessings opens the mind to Infin ite Consciousness. This is the process of thinking for self; it is the downing of gullibility. For today, I count among my bless ings the ability to share these thoughts with you, whoever you are. f) Political Freedom IsNot Enough MILLER UPTON FREEDOM seems to be one of those words, along with love and de mocracy, which everyone· makes use of to his own convenience. Its very sight and sound stimulate an immediate emotional response with substantial positive over tones. It is therefore a favorite part of the vocabulary of every inspired leader and demagogue alike, be he a Lincoln or a Stalin, a Gandhi or a Hitler. We in our country make special use of the concept when we speak proudly of being part of the "free world." We obviously feel good when we do so, but I wonder if we are being fully objective and hon est with ourselves when we con tin ue to caress our egos this way.

If we don't start to challenge the assertion, to reflect exactly upon what the term Hfree world" en compasses and what it is we're free from, we may very well end up living a lie. Certainly the term cannot stand for national freedom in the sense of national independence - that is freedom from domination by an other sovereign power. All sov ereign states-Russia, China, Eng land, France, Cuba, Portugal, and so all-are "free" in this sense. So Dr. Upton is president of Beloit College in Wisconsin. This article is from an address of May 7, 1974, delivered in the C. A. Moorman Memorial Lectures at Culver-Stockton College, Canton, Missouri. 549 550 THE FREEMAN September we must have in mind something else. If I were to pose· the question to this audience as to what is meant when we use the term "free world," I am confident I would get two dominant responses. One group would assert that it has reference to those countries which believe in individual freedom; the other group would offer the re sponse that the term applies to those countries which are gov erned under some form of democ racy. Both responses have a com mon psychological effect, a favor able emotional reaction grounded on implied protection of the indi vidual against exploitation. But I must submit that both answers are subject to serious challenge at the present time on the basis of ob jective reality.

All-Powerful Governments It is manifestly clear that all countries in the world, including the so-called Western democracies, are trending towards a form of social organization in which the agency of government dominates individual behavior and action· where private property and pri vate choice are less and less ten able; where the only difference be tween the world's societies is not in the amount of individual free dom allowed but only in the man ner in which the all-powerful government is chosen. Individual ini tiative and decentralized author ity in all cultures has become sus pect; collective action through the agency of government has become trusted. And as a consequence it is increasingly difficult to estab lish clear lines of demarcation be tween the "free world" and the rest of the world so far as govern ment domination of the individual is concerned. Specific differences can be cited at this instant of time, but the st~tement seems im possible to challenge if historical trends are taken into account.

We therefore seem to be de pendent entirely upon the proposi tion that the "free world" coun tries are those which rely upon some form of democracy to de termine who shall be entrusted with the all-powerful authority of government. There is the sugges tion implicit in this notion that "freedom" and "democracy" are somehow synonymous, that polit ical freedom is all we need to en joy the benefits of a free society. I submit that this is the unchal lenged assumption that is leading our country Pied Piper fashion into the morass of collectivism and its concomitant of centralized au thoritarianism. We should have been alerted to this booby-trap type of thinking by Lenin's assertion that Capital ism represents democracy of the 1974 POLITICAL FREEDOM IS NOT ENOUGH 551 exploiting minority whereas So cialism represents democracy of the exploited majority. Individual creativity and initiative, decen tralization of authority and pri vate property need to be sacrificed for what is presumed to be the common good. But that we have not learned from experience is evi denced by the fact that Lenin's philosophical descendants now speak in terms of developing dem ocratic socialism, hoping to sug gest thereby that individual free dom can be preserved in a collec tivized state.

No One Ought to Rule The notion is implicit: if we have the freedom to vote for those whp will govern us then our free dom is preserved. But such a no tion is completely at variance with the concept of liberty. As Professor Douglas says in his re cent article in The Freeman maga zine, "Democracy is a theory about sovereignty, that is a theory about who ought to rule . . . The first principle of liberty, on the other hand, is that there is no one who, of right, ought to rule. The theory of liberty is not a theory of sov ereignty at all."l Rather, I would add, it is a theory of social vital ity and health. A theory which 1 George H. Douglas, "Mr. Mencken on Liberty," in The Freeman, Decem ber, 1973. maintains that the whole of soci ety is equal to the sum of its parts, that society prospers in all regards when individual freedom with its corollaries of individual creativity and initiative reign, that that gov ernment is best which governs least.

We have tended to lose sight of the compelling truth of this theory because we ten~ to confuse gov ernment with society. We operate under the false assumption that if it's good for the government it's good for society. We fail to deal consistently with the fact that government is a special creature of man and as such is only one agency of society established to deal with only some needs of so ciety. The agency of government can become too dominant for the social good just as any other agency can become too dominant. The health of human society is directly dependent upon the health and vitality of its individual mem bers. It is like any organism of the human body which is depend ent for its welfare upon the health and vitality of its individual cells. If governmental authority grows malignantly, then individual free dom and social vitality are doomed. Another reason we have lost sight of the truth of liberty is be cause we have too often confused freedom with security. President Roosevelt contributed to this con552 THE FREEMAN September fusion when he promulgated his four freedoms - freedom from want, freedom from fear, etc. in defense of his policy to central ize more authority in the federal government. This has become the same defense for all others who would substitute some brand of socialism for individualism, argu ing that one cannot be free if he is wracked by poverty or uncer tainty as to the future. We there fore subordinate the liberty of all in the hope of improving the se curity of some.

Liberty or Collective Security? But since liberty is defined as "freedom from arbitrary and des potic governmental authority" and security is defined as "freedom from danger, risk, etc."2 it is clear that we are faced with a choice: liberty or collective security, one simply cannot have both. The true joy of liberty is the challenge to provide one's own security. If one gets no joy in this challenge, then of course he's perfectly willing to sacrifice his freedom and that of his neighbor for a promise of se curity. And if a society puts more importance on collective security than individual freedom, then that is its choice to make. But in doing so it must cease any pretensions 2 The Random House Dictionary of the English Language, unabridged edition. to being part of the "free world" even though other countries may be no more free than it. The fact of the matter is that there is no longer a "free world"

in the Patrick Henry or Thomas Jefferson sense. And this is re grettable, not in any sentimental sense of clinging to the past but in the rigorous philosophical sense of doing what is best for human society. This capacity for people to lose sight of their philosophical foun dation brings to mind a true ex perience I had last year. I checked into a hotel in Cleveland for a one night stay, having made a reserva tion in advance. I filled out the registration card, and as the young lady behind the counter was tran scribing the information onto the room slip, she asked, "How do you plan to pay this?" I immediately responded, "With cash." HOh," she said, and then after a short pause of apparent embar rassment she responded, "Then do you have some form of credit card for personal identification?" After I got myself under con trol from laughing I said to her: "I was aware that the U.S. dollar had declined in value but I didn't realize it was that bad."

"Oh," she said, still not cracking a smile, "I hadn't thought of it that way."

1974 POLITICAL FREEDOM IS NOT ENOUGH 553 "I hadn't thought of it that way." There is the rub! While man is a unique creative being, he is also a creature of habit. And most of our behavior is controlled by conditioned reflex rather than rea soned judgment. Accordingly, our country is currently drifting as a society in a direction that is con trary to its creation and its basic mission. Rigidities Develop as Government Grows OverExtended The genius of the United States that brought it so far in so short a period of time is its having broken with the established reli ance on centralized government authority in favor of the principle of decentralized authority, there by releasing the creativity and in itiative of the ordinary individual citizen. This fact has been demon stra ted in so many areas of social life-economic, educational and ar tistic-tha t even the opponents of liberty do not dispute it. Now, however, we see this genius being threatened by the gradual erosion of the basic principle. To date, a major segment of the populace seems unconcerned either because "they haven't thought of it that way," they don't want to bear the burdens of liberty, or they are content with their political freedom and blithely go on in the same blind fashion, apparently assuming that civil liberty is synony mous with political freedom.

Our institutions of government, justice, taxation, business and edu cation are all beginning to suffer from a form of institutional hard ening of the arteries born of ex cessive centralization of authority. Although our political freedom has provided us with a degree of governmental resiliency that has been able to avoid violent eruption and revolution to date, it has be come increasingly evident that political freedom, while central to all other social freedoms, is still not enough in itself .. To provide the continuous opportunity for so cial self-renewal so desperately needed, individual freedom must be respected and practiced more fully in all walks of life. When we speak of a free society we must encompass much more than poli tical democracy if we are to pre serve the genius of the United States. The accelerated shift in attitude that took place in the 1930s toward using government in an interven ing way rather than a facilitating way has brought us over the last 40 years to the point where we now seem to believe that the only way to solve any social problem is to pass a law. We. experience daily the ridiculous spectre of our legis lators competing with one another in trying to get legislative credits 554 THE FREEMAN September by having their names associated with bills. As a consequence, we are building a gargantuan govern ment bureaucracy, with a morass of law unfathomable in many cases by the legislators themselves.

Forty per cent of our gross na tional income is now attributable to government of one sort or an other. A False Hope We continue blithely along this course, confident in our political freedom. But we fail to recognize that political freedom is not enough. A monolithic government produced over time by democratic process can become just as over bearing, cumbersome, repressive, and inefficient as such a govern ment imposed by any other means. After all, a democracy at best can only determine who shall govern and not how to govern, and it pro vides little solace to know that one has the chance to vote for the peo ple who are going to be in control of the government juggernaut that controls every facet of one's life. Government action can never effectively take the place of indi vidual initiative and individual ac tion for the solution of social prob lems. To propose such is tanta mount to arguing that the vehicle should propel the motor. There fore, laws in a free, self-renewing society must be proscriptive, not prescriptive. They must simply provide the broad limits within which the fullest amount of indi vidual creativity and action is en couraged. The challenge to any society that is to remain resilient and vibrant and therefore contin ually self-renewing is to achieve freedom within order, individual ity within community, and equality within diversity. Centralized gov ernmental authority can never achieve this kind of blending, for by definition there is no freedom.

All is sacrificed for order; the in dividual citizen as a whole is not trusted. In a society based on de centralized authority and freedom there is a constant threat of an archy and the absence of desirable order, but it is not absolutely denied. That is to say, order is pos sible under decentralized author ity, but freedom is not possible under centralized authority. Abuse of Power It is ironic that the political party that has been proclaiming over the last 40 years the grave threat to the United States of ex cessive centralization of authority is now the party that is being embarrassed through the over zealous use of that power by some of its leaders. It may just be this irony, however, that saves uS,for the people at large are being forced to see the ultimate danger 1974 POLITICAL FREEDOM IS NOT ENOUGH 555 to our way of life of such concen tration of power in a way that vvould never been seen if the irony were not there. They are at long last being forced to stop and ad mit: "I never thought of it that way!"

The press and the Congress are relentlessly belaboring the Presi dent in this regard, but in the final analysis it is the Congress that has been at fault and not the President. Even more accurately, it is we the people who have toler ated and even encouraged the ac tions of Congress over the years who are ultimately at fault. In our weakness we have willingly sacri ficed our individual liberty for a fleeting promise of security. Patrick Henry would have to be aghast! Congress is being criticized for its apparent impotence in the face of a strong President. But the fault lies not in its current impo tence but in its previous irrespon sibility in breaking with the gen ius of the United States by having opted for a highly centralized gov ernment structure instead of being faithful to a decentralized social structure. It has passed law after law after law for the Execu tive branch to administer, laws that are aimed at controlling every facet of our lives, laws that are paternalistic in nature, laws that circumscribe individual initiative and individual creativity rather than assure equal justice and equal opportunity, laws that prescribe individual action, laws that nullify private property.

After all, our constitution pro vided for a strong executive office in the presidency. The greater the federal bureaucracy and the greater the centralization of au thority in Washington, the greater will be the power of the individual President. The way to avoid a Frankenstein calamity is to avoid creating the monster to begin with. Security Is a Mirage The sad reality of it all is that the glittering promise of security through central governmental au thority turns out to be a mirage. We experience full employment only when we wage war. And aside from dislocating and brutalizing our individual lives, the wars maim our economy by stimulating inflation and disrupting our mone tary system. Our productivity de clines in relation to other nations. Poverty perseveres; but now it's looked upon as a political issue, which it isn't, rather than an eco nomic issue, which it is. Its pros pect for solution therefore de clines. In fact, all economic issues become politicized and therefore not dealt with properly. An intense adversary relationship develops 556 THE FREEMAN September between owner, employee and con sumer, which is just contrary to what should exist.

The fact of the matter is that what is good for an individual bus iness is good for owner, employee and consumer alike and therefore society at large. We see this truism violated in legislative action regu larly, currently by the absurd de termination of some legislators to penalize the oil companies for pre sumably profiting unduly during the recent oil crisis. Who do they figure own the companies, work for the companies and buy from the companies if not citizens whom they supposedly represent? Who else but the citizens of the United States will be forced to suffer if Congress penalizes the operating efficiency of these companies? Is not such legislative action, such arbitrary use of governmental au thority, a case of our collectively cutting off our nose to spite our face? A Miracle of Progress When one considers the miracle that has been wrought in this country over the last 200 years the conversion of a wilderness into what is generally recognized, for the time being at any rate, as the wealthiest and most powerful na tion in the world - one wonders how anyone can be critical of the economic system which brought it about. The land is no wealthier than many other lands in the world; the people are no different from those in other sections of the world; the climate is not superior to many other sections of the world - the only distinguishing characteristic is the extent to which we have relied upon decen tralized authority in the making of economic decisions and thereby capitalized more fully on the ini tiative and creativity of the indi vidual person.

There is no question that there have been instances of specific suf fering from excesses. Individual freedom in all areas - political, press, academic and economic will always be abused by some. But it simply cannot be denied that this economic system eliminated more poverty, created more leisure time, offered more cultural enjoy ments and created more educa tional opportunity in a shorter period of time than any other eco nomic system or government pro gram any place and at any time in the history of the world. So why now ridicule it, shackle it and sub stitute bureaucratic governmental programs for it? If we want to work on problems of the environ ment, worldwide poverty, cultural and educational deprivation, etc., we had best leave our economy free. Of course a free economy pro1974 POLITICAL FREEDOM IS NOT ENOUGH 557 duces its own elite just as any and every social system, but it is far safer to have these elite deter mined through the anonymous polls of the market place in serv ing the wants. of the public than by political appeal or demagoguery. We should penalize severely those who abuse the system and thereby violate the trust implicit in any decentralization of author ity. But we should not throw out the baby with the bath. It is well worth reflecting upon how much more advanced our economy and society would have been had there not been the heavy intrusion of the federal government into the opera tions of our individual businesses over the last 40 years.

There simply can be no doubt that the more individual initiative and creativity is circumscribed by governmental restraints and usur pation, the less productive the society becomes. A paternalistic government inevitably becomes an oppressive and suffocating govern ment. While I readily use the seat belts in my automobile for my own protection, I don't want the gov ernment telling me I have to. It's a very short step from Washing ton telling me what I have to do in order to protect my own body to telling me what I can or cannot do in order to protect my mind. For some inexplicable reason we have come to distrust individual initiative and freedom of action and assume that by substituting governmental action for individ ual action we will have greater wisdom and greater integrity, for getting somehow that it's the same fallible individuals who exercise power in the government halls as in the market place. If individuals can't be trusted as servants, how can they be trusted as masters? If evil is to prevail it is far better to have it decentralized. Is not this the prime lesson of Watergate?

Centralized Societies Fall History readily records that all societies founded on a highly cen tralized authority structure ulti mately die from a hardening of their societal arteries - a loss of resiliency, an inability to renew themselves. Our country was to be the great global experiment to prove that a society based upon trust in the individual and decen tralization of authority would de velop best and last longer. If we can't be faithful to the principle in our own country, it is not likely to be respected elsewhere. And if it does not prevail ultimately, hu man society at large will most certainly be doomed for want of a creative, self-renewing character. As Jean Ravel so well develops in his book, Without Marx or Jesus, the· United States is the only country remaining that still has 558 THE FREEMAN September the requisite freedom in its social functioning to offer the prospect for liberating change. If this qual ity be lost by our going the way of all other countries, then what profits us, and what profits man?

Shortly we shall celebrate the Bicentennial of the signing of the Declaration of Independence. This was a notable event in itself, but we have more to celebrate and venerate than this. Subsequent to it there was a war to be fought and won; true independence as a sovereign state to be achieved; political compromise and agree ment to be worked out; a consti tution to be written and agreed to; a government to be formed; :t President to be elected and in stalled; and the whole govern mental structure to be put into successful operation. It was not until 1787 that the Constitution was signed, and 1789 that the gov ernment of the United States was launched under that Constitution with the great promise of the Declaration of Independence hope fully realized. Relive the Earlier Concepts Let us not, therefore, content ourselves with a crash celebration of the Bicentennial of the begin ning - July 4, 1976. Such a cele bration we should have, but we have more to think about than that. We have the opportunity during the 13-year period 1976 1989 to reawaken the nation to the nature of its origin and the genius of its concept. All segments of our contemporary society should be in volved in recovering the mission and pride of our existence - not for the sake of pride alone but to reassure our contribution to the social evolution of man by fidelity to the principle of decentraliza tion of authority.

This is not something the gov ernment whose birthday we will be recognizing can do or should do. Remember that government is only one agency of society! It was the creativity and initiative of private individuals that inspired and wrote the Declaration of In dependence. It was the creativity and initiative of private individ uals that hammered out the Con stitution of the United States. It was the creativity and initiative of private individuals that fash ioned this governmental structure that has become the prototype for so 'many revolutionary govern ments throughout the world in the evolutionary process toward indi vidual freedom and decentralized authority. It was the creativity and initiative of private individ uals that converted a wilderness into a modern state almost over night. It was the creativity and initiative of private individuals that in no more than an instant of 1974 POLITICAL FREEDOM IS NOT ENOUGH 559 history created the wealthiest and most powerful nation the world has ever known. And it is the cre ativity and initiative of private in dividuals which alone will solve the immense problems of the fu ture and enable man to proceed apace in keeping with his social evolutionary design.

A NonGovernmental Celebration Let us, therefore, pay our re spects to the Bicentennial of the founding of our government in the only way consistent with its origin and its essence. Let us take the initiative as private individ uals and institutions in diverse ways to recall our heritage, honor our uniqueness, and plan for our future. In doing so, let us not be satisfied with a crash celebration as of a single date. Let us make use of the full bicentennial era of 1976 to 1989. Let us grasp this unique oppor tunity to reawaken the citizens of this nation to its special genius and destiny in serving the evolu tionary destiny of man. Not in any narrow, nationalistic, flag waving sense which at times is willing to destroy the true genius of America in a misguided effort to promote its physical embodi ment. Rather, let us strive to sensitize everyone to be aware of the fact that our forefathers at tempted to create a society in which freedom could exist within order, individuality could exist within community, and equality could exist within diversity - that is, in which individual liberty is prized over collective security.

This is the great challenge to us; this is the well-known Ameri can dream. To achieve it we must have faith in the individual citi zen while fostering a thorough going judicial process to·· penalize those who violate the trust. To achieve it we must assure equal justice under the law and equal opportunity for self-development. To achieve it we must renounce governmental bureaucratic author itarianism of any and every sort. To achieve it we must respect pri vate property and rely upon the creativity and initiative of the free individual. And most of all, to achieve it we must give up the naive notion that adherence to a democratic form of government is the sole requisite to realization l)f these other freedoms. Individual liberty can be violated by a gov ernment democratically chosen just as readily as one autocrati cally imposed. A tyranny of the masses is no less tyrannical be cause it represents majority will.

The record of the past and the conditions of the present demon strate conclusively that political freedom alone is not enough. We need liberty as well as democracy! ~ Freedom's Bounty CARL A. KEYSER A VARIETY OF REASONS have been given to explain the good life we Americans enj oy. One claims that it came about when steam power liberated factories from river valley sites and streams that were the source of energy. Another said it resulted when interchange able parts led to mass production and the ultimate in division of labor. Still another credits im proved metals technology, partic ularly the means to produce steel in large batches, steel from which rails and bridges and engines were made to bind East and West and open the granaries of the heart land. It has often been said that Mr. Keyser is Commonwealth Professor Emeritus of the University of Massachusetts at Amherst where he had specialized in materials engineering and metallurgy.

560 our bounty is simply the result of a fortuitous marriage of resources to a congenial climate, this in spite of the fact that natives exposed to the same graces of nature for centuries barely managed to exist. Of course, weight must be given to these explanations, and to others not mentioned, for our good fortune. They are, it is true, pieces of a puzzle which, fitted to gether, give us a picture that is incomplete. The missing piece can be found hiding in the 19th cen tury history of Russia. and the United States. In the early eighteen hundreds the United States and Russia were both agricultural countries, the one young and sparsely settled with people who sought to escape European autocracy and the other 1974 FREEDOM'S BOUNTY 561 slightly, but only slightly, more densely populated, an old country with a tradi tion of centralized power and despotism. Both coun tries were almost incalculably rich in resources and were blessed with temperate climates. Both countries were open to the influence of newly developed steam power, both were exposed to the effects of the industrial revolution, and both had access to the development of tech nology and advances in scientific knowledge.

Serfs and Slaves At the midpoint of the century America was, excepting for its slaves, a free country. There were 3,000,000 slaves out of a total population of 32,000,000 when Lincoln issued the emancipation proclamation in 1863. At nearly the same time, in 1861, Czar Alex ander freed 15,000,000 serfs out of an estimated total population of 75,000,000. There were, to be sure, distinc tions between serf and slave: slaves were considered personal property whereas serfs were re quired to perform services for a master who did not own the serf and whose power over the serf was limited. Serfs could escape their bondage if they could payoff their indebtedness to their mas ters, but since this was almost im possible serfs could be considered for all practical purposes to be the equivalent of slaves. The propor tion, then, of nonfree men to free men in the population was about 10 per cent in the United States and about 20 per cent in Russia at the time of emancipation. Until freedom was granted there were proportionately twice as many peo ple· in bondage in Russia as in the United States.

Slaves produce only what the threat of punishment forces them to produce since little or no addi tional rewards accrue for produc ing more. Free men, who stand to profit from their own ingenuity and effort, will attempt to produce more and more, to their own and the· benefit of others, as long as their rewards increase. This will lead them to apply newly discov ered knowledge, make new ma chines to increase production, ac cumulate capital, trade, barter, and sell. It seems likely, then, that the higher proportion of slaves in Russia helps to explain the grow ing gap in the well-being of Amer icans and Russians as the 19th century progressed. But this is also an incomplete explanation. What about the free men, that is, those who were neither bonded in Russia nor enslaved in America? What was their status and influ ence on development? Probably the landowners came closest to being free men in 562 THE FREEMAN September 19th century Russia. Until 1803 they lacked even the freedom to free their own serfs, not that there was a strong inclination to do so.

In 1803 Czar Alexander I grant ed noblemen permission to liberate their serfs, but only 47,000 were freed. In 1810 all legislative initi ative rested with a Council of State presided over by the Czar. Elected assemblies in the cantons, districts, provinces, and states existed which could pass motions but not laws. Courts operated in secrecy and were susceptible to bribery. Rule of the land was by an officious bureaucracy whose ar bitrary decisions stifled life. High er education was permitted only for children of noblemen and of ficials. Censorship of the press and speech was very strict. Local Government Reforms Under Nicholas I, the same au tocratic, arbitrary rule continued. Alexander II, the son of Nicholas I, was an absolute monarch who, responding to revolutionary threats, freed the serfs without payment to the landlords. In addi tion, serfs were granted allot ments of land for which they paid a fixed rent to their landlords, with an option to buy, financed by gov ernment bonds. After the freeing of the serfs, local government was reformed by establishment of new provincial councils. Forty-eight per cent of the seats were assigned to landowners, forty per cent to peasants, and the balance to town residents. Not until 1864 was trial by jury and an independent judi ciary established. The reign of Alexander II was an era of re form apd progress in spite of the fact that the country remained an absolute monarchy, essentially without freedom of press, speech, and even thought, and with no guarantee of person and property from the whim of the autocrat.

By 1889, under Alexander III who had corne to power in 1881, much of the progress made-under Alexander II was erased. The provincial councils were placed under civil service and became subservient to the provincial gov ernors. The representation of land owners was raised from 48 to 57 per cent in the councils while peasant seats dropped from 40 to 30 per cent. The press was ruth lessly controlled and silenced and taxes increased by 29 per cent in the ten years from 1883 to 1892. Two Kinds of Growth Expansion of Russia eastward into Siberia was by Cossacks whose interests were military rather than productive, by politi cal and criminal prisoners exiled to virgin land as laborers, by re ligious dissenters, and by fugi tives escaping conscription in the 1974 FREEDOM'S BOUNTY 563 Czar's armies. Between 1823 and 1898, 700,000 exiles and 216,000 voluntary emigrants settled in Si beria, a region which had enor mous wealth in timber, furs, and minerals. On the other hand, ex pansion of the United States west ward was by natives seeking the opportunities of undeveloped land and by immigrants who chose freely and voluntarily to come to the new country to escape the stratified and stagnant society of the old.

From the beginning of the 19th century to the beginning of the 20th century ~ussi~n progress was minimal while the United States became the best-fed, best-clothed, and best-housed nation in the world. Today a wider than ever Russo-American gap remains, both in material well-being and per sonal freedom. This is no chanc y coincidence. As long as the American free market exists where ideas, goods and services can be exchanged voluntarily, freely, and honestly, and where the primary function of government is to guarantee such a market place, the gap is not likely to disappear. A friend of freedom recently summed up the situation this way: It is well to remember, however, that serfdom is not necessarily the per petual condition of the people of Russia. Nor can Americans comfort ably assume that their government will limit its activities to the policing of the market and the preservation of freedom. A government that ma nipulates money and credit, that reg ulates and controls wages and prices and rents and profits, that owns or closely supervises numerous business activities, and that offers welfare programs from cradle to grave, is a government that threatens to tax the citizenry into serfdom. @ IDEAS ON LIBERTY Why Man Must Be Free IF MAN is to continue his self-improvement, he must be free to exercise the powers of choice with which he has been endowed.

When discrimination is not allowed according to one's wisdom and conscience, both discrimination and conscience will atrophy in the same manner as an unused muscle. Since man was given these faculties, it necessarily follows that he should use them and be personally responsible for the consequences of his choices. He must be free to either enjoy or endure the consequences of each decision, because the lesson it teaches is the sole purpose of ex perience - the best of all teachers. F. A. HARPER Liberty: A Path to Its Recovery The RALPH BRADFORD OUR COUNTRY is experiencing a self-imposed malaise of massive proportions and suicidal import a condition that is at once'insidi ous and hard to define or explain. To state it s'imply and starkly, the Americ'ans are doing their utmost to destroy America! Intentionally? Deliberately? Of course not - except in the case of a .relatively few dedicated revolu tionaries. For the most part, the destroyers are people of good in tention, who would be horrified at the assertion of their guilt.

"Who - me? Why I love my country! I'm only trying to save it from .... " And then will follow the name or purpose of the organ izations, interests or persons who have a different social, economic or poli~ical philosophy from that of the outraged speaker. Mr. Bradford is well known as a writer, speaker, and business organization consultant. He now lives in Ocala, Florida. 564 Unhesitatingly, he attributes evil purpose to all who dissent from his viewpoint; and millions of other zealots like him are equal ly busy castigating the opponents of their particular philosophies or prejudices. As a result, the com posite picture of, America that emerges to the world is that of a dishonest, hypocritical, wicked, and no-Ionger-to-be-respected gi ant. And the picture is being painted, not by the Russians, Serbs, Chinese or Albaniap.s - but by the Americans! Nobody would contend,- I sup pose, that this country has ever been free, or should be, from a certain amount of critical intro spection. This is part of the proc ess of self-government. The com petition of political parties assures a lively and continuing assessment of our customs, practices, laws, principles and institutions - an accepted procedure, understood by 1974 THE ENIGMA 565 the people, and largely beneficial.

But the current chorus of defa mation goes far beyond such help ful self-analysis, and often seems to be without identifiable reason or excuse. To be sure, our assets and resources have been impaired and depleted, in part by heedless exploitation, in part by statist brakes on development, in part by the ruinous fiscal policies of recent decades. As a result we have been assailed by the twin evils of doubt and inflation. Inflation, of course, is but the visible symptom of a general self-deception about the effect of unlimited Federal debt on the cost of living. The evil of doubt also results, in part at least, from inflation. When people see the value of their savings steadily shrinking they are troubled by doubts as· to their personal future. In time the doubt becomes fear. The doubt and fear feed each other. People begin to question their ability to cope with life's problems. And perhaps most dev astating of all, they begin to be troubled about a thing that has always been an article of faith with them - namely, the rightness and justice and strength of their government.

But today's incessant and stri dent diatribe goes beyond custo mary discontents. Never within the memory of this wri ter has there been such a persistent and wholesale denigration of the Unit ed States of America as we are now enduring. Whence the Defamation? Whence came all this vitupera tion of America by the Ameri cans? Allowing for the human propensity to be "agin the govern ment," and discounting the bom bast and exaggeration of partisan politics, what is the reason, after nearly 200 years of spectacularly successful national existence, for the constant defamation of our country by its own people? One basic cause is to be found in the gradual conversion of our government from the simple form and purpose conceived for it by the Founders into the gigantic social welfare organization that now sprawls over the District of Co lumbia and dominates the national scene. In the minds of millions, the government is no longer the or ganized power of the people to govern themselves. In their view it has ceased being the simple but majestic instrument that was to uphold justice, protect citizens from aggression, insure their per sonal and political freedom - and then .... let them alone. All that is now taken for granted, to be sure (except the part about leav ing them alone), but it has become of secondary importance. In addi tion to its traditional functions, 566 THE FREEMAN September the government is now an aggre gation of agencies whose job is to provide certain "benefits" - Le., financial assistance - to .... prac tically everybody! This means that its area of potential culpability has been enormously extended.

There are now hundreds of things for which people can blame the government, either for its failure to do enough, or for having done too much, depending on the point of view. Moreover, the government has been assigned the job of guarding the interests of farmers, students, laborers, artists, writers, old peo ple, young people, racial minori ties, housewives, inner city dwell ers, suburbanites, ruralites - and especially "consumers" (which again means everybody) . And this guardianship is not to be achieved as an ordinary matter of law en forcement, but through militant administrative activism. All this has meant a great proliferation of the bureaucracy, with attendant operating expense, plus enormous outlays to finance the innumer able programs that are generated. And it has meant hundreds of new targets and occasions for the ex change of abusive rhetoric. Harmful or Helpful? A great weakness in all this has been the failure to distinguish be tween those features of the societal structure that are harmful and those that are helpful to the growth of the individual-for that, if I understand the real im port of our history, is what this country is all about. The freedom and fulfillment of the individual this was the idealistic dream and the practical aim of those who or ganized the American State.

But the intrusion of govern ment into all walks of life - our tax-supported and politically ori ented and regulated schools; a subsidized and sharply controll.ed agriculture; vast housing pro grams, some of whose monstrously useless buildings are already be ing demolished; welfare programs that have little real concern either for the cost to the public or for the effect upon the recipient; all these and many other well meant but disastrous and costly programs have not truly aided but served to defeat the great idea of an achieved social harmony through the exercise of freedom. Thus the floundering and some times the blundering of a nation that is still striving to find itself, not on the world stage only, but especially in the important matter of what is the proper relationship between government and the gov erned - whether or not the posture of the State as a generous uncle can best serve the true interests of the citizen. Growing numbers 1974 TIRE ENIGMA 567 of thoughtful people are convinced that full freedom and not paternal ism is the best ins urance of indi vidual growth and development.

Certainly the practice of govern mentalism, with its concomitant plethora of regulatory bureaus and departments, will continue to pro vide fuel for the fires of contro versy and bitterness. Unpopular War It has been the fashion in re cent years to blame all our Ameri can doubts and dissatisfactions on war, especially the Korean "Police Operation" and the subsequent Viet Nam exercise in frustration. Those wars did indeed make their disastrous contribution to our na tional discontent. But they were only a current phase of the peren nial unpopularity of America among the Americans. The shrill chorus of defamation was on stage long before the Geneva Accord; and it will still be heard when the Mekong Delta and the Central Highlands are but a. fading mem ory. As Southeast Asia was phas ing out, the Watergate scandal was phasing in as a center of dis satisfaction; and when its course is run new occasions of critical discontent will arise or be manu factured.

First and always, there will be the voices of violence and revolu tion. These fall into two main divisions: the sincere, if deluded disciples of Karl Marx and sup porters of every regime that even pretends to follow the Marx-Lenin Mao line; and second, the hard eyed, communist-trained agents who care little for Marxism as a political theory, but are deter mined upon the destruction of any government that is not communist in form and purpose. These are the activists, trained in the tech niques of revolution, one of which is to infiltrate and use any move ment that has a cause for griev ance, real or fancied. But of even greater destructive impact, though not so intended, will be the continuing clamor of our many special-interest groups. I am not referring now to such "special interests" as agriculture, or manufacturing, or labor, or banking, as the term is ordinarily used. I mean rather the many groups that have as their special interest the promotion, preven tion or abolition of this, that or the other policy or program which, in their belief, threatens (or in sures) the health, welfare, happi ness, freedom - even the perma nence - of the American nation.

Such people are not communists. They wish no harm to this coun try. Indeed, most of them have as their main purpose and mission a program of "saving" the Ameri can people from .... something.

568 THE FREEMAN September A Chorus of Defeat It is not possible or desirable in an article of this brief compass to review and assess all these "move ments." Some of them have a valid basis for the dissatisfactions they express. Some of the changes advocated are long overdue. But that being granted, one who loves this country is appalled at the ex tent to which their voices are di rected, not at a particular evil, but at .the whole American scene, its institutions, its people, and its government. Perhaps this is best illustrated by the emotional effort that was made, following the as sassination of President Kennedy, to load the whole American peo ple with a sense of guilt for the brutal act of one evil man. The result of all this is that the audible voice, certainly the most quoted voice, of our country today is usually one of condemnation, hardly ever one of hope. The com posite chorus of propaganda damns America generally, praises it seldom. Whether there is a South Asian War, a Middle East conflict, a shortage of fuel, or a problem of international credit, our country is customarily the villain, almost never the hero.

Certainly that is the impression one gets from watching television or reading newspapers and maga zines. I am not at the moment criticizing those media. By and large, 'with notable exceptions, they report what is happening the news. On the old man-bites dog formula, bad news inevitably comes front and center. This much can be conceded to media that have plenty to answer for in the way of sensationalism and distor tion. But beyond the media are those who make the bad news - the shouters and ranters; the critics and defamers; the promoters of evil causes who defame with de liberate intent; the supporters of worthy causes who also defame, not with evil intent but by ascrib ing the worst motives to all who oppose them. Thus we hear that there is poverty in the land, not because some people are unfortu nate, but because wicked and ra pacious men are growing fat by despoiling the poor. There is pol lution, not because we all throw our waste about indiscriminately, but because the producers of goods don't package them prop erly. There are shprtages of fuel, not because we burn it up waste fully in our cars and furnaces, but because reckless producers of fossil energy are keeping oil and coal off the market. The cost of food is high, not becaus.e we have all accepted government-induced inflation as a way of economic life, not because transportation and all other costs have soared with a 1-974 THE ENIGMA 569 dwindling dollar, but because self ish farmers, scheming wholesal ers, and retailers without con science have conspired to drive prices up.

And so on, and on, and on . . . . in a cumulative jeremiad that strips our country bare of good intent or high purpose and pre sents it to the world and to its own people as a nation sunk in selfishness, iniquity and dishonor. And it is a false rendering! It simply does not reflect the reality of America. This statement is no Pollyanna pretense to national per fection. We have our sins and fol lies to answer for, like other na tions. But a ranting voice on a loud speaker; a screaming revo lutionary with a bull horn; a mur derer with a smoking gun or drip ping knife; a sneaking arsonist setting fires; a cowardly terrorist planting a bomb to kill innocent people; a minority mob of stu dents seizing offices, destroying records, spreading excrement, shouting obscenities - these are not America. The Real America America is in those millions of homes where love and decency and pride and parental concern and filial affection prevail-and it is nonsense to pretend, as some-do, that such homes do not exist, or that they are diminishing in number. America is in those grade and high schools where girls and boys by the millions are studying and learning and ducking classes and killing time and flirting and fall ing in and out of love - as they have always done. It is in hun dreds of small colleges and many universities, where the great mass of students are still concerned with learning, excelling, finding a good job, and "getting ahead in the world."

While all the noisy turmoil of marches, "protests," demonstra tions, and riots occupies stage cen ter, the people of the country carryon - working, earning, spending, saving, investing, taking chances, losing, winning, loving, marrying, having kids, getting on each other's nerves, quarreling, making up, planning, hoping, hav ing disappointments, enjoying achievements, sharing sorrows, and making homes where warmth and faith and love abide. While a handful of "activists" are disrupting traffic, upsetting cars, smashing windows, and thereby gaining a few headlines or a coveted spot on television, in hundreds of towns and cities all over the country men and women are giving their time to work on projects to benefit their communi ties. Businessmen are serving on committees; housewive~ are man aging day care centers; working 570 THE FREEMAN September mothers are helping to build a home and a future for their fam ilies. Carpenters are aiding the Red Cross; bricklayers are active in the· Community Chest; others give up their evenings to help op erate clubs for boys and girls. On thousands of farms teenagers are being taught the essentials of husbandry and are competing for prizes contributed by people who are not required to do so, but who want to share their substance and point young people to a better future.

Serious Work for Progress All very prosaic and material istic? Of course. But so, despite its high moments, is life itself. Before we can paint or carve or write books or compose music or operate farms or organize bu~iness enterprises, we must eat, wear clothes, and be sheltered. Such, in deed, is the price of existence. The great majority of people understand this and govern their lives accordingly. At the very time when campus riots were getting the headlines, the rioters were but a handful of students, often led by outside agitators. The overwhelm ing majority of students wanted to get on with the business of ac quiring an education, the better to cope with the problems of their later years. And it was so with every other incendiary and revolutionary movement. Small coteries of irresponsible adventurers made noise and committed depredations. The serious work for progress in social betterment and human un derstanding was done by persist ent pluggers who were unwilling to burn down the barn to elimi nate the rats.

It is not the purpose of these paragraphs to decry propaganda, organization, meetings, agitation, or any other lawful means of fo cusing attention on needed re forms. "Congress shall make no law . . . abridging the freedom of speech . .. or the right of the peo ple peaceably to assemble, and to petition the government for a re dress of grievances." And aside from that Constitutional provi sion, change is the order of life; and today it is needed .in many areas if mankind is to attain full freedom and realize its highest potential. But it is a tragic mistake, cumu latively suicidal, to convert every demand for change into a crusade against the American society. With all its failures and shortcom ings, that society is one of the best, perhaps on all counts it is the very best, that has yet been devised by groping man for his own governance. The evils that exist here are not peculiar to America, but are the common and tragic portion of all mankind. Sum 1974 THE ENIGMA 571 them all up ; take the total of ev erything that is complained of; and then place in the opposing bal ance the multiform advantages we Americans enjoy in terms of af fluence, comfort, and freedom do this, and the scales will tip re soundingly for the good, as against the bad, in our country. Or again, weigh in those same scales of comparison the advantages of fife in the United States as against life in any other country on earth, and once more the balance will come down handsomely for the American performance.

Striving Toward Perfection The perfect society, the country without fault or reproach, has yet to be devised. Man is a developing creature, still close to the cave and the jungle in many of his reflexes. He errs and sins grievously against his fellows, and against himself. Just now especially he is caught up in great tides of change, and is the victim as well as the beneficiary of vast scientific dis coveries and technological ad vances. He stands today tiptoe, as it were, on the edge of a new im mensity - his eyes on the planets and stars, his feet dragging in the mire of an all-too-earthy existence. His glory is that he does con sciously and persistently strive toward perfection. He does want to do and be better. Groping and stumbling, hindered by selfishness and prej udice, he does neverthe less catch visions of the better life and is at moments exalted. His tragedy is that he is still not as big as his visions, smaller in mind and comprehension than his sci ence - a moral and ethical juve nile, overshadowed by the soaring splendor of his technology. But he stri ves, he reaches, he aspires and therein resides his nobility.

Therein also is found the hope of mankind for ultimate perfection. Meanwhile, men are not perfect, neither we Americans nor anyone else. Our life is flawed by the fail ures, malice, ignorance, selfishness and general perversity of human nature. Our society has been and is marred by poverty - but far less so than the societies of most other countries. It has been scarred by crime, like other societies that boast of their high ethical stand ards. Capitalism in America has produced its quota of rapacious crooks --:- and so has socialism in England and Sweden and commu nism. in Russia and China. A mi nority content of depravity, cu pidity, and ruthlessness inheres in the human condition. The Ameri can society, like others, has failed in a subtle way to achieve the highest plane of freedom, possibly because it has made ' freedom into a kind of political shibboleth of something expressed in terms of 572 THE FREEMAN September physical advantage, rather than as an essential thing of the human spirit.

But it is a great society, easily the best and finest yet practiced among men. And it should not, for the sake of all mankind, be pulled apart, either by enemies who want to destroy it, or by friends who, with tragic good intent, are quite apt to dismember it in the process of trying to make it better. The Americans love their coun try - but they constantly revile it. They are proud of its achieve ments - but they dwell on its blunders. They know about its re markable successes - but they'd rather talk about its failures. They speak eloquently of its great fu ture, all the while they are busily pulling it to pieces. That is the enigma. IDEAS ON 46 LIBERTY Freedom Lost Is Freedom Lost THE GOVERNMENT FORCE which takes away any individual's free dom must always be applied locally because that's where the in dividual is. Each and every individual is local to some locality. To destroy an individual's freedom, government force must be applied in his locality.

The argument that local government is less dangerous than federal government has been used to expand local governments all over these United States, and the government expansionists apply the same type argument to state governments. "State governments," they say, "are less dangerous than the federal government." The result is that local and state governments have expanded even faster than the federal government in recent years. Local governments have been taking more and more freedom of choice away from the individual. State governments have been taking more and more freedom of choice away for the individual. The federal government has been taking more and more free dom of choice away from the individual. They are all dangerous. In recent years the greatest danger has come from local and state governments because they have been the most successful in taking freedom of choice away from the individual.

Freedom lost is freedom lost, whether it be to the federal gov ernment, the state government or the local government. From the Colorado Springs Gazette Telegraph, July 5,1974 A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN The Fellow-Trevellers IN THE BEGINNING there was the romantic tradition. The artists, worshipping clay, paint, decibels or words (as the case might be), retreated to their garrets with confused feelings that the French Revolution, which was supposed to have brought about a universal en lightenment, had misfired. The new Bohemians may have consid ered themselves to be socialists, anarchists or radical democrats, but they actually hungered with out knowing it for an aristocratic order that would support them with a quite old-fashioned patron age. That was the way it had been before the damnable bourgeoisie began to scramble for capital to start factories - the "Satanic mills" - and that was the way it should be again.

The romantics were subsequent ly joined by the Fabian liberals, who sought to use government as a "planning" instrument to re fashion society in accordance with supposed scientific principles. Call ing themselves intellectuals, the romantics and the Fabians (or Progressives, as they were known in America), were actually short on analytical ability. They couldn't understand the emerging capital ism that had unshackled the pro ducer after Napoleon had com pleted the wrecking of the old feudal world. That was how things stood when, at the end of World War I, the Bolsheviks grabbed the levers of power in Russia, quite in defi ance of Marx's theory that the "revolution" would first come in the industrialized countries. The scene was set for the rise of the Fellow-Traveller. The noncompre hending intellectuals (who was it said "thinking is too important to leave to the intellectuals"?) re573 574 THE FREEMAN September acted to the emergence of the So viet State in a variety of ways, but on one thing they were agreed: the "experiment" in the land of the muzhiks was something to be coddled and protected.

In a remarkable book called The Fellow-Travellers: A Postscript to the Enlightenment (Macmillan, $8.95), David Caute follows the fortunes of three or four genera tions of intellectuals who were be mused by the Portent in the East through all the hot and cold war days of the middle twentieth cen tury. The story, as Mr. Caute pre sents it, has the attributes of a great tapestry. The characters come and go, some of them chang ing their minds, some persisting to the end in holding that Statist Communism, though it might not be considered a good organiza tional form for a Western nation that had known habeas corpus and other liberties, is an acceptable order for a backward nation that has yet to achieve its industrial revolution. Biographical Material As a collection of interweaving biographies The Fellow-Travellers is fascinating. If you want to know whatever became of such Germans as Lion Feuchtwanger, Arnold Zweig, Heinrich Mann and Ernst Toller, all of whom trusted the So viets to save their Fatherland from Hitler, you'll find it here, with a liberal garnishment of historical irony. The British Fellow-Travel lers - Harold Laski, George Ber nard Shaw, Sidney and Beatrice Webb, the poets (Auden, Spend er), the detached socialists (Or well was the greatest of them un til he went to Spain and saw what the Stalinists were doing) ...:.- were more interested in Lenin and Sta lin as planners than as anti Fascists. The FeIfow-Travelling French, from Anatole France and Romain Rolland on down through Andre Malraux and Andre Gide to Jean-Paul Sartre, were more ab stract about it all (Anatole France was looking for a new breed of eighteenth century philosophe, Rolland was for universal peace, Malraux wanted adventure, Gide and Sartre had moral and exis tential preoccupations). The Americans-Lincoln Steffens, Anna Louise Strong, John Dos Passos, Corliss Lamont, Malcolm Cowley, Theodore Dreiser, Upton Sinclair, Max Eastman - got into the Fel low-Travelling act mostly for idealistic motives. They didn't fear Hitler as the Germans feared him, nor were they particularly inter ested in turning their own nation over to a Fabian bureaucracy, even though many of them came to accept the New Deal as a domestic substitute for more orthodox so cialism.

1974 THE FELLOW-TRAVELLERS 575 Shock Waves of Change What is deficient about Mr. Caute's vast canvas is its failure to be incisive about the social shocks that brought intellectuals into the Fellow-Travelling orbit or pro pelled them out of it. The shocks began quite early in the game, with the breaking of the Kron stadt sailors' mutiny against Bol shevism. The 1929 depression was the biggest shock of all. Then came the counter-shocks: the Soviet man-made famine of the Thirties, the purges, the Moscow trials, the triumph of ugly dictatorship in the person of Stalin, the signing of the Nazi-Soviet Pact. Many of the American idealists-Max East man, Isaac Don Levine, Edmund Wilson, J. B. Matthews, Dos Pass os, even Louis Fischer-got off the train at one point or another be cause they couldn't stand the sight of torture. Max Eastman once wrote a great essay on the "motive pat terns" that brought people to so cialism in his time. Some were looking for freedom, others were more interested in order. Natu rally the freedom-lover would re act to a purge, or a fostered fa mine (breaking eggs to make an omelette), or the creation of an all-devouring Ogpu, in a different way than a "planner" with a book keeping mind would react.

If Mr. Caute had applied Eastman's motive-pattern test to his characters, he would have come up with more convincing explana tions for the evolution of such "defectors" as Dos Passos or Mal raux. And he would have been able to come to grips with the nature of many a Fellow-Travelling com promise. In Spain, FeUow-Tra vel lers put up with the Stalin terror beca use they considered Franco the greater evil. So it was, all through the West, after Hitler had attacked Russia. Even such a freedom-lover as Winston Church ill could be a Fellow-Traveller on the pragmatic theory that "the enemy of my enemy is my friend." The McCarthy Period Mr. Caute is at his best in deal ing with the Germans, especially the German Jewish intellectuals. They needed Soviet help to get rid of the Nazis. But when it comes to understanding the so-called Mc Carthy Period in America Mr. Caute misses the whole point.

With Hitler out of the way, there was no pragmatic reason to regard the Soviets as friends. It was not mere "witch-hunting" that ac counted for the U.S. concern with the behavior of Fellow-Travellers such as Owen Lattimore. The So viets in the Cold War period, and the Maoists in China, were - and still are, for that matter - push ing for international domination, 576 THE FREEMAN September and the influence of people like Lattimore made it difficult for the U.S. to formulate a foreign policy that would be an adequate check on Communist expansion. McCarthy was not a particularly intelligent student of Communism, and he couldn't do arithmetic. But there was no academic or journal istic "reign of terror" in the U.S. in the early Fifties. As a matter of fact, anti-Communist writers had difficulty getting their books published, and the only professor that lost his job during the so called witch-hunt period was Will moore Kendall of Yale, who made the mistake of exposing himself as a McCarthy sympathizer.

Hollywood, of course, was a dif ferentstory: the proCommunist film writers did have boycott troubles. But Morrie Ryskind could tell David Caute a thing or two about the long period in the Thirties and Forties in which the Fellow-Travellers arrogantly squeezed the anti-Communists out of the studios. What the Fellow Travellers in Hollywood got in the McCarthy period was a bit of be lated poetic justice. Mr. Caute writes beautifully about the general Fellow-Travel ling ambivalence. But, when he deals with the American scene, he is a bit ambivalent himself. , HANDSOME BLUE LEATHERLEX FREEMAN BINDERS $2.50 each ORDER FROM: THE FOUNDATION FOR ECONOMIC EDUCATION IRVINGTON-ON-HUDSON, NEW YORK 10533 the Freeman VOL. 24, NO. 10. OCTOBER 1974 ATheme for the Bicentennial: The Founding Fathers'Fear of Power Allan C. Brownfeld 579 A review of the early warnings about the concentration of political power.

What Does America Owe to the "Third World"? Neera Badhwar 585 A reasonable doubt as to the efficacy of intergovernmental foreign aid. Why Gold Is Money Traders decide which form of money to trust. Robert L. Guarnieri 592 Why Is Liberalism Endemic? Charles R. LaDow 595 Concerning the continued popularity of a social system that is such a failure. EconomicCalculation Brian Summers 602 Socialism cannot function without a means for economic calculation. M'arx, Mises and Socialism Dave Osterfeld 605 Further thoughts concerning the vital role of the market and money for economic calculation. Regulation Helps the Rich and Harms the Poor A cogent reason Why government should be limited. Bernard H. Siegan 612 Dog-Eat-DogCompetition M. Northrup Buechner 614 Market competition is the activity of two or more parties pursuing the same customers' dollars by offering the highest values in exchange. The High Cost of the Draft Robert McNown and Dwight R. Lee 627 The question here concerns who should pay the bill.

Laws Versus Tyranny Obedienceto the moral law brings p·eace and harmony. Book Review: "Gibbon for Moderns" by Peter B. Witonski Leonard E. Read 632 637 Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

the Freeman A MONTHLY JOURNAL OF IDEAS ON LIBERTY IRVINGTON·ON·HUDSON, N. Y. 10533 TEL.: (914) 591-7230 LEONARD E. READ PAUL L. POIROT President, Foundation for Economic Education Managing Editor THE F R E E MAN is published monthly by the Foundation for Economic Education, Inc., a non political, nonprofit, educational champion of private property, the free market, the profit and loss system, and limited government. Any interested person may receive its publications for the asking. The costs of Foundation projects and services, including THE FREEMAN,are met through voluntary donations. Total expenses average $12.00 a year per person on the mailing list. Donations are in vited in any amount-$5.00 to $10,000-as the means of maintaining and extending the Foundation's work. Copyright, 1974, The Foundation for Economic Education, Inc. Printed in U.S.A. Additional copies, postpaid, to one address: Single copy, 50 cents; 3 for $1.00; 10 for $2.50;25 or more, 20 cents each.

THE FREEMAN is available on microfilm from Xerox University Microfilms, Ann Arbor, Michigan 48106. Some articles available as reprints at cost; state quantity desired. Per mission granted to reprint any article from this issue, with appropriate credit, except "Regulation Helps the Rich and Harms the Poor," "Dog Eat-Dog Competition," and "The High Cost of the Draft."

~ ~IIII~ A Themefor theBicentennial: ALLAN C. BROWNFELD The FoundingFathers'Fearof Power AMERICANS approach che Bicen tennial celebration in the face of the Watergate scandal and sub jected to a maze of rules and reg ulations inflicted upon them by what is becoming an increasingly powerful governmental apparatus. Government now feels that it has the right and the power to tell us to buckle our automobile seat belts, what drugs we may and may not take, what race and sex a job applicant must be to be hired, what distant school our children will be bused to attend, what kind of gasoline we must use in our cars ... and this is only the beginning. On the horizon are plans for governmentally con trolled medical care, national zon ing in the form of land use leg islation, national data banks which Mr. Brownfeld of Alexandria, Virginia, is a freelance author, editor, and lecturer especially interested in political science.

will know everything about us and our personal lives, and a host of other interferences in what we once believed was meant to be a free society. Watergate reveals the vast amount of power which has been centered in the executive branch, and the suspended jail sentences given to high officials who have pleaded guilty to serious crimes indicate that our idea of equal justice for all is far from reality. A President himself claims that his executive position virtually places him outside of the ordinary procedures of the law, and gives him the right to determine which kinds of evidence can and cannot be considered by the special pros ecutor, the Congress, and the courts whose duty it is to investi gate the charges against him. If the Bicentennial causes us to reflect upon the meaning of our 579 580 THE FREEMAN October history, one essential element should be stressed. That is that the Founding Fathers were deeply suspicious of centralized govern mental power. It was this fear of total government which caused them to rebel against the arbi trary rule of King George III. In the Constitution they tried their best to construct a form of gov ernment which, through a series of checks and balances and a clear division of powers, would protect the inqividual. They believed that government was a necessary evil, not a positive good. They would shudder at popular assumptions which regard government as the answer to all of our problems and which allow public officials to claim rights superior to those of the men and women who have elected them.

How Government Grows In a letter to Edward Carring ton, Thomas Jefferson wrote that, "The natural progress of things is for liberty to yield and govern ment to gain ground." He noted that "one of the most profound preferences in human nature is for satisfying one's needs and desires with the least possible ex ertion; for appropriating wealth produced by the labor of others, rather than producing it by one's own labor . . . the stronger and more centralized the government, the safer would be the guarantee of such monopolies; in other words, the stronger the govern ment, the weaker the producer, the less consideration need be giv en him and the more might be taken away from him." At the beginning of his Ad ministration, Jefferson wrote a friend that, "The path we have to pursue is so quiet that we have nothing scarcely to propose to our Legislature. A noiseless course not meddling with the af fairs of others, unattractive of notice, is a mark that society is going on in happiness."

Today, of course, there is al most no aspect of our lives that some agency of government does not· consider within the province of its authority and control. That government should be clearly limited and that power was a corrupting force was the essential perception held by the men who made the nation. In The Federalist Papers, James Madison declared that, "It may be a reflec tion on human nature that such devices should be necessary to control the abuses of government. But what is government itself but the greatest of all reflections on human nature? If men were an gels, no government would be necessary. If angels were to gov ern men, neither external nor in ternal controls on government 1974 A THEME FOR THE BICENTENNIAL 581 would be necessary. In framing a government which is to be ad ministered by men over men, the great difficulty lies in this: you must first enable the government to control the governed, and in the next place oblige it to control itself."

They Were Not Utopians The Founding Fathers were not utopians. They understood man's nature and attempted to form a government which was consistent with - not contrary to - that na ture. Alexander Hamilton pointed out that, "Here we have already seen enough of the fallacy and extravagance of those idle theories which have amused us with prom ises of an exemption from the im perfections, weaknesses, and evils incident to society in every shape. Is it not time to awake from the deceitful dream of a golden age, and to adopt as a practical maxim for the direction of our political conduct that we, as well as the other inhabitants of the globe, are yet remote from the happy em pire of perfect wisdom and perfect virtue ?" Rather than viewing man and government in positive terms the Framers of the Constitution had almost precisely the opposite view. John Adams expressed the view that, "Whoever would found a state and make proper laws for the government of it must pre sume that all men are bad by na ture." As if speaking to those who place ultimate faith in egalitarian democracy, Adams attempted to learn something from the pages of past history: "We may appeal to every page of history we have hitherto turned over, for proofs irrefragable, that the people, when they have been unchecked, have been as unjust, tyrannical, brutal, barbarous and cruel as any king or senate possessed of uncontrol lable power . . .. All projects of government, formed upon a sup position of continual vigilance, sagacity, and virtue, firmness of the people, when possessed of the exercise of supreme power, are cheats and delusions .... The fun damental article of my political creed is that despotism, or un limited sovereignty, or absolute power, is the same in a majority of a popular assembly, an aristo cratical council, an oligarchical junto, and a single emperor.

Equally arbitrary, cruel, bloody, and in every respect diabolical." The political philosopher who had the most important impact upon the thinking of the Founding Fathers was John Locke. Locke repeatedly emphasized his suspi cion of government power and be lieved· that if the authorities vio late their trust, the regime is to be dissolved.

582 THE FREEMAN October Let the Legislative Branch Be Predominant It was Locke's view, in addition, that the legislative branch of gov ernment - that branch closest to the people and most subject to their control - should be the most powerful governmental branch. In his Second Treatise, Locke notes: "Yet the legislative being only a fiduciary power to act for certain ends, there remains still in the people a supreme power to remove or alter the legislative, when they find the legislative act contrary to the trust reposed in them . . . . And thus the community perpetu ally retains a supreme power of saving themselves from the at tempts and designs of any body, even of their legislators, whenever they shall be so foolish or so wick ed as to lay and carryon designs against the liberties and proper ties of the subject." The political tradition out of which the U.S. Constitution grew repeatedly stressed the impor tance of limiting the sphere of government. One role which gov ernment was to have - and which many today seem not to under stand - was that of the protection of private property.

Locke stresses this point: "The great and chief end therefore, of man's uniting into commonwealths, and putting themselves under gov ernment, is the preservation of their property Every man has a property in his own person. This nobody has any right to but himself. The labor of his body and the work of his hands, we may say are properly his. Whatsoever, then, he removes out of the state that nature hath provided and left it in, he hath mixed his labor with it, and joined to it something that is his own, and thereby makes it his property." Protection of Property Those who argue that property should be equally divided are ad vocating a political philosophy sharply contrary to that held by the Founding Fathers. James Madison held that, "The diversity in the faculties of men, from which the rights of property originate, is not less an insuperable obstacle to a uniformity of interest. The protection of these faculties is the firs,t object of government. From the protection of different and un equal faculties of acquiring prop erty, the possession of different degrees and kinds of property im mediately results."

Property, it was believed at the time of the Revolution, was neces sary because its protection in sured that individual liberty and possibilities for achievement would survive. Professor Donald Devine, in his volume, The Political Cul ture of the United States, notes 1974 A THEME FOR THE BICENTENNIAL 583 that, "Property is a basic liberal value because. its protection allows the individual to be free and se cure." During the colonial era, Americans became all too familiar with the dangers of unlimited and ar bitrary government. The Revolu tion was fought to prevent such governmental abuses and to make certain that individual citizens might be secure in their lives and property. When the Articles of Confederation were being consid ered, fears of excessive concentra tion of authority were often ex pressed. The town of West Spring field, Massachusetts, to cite one example, reminded its representa tives of the "weakness of human nature and growing thirst for power .... It is freedom, Gentle men, it is freedom, and not a choice of the forms of servitude for which we contend, and we rely on your fidelity, that you will not consent to the present plan of Union, til after the most calm and dispassionate examination you are fully convinced that it is well cal culated to secure so great and de sirable an object."

One of the early textbooks of the American patriots was Cato's Letters, the joint product of Thomas Gordon and John Trench ard. Written during 1720-23, 'it was widely read in the colonies to gether with James Burgh's Politic,al Disquisitions. The basic con cept stressed in both of these works is the evil effect of power. "The love of power is natural," wrote Burgh, "it is insatiable,; it is whetted, not cloyed by posses sion." Gordon and Trenchard observed that, "Power renders man wanton, insolent to others, and fond of themselves .... All history affords but few instances of men trusted with great power without abusing it, when with security they could." The people must retain power in their own hands, grant it sparing ly, and then only under the strict est supervision. "The people can never be too jealous of their lib erties," warned Burgh. "Power is of an elastic nature, ever extend ing itself and encroaching on the liberties of the subjects." Cato also believed that, "Political jeal ousy . . . in the people is a neces sary and laudable passion." There fore, the people must select their rulers with care, and these must be "narrowly watched and checked with Restraints stronger than their Temptation to break them."

Eternal Vigilance The written and spoken words of the men who led the Revolution give us numerous examples of their fear and suspicion of power and the men who held it. Samuel Adams asserted that "there is a 584 THE FREEMAN October degree of watchfulness over all men possessed of power or influ ence upon which the liberties of mankind much depend. It is neces sary to guard against the infirm ities of the best as well as the wickedness of the worst of men." Therefore, "Jealousy is the best security of public liberty." The corruption of power, the op':' pression of strong government these were the vital, immediate dangers felt by those who waged the Revolution. Today, unfortunately, govern ment seems to be out of our con trol. Non-elected officials - bureau crats - make rules which have the effect of law, controlling more and more aspects of our lives. Government is no longer viewed in negative terms, but is now viewed positively, as the answer to almost all of our social, economic, and political problems.

In 1800, Jefferson wrote of his belief that "a single consolidated government would become the most corrupt government on earth." Twenty-one years later he re marked that, "Our government is now taking so steady a course as to show by what road it will pass to destruction, to wit: by consoli dation first, and then corruption, its necessary consequence." Perhaps by reviewing the polit ical perceptions of the Founding Fathers as an important element in the Bicentennial celebration we will gain some of the wisdom which we have lost in the years since 1776. Many have lamented that America is the only nation in the world's history whose Golden Age was at the beginning. It is up to us to see that this lament does not become a self-fulfilling prophecy. ~ NEERA BADHWAR IT ALL STARTED with the class-war which, if you remember, did not materialize even in Russia: the Re volution was the work of a tight ly-organized intellectual elite re sisted to the last by bourgeois, worker, aristocrat, soldier, peasant and sailor alike.

We are now told in solemn U. N. debate that there will be an inter national class-war unless the U. S. A. works out a plan for the distribution of her citizens' wealth. Presumably, the war will be waged against America by the "Third WorId's" armed forces - armed with American arms, and support ed logistically by American sweat ers, shoes, and powdered milk. The "beautiful" Dr. Mubashir "As a citizen of India, here as a graduate student of political science," explains Neera Badhwar, "I am particularly concerned with the issue of foreign aid - and interested in dissociating myself from its proponents." Hasan (to quote from James Res ton's "Impeaching at Turtle Bay," The N ew York Times, April 24, 1974), the Finance Minister of Pakistan, explained that increas ing and sharing her production with the poor nations is not America's only alternative. She has the option of reducing her con sumption and sharing the "sur plus."

What conclusion can we draw from this proposal? Marx's millennium was a fairy tale world in which all were to be equally "free" from material need - a world to be reached through a distribution of capitalism's achievements: after capitalism had "solved" the "problem" of produc tion for all time, communism would take over and "solve" the "problem" of distribution. In its ability to produce lay capitalism's historical "justification." 585 586 THE, FREEMAN October 8eyondMarx Modern collectivists in socialist "republics" have carried the Marx ist dictum one step further. Decades of evidence has forced them to abandon the naive claim that the production of wealth is set in motion in a certain histori cal period (capitalism), and that it becomes thereafter self-generat ing and automated - a process so simplified that it is a mere matter of filing cards and pushing but tons. They cannot escape the fact that production requires continu ing thought and effort, continuing free enterprise; that capitalism cannot be superseded if poverty is to be superseded. But their polit ical philosophies forbid capitalism in their own countries. So for Marxist history they substitute a neo-Marxist geography: for capi talism as a historical period they substitute America which, as still the freest and most productive country in the world, must now jus tify its existence by serving as the milch-cow for the neo-Communists of the "Third World" -who are fa miliar with distribution but not with· creation. Thus they are not at all bashful about attempting to direct the distribution of Amer ica's wealth.

The suggestions of those - both Americans and non-Americans who would shackle this country with a global responsibility for overcoming poverty, range from the laughable (American aid for a worldwide campaign to restore breast-feeding) to the frighten ingly dictatorial (forcing Amer icans to "change their rich diet and affluent lifestyle") . Is It Possible? Is it even possible to believe that the poor nations can become rich merely by compelling Amer ica to reduce her consumption and share her "surplus"? Surely the billions of aid dollars poured into these countries with nary a rise in the standard of living consti tutes definitive proof that they have to gear up their own produc tion if they want to achieve pros perity. In the light of this fact one suspects that the motive of the international Robin Hoods is not so much a desire for "freedom" from material need for all, as a desire to reduce America to the level of the "Third World" coun tries, to pull it into the interna tional brotherhood of poverty and suffering. Calls for a "redistribu tion" of America's wealth can mean nothing else. The spirit of such pronouncements can best be expressed by quoting Tocqueville's observation about preRevolution ary France: ". . . all were quite ready to sink their differences and to be integrated into a homogene ous whole, provided no one rose 1974 WHAT DOES AMERICA OWE TO THE "THIRD WORLD"? 587 above the common level." This is not an expression of a desire for the well-being of one's fellow man.

It is an expression of hatred for affluence and achievement. Unanswered Questions Two questions are left unan swered - or never asked - when this involuntary charity is pro posed for American citizens: Why? and By what right? Why has the "Third World's" claim to America's wealth been accepted as a primary, a not-to-be questioned absolute? And how has it happened that the same govern ment which was instituted by its founders to protect the wealth and "the faculties of men, from which the rights of property originate':' is now presumed to have the right to appropriate its citizens' prop erty for any reason it chooses? To answer the second question first: theft begins at home. The government has become inured to the practice of robbing some in dividuals for the sake of a "group" - in the name of the "good of so ciety." Therefore the reckless sug gestion that it now rob its citi zens for overseas groups leaves no one breathless. It would be in structive to trace the history of this development.

Within the nation the class-war - the dethronement of individual ism and the destruction of peace - started with the New Deal which gave one a new deal - spe cial privileges - if one belonged to a class or group called "poor." The 1960s were the years of a group named "black." The early '70s is the decade of a war of all against all. Broken Coalition As political scientists tell uS,the "New Deal coalition" has broken up. Labor has taken issue with equal opportunity groups, the working-welfare poor with the only-welfare poor. Women's Lib has been .berated by racial groups for gate-crashing into their special domain: The Disadvantaged Mi nority. Alvin F. Poussaint ("A Threat to Blacks," The New York Times, May 6, 1974) urges both groups to work together in their struggle for power and "accele rated social change." Typically, he fails to explain the meaning of that phrase or of the word "power."

For the meaning, when stated ex plicitly, is not pretty. "Accelerated social change" is change by coer cion - by legislative action - rather than by persuasion. Power politics is the politics of group warfare, of the "factious spirit," to use Madi son's term. And the eternal casu alty of this factious spirit is the individual. The individual has been frag mented, divided, among groups, so 588 THE FREEMAN October that now he is deemed to have no in.dividual rights or interests, but only "group interests." In other words, nearly every aspect of his life is now subject to the majority vote of those who happen to share his various interests. He finds himself surrounded by his self-ap pointed representatives,- labor unions, professional associations, sexist organizations, racial bro therhoods - to whom he never gave his consent, but with whom he must ally himself, often under legal compulsion.

The Marco De Funis case (wherein a white student with superior grades was initially re fused admission by the University of Washington Law School as part of a policy to "make up" for ear lier discrimination against blacks) highlighted the fact that reverse discrimination is discrimination still, although the Supreme Court refused to rule on it. It is debat able that the Court will recognize the root problem when such a case comes before it again. Violation o/Individual Rights The root problem is that "group rights" are a violation of individ ual rights. Only the recognition and protection of individual rights can keep men anchored to the pur suit of their own interests. For individual rights are the radius which defines the circle of a man's legitimate activities - and the point of origin of the radius is man's reason. A group is merely a collection of entities, it is not an entity in itself, it has no mind or reason - and therefore can have no rights distinct from the rights of the individual. As The New York Times editorialized on August 4, 1963, ". . . the question must be not whether a group recognizable in color, features or culture has its rights as a group. No, the question is whether any American individual, regardless of color, features or culture, is deprived of his rights as an American. If the individual has all the rights and privileges due him under the laws and the Constitution, we need not worry about groups and masses those do not, in fact, exist, except as figures of speech." In attempt ing to transcend the individual, "group rights" transgress the de limited area of each man's rights and, by imposing on him actions alienated from his self-interest, they break the connection between the judgment of his mind and his actions. In the name of the group or society, a "higher good" takes precedence over the good of the individual -and necessarily sacri fices some for the sake of the others.

In a free society - i.e., a society based on individual rights - nei ther individuals nor government 197.1,. WHAT DOES AMERICA OWE TO THE "THIRD WORLD"? 589 may initiate force. The actions of individuals are limited by the ob ligation to respect the rights of others, while the actions of gov ernment are limited to the obliga tion of protecting these rights. But when "group rights" and the "good of society" are accepted as valid concepts, this limitation is broken, government can claim with impunity a boundless power, and individuals become free to advo cate the institutionalization of their whims in the form of law. It is not surprising, then, that when this government proclaims an authority to tax its citizens for the benefit of humanity, for the good of all societies, anywhere, there are few protests. If the individual can be sacrificed for groups at home, he can be sacri ficed for groups abroad.

Why flteDufy? This leads us to the first ques tion: why America is assumed to have a duty towards the world, and why she accepts such a duty. The ability of the "Third World" to make America feel responsible for the former is a result of the ethics that holds that the highest good eonsists in serving others and the higher the cost to self, the more moral the action. It is true that in practice men do not always sacrifice themselves for others. But that is not the point. The point is that they accept the tenet that such sacrifice is the defini tion of virtue - and that, having accepted this, they must feel guilt for not consistently practicing it. In the face of another's need, then, an affluent person or nation is especially vulnerable to guilt. For if it is easier for a camel to pass through the eye of a needle than for a rich man to get into heaven, the rich man - or nation - cannot but experience his wealth as a slur on his character, an ugly third hump that brands him for hell. So he apologizes for his productivity - even as he is being damned for not producing enough (i.e., "ac cording to his ability") for the satisfaction of others ("according to their needs").

Unearned Guilt This guilt is the psychological basis of the support both for the political philosophy of the welfare state (of which the theory of group rights is an integral part) and for the thesis that America owes a debt to poorer nations. The assumption of an unearned guilt, the atonement for strength and ability, constitutes what philoso pher Ayn Rand has called "the sanction of the victim" - an in evitable consequence of accepting the ethics of self-sacrifice (Ayn Rand, Atlas Shrugged). America has given this sanction 590 THE FREEMAN October to her spiritual enemies. She has accepted the· onus of being her "brothers' keeper." Recently the Senate took the unprecedented step of giving the "keeper's" guilt official stature by couching it in the form of a reso lution. April 30, 1974, was de clared a "National Day of Humili ation, Fasting and Prayer" set aside to repent "for our national sins."

It would be startling to hear such self-abnegation even from a starving Asian country - perhaps because no starving Asian country has any virtues for which to beg forgiveness. For these days it is virtues that people seek to expiate. Analogous to the Senate action is the Indian manner of rej ecting a beggar's plea for alms: the rejec tion is accompanied by the words, "Forgive me." The beggar is pre sumed to have a natural right to your property, therefore your re fusal to part with it must needs be apologized for. It is clear that the "sins" of the resolution refer to the fact that America's citizens are not living in abject poverty, that this nation is most uniquely the nation that has never been touched by the fear of famine - or the fear of the boot. What is overlooked or evaded is the connection between the two, be tween the absence of the boot and the absence of famine. Freedom to Think Psychologists have long held that the mind can function ef ficiently only when it is unthreat ened, is free to think. And that only in such a situation will the individual be motivated to per form optimally. Nearly everyone accepts this thesis on the indi vid ual' interpersonal, level. But most people forget or deny the connec tion between freedom and think ing and, therefore, productivity and, conversely, the connection be tween lack of freedom and lack of productivity - when the question concerns a political system. Yet in talking about a political system-· a certain form of government in teracting with a collection of in dividuals - one is' talking, ulti mately, only about individuals for whom the principles of psychology still must hold true. Whether it is naked terror that prevails, or arbi trary law that shackles the econ omy, the connection between lack of freedom and lack of productiv ity has dramatic manifestation in the· international world. For in stance, it is no coincidence that the totalitarian Soviet Union, with some of the best agricultural land in the world, has already had two famines in its brief history (in cluding the first government-en gineered famine in the long his tory of Russia), and has to import wheat and technology from Amer1974 WHAT DOES AMERICA OWE TO THE "THIRD WORLD"? 591 iea. Neither is it an accident that capitalist* Japan is one of the richest countries in the world, while the official poverty line in socialist India ($30 - a year) is exceeded by only a, small part of the population.

A Matter of the Mind It follows, then, that to repent for one's material well-being, one's productivity, is to repent for the unobstructed use of one's mind, for the freedom that makes it possible for men to translate the action of their minds into physi cal action - to translate mental efficacy into material goods. More over, "repenting for our national sins" - i.e., wealth - makes it in explicable why America should want other nations to accrue wealth, i.e., sins. The question therefore arises: are the advocates of global foreign aid really interested in seeing mankind everywhere prosper? If so, why have they never suggested that freedom instead of free rice be exported? For only when America suspends her charity will the leaders of the "Third World" learn that they cannot have their cookies and eat them too, that they cannot rely on free, capitalist* America to build up their muscles, while they continue to restrict their peo ples' freedom in the name of the "good of society." Or is the pur pose of the do-gooders not uni versal prosperity at all, but mere ly the draining of this country to the death? The fundamental issue is this: are the advocates of "group rights" (the "good of so ciety") interested in seeing their countrymen happy - or merely in destroying whatever freedom there remains, by destroying the very concept of individual rights?

Is the goal of the collectivists the day when ". . . all [will be] quite ready to sink their differ ences and to be integrated into a homogeneous whole, provided no one [rises] above the common level"? " * There is no fully capitalist country in the world. The term is used here for America and Japan because their mixed economies are still predominantly free. IDEAS ON LIBERTY The Use of Capital THE FACTS ARE that every form of wealth is dedicated to the im provement and advancement of the so-called common man. Capital, with negligible exceptions, is used for the orderly production and distribution of goods, 95 per cent of which are consumed by those who claim to be disinherited. From The William Feather Magazine $ ROBERT L. GUARNIERI ---------THERE ARE THOSE who try to give the impression that money can be created by decree or covenant. They assert that an authority such as the state, or an agreement between individuals can willfully establish a currency unit. The most conspicuous recent example of this was the "creation" of "paper gold" or the SDR's (Spe cial Drawing Rights) by the In ternational Monetary Fund.

Historical evidence does not support the idea that a new form of money can be created by the mere passage of a law. There is much more to it than that. Money is not the product of a compact or of legislative acts. It evolved in the market. As primitive peo ple became increasingly aware of their business interests, they came to understand the simple Dr. Guarnieri is Vice President and Chief Econ omist of International Investors, Inc., in New York. 592 fact that exchanging less-market able goods for others of greater salability brought the trader closer to his ultimate economic goal. In ancient Greece, as in some parts of Africa today, cattle were the most marketable commodity, and were used in exchange in addition to their use as sources of food and beasts of burden. Do mestic animals such as cattle, horses, and sheep constituted the chief sign of wealth among an cient peoples, both nomadic and agricultural. Their marketability extended to all economic men.

The lack of roads made transpor tation difficult, but cattle trans ported themselves almost without cost. This made them marketable over a wide geographic area and increased the constancy of the demand for them. A cow is a commodity of considerable dura bility, and its storage costs are 1974 WHY GOLD IS MONEY 593 negligible where pastures are abundant and cattle are kept out doors. In societies where a large herd served as a status symbol and also afforded economic secur ity, comparatively few animals would be offered for sale at one time and consequently found a ready market. Because of these factors and the fact tha t the actual trading in cattle was better developed than trade in any other commodity, cattle emerged a.s the most marketable commodity in the economy and hence the natural money of the people. The division of labor and com mercial development and the for mation of cities with their highly industrial population had the ef fect of diminishing the marketa bility of cattle while increasing the salability of other commodi ties, especially the metals then in use. The city-dwelling manufac turer was not in a position to accept cattle in the course of trade with farmers. Cattle were no longer the most marketable commodity, and finally ceased to be money at all.

Metallic Money Copper was the first metal from which tools and weapons were made. Along with copper, gold and silver were the earliest ma terials used for jewelry and orna mentation. Therefore, at the time when the medium of exchange passed from cattle money to me tallic money, copper, gold, and silver had become the goods of most general desire, largely be cause of primitive people's ex tensi ve use of jewelry. The mar ketability of the metals was greatly enhanced by their useful ness to all people and the fact that they could be readily trans ported throughout a wide market area. The fact that they were durable and could be stored or held without deteriorating gave them added salability. As the area of wor ld trade widened and the rate of turnover increased, the precious metals gold and silver ~ became more and more desirable because of their high purchasing power per unit of weight. This led to obvious advantages in transportation, handling, and storage and meant that copper would cease to serve as money. With the increasing division of labor, higher turnover of commodities, and trade with all parts of the known world, each individual felt the need for car rying more purchasing power on his person. Under these conditions the precious metals, especially gold, became the most convenient medi um of exchange and there fore became the money of the most highly developed economies.

Thus money came into being, not 594 THE FREEMAN October as the result of an agreement, legislative compulsion, or mere chance, but as the natural result of voluntary exchanges in the market place. It can only continue to serve as money as long as it proves acceptable under these conditions. Neither can a newly created currency gain acceptance unless it is backed by something which has already proved itself in the market. The SDR paper met with some acceptance in international finance only because it was linked The Money Supply to gold, of proven monetary qual ities. The creation of Special Drawing Rights was claimed to be a new way for the Interna tional Monetary Fund to make easy credit loans to countries guilty of monetary mismanage ment. But this was not the cre ation of a new international money. Gold is the only interna tional money. A sound currency cannot be created by the mere passing of a law, and today's paper money managers would do well to keep this in mind. ~ IDEAS ON LIBERTY WHILE AN increase in the money supply, like an increase: in the supply of any good, lowers its price, the change does not - unlike other goods - confer a social benefit. The public at large is not made richer. Whereas new consumer or capital goods add to standards of living, new money only raises prices - i.e., dilutes its own purchasing power. The reason for this puzzle is that money is only useful for its exchange-value. Other goods have various "real" utilities, so that an increase in their supply satisfies, more consumer wants. Money has only utility for prospective exchange; or "purchasing-power." Our law - that an increase in money does not confer a social benefit - stems from its unique use as a medium of exchange.

MURRAY N. ROTHBARD What Has Government Done to Our Money?

CHARLES R. LADow LET IT BE CLEAR that the liberal ism here in question is not classi cal liberalism, which is quite properly endemic throughout his tory among the minds and works that last. The question refers to what has passed for liberalism in the past century, mostly. This brand of liberalism has enj oyed such popularity, flattering the wish-fancies of the average mind as it does, tha t the distinction seems unneeded. But, the way words are misused today, it is best to nail it down. The new liberalism is socialism; or, as John Dewey put it: "Liberalism must now become radicalism." It is not easy to understand the persistence of the socialistic brand of liberalism in the United States. When the failures of any system of control are as glaring as those of the leftish leadership during recent decades, it is diffi cult to see why the electorate allows it to proceed. However, this it does and, not inconceivably, Mr. LaDow, of San Diego, recently retired as a teacher of social studies in high school.

may continue to do - even to the point of national bankruptcy. Why? Willingness of the habitually poor and handicapped to see the welfare state grow is understand able, if ill-advised. They are bound to suffer most in any beheading of the "hen that lays the golden egg": capitalism. Even the cur rent inflation hits them hardest of all classes, just as the inordi nate government spending which feeds them is the main cause of it. However, without aid of t~e vast middle classes, they would not be able to maintain the poli cies at the polls, especially since so many of them do not even trouble to vote. Another reason given for the persistence of the political phe nomenon is the guilty conscience of our population, which leads a majority to vote for policies of economic leveling. There is some evidence that this is a factor; but it is still hard to understand. The record of rising private philan thropy belies the reason for wide595 596 THE FREEMAN October spread guilty consciences. At the same time, a certain public cal lousness tends to make the matter moot. Although people feel con cern for victims of chance or crime, there is still much disdain for those living in deserved squalor. Society's perennial peck ing order is alive and doing well.

Labor unions have been the most conspicuous beneficiaries of the welfare state, having, perhaps, the most clear-cut interest in its survival. However, their rank-and file represent an elite among the working force of the nation, most of whom have moved well up into the middle class. Although their dues may be used for liberal po litical purposes, their leaders may hardly count their votes at the polls. (Questioned at a student seminar in Claremont during the Goldwater campaign, a Teamster official admitted that many mem bers in Los Angeles would vote for Goldwater.) Tocqueville Saw It Nearly a hundred and fifty years ago, French observer Alexis de Tocqueville noted that Ameri can sentiment favored equality even above liberty. Although this estimate seems to have been borne out in our subsequent political his tory, with its rise in populism, co incidental rise in extremes be tween wealth and poverty begs a question about the sincerity of the sentiment. Especially this is so when we recall the rapt admira tion of the crowd for the more fortunate, ranging from movie stars and professional athletes to the Kennedy family. Since this occurs with no evident regard for individual excellence, one may sus pect that equality is a shibboleth.

At any rate, since the voting pat tern seems to lead toward en thronement of the superstate, the question seems to arise whether there is any real sentiment for either equality or liberty. The late Albert Jay Nock wrote, some decades back, that "The simple truth is that our business men do not want a government that will let business alone. They want a government that they can use." Perhaps Nock got to the root of the matter of why government has grown so big. People want to use government to obtain benefits which the free choices of their fellows would not give them. Hon est work and trade do not pay enough to satisfy their greed. What a grand shortcut it is to get the government to send out tax collectors, enforcers, raise tariffs, institute public programs - all to benefit the activities in which one is engaged! Businessmen who once sought political benefits for their "infant ind ustries" were not wise enough 1974 WHY IS LIBERALISM ENDEMIC? 597 to see, or did not care, that such tactics in a nation with a popular government could, in the long run, be practiced by most anyone. It was only a matter of time until a Franklin D. Roosevelt would arise to open the public purse to "the forgotten man." Although Roose velt was an innovator, he was certainly not the inventor of the ancient scheme of public welfare which marked the fall of Athens and Rome. However, our politi cians of both parties have since made Roosevelt look like a piker.

We must be very close to the state of Athenian democracy at its na dir, when every third person was, somehow, on the public payroll. The ubiquitous civil services, pub lic retirement, Social Security, Medicare-Medicaid, miscellaneous "programs" and public relief, as well as the necessary military, make it most likely. The tax load and national debt bear out the as sumption. It might be well to take time out to answer those who object that our taxes are lower than in other developed nations. When we consider that most of those other nations are in even deeper trouble than we, that is not much of an argument. Misery may love com pany; but who wants to be miser able ? We were once a model of economical government, and should be so now. Private Greed To return to the point: It is private greed which has supported the growth of the welfare state. The pittance received by those at the welfare base is in sharp con trast to the millions amassed by those who play the bull market of inflation successfully. Hamburger chains, hula hoops, and frisbees; cheaply made goods, made for a day. Eight-lane freeways, at mil lions per mile, to be replaced by monorails? Scarce goods and· re sources wasted as if supply were endless. And yet, we cannot blame either the tycoon or the welfare recipient. Each is operating in obedience to the law of supply and demand. We take what we can get any time. To do otherwise is to fail to survive. If a sane economy is desired, with conservation of resources and a happy population, different policies are required. The legalization of greed must be re placed by the free market, where no one is allowed the aegis of gov ernment support in taking advan tage of others. They will still com pete, and that is good; but they will not be aided by outside force.

But self-interest is also guided by ideas. Any person with no moral concepts is a monster. "From each, according to his abil ities; to each according to his needs," is a moral concept. Taken at its face value, perhaps it would 598 THE FREEMAN October be acceptable to all persons of good will. In the good family, father and mother use their best abilities to see that the child gets all it needs. Other relatives, friends, or even strangers may similarly care for an individual's needs. Such services sometimes in clude the sacrifice of life itself. Then why, asks the liberal, should not the state perform similar ser vices for us all? Apparently, many people do not have a clear answer to this question, because there is much confusion about politics. The answer is very simple. In the case of father, mother, relative, or stranger, there is no civilized so ciety which would legally condone theft as a means of helping an other. If government universally enjoins citizens against thievery, even of the Robin Hood variety, on what grounds is government enabled to act as a thief, taking from one and giving to another?

The business of government is to prevent thievery and fraud and keep the peace, the expense of which covers its legitimate taxing power. The nineteenth century saw the ascendency of romantic ideas of politics and morals. The ideas of Rousseau and Marx replaced those of Locke and Adam Smith. From Horace Mann to John Dewey, pub lic education in the United States has been dominated by the social ideas of Rousseau and German philosophy and pedagogy. Many generations have become adult with scant tutelage in the empir icism of individual responsibility. Everett Dean Martin In his 1930 Book-of-the-Month, Liberty, Everett Dea.n Martin wrote: In proclaiming the natural good ness of man, Rousseau gives primacy to instinct and emotion, and minimizes discipline and reason and distinction of worth among men. One· man is· by nature just as good as another. But the wisest men have taught that good ness is excellence; it must be achieved; it is that which marks dis tinction between higher men and lower, and between men and animals.

It is not so with Rousseau. "Happy the people among whom one may be good without effort and just without virtue." As men are naturally good~ it is not necessary that they excel in intelligence in order to do good. In deed Rousseau seems to find that it is the simple-minded people who are the best. Therefore let men follow their natural inclinations, be inspired by noble sentiments, and they need have no doubts as to what is right. The sovereign people can do no wrong. In the remainder of the chapter on "Romantic Ideas of Liberty," Dr. Martin continued a devastat ing criticism of the romantic no tions of modern liberalism. It is 197J" WHY IS LIBERALISM ENDEMIC? 599 interesting to conjecture upon the chances of such a book to be Book of-the-Month now, over four dec ades later. In 1930, men of the calibre of Martin, N ock, and H. L. Mencken were accorded wide audi ence - except on the platforms of public schools. In the meantime, the rising acceptance of Marxism and behavioristic psychology has hardened the environmental de terminism of Rousseau into vir tual orthodoxy. This is the philo sophical basis of liberalism's strong hold.

In 1939, this writer attended a Claremont Colleges dinner-debate at which Everett Martin took on most of the top brass of the Cali fornia. State' school system. Any witness to that discussion would have clearly seen the differences between the classical liberal, which Martin was, and the more recent pretenders to liberalism." There was no doubt that Dr. Martin was the winner on points of reason; but the schoolmen, to a man, went away preferring their instincts and emotions to disciplined rea son. Since 1939 the public schools have regressed even farther into Rousseauism, as more orthodox teachers have gone into retire ment, to the point where they have bred large groups of children at war with their parents and society and who worship at the shrine of primitivism. The Role of the Schools in the Persistence of Liberalism If one were to point to the most potent reason for the persistence of liberalism, one would have to choose our system of public schools. Whereas individual school men may represent every school of political or philosophical thought, the general effect of the system is completely in accord with statism - which is a matter for no wonder at all. Besides hav ing its roots in the romanticism of Rousseau and German philos ophy, the huge system is a. chief beneficiary of public funds. Un satiated by state and local coffers, it knocks continually on Washing ton's door. Demise of liberalism would destroy the organizational game plan which proceeds regard less of individual educators' be liefs. The National Education As sociation is one of our most statist organizations. It is largest too!

The very success of organized public education may be its un doing, as well as the undoing of the welfare state. Because of its vacuous theories, it is doing such a poor job of bringing up articu late generations that there is a question of whence its future de fenders may come. Able persons who find no education in school are likely to seek it elsewhere. E lsewhere is where most of the cri tics of liberalism are. Any self600 THE FREEMAN October respecting able mind is likely to be turned off, eventually, by the mawkish sentiments and illogical ity of the liberal line. Watering down of the curriculum has pro ceeded to the point where there is much more froth than substance to the whole operation. The time for liberalism may be running out, right at its grassroots. But some would say that it is the media which holds the liberals in power just now. Certainly, the press and electronic efforts lend an air of omniscience to the lib- , eral cause. Invading each house hold twenty-four hours a day, they exhibit such an overwhelming slant of liberalism that they would seem to be the propaganda force which carries the day. But this begs the question: Why do they do it? The answer would seem to lie in the previous suggestions here offered. Most managements, writers, and commentators are moved by the same motives and have been reared in the same in tellectual tradition as their audi ences. (Once asked what he thought was wrong with the mov ies, Everett Martin answered: "Mostly the audience.") Muckraking Journalism The social astigmatism which makes the persistence of liberal ism possible could not survive without the press. That segment of literature and journalism which lives on violence, gossip, innuendo, and the bizarre keeps alive the most execrable crowd suspicions which deny the good and empha size the evil in the enterprise sys tem. They carryon the work of Lincoln Steffens, Upton Sinclair, and the gaggle of muckrakers who set the standards of criticism for today's liberalism. So little do the observations of the original muck rakers apply to our era that even Norman Thomas came to feel that socialism was proceeding satis factorily. Nevertheless, our pun dits continue to whip a bewild ered, if not dead, horse: American capitalism. Chapter 7 of Alexander Solzhenitsyn's August 1914 shows the same ghastly appearance of a vacuous journalism in late Tsarist Russia. This suggests reminding our publishers that, although a great deal of money may be made by toadying to the basest tastes and prejudices of the crowd, the end of such a policy may very well be not only the loss of a fortune so made, but even the loss of such freedom of the press as made-it possible.

However, public opinion shows many signs of overkill. Extrem ism of so much of the sources of public information has eroded credibility to the knowledgeable and surfeited the ignorant. It would be folly to predict just when 1974 WHY IS LIBERALISM ENDEMIC? 601 the long nightmare of monomania will be over. But, end it must be fore we can begin to achieve eco nomic and social sanity. Until that day, gestures toward cutting cor ruption in government will be empty gestures, calculated only to mislead fools, because the corrup tion to be found in any govern ment, as Lord Acton suggested, is in direct proportion to the power it wields. In this respect, our gov ernment is very close to becoming Leviatha,n. Signs that Public Opinion May Be Changing Weare indebted to Winston Churchill for an insight regarding absolute government. He suggest ed that if Hitler's Nazis were able to kill off all the men with free minds in Germany, a new crop would spring up in a generation.

History has borne him out, rela tively speaking. Although Ade nauer and the founders of West Germany were not killed off, and were hardly of a new generation, still the political economy of rena scent Germany more nearly ap proaches free trade than those of many of her erstwhile conquerors. Harsh lessons are well learned. Even the long dark night of Soviet Russia has produced the likes of Alexander Solzhenitsyn. Because opinion polls have done so much to create, as well as mea sure, the points of view of indi viduals, one hesitates to cite them affirmatively. After all, it may be that the "average mind," what ever that is, accepts ideas very much as it accepts clothing styles. Certainly, many individuals look upon politics as they do on a horse race, trying only to pick a 'winner. Nevertheless, so many polls have, over a period of years, discovered an under lying conserv atism in most American voters that they may be redeeming past error. They now tell us that most New ' Yorkers are conservative; although Senator Javits and the New York Times do not appear to play to that constituency.

Be that as it may, rumblings of tax revolt, outrage (both black and white) over school busing, school boards firing striking teachers, businessmen (down to the small est) crying out against govern rnent red tape, independent busi nessmen (the vast majority of business) becoming adamant against the excesses of labor un ions (representing a minority of the working force), households harassed by taxes and prices raised by government bungling all suggest a tidal wave that our leg isla tors may ignore to their regret. I) Economic BRIAN SUMMERS Calculation Mr. Summers is a member of the staff of The Foundation for Economic Education. WHICH ECONOMIC SYSTEM pro-To be efficient one must have a duces what society wants in the means of comparing possible manner society deems most ef-courses of action. To cite an ex ficient? .ample, consider the proverbial As with all economic questions,· widget manufacturer. Should his the answer is found by focusing product be made of resource A or one's attention on the actions of resource B? Should he use manu individuals. When one understands facturing process X or process Y?

the actions of individuals, then The only way to decide these ques one understands the actions of tions in the manner society con society, for society moves only as siders most efficient is to know its individual members move. the price society places on resource The movement of rational be-A, resource B, process X, process ings is purposeful. People choose Y, and the final manufactured those courses of action they think widget. will better their own situations How does society determine from their own points of view. Of prices? Most people seem to think course, people make mistakes. that free market prices are de Sometimes, due to a lack of under-termined by merchants. It is true standing, they choose the wrong that the merchant is the one who courses of action. The purpose of actually writes down a specific economics is to provide underprice. However, in a free market standing that reduces such wrong the merchant's hand is guided by choices by men seeking to maxi-society.

mize prosperity. That is, econom-The widget manufacturer is well ics helps men to be efficient. aware that he cannot arbitrarily set his price. He must constantly take into account the prices being charged by competing widget man602 1974 ECONOMIC CALCULATION 603 ufacturers,m8nuf:l(~turerg of sub stitute products, and all other merchants competing for the con sumer's dollar. As the manufac turer raises his price, customers take their business elsewhere. As he lowers his price, customers return. Free market prices of con sumers' goods are determined by the merchant's anticipation of the consumer's reaction to his price. Pricing the Factors of Production In a free market, consumers also indirectly determine prices of the factors of production: labor, na tural resources, and capital goods. Businessmen, anticipating future prices of consumers' goods, bid among themselves for factors of production. Thus businessmen, in the role of competing buyers, de termine the prices of the factors of production in the same way consumers set the prices of con sumers' goods. However, the busi nessman is merely acting as an agent for the consumer, for he is guided by his estimation of the future prices of consumers' goods.

Using free market prices, the businessman attempts to calculate the manufacturing procedure that will maximize the difference be tween his final selling price. and total production costs. That is, he uses society's prices to try to max imize his profits. Because his final selling price is set by competition, this means that the businessman tries to maximize profits by mini mizing costs of production. This, from the point of view of society, is what it means to be efficient. That is, in the free market the most efficient producer is the one earning the greatest profits. Of course, many businessmen do not earn profits. Those busi nessmen whose balance sheets show losses are soon driven from the market and forced, by eco nomic necessity, to try their hands at something else. This is how society, acting through the market, discourages the inefficient use of labor, natural resources, and cap ital goods.

Those businessmen who do earn profits are encouraged by their profits to continue in business and use their profits to expand their operations. This is how society encourages the efficient use of factors of production. Interfering with Trade The system of economic calcula tion just described presupposes that the market is free from gov ernmental interference. When the government does intervene in the economy, inefficiencies are the in evitable result. The government can only influence the prices of consumers' goods and of the fac tors of production by overriding the prices determined by society 604 THE FREEMAN October through the market. When the government does this, then the economy produces what the gov ernment wants in the-manner the government considers best, rather than what society wants in the manner society deems most ef ficient. In the United States today, the government influences prices in in numerable ways. Wage and price controls, minimum wage laws, laws discouraging the hiring of nonunion workers, rent controls, interest rate regulations, tariffs, and zoning laws are just a few of the ways the government contra venes free market pricing and thus distorts and disrupts economic cal culation. Such laws, from the point of view of society, can only result in misallocations of scarce re sources.

The farther an economy moves from free enterprise, the more wasteful it becomes. In a com pletely socialized economy, con sumers have no influence over "prices" of consumers' goods. The government widget manufacturer can arbitrarily set his "price" be cause the government is the only manufacturer of widgets. Custom ers have nowhere else to turn. In a completely socialized econ omy, consumers also have-no in fluence over the "prices" of labor, natural resources, and capital goods. These factors of production are controlled' by the government, and the government decides their "prices." How does a completely social ized government decide these "prices"? Well, it can guess. This is apparently a common procedure in communist countries. Another procedure communists often use is to charge whatever the going rate is in the relatively free markets of the West. Of course, free mar ket prices vary from place to place, so the communists are at best approximating the prices that would prevail in their countries were their markets free. Should we ever completely lose our West ern markets, no one anywhere in the world will know what to charge for anything.

Lacking a means of economic calculation, socialism is bound to fail. I IDEAS ON LIBERTY The Market Process THE EFFICIENCY of the price system ... depends on the degree of success with which market forces can be relied upon to generate spontaneous corre'ctions in the allocation patterns prevailing at times of disequilibrium. ISRAEL KIRZNER, Competition and Entrepreneurshil DAVE OSTERFELD KARL MARX and Frederick Engels defined socialism as that stage of economic development when pro duction according to a consciously "settled plan" replaces the produc tion of commodities. "Commod ity production" exists when pro ducts are produced for sale on the market, Le., when production is separa ted from use by an inter vening exchange. 1 Since a commo dity necessarily presupposes a market, the substitution of a plan ned economy for commodity pro duction therefore entails the de struction of the market. And this is precisely what is demanded.

According to socialist theory, at the proper time, the proletariat will seize control of the means of Mr. Osterfeldof Cincinnati, Ohio, is a graduate student majoring in political theory. production. "With the seIzIng of the means of production," writes Engels, "production of commodi ties is done away with .... An archy in social production is re placed by systematic definite or ganization .... Socialized produc tion upon a predetermined plan becomes henceforth possible."2 Thus, according to Marx and Engels, the production of commod ities for exchange on the market would be replaced by a socialist system of planning and distribu tion where buying and selling would be terminated. For them, the essence of capitalism was pro duction for the market, i.e., "com modity production" ; that of so cialism was a planned system of production and distribution. Marx and Engels scoffed at the idea that their position was 605 606 THE FREEMAN October utopian. On the contrary, they characterized their wri tings as "scientific" and felt that there was strong empirical evidence for their belief in the ultimate tran sition from capitalistic market production to socialistic planned prod uction. They reasoned as fol lows: In the Middle Ages peasants and handicraftsmen worked in dependently and then exchanged their products. There were no large factories. The tools of pro duction were small and individu ally owned.

However, as capitalism devel oped, machines were invented that permitted the emergence of large factories. While production for society as a whole remained "an archic," that within the factories became organized. Further, it was evident that large, well-organized factories were more productive than individual small producers. This, they felt, demonstrated the practical superiority of socialism. All that was now required was to remove the increasingly social, i.e., organized, nature of produc tion within the factory from the hands of the capitalists and then simply generalize the organiza tion of production within the fac tory to the whole society. This would be accomplished by the pro letarian revolution. It was as sumed that socialism would end all economic problems. Mises and Economic Calculation The practicali ty of socialism went largely unchallenged until 1920 when Ludwig von Mises ar gued not simply its undesirability but its actual impossibility. Cap talism, he asserted, "is the only conceivable form of social econ omy." The "attempt to reform the world socialistically," he con cluded, "might destroy civiliza tion. It would never set up a successful socialist community."3 Mises pointed out that there was a fu.ndamental difference be tween factory organization within a market framework and the con scious organization of the entire economic system. 4 A factory is organized by referring its internal operations to "external" markets.

The large factory, to cite just one example, produces many half finished goods that are then used for the production of the final prod uct. The only way one can determine whether it is econom ically sound to produce the half finished goods within the factory or to buy them from other plants is to compare the cost that would be incurred in their production with the "external" market price. 5 But if the entire society were to be, as Lenin recommended, or ganized like the postal system, there would be no external mark ets to which to refer one's inter nal operations. Thus it would be 1974 MARX, MISES AND SOCIALISM 607 impossible to generalize the prin ciple of factory organization to the entire society; for with the entire society so organized, the very basis of its organization, the market, would be eliminated. Profit (a net reduction in felt uneasiness) and loss (a net in crease in felt uneasiness) are not arbitrary. They inhere in all ac tions of all individuals. Every society must therefore have some method for calculating profit and loss or end up destroying itself.

The elimination of the-market, Mises pointed out, would only serve to abolish the only known method of calculating profit and loss but it could never do away with profit and loss themselves. Unable to calculate, a socialist society could not proceed ration ally. Thus, a "planned" economy, felt Mises, must inevitably pro duce chaos. Having demonstrated the neces sity of calculation for all societies, Mises argued that there were two prerequisites for rational calcula tion: the market and money. 6 The Role of the Market While a factory is characterized by its singleness of purpose and is therefore faced only with the more or less technical problem of applying means to ends, society is characterized by its multiplicity of purposes and is faced with the economic problem of allocating scarce resources such that the production of less intensely de sired goods does not prevent the production of more intensely needed goods. Under capitalism this problem is solved daily through the market and without anyone's conscious eff'ort. Since people only buy what is useful for them, there can be no distinction between production for profit and production for use. Prices' are the outcome of the interplay of peo ples' decisions to buy and not to buy. Profits result from success fully supplying consumers with what they most intensely desire at the time of their valuations; losses from the failure to do so.

In the quest for profit, labor and capital perpetually flow to areas where they can reap the most lucrative return on invest ment and away from areas that manifest loss. In this way the market also determines prices for the factors of production in the same way that it forms them for consumers' goods. "The entrepre neurs," says Mises, "eager to earn profits, appear as bidders at an auction, as it were, in which the owners of the factors of prod uc tion put up for sale land, capital goods and labor."7 Since what the entrepreneur can bid is limited by his expected return from the sale of his product, the-factors of 608 THE FREEMAN October production are thereby channeled into the production of the most intensely desired goods. It can be further seen that the price of any object is not determined by adding up the "costs" of the factors of production but that the prices for the factors of produc tion are, in fact, derived from the prices of the final consumer goods.

Only in this way can prices for all the factors of production be formed and the relative efficiency of the nearly infinite number of possible methods and combina tions of production be ascertained. Only by means of the market can w~ determine what to produce, in what quantities and qualities, and by what methods. The Role of Money A second element is also re quired before we can successfully calculate: money. Since consump tion goods provide us with im mediate benefits we can value them directly, without monetary calcu lation. However, the means of production are valued only indi rectly. And as production grows more complex it becomes simply impossible to ascertain, intuiti tively, their contribution to our well-being. Thus money, an auxili ary method of calculation, is re quired. Money reduces everything to a common unit, thereby per mitting exact calculations. Only then can we determine the ap propriate methods of production, Le., whether in a given circum stance to use, say, more steel, and less manpower, or vice versa.

Without the ability, afforded us by money, to calculate and com pare relative costs there would be no rational way to choose between the plethora of possible alterna tives. But even if some form of "money" were, used in a socialist society it could never perform this essential function, for the utility of money implies the abil ity of the individual to act on his valuations. As Mises says, "the higgling of the market establishes substitution relations between commodities." This obviously pre supposes the existence of private property throughout the economy. Thus, the existence of money a.nd the market imply each other,and together, they enable us to calcu late. And only economic calcula tion "provides a guide amid the bewildering throng of economic possibilities. It enables us to ex tend judgments of value which apply directly only to consumption goods . . . to all goods of higher orders. Without it, all production by lengthy and roundabout proc esses would be so many steps in the dark."s But precisely because socialism endeavors to eliminate exchange, 1974 MARX, MISES AND SOCIALISM 609 money, and private 'ownership of the means of production, economic calculation is impossible under socialism. Hence a socialist society would be unable to determine what is profitable and what is not. The resulting inefficiencies and distor tions, Mises felt, would lead to capital decumulation, in turn re sulting in progressive impoverish ment. "The paradox of 'plan ning,'" concluded Mises, "is that it cannot plan."9 JlWar Communism"

No sooner had Mises wri tten than his theory received dramatic confirmation. The Bolsheviks seized power in Russia in 1917 and attempted to implement so cialist principles. Exchange was outla\ved, money was purposely in flated out of existence, over 37,000 enterprises were nationalized, and private holdings in agriculture were declared illegal. The results were disastrous. The iron ore and cast iron industries fell by 1920 to only 1.9 and 2.4 percent of their 1914 volume of production. Oil production fell to 41 percent and coal to 27 percent. The 1920 av erage productivity was ten to twenty percent of the 1914 total and the production of fully manu factured goods was .12.9 percent of 1913. In agriculture, produc tion was halved and, despite the distribution of 700,000 tons of food from the United States, peo ple perished by the millions. 10 The economic debacle now known as "War Communism" came to its end only with the advent of the "New Economic Policy" in the early 1920's, which reinstated a semblance of a market economy.

By 1928 production was back to the 1914 levels. Since that time the "socialist" countries have learned to direct production (1) by means of restricted domestic markets, and (2) by coopting the methods determined by the for eign Western markets. Oskar Lange An attempt was made by the Marxist, Oskar Lange, in 1937 to demonstrate the viability of so cialism. Lange allegedly "refuted" Mises by advocating what has come to be known as "market so cialism" (although he never used that term). While the state would own the means of production, prices, according to Lange, would be determined by competition, and production would be extended to the point where marginal cost equaled price. There would be a Central Planning Board but the correct prices for the factors of production would be ostensibly found by a method of trial and error. Correct prices were consid ered to be the actual market prices. There would be wage in610 THE FREEMAN October equality, rent and interest. How ever the state would appropriate the rent and interest and use them for social purposes. ll The most interesting thing about Lange's "refutation" is that he defines socialism in terms of property, instead of market, rela tions. He is forced to maintain commodity production, exchange, interest, rent and wage inequality.

Hence, Lange actually builds his "socialist" model on the very mar ket principles it was the goal of socialism to replace,12 thereby ac tually reinforcing Mises' assertion that a nonmarket society is im possible. Paul Sweezy Perhaps the pre-eminent Ameri can Marxist is Paul Sweezy who, without direct reference to Mises, claims that a nonmarket economy is possible. Sweezy believes that skilled labor is simply a multiple of unskilled labor whose value is determinable outside of the mar ket by, for example, placing two men on the same assembly line and then measuring their values in terms of their outputS. 13 But this does not even touch upon the essential point: the allocation of scarce resources. It only tells us if one man is more productive at the same job than another. It is silent on the questions of how many men should be employed on that particular assembly line? What materi als should be used in the produc tion of a particular good? By what methods should it be produced? In what quantity and quality should it be produced? Should a new plant be opened? If so, where?

Should an old one be expanded, contracted, or discontinued alto gether? Should a new invention be implemented at this time? Next week? Next year? Or not at all? etc., etc. The fact that one man is more productive on an assembly line than another is no help what soever in answering these crucial questions. Thus, Sweezy falls into the very error that Mises warned of a half century ago: the confusion of technological with economic prob lems. Technology can only tell us the various ways to produce a thing. It cannot tell us which method we should adopt to pro duce it or if it should even be pro duced at all. These are economic problems. One can increase pro ductivity in a given area by build ing a technologically modern plant. However, whether the plant was economically desirable or actually impeded the satisfaction of more important desires in other areas by diverting needed resources to the production of the new plant is an altogether separate question.

The latter can be handled only by economic calculation. Technology 1974 MARX, MISES AND SOCIALISM 611 and value are distinct concepts. It is clear that Sweezy fails to under stand the nature of the problem raised by Mises. Conclusion In 1920 Ludwig von Mises dem onstrated the impossibility of so ialism. Since that time there have been periodic attempts to refute Mises and establish socialism's practicality.14 Two of the more famous "refutations" were examined here and found to be lament ably deficient. Unfortunately, Mises' attack is simply ignored by most socialists. In Leo Huber man's presentation of the Marxian economic theory in Monthly Re view as well as in Michael Har rington's recent Socialism, to cite just two exampl~s,15 Mises is never mentioned, nor the possibil ity of socialism ever questioned. Silence, however, cannot change economic law. ~ • FOOTNOTES. 1 See Paul Craig Roberts and Matthew Stephenson, Marx's Theory of Exchange, Alienation and Crisis (Stanford, Cali fornia, 1973) .

2 Frederick Engels, Socialism: Uto pian and Scientific (New York, 1972), pp.72-5; also see Karl Marx, The Critique of the Gotha Programme (Peking, 1972), p. 14: "With the cooperative society based on common ownership of the means of production the producers do not ex change their products." 3 Ludwig von Mises, Socialism (Lon don, 1969), pp. 220 and 137. 4 Ibid., p. 215. I) Ludwig von Mises, Bureaucracy (New Rochelle, 1969), p. 33. 6 Mises, Socialism, pp. 117-18. 7 Ludwig von Mises, Human Action (Chicago, 1966), p. 335. 8 Mises, Socialism, pp. 115-17. 9 Mises, Human Action, p. 600. 10 See, for example, Lancelot Lawton, An Economic History of Soviet Russia (London, 1932); and the same author's The Russian Revolution (London, 1927) ; and Michael Farbman, Bolshevism in Retreat (London, 1923). 11 Oskar Lange, "On the Economic Theory of Socialism," Soviet Economics, ed. Alec Nove and D. M. Nuti (Baltimore, 1972), pp. 92-110.

12 Paul Craig Roberts, "Oskar Lange's Theory of Socialist Planning," Journal of Political Economy (May, 1971), p. 566. Roberts also points out that since the marginal rule is only an illustrative principle it does not provide any guidance for decision-making in the real world. Hence Lange's model isn't sound even on its own terms. 13 Paul Sweezy, The Theory of Capi talist Development (New York, 1942), pp.41-5. 14 Others include H. D. Dickinson, "Price Formation in a Socialist Commun ity" Economic Journal (June, 1933), pp. 237-50; and Jan Drewnowski, "The Eco nomic Theory of Socialism: A Suggestion for Reconsideration" Journal of Political Economy (August, 1961), pp.341-54; for a critique of the latter's position see P. C. Roberts, "Drewnowski's Economic Theory of Socialism," Journal of Political Econ omy (July, 1968), pp. 645-50~ 15 Leo Huberman, "Value and Surplus Value," Monthly Review (July, 1949), pp. 90-6; and "The Accumulation of Cap ital," Monthly Review (August, 1949), pp. 123-28; and Michael Harrington, Socialism (New York, 1972).

BERNARDH. SIEGAN THE BELIEF that we need govern mental regulation to prevent the rich from exploiting the poor is at the basis of many laws. It hap pens to be wrong; usually regula tion benefits the rich much more than the poor. Fifty years of zoning experi ence in this country supports this conclusion. Zoning is one of our most pervasive forms of regula tion, and its effects are by now apparent and beyond conjecture. They show that instead of provid ing for the public welfare, it has done well only for the private wel fare of the well-to-do. It has gen erally been harmful to those of average and less income. The most Copyright 1974 Bernard H. Siegan Mr. Siegan is the author of Land Use Wi:hout Zoning and many articles on the subject. He practiced law for 20 years in Chicago before moving in 1973 to La Jolla, Califomia where he is professor of law at the University of San Diego Law School.

612 notable exceptions, it seems, are the fortunate ones who become politicians and planners control ling zoning. If they do not become rich, at least they become pow erful. This is how zoning has discrim inated against the less affluent persons in our society: 1. The best means for lowering the cost of housing, both new and existing, is to increase the supply. Zoning does exactly the reverse. It restricts the production and supply of real estate from housing to stores. Hardest hit as a result, are those with the least money. For a family struggling to main tain financial solvency, almost any increase in rent can be a serious handicap. Consider the case of two Texas cities separated by only 242 miles: Dallas and Houston. Dallas has been zoned since the early 30's and Houston has never adopted it.

1974 REGULATION HELPS T'HE RICH AND HARMS THE POOR 613 Both have quite similar economic profiles. There is one major ex ception however: cost of rent. Apartment rentals in Houston are distinctly lower because the sup ply of land for apartments is not restricted by political and plan ning considerations. 2. Most affluent suburban and rural communities erect zoning barriers to exclude apartments and townhouses. When apartments are permitted, they usually have to comply with rigorous "snob" con struction and design standards that make them affordable only by the wealthier~ Their practices with respect to mobile homes are worse. These units catering frequently to families that would otherwise seek government housing subsidies are excluded from vast portions of this country. 3. Typically, these communities also do not want inexpensive homes in their midst. So they re quire, among other things, large lots or large amounts of interior space per dwelling, both of which add to the bill.

4. The practical operation of zoning raises development costs that are passed on to the con sumer. When the local authorities rezone property for single or mul tiple family purposes, they are likely to extract conditions, legal and sometimes extra-legal, which can be quite expensive. The installation and maintenance of swimming pools and recreational facilities, for example, add sig nificantly to the cost of housing. One of the motives behind these practices is to keep out projects that attract people of lower in comes. 5. Zoning prohibitions tend to curtail the construction of stores and repair shops within walking or short distances of homes and apartments. In areas lacking pub lic transportation, this creates in convenience and hardship for a family without a car or with only one older one, particularly if it is used by the husband during the day. The rise in gasoline prices adds to the problems.

6. Zoning is harmful to the in terests of small builders. There are now so many zoning rules and regulations that it requires the services of lawyers and sometimes planners to process almost any changes. Moreover, obtaining zon ing approval may take months or years and that involves the ex pense of holding or optioning prop erty. These conditions are elimi nating small builders to the ad vantage of the large ones who are in a much better position to cope. These facts hopefully should help put to rest a major myth of our society. The zoning story is not unique; it is duplicated in other areas of regulation. f) Dog-Eat-Dog Competition M. NORTHRUP BUECHNER THE CHARGE of "dog-eat-dog" or "cutthroat" competition is not among the heaviest weapons in the anticapitalist arsenal, but neither is its significance trivia1. It was an important factor behind the Interstate Commerce Act of 1887, the first major intervention by the Federal government into private business in this country. In the depression of the 1930's, during Roosevelt's first term, it was the major impetus behind the attempt ed cartelization of American busi ness through the National Recov ery Administration. It is the pri mary reasoning behind some stat utes of the antitrust laws, espe cially the Robinson-Patman Act.

And it is a not infrequent com plaint of businessmen who have gone to VVashington to seek sub sidies or other forms of govern ment support. Mr. Buechner is an assistant professor in the College of Business Administration, St. John's University, Jamaica, N. Y. "This paper," he says, "has benefited from the advice and criti cism of Kathleen Edwards." 614 Further, the concept of dog-eat dog competition is used to support what is one of the heaviest weap ons in the anticapitalist arsenal, the charge that a free economy generates monopolies and monop oly power. Specifically, it is al leged that if left unrestricted, competition will result in firms destroying one another until every industry, and perhaps the entire economy, is dominated by one or a few firms. But the most important influ ence of the dog-eat-dog view of competition is in its moral per spective. It projects and implies a view of competition as malicious, degraded and corrupt, and by ex tension, since competition is the motive power of a capitalist econ omy, the same view of capitalism.

It is this view of competition as vicious, antisocial, destructive be havior that is a significant factor in the willingness of politicians, the courts, and the people gener ally to forcibly modify competitive 1974 DOG-EAT-DOG COMPETITION 615 action through government law. And the same implicit view of the immoral nature of competition has served to undermine the, willing ness and ability of those who would defend capitalism. The sub ject of dog-eat-dog competition therefore is worthy of serious attention. A Valid Concept of Competition: First Step The businessman is most likely to complain of dog-eat-dog compe tition when the process of compe tition seems to be reducing his profits and perhaps threatening the survival of his business;. He feels himself attacked by his rivals in the market because their activ ity is in fact having the effect of damaging his economic welfare. It seems to him that the compet ing businesses are in the position of dogs fighting over the same scrap of meat and like dogs, in order for one of them to be free to eat or enjoy the trade in peace, he will have to kill off the others.

This is the spectre that the con cept of dog-eat-dog competition calls up: two or more parties each of which must destroy the others in order to survive. It is in fact a totally invalid view of competition. However, to prove that the dog eat-dog view of competition is in valid, it is first necessary to es tablish a valid concept of competition as a standard for evaluation. As a first step in that direction, everyone's concept or idea. of com petition will have the following as an essential, if implicit, element: the activity of two or more parties trying to acquire a value which only one can have.! For the mean ing of value here and in the re mainder of this paper, I follow Ayn Rand's definition, "that which one acts to gain and! or keep."2 There are a number of aspects to this approach to competition that need to be explicitly identi fied and emphasized. First, com petition is a kind of activity or action (as distinguished from the usual economic approach that de scribes "pure competition" as a kind of condition or state of real ity). Second, there cannot be com petition where there is only one party or participant. A solitary individual or firm would have no body to compete w'ith. Third, and most important, competition is an activity that arises only when the value pursued can only be had by ! When I say "everyone," I exclude only modern economists whose concept of u pure competition" is the opposite of this; Le., under "pure competition" there is no pursuit of values which only one can have.

2 Ayn Rand, The Virtue of Selfishness, (New York: The New American Library, 1964), p. 5. It is not possible to do more than mention here the overwhelming sig nificance that this concept of value has for the science of economics.

616 THE FREEMAN October one, when the acquisition of that value by one of the competitors necessarily excludes everyone else from its possession. 3 Viewed in this way, "competi tion" is a very broad concept cov ering a tremendously wide and disparate range of activities. How ever, this is entirely consistent with the way the term is used in reality, for "competition" is not restricted in its application to eco nomics and business. It has been the habitual neglect of this very fact and the treatment of compe tition as if its meaning were lim ited to the business world that has been a major source of error on this subject. The economists' pure ly competitive view of competition could never have been accepted if any attempt had been made to in tegrate it with the other forms of competition. Therefore it is worth while reviewing some of the al ternative uses of "competition" in connection with the definition ad vocated here.

Some Applications of "CompetitIon II Perhaps the most widely used alternative application is to games. In any game, the value pursued is "winning," the meaning of win ning being defined by the rules of 3 I believe I am indebted to George Reisman for this point in my approach to competition. the game. What makes the activity of a game competitive is that normally there can only be one winner. (Games are in a class by themselves as far as competition is concerned because of the arti ficial context, established by the rules, in which the competition takes place. We shall return to this shortly.) The concept "competition" is also used in connection with the activity of a political campaign. One aspect of a political campaign which makes it a type of compe tition is that not both parties to the campaign can be elected. If both McGovern and Nixon could have become President at the same time, the election campaign would not have been competition, and ob viously the nature of the entire proceeding would have been rad ically altered. And we can also talk about the competition of two men for the love of the same wom an. Again, it is competition in part because in our society, she can only marry one of them. In a dif ferent society, where a woman could have two or more husbands, it would not necessarily be com petition.

In the competition of the busi ness world, the common value pur sued by two or more firms is the customer's dollar. Two businesses are in competition with one an other when their relationship is 1974 DOG-EAT-DOG COMPETITION 617 such that the same customer in pursuit of some specific economic value could potentially spend his money with both of them. What makes their relationship compet itive is that what is potential for both can only be actualized for one, i.e., the potential customer can actually spend a given dollar only once. It is this pursuit of the customer's dollar that gives rise to all the business activity that is commonly regarded as competi tive: cutting prices, improving quality, offering better services, giving guarantees, running sales, advertising, providing attractive surroundings, etc. It is this type of activity that characterizes an entire capitalist economy from top to bottom and it is specific con crete actions of this kind that are subsumed under the concept of competition as it is applied to the business world.

A Valid Concept of Competition: Second Step There is something very impor tant that all these concrete actions have in common. They all involve the creation and offering of values. A lower price is a value to a cus tomer and so is a better product. Pleasant surroundings, good serv ice, guarantees, are all values which the business offers as the means of competing. (Advertising is the way that businesses make the public aware that the values they offer are available.) If compe tition is the activity of two or more parties trying to acquire a value which only one can have, the specific activity involved is mak ing values available, offering val ues, creating values, putting val ues on display. It is this value centered activity that is the con tent of "competition," the type of actions that are actually subsumed under the concept. That the value pursued can only be had by one sets the general context; that the method of pursuit is the offer of other values gives the specific meaning.

That the content of competition is making values available is true of every form of real world com petition, not just business competi tion. The competition of a political campaign is putting values on dis play in the form of personal ap pearances by the candidate and of fering values in the' form of cam paign promises and position papers. People vote for the candi date they think has the most val ues to offer. Two lovers trying to win the same girl do so by display ing the values of character and personality they have that they hope she will fall in love with. All competition is essentially a pro value activity, in some way di rected at announcing, creating, displaying or offering values.

618 THE FREEMAN October Competition in Games The only exception to this is the competition that occurs in games. It is an exception by virtue of the fact that the rules of the game normally carry the activity in volved entirely outside the context of normal human interaction. In a game, the specific form that com petitive action takes is entirely de fined by the rules of the game and can be anything the rules pre scribe. The rules of the game are in turn limited by the fact that the purpose of the game is to amuse and entertain the participants or spectators or both. But apart from that specific purpose, and as far as normal human relations are con cerned, the rules of the game are arbitrary. Outside the context of the game, there is no rational basis for the furious dispute we see con cerning the movement of a .leather ball over the hundred yards of a football field. In the real world, to smash yourself head first into the body of a stranger is assault and battery. On a football field, it may be blocking or tackling and is part of the competitive activity de fined by the rules. Similar exam ples could be drawn from almost any game.

The reason that a game's com petition need not take the form of offering values is that the playing of the game itself presupposes the voluntary agreement that is the raison d' etre for the offer of val ues. In the absence of force, any kind of human interaction re quires the consent of all parties, and values are offered in order to secure that consent. This is the root in reality of the fact that real world competition takes the form of offering values. But since the players of a game have already established the context of volun tary consent by agreeing to play, the interaction that takes place within the game need not require any further agreement and hence no further offering of values. By contrast, in the real world, there is no set of rules spelled out in ad vance and consequently most con tinuing human relationships de pend on a continuing offer and ac ceptance of values.

Competition versus the Use of Physical Force Competition in the real world does not include as a kind of activ ity the destruction or theft of val ues. Consequently, it does not in clude the use of physical force or violence or any derivatives there of. The use of physical force is al ways essentially anti-value, being inevitably directed at either the destruction or confiscation of someone's life, liberty or property. This is true whether the force is used criminally, in initiation, or properly, in retaliation. Whether 1974 DOG-EAT-DOG COMPETITION 619 he is an innocent victim or a hunted criminal, the recipient of force always experiences it as an attack on his values. It is the es sentially anti-value nature of force that explains the reason for its existence, Le., if it were not di rected against somebody's values, the force would not be necessary. There is another sense in which the retaliatory use of force by the victim against the criminal is pro value, for the victim uses force to preserve and maintain values that are rightfully his. However, the anti-value basis of the efficacy of force can still be seen in the fact that the intended victim maintains his values only by threatening or destroying the life, liberty or pro perty of the criminal, as does the government when it acts as the victim's surrogate. There is noth ing competitive about the use of physical force. 4 Thus, all the activities associ ated with "Watergate" are not considered a normal part of the competitive process of the past political campaign. Nor would it be considered competition if one political candidate had his oppo nent assassinated. And if one of a 4 This discussion of the use of physical force is much indebted to the writings of Ayn Rand. See especially For The New Intellectual (New York: Random House, 1961), pp. 164-66, and Capitalism: The Unknown Ideal (New York: The New American Library, Inc., 1966), pp. 39-41 and 299-300.

woman's suitors should throw acid in the face of a competitor to dis figure him, that would not be a competitive process of wooing her love. Contrary to a leading eco nomic principles text, war is not a form of competition. 5 It fulfills the condition of the general con text for competitive activity in that the value sought, victory, can only be reached by one of the parties. But war is essentially anti-value, destructive of values, the key to success being the extent of the destruction that can be in flicted or threatened against the enemy. As such, in terms of the fundamental meaning and signif icance of the activity involved, war is the opposite of competition. Nor would it be considered part of the competitive process in the business world for a businessman to dynamite his competitor's plant or to murder the manager of a competing firm. Competition in business always takes place-by means of the creation and offering of economic values in trade or ex change. It does not include any activity that involves the initia tion of physical force, since such activity contradicts the basic na ture and motive power of compe tition. Consequently, the suing of 5 Armen A. Alchian and William R.

Allen, University Economics, third edi tion (Belmont, California: Wadsworth Publishing Company, Inc., 1972), pp. 11-12.

620 THE FREEMAN October a superior firm by an inferior un der the antitrust laws, very pop ular today,6 is not competition either. Economic competition should be defined as the activity of two or more firms pursuing the same customers' dollars by of fering the highest values in ex change. Three Implications of Dog-Eat-Dog Competition Now, having established a valid concept of competition, we are in a position to critically evaluate the view of competition as "dog eat-dog." That label is intended to draw a parallel between the ac tivity of dogs fighting over a piece of meat and businesses competing for customers and to suggest that there is no essential difference be tween the two cases. It is true that if one dog gets the meat, that necessarily means the other dog or dogs cannot have it. To that extent, and to that extent only, there is a parallel between the general contexts in which compe tition and a dog fight may take place. However, that general con text is not the primary or essen tial issue. As we have seen, war and competition have that much in common. More important are the things suggested by the dog6 See Business Week, "Is John Sher man's Antitrust Obsolete 1", March 23, 1974, p. 54.

eat-dog view of competition which in fact are not true of any real world competitive relationship. There are in fact three such im plications of the dog-eat-dog view. First: Obsessive Concern with Other Firms The first thing suggested by the dog-eat-dog view is that the pri mary focus of attention of com peting firms is on each other, that each firm directs all its actions at the other firms in the industry. Of the three implications of "dog eat-dog," this is the only one that is true even of dogs. If two dogs are fighting over a piece of meat, each dog must be primarily con cerned with the other dog and di rect all its actions at the other dog in order to win the fight. This is not the case in business. Compet ing businesses are not engaged in a fight, there normally is no win ner at all, and the primary focus of attention and direction of ac tion is not at the other firms. This is not to say that firms in compe tition with one another do not have to be concerned with what each other is doing, as they cer tainly do. But the primary meth od,. the a,ction of competition, is in the creation and offering of eco nomic values, more concretely, in the production and sale of goods and services. And consequently, the primary activity and focus of 1974 DOG-EAT-DOG COMPETITION 621 concern of a business firm must be on the production and sale of its own goods.

Concern with what other firms are doing is a side issue. It comes up and is relevant only in so far as it may affect the firm's ability to sell its own goods. It is mean ingless in fact for one firm to be concerned with another apart from that specific issue. Since compet ing firms are not engaged in a fight, in any direct physical con tact, the only impact they can have on one another is through each other's sales. It is because of that impact that firms do have to be aware of changes in the quality of the competition's product, their prices, services, advertising cam paigns, etc., not as an end in itself, but as relevant information for the firm's determination of its own quality, price, advertising, etc. But rationally, the firm's primary fo cus of concern must be on its own productive activity, not on what the cornpetition is doing. The way the firm competes is through the offering of values. A firm or an entrepreneur obsessed with what the competition is doing, as sug gested by "dog-eat-dog," would have no values to offer.

Second: Formalized Theft The second thing suggested by the dog-eat-dog view is the idea that competition is the process of one party struggling to take some thing away from someone else, a kind of formalized theft. This is not true even of two dogs fighting over a piece of meat. Since the meat does not belong to either of the dogs, the winner cannot be said to have taken it away from the loser. However, it has signifi cantly greater plausibility with dogs than with human beings, since the concepts of individual rights and property do not apply to dogs. With human beings and business competition, the custom er's dollar pursued is the property of the customer until he spends it. No businessman can have any prior claim on the customer's money, and consequently he has had nothing taken away from him if that customer or all customers choose to spend their money with his competitors. Even if a business has a cus tomer of long standing that it has come to count and rely on, that does not change the fact that in a free society aU-men are free agents and can belong to no other man.

If that long-standing customer changes his mind and starts to patronize a competitor, nothing has been taken away from the business that loses the customer in any fundamental sense. The complaints in such a case arise from a. refusal to acknowledge or recognize that the customer did 622 THE FREEMAN October not belong to the business, the business did not own the customer, the customer was not the property of the business in the first place. Competition is not a process of businesses trying to take values away from one another but rather a process of creating values and offering them for exchange on the market. Third: Destruction or Elimination of Competing firms The third and by far the most important implication of the dog eat-dog view is that the goal of competing firms is the destruction of one another, that success in the market place means the elimination of the competition. Again, such a view is not true even of dogs.

When two dogs fight over a scrap of meat, the success of one does not depend on the death of the other; it depends only on winning the fight. However, even this view of success in the dog world is not ap plicable to economic competition. The concept of a "winner" in the dog-eat-dog sense has no relevance for competing firms. The obvious reason is that virtually all real world markets will support mote than one firm. There may be some plausibility in calling the firm with the largest share of the mar ket the temporary winner, but "winner" in this context does not mean the exclusion of everyone else from the prize as it does for the two dogs. While in each spe cific case, a dollar spent with one firm cannot also be spent with an other, one sale or one customer is not the condition of success or failure. The normal condition is that most of the firms in the mar ket can continue to survive and prosper and make profits over the long run with a reasonably effi cient performance. The success of one does not depend on the de struction of anyone else, but rather on the quality of the firm's own productive efforts.

The primary goal of the firm is not the destruction of other firms but the acquisition of the custo mer's dollar, the maximization of profits. The primary means to that goal is production of the best pro duct possible at the lowest possible price. If other firms are driven out of business in the process of pur suing that goal, it is normally en tirely incidental. The goal was not the destruction of other firms, but the maximization of profits. New firms are constantly opening for business and failing, not because competing firms set out to destroy them, but simply because they could not match the competition's quality and/or price at a cost which would allow them to make profits. Cases do occur where one firm cuts its price expecting to drive 1974 DOG-EAT-DOG COMPETITION 623 some competitors from the mar ket, pick up their customers, and increase its own business and profits. I am not speaking here of predatory price cutting, which is another anticapitalist myth, but of the case where one firm is gen uinely more efficient than others and can continue to make profits at prices that drive other businesses into bankruptcy. Again, the focus of the price-cutting firm's concern is not on driving other firms out of business, but on increasing the size of its own market. The elimi nation of the other firms is inci dental. The businesses being driv en from the market under such circumstances may complain that it is "dog-eat-dog" or "cutthroat competition," but that is not its basic motive or purpose.

Dog-Eat-Dog Competition in the Real World Is it possible for the conditions implied by "dog-eat-dog" to exist in the real world? Is it possible for there to be more firms in a market than the market can sup port so that the survival of some does depend on the elimination of others? Yes, it is possible. It can come about in essentially two al ternative ways. First, a highly profitable new and/or growing in dustry may attract so many firms that everyone ends up making losses. The classic example is the railroads in the I.9th century. However, such a situation repre sents a serious error in business judgment about the potential long run profits in the industry, and we should expect it to be rare in the free market. In the case of the railroads, they were overbuilt in the pursuit of government sub sidies and land grants, not as the result of private errors in the pur suit of private profits.

The second alternative is that an industry which is not overbuilt to begin with may suffer a change in market conditions, most likely a decrease in demand, which results in all or most of the firms taking losses. The decrease in demand can occur for two reasons: (1) a shift in demand away from this product to something else, or (2) a general decrease in demand as a symptom of a recession or depression. In ei ther case, the consequence may be too many firms in the industry for existing market conditions. These are the conditions under which the cry of "dog-eat-dog com petition" is most likely to be heard. The implication of 'the cry is that the process of competition itself is destroying the firms in the in dustry; and if we interpret com petition as only the offer of values, then there is a sense in which competition is to blame. The pro blem is simply that too large a quantity of goods (values) is being 624 THE FREEMAN October offered on the market, as we shaH see.

But competition, aggressive competi tion, is not just the pro cess of churning out goods. It is the pursuit of the customer's dol lar by offering the highest val ues in exchange. In that context, firms may lose money as the result of competition if another firm or firms consistently offer higher val ues and attract most of the cus tomers. But under the dog-eat-dog conditions described above, all or most of the firms are losing money and none of them is doing well. Their losses, therefore, cannot be. the result of unusually aggressive competition because the firm ini tiating such competition, offering the higher values and attracting the customers, should be making good profits. No, the firms are losing money not because competi tion is abnormally intense, but be cause of the Law of Demand. Dog-Eat-Dog versus the Law of Demand The Law of Demand says that larger quantities can only be sold at lower prices and smaller quanti ties can be sold for higher prices.

If all the firms in a market are losing money, the fundamental rea son must be that under existing demand conditions, the total quan tity the firms want to sell can only be sold at a price below costs. Obviously, this is a situation that can not continue. No firm can go on indefinitely producing at a loss. Eventually the least efficient firms will leave the industry and when they do this will reduce the total quantity to be sold on the market. The smaller quantity in turn can be sold for a higher price, and this process will continue until the firms remaining in the market can make profits. The crucial point for our purposes is that it is not conl petition that causes losses or drives firms from the market under such conditions, but the relation be tween the demand for the product and the cost conditions facing the firms. This last point is the basis for the answer to the charge that dog eat-dog competition results in monopolization. When existing firms are being driven out of a market under the circumstances described above, it is because of the conditions that exist in that market. Firms will stop leaving when those conditions change, and it is the process of firms leaving that is the means to changing those conditions, i.e., reducing the quantity sold and raising price.

The cause of the problem is not in the competition, and there is noth ing about the nature of competi tion that inevitably leads to mo nopolization. The only way that monopoly can result from competi1974 DOG-EAT-DOG COMPETITION 625 tion is if one firm can outcompete everyone else in the market, offer ing higher values than any other firm can match. Such a monopoly is very rare in the open market and represents a significant achieve ment. It is also clearly to the in terest of the market's customers. Summary and Conclusion Concerning Economic Competition The fundamental means by which economic competition proceeds in the real world is the offer of eco nomic values, placing goods and services f or sale on the mar keto The concept of dog-eat-dog com petition implies that competition is characterized by a paranoid obsession with what other firms are doing and proceeds through formalized theft and the destruc tion of other firms. As such, dog eat-dog competition has no con nection with competition as it actually exists in the business world or with any other form of competition.

Moreover, from the broadest perspective, the dog-eat-dog view implies that competition is a pro cess of destroying values; other firms, other firms' customers, other firms' goods. Blowing up a competitor's plant and murdering the manager would be entirely consistent with what is suggested by dog-eat-dog. As such, this view of competitive action is not merely mistaken, it is the reverse of competition as it is actually car ried on in reality. The heart of competition is making values available, and any concept that suggests the opposite is viciously antisocial and destruc tive. This is not an abstract char acterization but a factual indict ment. It can be seen in the conse quences of the policies listed in the first paragraph of this article, pol icies that have flowed from the dog-eat-dog concept. The Inter state Commerce Commission was created in part to prevent dog-eat dog competition among the rail roads and in the process has vir tually destroyed them. The Nation al Recovery Administration, set up to prevent dog-eat-dog competi tion among American businesses generally during the Great De pression, would have turned the United States of America into a fascist state. And the Robinson Patman Act, designed to prevent some firms from harming or de stroying others through low prices, has in practice operated as an attack on all price competition. Such are the consequences of a false con cept.

It is bitterly ironic that the de structiveness which the dog-eat dog concept attributes to real world competition has in fact been the consequence of the policies 626 THE FREEMAN October generated by the dog-eat-dog con cept. It becomes mind-staggering when one grasps that this is only a minor instance of a process which operates on a global scale. It is a process whereby a charge against capitalism generates gov ernment action which creates the evil alleged in the charge (e.g., the The Nature of Monopoly charge that capitalism is eco nomically unstable has led to gov ernment policies which have de stabilized the economy). This per verse sequence of events can be found to have resulted from virtu ally all the attacks that have been directed against the capitalist sys ~m. ~ IDEAS ON LIBERTY A SERIOUS CHARGE made against the free market by its friends is ... that in an unhampered market the individual would not be truly free but would be imposed upon by monopolies of various kinds and degrees. This charge appears in the preamble to one piece of interventionist legislation after another. Thus, the worker is said to need special protection because of the monopoly power of the employer. The farmer must be protected against monopolies on both sides of his market. Certain kinds of business firms must be protected against certain other kinds. Certain price decisions must be influenced by government because of the monopoly power of the firms involved. And on and on it goes. Clearly, if private monopoly is il}deed this ubiquitous, a presumption is established in favor of a substantial role for government.

In my opinion, however ... positions of monopoly power tend to be short-lived and relatively ineffective, except as they receive the positive assistance and protection of government. Or phrased another way, government in the United States has done far more to promote monopoly than to promote and permit competition. BENJAMIN A. ROGGE, "Is Economic Freedom Possible?"

ROBERTMeNOWN AND DWIGHT LEE man's service in the military is measured by the value of those opportunities forgone. Generally the opportunity sacrificed here is a civilian job, with a value equal to the salary he could expect to receive. The President's Commis sion on an All-Volunteer Armed Force estimated that the military pay for draftees is only half that which they could receive in civil ian work. Add to this salary dis crepancy a possible preference for civilian over military employment, and it is apparent that the true cost of the draft is quite high. To the individual draftee the oppor tunity cost of military service is equal to the salary which he would have to be offered in order to be attracted to military service. Thus whatever savings the taxpayers garner through the lower military pay permitted by conscription ap pears as a cost to the individual draftee. Military budgets may be lower with a system based on con scription, but this does not imply e HighCost of the Draft t ~ WITH THE EXCEPTION of the recent postwar period, the United States has always maintained an army of volunteers in times of peace.

But it is claimed that our need for a large standing army because of the cold war would make an all-volunteer force prohibitively expensi vee No one would deny that it is possible to staff an army of most any size with quality person nel if we were willing to offer sufficiently generous salaries. The objection is that this would simply be too expensive. That an all-volunteer force is more costly than a system with conscription is an illusion. Man power costs are not less under the draft, they are simply shifted onto one particular group, namely the draftees. The cost of a young This article is based on a chapter from a book by Professors Lee and McNown, to be published by Science Research Associates, In corporated in 1975. Messrs. McNown and Lee are Assistant Pro fessors, Department of Economics, University of Colorado at Boulder. 627 628 THE FREEMAN October that the social costs are lower. The draft merely shifts the burden of manpower costs from the taxpay ers onto the young men of draft age.

Suppose, for exa.mple, that it would require a salary increase of $3000 per man to attract volun teers equal in number to the pres ent volume of draftees. For every man drafted to serve, the tax payers save $3000, but the indi vidual draftee suffers a cost in terms of income forgone and aver sion to military duty valued at $3000. Manpower costs to society as a whole are no different in either case. The only difference is in who pays the costs - the tax payers· as a. whole or the men who are .unfortunate enough to be drafted. LessCostly Actually there are strong rea sons for believing that an all volunteer system will involve lower social costs than a system with conscription. Budget outlays will be higher of course, but this is not indicative of true relative social costs. The most important savings to society will come in the form of lower rates of induction of those men with the highest opportunity costs. Those most productive in civilian life are those who earn handsome salaries. These are of course the ones least likely to be attracted by military service, un less the military is willing to offer them comparable salaries. With the exception of medical doctors, however, the military 'will not gen erally be interested in paying sal aries which would attract those who are unusually productive in civilian life. Movie actors, corpo rate executives, scientists, and writers, for example, are unlikely to make contributions to the mili tary which are comparable to those made in civilian life, and it would be highly inefficient to have them inducted.

There will be additional savings through a more efficient use of all men of draft age, including those threatened by the draft but never inducted. Many men subject to the draft have gone to great lengths to redesign their lives in order to avoid conscription. En rollment in colleges and semi naries, employment in draft de ferred positions, and legal action to avoid the draft cost society $2.50 for every $1.00 saved the taxpayers through the draft. 1 The entire social fabric has been strained by.military conscription, for in no other sphere of activity in our society do we permit such 1 The Report of the President's Com mission on an All-Volunteer Armed Force, Washington, D.C. 1970.

1974 THE HIGH COST OF THE DRAFT' 629 an arbitrary system of involun tary servitude. Another reason for anticipating lower manpower costs would be that volunteers are likely to have a substantially higher reenlist ment rate than draftees. Thus with an all-volunteer force there will be considerable savings in training costs as a result of the lower turnover rates. With a two year tour of duty involving six months of basic training and a couple of months of processing for discharge, the military actu ally receives very little benefit from draftees who do not reenlist. Finally, with manpower costs accurately· portrayed by the sal aries paid, the branches of the armed forces will have an incen tive to utilize men more efficiently. When all inductees, from college graduate to high school drop-out, are paid a token wage of $115 per month, and when an ample supply of men is guaranteed by con scription, there is virtually no incentive for the service to econ omize on the use of manpower.

Stories of highly skilled or edu cated draftees being sent off to do menial labor were common place in the "old army." With the mili tary paying the true cost of labor services there will be an incentive to allocate scarce labor resources to lines of activity for which they are most suited. It will also become worthwhile to substi tute nonhuman resources and civilian personnel for military manpower in those cases where such tasks can be performed more cheaply. When the cost to the army of an enlisted man is a nominal $115 per month, there is little reason to seek ways to econ omize on the use of this resource. The AII-Vo'unteerSystem Under Trial Largely on the basis of such arguments, the Congress was in duced to tryout the all-volunteer system. As of January, 1973, the armed forces have officially been attempting to fill their manpower needs without use of conscription. Higher salaries, more attractive lifestyles, and large promotional activities have been employed in the effort to attract volunteers.

After about one year of this sys tem, the all-volunteer army has come under attack from several influential military officials and congressmen. They cite several reasons why they believe the all volunteer army is bound to fail. Firstly, they bring up the old argument that it is just too ex pensive to support a two-million plus army on a voluntary basis. But we have seen that this argu ment is fallacious. Whatever sav ings the taxpayers realize is a burden imposed directly on the 630 THE FREEMAN October draftees. The issue is not concern ing a difference in total costs; it is rather over who incurs those costs. The critics of the all-volunteer system also contend that neither quality nor quantity quotas are being satisfied with present re cruitment programs; that a return to conscription is needed to ac quire the educational and skill backgrounds needed in today's army. This could be merely a problem of transition. Reenlist ment rates for draftees are under standably lower than those for volunteers. As we move towards an all-volunteer army, the overall reenlistment rate should rise as the proportion of draftees in the army from previous years is grad ually reduced. Once· transition is completed some of the quality and quantity deficiencies should be overcome through higher reenlist ment rates. It is also likely that salaries are still inadequate to attract the high caliber of person nel the army desires. A recruit today is paid $307 per month, and a sergeant with four years of ser vice makes about $450 plus $80 to $120 per month in housing bene fits. While this is a considerable improvement over wages of four years back, it is not hard to imagine that more attractive sal aries may need to be offered if skilled and educated men are to be attracted into a highly disci plined, often dangerous career.

The military pay bill which was to permit us to move towards an all-volunteer system did not pro vide for a level of pay which the President's Commission on an All-Volunteer Armed Force rec ommended. Compromises were made particularly at the expense of the new enlistees. Considering that this group received no pay increases between 1952 and 1965, we might expect that salary in creases will need to be somewhat more generous if we are to attract the caliber of personnel desired by our armed forces. Some also fear that the higher manpower costs will lead to cut backs in non-personnel defense expenditures. If this were to come about, it could only be a result of citizens and congressmen reacting to new information about the true cost of military activities to so ciety. If the only way in which citizens can be convinced to main tain an extravagant military is by hiding some of the costs behind the blanket of conscription, then it seems clear that too many re sources are in fact being allocated to military purposes.

Minority Control Finally, there is the fear that an all-volunteer army would be come dominated by blacks and 1974 THE HIGH COST OF THE DRAFT 631 other disadvantaged minority groups. It certainly is the case that economically disadvantaged groups will be attracted in dispro portionate numbers because of their relatively low alternative in come earning opportunities. Blacks have in fact accounted for 20 per cent of enlistments in recent months, while they comprise only 14 per cent of the service-age population. A disproportionate number of blacks in the armed forces mayor may not be an un desirable thing. Some would take the position that the army is in terested in particular skills and abilities, and the color of the body in which these attributes are housed should make little differ ence. What is objectionable about a disproportionate number of black enlistees is the underlying economic condition which this re flects. It is appropriate to try to deal with economic inequalities at the source, not to circumvent a result of these inequalities by im posing a new inequity, namely in voluntary servitude.

In conclusion, it is apparent that most of the objections to an all-volunteer force derive from the position that it is simply too ex pensive. This is, however, an illu sion. A reasonable measure of the social costs of a standing army obtained by any method is the value of the opportunities for gone. The social costs of a stand ing army of 2.2 million men is approximately equal to the in comes sacrificed when these men are taken from the civilian sector. A $5 billion savings to the tax payers in lower military pay as the result of conscription is merely a transfer from one group - the draftees - to another, namely the taxpayers. A less equitable system could hardly be imagined. f) IDEAS ON LIBERTY Equality vs. Liberty IT IS equality of freedom and independence that gives unto man his opportunity to be rich or poor or to be good or bad. Equality of men leaves no choice, because if all men are equal by nature or inherently there can be no differences and no distinctions. All have an equal right to stand at the judgment bars of God and man - but all are not entitled to the same judgment. Virtue and depravity are not entitled to the same rewards on earth or in Heaven.

R. CARTER PITTMAN LAW LEONARD E. READ VERSUS TYRANNY ACCORDING to Thomas Fuller, the 17th century Royalist historian and preacher: "Law governs man; reason the law." This doesn't seem right to me or, at least, seems con tradictory to Professor Lunden's observation about moral obliga tions. Does reason govern law? If so, reason would appear to be a low grade faculty, for there are as many varying conceptions of "law" as there are persons who use the term. Indeed, most of us use "law" loosely, meaning now this and then that. Were reason to govern, it would seem, at the very least, that we should have a sounder con ception of what law is than is now the case. In this context, what is law? Is ita body of legal edicts backed by force? Or a consciousness of moral obligations? Or, if some combina tion of the two, which takes prece632 dence? These and many other re lated questions need some careful reflection if reason is to govern.

Lord Keynes, in 1938, speaking of the time when he was twenty, said of himself and his friends: We repudiated entirely customary morals, conventions, and traditional wisdom. We were . . . in the strict sense of the term, immoralists . . . we recognized no moral obligation, no inner sanction, _to conform or obey. Before heaven we claimed to be our own judge in our own case. So far as I am concerned,it is too late to change; I remain and always will remain, an immoralist . . . . In a recent comment on that pas sage, Henry Hazlitt suggests that "it is the spread of precisely this attitude since then to ever-widen ing circles that helps to explain the moral and political decay In the last few decades." As to which takes precedence 1974 LAW VERSUS TYRANNY 633 a body of legal edicts backed by force, or a consciousness of moral obligations - I say, contrary to Keynes, the latter. In describing himself as an immoralist, Lord Keynes was saying that no moral laws or ethical imperatives are to stand in the way of desires and ac tions or to otherwise restrict his thoughts and deeds. And the re suIt is an outpouring of legal edicts inspired by him and his disciples and designed to control the affairs of society.

Now to my faith. I am a moral ist. I subscribe to the proposition that there are laws of nature and the universe, of Creation, that should be discovered and respected. I believe that all man-made laws legal edicts - which go beyond cod ifying and complementing the moral law, serve not to bind men together but to spread them asunder, creating chaos rather than harmony, tyranny rather than peaceful order. Fundamental to my faith is the rejection of government as the sovereign power. This puts me on the side of the writers of the Dec laration of Independence: ... that all men are ... en dowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the Pursuit of Happiness. By proclaming the Creator as the endower of men's rights, they pro claimed the Creator as sovereign, denying government that ancient and medieval role. Moralists! Being a moralist also links me with Walter Lunden, F. A. Hayek, Henry Hazlitt, and an encouraging number of other moralists and eth icists of increasing influence. How ever, this does not mean that all of us see precisely eye to eye. That would be as undesirable as it is im possible. Why? It is our differ ences that serve as steppingstones to truth, an infinite pursuit. We agree on being moralists, not im moralists, moral values being the correct vantage point from which to look for improvement, refine ment. Thus, let each share what ever his best thoughts reveal - the upgrading procedure, that is, learning from each other, ca.tholic ity the rule.

Foundations of Morality What are the foundations of morality? Moralists have varying answers to this question.My foun dations are the Golden Rule and the Ten Commandments. The Gold en Rule, in my view, is the prime tenet of sound economics and, doubtless, the oldest ethical pro position of distinctly universal character. Let no one do to others that which he would not have them do to him; that would be 634 THE FREEMAN October just about the ideal, economically, socially, morally, ethically. Admit tedly, this is more a goal than a likelihood, but it is goals we are considering. There are moral values which are appropriately reinforced by man-made law, and other moral values which do not lend them selves to legal implementation. Let us examine the Ten Command ments to find where man-made laws are appropriate, that is, where they are complementary to the moral law, and where not. Man-made laws -legal edicts backed by force - are inappro priate when directed at what the individual thinks or believes or does to himself. A man's inner life can only be impaired, never improved, by coercive forces. Gov ernment is but an arm of society and its only proper role is to cod ify and inhibit injuries inflicted on society, that is, on others than self. Self-injury is subject to self correction - none other!

Take the Commandment, "Thou shalt not covet." Enforce this by a man-made law? The absurdity is obvious. Envy is the root of many evils - stealing, killing, and the like - yet it cannot be done away with by the gun, billy club, fist, or any other physical force. Might as well pass a law against stress or worry or despair or man's thoughts about the hereafter or against suicide for that matter. The you's and I's - society - may lament the ills many people inflict on themselves but we cannot cor rect them by legal concoctions. The moralist concedes that there is good and evil in the world - in man - in any man - that there is a moral law by which one may dis tinguish the good from the evil. But he knows that he is powerless to relieve any individua.l of the cer tain consequences of that person's immoral actions. Would he try to enact legislation to the effect that a person shall not be burned if he touches a hot stove or drown if he stays indefinitely under water without air? Such human enact ments would be inconsistent with the moral laws of cause and con sequence - would indeed be a form of tyranny, an invitation to law lessness in the mistaken belief that one might violate the moral law with impunity.

Protective Prohibitions Here are a few samplings of prohibitions by a government out of bounds, minding your and my business: driving a car without seat belts, staying away from school, working for less than $2.00 an hour, laboring more than 40 hours a week, keeping stores open on the Sabbath, exchanging the fruits of one's labor for gold, on and on. All in the name of protect1974 LAW VERSUS TYRANNY 635 ing the you's and me's against our selves. Law? Not the way a mor alist would define it! These are tyrannies. Clearly, the moral law takes precedence over the legal edicts of civil law. The latter serves a use ful purpose provided its limited role is understood and heeded. When statutory law invades the do main of the moral law, it is itself ineffective and it paralyzes moral action; it creates a vacuum. Coercively enforce an observa tion of the Golden Rule when only self-enforcement is possible? Non sensical! Can the government stop covetousness by making it illegal?

Of course not! The role of civil law should be limited exclusively to inhibiting such injuries as some inflict on others, never di rected at injuries we inflict on ourselves. My moral code is founded on the Golden Rule and the Ten Com mandments, and I would call upon the civil law to help enforce only these: "Thou shalt not kill," "Thou shalt not steal," and "Thou shalt not bear false witness." Conceded, killing, stealing, and bearing false witness inflict self injury: the destruction of one's soul, the loss of neighborly respect, the reduction of propects for co operation. However, each of these evils inflicts injuries on others and thus becomes a societal problem. Such destructive behavior should be inhibited, insofar as possible, by the organized and legal arm of society - government. Mass Murder All but the mentally deficient stand against the murder of one by another and more or less agree that one means of minimizing the practice is to oblige the murderer to pay the penalty for his crime.

Mass murder, on the other hand - killings by the millions - is not so much frowned upon. Why? These are done in the name of a collective and thus are thought lessly regarded as impersonal. I didn't do it; the nation (or some other abstraction) did it! Witness the Crusades in the name of Christianity or the Thirty Years' War in Central Europe, or what goes on more and more in our time. 1 The Commandment, "Thou shalt not kill," is no less broken when done in the name of a collec tive than when one man kills an other. What is the explanation for this calamitous trend? In my view, omnipotent government, that is government, not the Creator, as sovereign. 1 For further reflection on this com plex matter, see my "Conscience on the Battlefield." (Copy on request.) The Thirty Years' War witnessed the slaugh ter of millions of people "to the glory of God"! See Grey Eminence by Aldous Hux ley (New York: Harper & Bros., 1941).

636 THE FREEMAN October Only those who reason clearly from cause to consequence stand foursquare in support of "Thou shalt not steal." True, not one in a thousand would steal a penny from a child's bank or a neigh bor's goose or another's loaf of bread. Full respect for private pro perty at the you-and-me level! Yet, people by the millions will ask the government to do the taking for them - billions upon billions of dollars annually. Plunder at the impersonal level! Why? The same old reason: government out of bounds, that is, government as sov ereign. "The king can do no wrong; therefore, what he does for me at the expense of others is right." Sound reasoning? Hardly! Those who cherish liberty are well advised to respect and defend the rightful claims of others. As Santayana wrote, "The man who is not permitted to own is owned." Observe that "Thou shalt not steal" presupposes private owner ship, the bedrock or foundation of individual liberty. Why this asser tion? How possibly could one steal were nothing owned! To disregard this moral law is to deny being one's own man; disobedience invites enslavement - being owned.

Merely observe how the fruits of individual effort are increasingly expropriated by the collective, how our options of ownership are being diminished. And the way to reverse this dreadful trend is to heed the Commandment against theft. Government's role here, as in the case of murder, is to inhibit these infractions of the moral law, not to promote them. "Thou shalt not bear false wit ness" means not to misrepresent or defraud or falsify. Make a con tract, keep it. Let all representa tions be truthful, whether they pertain to persons or to goods and services. False witness, having to do with injury to others, ration ally warrants that the civil law help rescue us from this evil. To my way of thinking, moral ity, once shattered, destroys the people and whoever or whatever pres umes to rule. It is only the consciousness of moral obligations that binds men together. This is one reason why I a.m an unabashed moralist and why I hope that our tribe may increase in number and improve in consciousness. Amen!

~ A REVIEWER'S NOTEBOOK J 0 H N C HAM B E R L AIN Gibbon for Moderns Gibbon for Moderns is the title chosen by Peter P. Witonski for his one-volume abridgement of Eighteenth-Century Edward Gib bon's famous history of the decline and fall of the Roman Empire (Arlington House, $8.95). And, as part of his didactic purpose, Wit onski adds a brief notice that he is presenting the more important pa.rts of an always fascinating his torical work for their "lessons for America today." Since Rome, with its eastern ex tension in the Byzantine Empire, lasted for a couple of millennia, the "lessons" that are to be learned from Gibbon, Mommsen or any other historian of the rise, spread and decline of Latin civilization have a thousand faces. More than thirty years ago an American newspaper man, H. J. Haskell of the Kansas City Star, wrote a de lightful book called The New Deal I in Old Rome. His "lesson" was that Henry Wallace, Harold Ickes, Rexford Tugwell and Franklin D.

Roosevelt had had previous incar nations in the age when Gaius Gracchus was championing the Ever Normal Granary and when Augustus Caesar was going strong on the public works that changed Rome from a city of brick to a city of marble. If the New Deal (with its own modern version of "bread and circuses") hoped to succeed, it would have to do better than Rome. The problem was to build a society which, in Mr. Haskell's words, would provide "reasonable incentives for the free rise of a general staff of competent man agers whose ranks are always open to fresh recruits." Writing in 1938, Haskell sounded a dubious note. Who and what would come after Wallace, Tugwell and Company? Albert Jay Nock was more def inite. He delighted in pointing out that all the panaceas had been 637 638 THE FREEMAN October tried by the Romans and all had failed. Nero clipped the Roman coins, but inflation solved nothing.

Diocletian tried unsuccessfully to fix prices. "Empire," in the form of extracting treasure from con quered provinces, ran out when the "movables" had an been :re moved, leaving only the slaves. The dependence on slave labor ulti mately took its own toll by under cutting the free peasantry, who turned up in Rome to live on the dole. Antisocial Solutions Dero Saunders, a bright editor of Fortune Magazine whose avoca tion was dabbling in the history of antiquity, pushed the New Deal comparisons in the edition of Mommsen's History of Rome which he prepared with John H. Collins, a classical student. Mommsen's main "lesson," as passed along by Saunders, was that Robin Hood methods of solving the "social problem" end by tearing society apart, the result being anarchy that finds its Draconian cure in dictatorship. Witonski's "lessons" are a bit more subtle than those advanced by Haskell, Nock, Dero Saunders and other Roman buffs of the past g:eneration. Eschewing the "eco nomic interpretation," Witonski identifies Rome not only with the decline and fall of a temporal empire but also with the rise of Christianity. He holds, with the late Frank Meyer (to whom he dedicates Gibbon for Moderns), that Roman law and Christian eth ics have combined to create the concept of the "West," which, though it is now under seige, is still alive and kicking against the efforts of the new barbarian "counterculture" to undermine it.

The Fall of Constantinople Gibbon, a man of the Eighteenth Century "enlightenment," was a °free thinker with a Deist preju dice against any religious speci ficity. He was inclined to blame the Christians for sapping the morals of the old pagan society, which had its many household gods. Even so, if the conversion of the Emperor Constantine had been able to keep the Turks forever at bay before Constantinople, Gibbon would have held Christianity in the same af fection that Voltaire cynically mainta.ined for the God whom "necessity" demanded. The "fall" of the Roman Empire bemoaned by Gibbon was material; it came because the empire, after the An tonines, could not longer fend off the barbarians from the North and the Moslems from the East. When Mohammed II took Con stantinople, it was the end for Gibbon. His descriptions of the ultimate failure of pomp and pow1974 GIBBON FOR MODERNS 639 er are marvelously evocative, and one never tires of the balanced rhythms of the Eighteenth Cen tury style. As for Gibbon's dis paragement of the moral preten sions of the Crusades, it is good for our souls that we be reminded of the often non-Christian beha vior of the defenders of the West ern chivalric order. For pragmatic reasons, Gibbon had to accept the Crusades as good: after all, they gave Constantinople a "breather"

of some three centuries which it might not otherwise have had. Witonski raises points that are merely implicit in Gibbon. The "breather" of the Crusades al lowed the West, as the inheritor of Roman civilization, to develop the nation-State. Rome, in a sense, was pushed into the North by the spread of Islam, which, as Henri Pirenne has pointed out, turned the Mediterranean for a period in to a Moslem lake. The "barbari ans" from the Gothic North took over enough of the Latin culture to sustain "Rome" as part of Charlemagne's Frankish Empire. Latinity persisted in Spanish, French and even Rhineland Ger man customs. The Moors took Spain, but Gallic Latinity was saved by the Pyrenees. And the big comeback which,with the Cru sades, was to retake the Mediter ranean for the "West" was pow ered by such northern "Romans" as Robert, Duke of Normandy, and Richard the Lion Hearted of Eng land, along with ex-barbarians who had come within the civilizing in fluence of contact with both Rome and Christi ani ty after they had invaded Lombardy and the Italian peninsula.

The West Again Under Seige So "Rome" never actually died. It survived in Constantinople until 1453, and it revived in the West when the Moslems were pushed back in the Mediterranean. All of which points to a "lesson" that Peter Witonski does not unduly stress, partly because he wrote his introduction to Gibbon for M od erns before the Arab-Israeli Yom Kippur War. The "West" is under seige again from the East, with the Soviets threatening a complete takeover in the Balkans (a second "fall of Constantinople" ?) when Yugoslavia's Tito dies. Elsewhere the Soviets have cleverly arranged to create the turmoil that resulted last Fall in the Arab oil embargo, which hit at all the Western Euro pean states that have inherited the Roman and Christian traditions. The Mediterranean could become a part-Islamic "lake" if Henry Kissinger's diplomacy, which is directed toward driving a perma nent wedge between the Russians and the Arabs, should fail.

If the West would save itself 640 THE FREEMAN October once more, it needs a new Henri Pirenne and a new Edward Gibbon to point to the consequences of los ing the Mediterranean to collabo rating Communist and Arab ji hads. Western Europe consists of small and vulnerable peninsulas (Iberia, Italy, Scandinavia) joined to a shrunken trunk (France, the low countries, West Germany, Switzerland). Loss of the Mediterranean would effectively out flank the European West. If this should ever happen, a new Gibbon would be required to write a real "decline and fall." The stakes are big, as the late Frank Meyer and his disciple Peter Wit onski have tried to bring home to a world that has read all too little of Edward Gibbon. HANDSOME BLUE LEATHERLEX FREEMAN BINDERS $2.50 each ORDER FROM: THE FOUNDATION FOR ECONOMIC EDUCATION IRVINGTON-aN-HUDSON, NEW YORK 10533 the Freeman VOL. 24, NO. 11 • NOVEMBER 1974 The Blindness of Macro-economics Charles R. LaDow 643 A call to exchange the welfare state for the personal liberty guaranteed in the Constitution.

Who Owns the Job? Cecil V. Grove 652 No one; the job is done as owners voluntarily exchange what is theirs. Castles in the Air Leonard E. Read 654 Progress comes as men put foundations under worthy dreams. "It's for Real" William H. Peterson 658 How los Angeles youngsters start in the lower grades to do business in a free society. The Individualand Majority Rule Ronald F. Cooney 661 Concerning some of the abuses of majoritarianism against which Tocqueville warned. Impossible Riddles The regulatory process invariably curtails development. Bernard H. Siegan 668 The Right to Feel Alienated Robert J. Rubanowice 670 If one doe'S not feel alienated in the face of smothering collectives, he is lost. British Booksellers Learn to Compete Willie E. Nelms 674 How a Nineteenth Century effort at retail price maintenance was broken to the advantage of the reading public. The "New" Protectionism Paul Stevens 680 statist interventions domestically lead to world trade wars; the antidote is freedom.

All Different Afford every talent an equal chance to earn another. George Ellis 691 Value and the Welfare State Brian Summers 692 How are individual welfares to be measured in ord,er to arrive at "the general welfare"? Book Reviews: 695 "United Nations Journal: A Delegate's Odyssey" by William F. Buckley, Jr. "An Introduction of Christian Economics" !by Gary North "Economic Growth and Stability: An Analysis of Economic Change and Policies" by Gottfried Haberler "Roots of the New Republic: A New Perspective on Early American Constitutionalism" by George Dargo "Pagans in the Pulpit" by Richard S. Wheeler Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

the Freeman A MONTHLY JOURNAL OF IDEAS ON LIBERTY IRVINGTON·ON·HUDSON, N. Y. 10533 TEL.: (914) 591·7230 LEONARD E. READ PAUL L. POIROT President, Foundation for Economic Education Managing Editor THE F R E E MAN is published monthly· by the Foundation for Economic Education, Inc., a non political, nonprofit, educational champion of private property, the free market, the profit and loss system, and limited government. Any interested person may receive its publications for the asking. The costs of Foundation projects and services, including THE FREEMAN,are met through voluntary donations. Total expenses average $12.00 a year per person on the mailing list. Donations are in vited in any amount-$5.00 to $lO,OOO-as the means of maintaining and extending the Foundation's work. Copyright, 1974, The Foundation for Economic Education, Inc. Printed in U.S.A. Additional copies, postpaid, to one address: Single copy, 50 cents; 3 for $1.00; 10 for $2.50; 25 or more, 20 cents each.

THE FREEMAN is available on microfilm from Xerox University Microfilms, Ann Arbor, Michigan 48106. Some articles available as reprints at cost; state quantity desired. Per mission granted to reprint any article from this issue, with appropriate credit, except "Who Owns the Job?," "Impossible Riddles," and "The 'New' Protectionism."

CHARLES R. LADow T THERE IS a charming little allegory of Hans Christian Anderson which fits very well the efforts of macro economists and others who have directed public policy in recent years. In The Emperor's N e~u Clothes, a group of self-styled magic weavers undertook to weave clothes for the emperor which would make him invisible. When the invisible clothes were finished, they went through the motions of dressing the ruler and he strolled out among .his subjects to check the result. Like any "silent major ity," the people were loath to speak out questioning their government. However, one little child broke the spell by crying: "The emperor is naked!" Like the emperor's new clothes, the impressive weaving of our political economists has had a denuding effect on the exchequer. The childlike simplicity of indi vidualism is called for to show them up. Mr. LaDow, of San Diego, recently retired as a teacher of social studies in high school.

No less charming was a talk of William James to teachers and students: "On a Certain Blindness in Human Beings." James demon strated, including an example of his own lack of perception, how impossible it is to plumb another individual's motives (what makes him tick). Let anyone who ques tions the universality of this blindness read this essay in Wil liam James' little book: Talks to Teachers. Indeed, macro-econo mists are aware of this short coming in their trade. They are commonly fond of proclaiming their modesty by suggesting: "Let the political philosophers tell us what kind of an economy they want and we will produce the model." However, this shrugging of responsibility provides us with an empty alternative when most of our political philosophers are, themselves, tied u~ in analytical generalities which ignore the re alities of individual existence. Somehow, classes, races, sexes, 643 644 THE FREEMAN November and other kinds of groups are all that remain within the brackets of their consideration. The indi vidual exception is filtered out something with which they are un prepared to deal. Since each of us is an individual exception, by defi nition as well as in reality, these macro-sociologists are poorly equipped to manage the realities of human existence.

Not Even Governments Can Long flout Public Opinion While man is a gregarious ani mal whose very existence depends upon political organization, the viability of any political organiza tion is dependent upon the volun tary support of its individual members. There have never been enough jails and concentration camps in any tyrannous state to hold all its dissidents. Custom is the accretion of individual com promises found necessary to essen tially different beings in order to survive living together. (Current violence in our society is a warn ing.) Law can be successful only when it complements such long standing customs and adopts new rules only when they are clearly in accord with a previous develop ment of custom. In other words, effective reform can come about only from within society, by the voluntary consent of individuals, and cannot be successfullybrought about by government decree, or the judgment of a court.

A case in point is the current hiatus in improved race relations in this nation. Following World War II, one could see remarkable voluntary improvement in race re lations; but massive government intervention has precipitated strife and has hopelessly muddled its progress, splintering what might have become a genuine con sensus. There is scarcely a facet of our governments' recent opera tions which does not bear this onus. "Giving government back to the people" is more than a politi cal slogan. It is a practical neces sity if we wish to avert social chaos. Since the overriding bugaboo of our ruling macro-economists has been unemployment, it is incum bent upon us to show how its evils may be avoided. They have seen nothing better to do than to pro liferate publicly funded programs to ameliorate the unemployment which their unwise policies cre ated in the first place. By granting monopoly rights to the minority of unionized labor and raising mini mum pay laws, they have disem ployed marginal workers and taxed the consumer with higher prices, which fall hardest on the poor.

Escalation of public relief has created a real option of unemploy ment to many who might other1974 THE BLINDNESS OF' MACRO-ECONOMICS 645 wise find employment. Even in a period of rising unemployment, many positions stand unfilled. These policies must revert to the free, competitive market before we can achieve full employment. Figures on unemployment are nleaningless in the current mix created by public policy. No consideration appears to be given to the tru th that, while many individuals are unemployed, by choice or necessity, just as many individuals are over-employed. The wartime necessity of "moonlight ing" has become a family habit for many. To pay increasing taxes and meet family goals, working wives have become the rule rather than the exception, while the hiring of household help, once a haven for the unskilled, is outside the budget of most of the middle class. Work ing wives and husbands must face household chores when they get home. Whole industries have risen catering to the do-it-yourselfer.

While plumbers, painters, and carpenters are claiming outrage ous pri<;es for their services, the average man is doing more and more of this work for himself. That this massive effort is not, and cannot be, counted in the GNP assures us that its impact on un employment is never counted. The Keynesian inflation fathered by the macro-economists and their profligate spending of the people's money has guaranteed that all the willing horses shall be overworked to support their programs. After all, the bulk of the tax load falls on this over-employed middle class. Work to be Done There is no need to bring in sta tistics to show that the official concern over unemployment is a red herring. All that is needed is to look around you. There is plenty of work to be done. Only two re quirements exist for putting everyone to work: 1. The money to hire their services and 2. Their individual willingness to go to work at what the market offers.

1. Let us consider first what is necessary to provide the funds to hire the work done. In order to accomplish this, all that needs to be done is to abolish all govern ment funding of so-called anti poverty programs and unemploy luent relief. The resultant possi bility of lowering taxes by at least fifty per cent should leave enough money in the hands of individuals and firms, the productive factors in the economy, to take up any slack in employment and allow people to get the work done that they need instead of what govern ment decides to do for them. This should even take care of displaced civil servants and appointed per sonnel and would put them into 646 THE FREEMAN November productive work, providing a much-needed boost to our lagging GNP. Also, the reduced bookkeep ing and red tape suffered by busi nesses should boost their produc tivity and provide a boon to the consumer in lowered prices, which are universally raised by the fixed costs of government meddling.

2. While there are some indi viduals who would work even if there were no necessity to do so, it may be generally agreed that the urge to work is directly propor tional to the need for making the effort. Otherwise, there would be few labor-saving devices and much less enthusiasm for vacations. So, if we remove the various govern mental programs which encourage people to get along without work ing, or to join some nonproductive bureaucracy, we are likely to see a renaissance of the work ethic. After all, the reign of this virtue among our ancestry was more due to the raw necessities incidental to taming a continent than to an industriousness peculiar to their genes. We honor them for their courage in facing hunger, thirst, and many hardships unknown to even the poorest of us. Should we deny to any of our contemporaries the honor due to the courage of facing necessity? After all, if we deny it to them in the productive workaday world, they will seek it ."in daredevilry, violence, and crime, as is now being demonstrated. If you look at individuals, rather than sociologists' evanescent groups, you will have to admit that most of them would go to work at whatever the market offers their talents - if they had to. In a uni verse fraught with dangers, the most sincere and useful tutor is necessity. To remove it from a person is to disarm him in the midst of war.

Why the· Great Depression? At this point, we anticipate the cries of those who revert to the "Great Depression" and a memory of people "selling apples on the street" and saying that we can't have that happen again. To begin with, honest economists are agreed that the great slump was caused by inept manipulations of govern ment itself, most particularly those of the Federal Reserve Board which allowed the banking system to become paralyzed. Fol lowing that, Federal controls were applied to hamstring enterprise,. which has had to learn to live with its hamstrings ever since. That is why people were selling apples on the street. But, even at that, what is wrong with selling apples, if that is the best thing you can think of to occupy yourself? Isn't that a better scene than the punks today ripping off old ladies' purses 1974 THE BLINDNESS OF MACRO-ECONOMICS 647 in broad daylight, or smoking pot on a tenement step while collecting relief? Governments which appro priate, in one way or another, 40 per cent of their productive citi zens' earnings are poor moral ex amples, either to the industrious or to the idle. We need not be sur prised that the former favor us with endless strikes, while the lat ter do it with riot and crime.

But, some win say that removal of government crutches would bring wages down to a starvation level - the old socialist argument. Well, two factors contribute to ris ing wages: inflation and techno logical advance. The inflationary factor is controlled by government by means of taxation and the money supply. Technological ad vance is altogether provided by in dustry, although it is aggravated by the selective inflationary intru sion of government, such as the mandating of smog devices, seat belt interlocks, space engineering, public transport, and others too numerous to mention. (That some of these intrusions may be legiti mate does not erase the probabil ity that most of them are not.) Henry Ford was the first to raise wages to five dollars mini mum per 8-hour day. This was a revolutionary, totally voluntary, step up at that time, made feasible by technological advance and wise merchandising in the pure free market sense. True, Mr. Ford was a benevolent despot who fought labor unions with his own police; but he was way ahead of the un ions in an honest wage raise which still left his product, the Model T, cheapest and best to the consumer.

The labor unions are the first to protest that their wages never keep up to inflation; but they lead in efforts to support inflationary government policies, which ·leads to a questioning of the intelligence and knowledge of their leaders and members. Rea' Wages at Stake It can be positively stated that wages and prices are inextricably related; for, as all economists agree, all we have to split up is what we produce. Whether the la borer gets the 40 cents per hour of the 1920s, or the $5.00 per hour of today, and whatever his "fair share" may be considered· to be, it must still be diminished in the proportion appropriated by gov ernment by taxation and inflation. We may be sure that such ad vances in his standard of Iiving as have occurred in the past four decades are solely due to the tech nological advances in the private sector under the vast handicaps of political intervention and legal ized seizure by the public sector.

Whatever dollar wages may be in a free market, real wages will be 648 THE FREEMAN November increased in the degree to which government withdraws its inter ventions and taxes. The individual will always claim the highest -~vages available to his personal capacities in a competitive market, because firms and households are literally helpless without help. The most that unions and gov ernment can do is to enforce equal splitting of the income pie - an outcome no one really wants. Any general rate of wages for a par ticular class of work has always been, and will always be, estab lished by the market; so forceful intervention in the process is fruit less in the first place. At some price, there is work for every body; but there is no form of government short of slavery which can force people to hire workers at over the market price. There is always the option of closing shop or doing the work oneself. Nobody should deny the right of any in dividual to hold out for the high est price for his services. Neither can anyone deny the right of all other indi vid uals to refuse to hire him.

Perhaps unions perform some service to firms in removing their need to bargain individually with workers. Bossed labor crews have long provided such services, as in field labor; but such arrangements have never been considered partic ularly favorable to individual workers. This writer worked in military construction during World War II. A union shop ste ward was overheard suggesting to an officer that raised military pay was due to union efforts. The of ficer replied: "Without our war, you wouldn't have such high pay." This illustrates the inexorable effect of supply and demand on general salaries and wages. Those who claim credit for increa~es must look to their arguments. Macro-Metaphysics Macro-economics is a metaphy sical art providing an ideal vehicle for such brilliant expositions as those of Professor Paul A. Samuelson, author of the textbook bible in the field. A sample-oc curred in The Morgan Guaranty Survey, for June, 1974, adapted from a memorandum to the West German Council of Economic Ad visers. One cannot help admiring Dr. Samuelson's breezy style and broad-brush technique in painting the generalities of the world eco nomic situation. Coining the term "stagflation," he correctly discerns that the current worldwide state of economic stagnation combined with inflation is not to be de scribed with one simple formula, but is an extremely complex situ a.tion, which he describes very well. He suggests, in closing, that a domestic cooling off might be in 1974 THE BLINDNESS OF MACRO-ECONOMICS 649 order, but questions that the poli tical climate would allow that. In a scholar, such disinterestedness is academically virtuous; but it fails to point out that the descriptive technique of macro-economics, when applied to practical affairs, is largly responsible for the public paralysis which grips. us.

At the close of Ernest A. Moody's book, The Logic of Wil liam of Ockham, there is a sum mation of Ockham's work which is germane to this discussion: "Problems, as Aristo,tle indicates in the Topics, are propositions; hence existence, and our aware ness of what exists, are not prob lems to be solved, but means of solving our problems." While one would not go so far as to suggest that Professor Samuelson was at tempting to enunciate a problem in the above considered analysis, it is illustrative of that certain blindness here attributed to m~cro-analysis. What we need is problems to solve. Perhaps he has given us the means of solving such problems as we are capable of bringing up; but it is a shame to see all that intelligence used only to show us the bad news that exists. It reminds one of Demos thenes' Third Philippic, where he challenged the Athenians to offer a motion to do something to pro tect themselves against the ad vances of Philip of Macedon, instead of paltering with one an other. There must be a motion leading to some action, or there is no problem. All the analysis of the general "isness" of the universe leads us nowhere until some prob lem is clearly stated.

Sociological Legislation The obligation of government to protect us from one another's aggressions, and even from de stroying our mutual environment, is generally accepted as estab lished custom. The laws on fraud and crime, when evenly enforced, are as effective as might be ex pected in an imperfect world. With the law on torts, they provide for reasonable protection and redress for individuals. However, the tor tuous decisions of courts, in recent years, often invaded by ambiguous sociological considerations, are long overdue for an overhaul to fit a society made up of individuals. As for the laws to prevent us from ruining our general environ ment, fines charging us, within rea son, for any harm we do would be ·more effective than the piecemeal, and often conflicting, regulations which have harassed us in this era of macro-decisions. If we look to land use, government its.elf already controls the largest area in the nation. If government would per form the rules of conservation in lands and installations under its 650 THE FREEMAN Novembel' control, which it would enforce upon the rest of us, any abuse which we might apply to our own private property would certainly not be so considerable as to call for draconian controls, or bribes to comply. Improper use of one's own property creates its own pen alty; and damaged neighbors may, and do, sue.

Macro-economists' prevailing view of pollution and waste of natural resources is another case of astigmatism. Fractional re serves allowed by the Federal Re serve with the resulting multiplier effect on credit and the monetiza tion of debt have provided artifi cial stimulation of consumption. Long term inflation has made cer tain that people will turn money into goods and commodities as rapidly as possible. These are the policies which have reigned under the advice of the macro-economists and over which firms and individ uals have no control, except at the ballot box. If over-consumption be desirable, then pollution and waste must be accepted as a necessary cost. What is the sense in belaboring citizens and firms for conditions solely due to public policy? Make it easy to borrow, constantly cheapen the people's money; then blame them as a bunch of wast rels! It doesn't make sense. All that is required to bring pollution and waste under control is to hold each bank fully responsible to de positors and halt the governmental creation of inconvertible currency.

One is not sure that banks, with branches on every corner, or a lot of multiplying enterprises and con glomerates, would like this pros pect very well; but they might pre fer it to an eventual credit col lapse, with resultant bankruptcy. If the emperor isn't naked, he is certainly doing a strip-tease. Let Us Try Freedom Micro-economics has a proposi ti on to offer: We move that we ac cept the reality of the free market and deny politicians the option to control it. While it may be true, as Macaulay suggested in 1824, that "Free trade, one of the greatest blessings which a government can confer on a people, is in almost every country unpopular," still Americans have enjoyed its bless ings more than most and they have a tradition of its support among their great men, from Thomas Jef ferson on down, so they are far better equipped to understand its options than most nations of men.

The advocates of a "mixed econ omy" need to be reminded of Lin coln's aphorism: "I believe this government cannot endure perma nently half slave and half free." Although this was applied to phy sical servitude, it is certainly 197.4 THE BLINDNESS OF MACRO-ECONOMICS 651 equally applicable to economics where our civil rights as persons are usurped by government, plac ing over a third of our productive efforts in bondage to the state (a form of part-time slavery). While we have never enjoyed a truly free market in the United States, in recent decades we have been moving away from that de sirable policy with increasing ac celeration. A real opportunity for statesmanship is clearly before our politicians and voters. Keyne sianism has had its chance. Its programs are failures in every de partment and are bleeding our economy slowly to death. Let us remove our blinders. All of this world's problems are created and solved by individuals doing their own thing, making macro-analysis an impossible maze. Give the individual a chance.

Admittedly, such a drastic change in policy cannot be accomplished in a day; but, if we know where we are headed, we can get there sooner than anyone suspects. Just as means can be found to adj ust a household budget to a sudden crisis, a nation can put its house in order to meet a new set of prior ities. We will all be happier when we have exchanged the welfare state for the personal liberty guar anteed by our original Constitu tion. ~ IDEA.s ON LIBERTY Power Corrupts Leaders POWER ACQUIRED by force and subject to no continuing functional check is bound to corrupt. Corporate managements are kept in line by the right of stockholders to move their equities when they are dissatisfied and by the right of consumers and other pur chasers to take their patronage elsewhere without let or hindrance when price or quality are poor. If the house of labor is to be clean, the same general principles must be applied there, with the work ingmen of the nation in the position of stockholders and consumers.

It is as absurd to expect good clean unionism in conditions of extensive compulsory unionism, as it would be to expect good government in a society where the divine right of kings or the dictatorship of the proletariat was the central political principle. SYLVESTER PETRO. "Can Labor Clean Its Own House?"

WhoOwnstheJobt• CECIL V. GROVE THAT QUESTION has generated all manner of controversy and fric tions over the years. Labor bosses, presuming to speak for all union members, maintain that jobs are owned by the workers. Although the claim is seldom made in such plain terms, when unions go out on strike, making use of threat and violence to prevent anyone else from doing the jobs they have just refused to perform, it is evi dent that both union leaders and members consider jobs to be the property of the unions. Management, on the other hand, tends to argue just the reverse. Pointing out that it is the com pany or corporation which does the employing and furnishes the nec essary capital involved, manageReprinted by permission from the editorial page of the July 21, 1974 edition of The Gazette Telegraph, Colorado Springs Colo rado, published by Freedom Newspape~st Inc. Mr. Grove is edi tonal wri ter in charge of the editorial page.

652 ment contends that the job be longs to the company or corp oration. Government, of course, goes them all one better. Regulating both employes and employers and taking its "cut" off the top in taxes, government acts on the assumption that it owns, not only the job, but the human beings involved, as well. What is the truth of the mat ter? Who, indeed, does own the job? Well, as usual, when you ask the wrong question, you are likely to get the wrong answer. In truth, no one owns a job. A job is something to be done, not something to be owned. A job is not property. And only property can be owned. And that, we believe, puts the entire question into its proper perspective. We can now ask, not who owns the job, but who owns the property 1974 WHO OWNS THE JOB? 653 involved and who should control it? The employe, as the owner of his own body, life and energy, is the only proper authority to decide how his property should be used.

Likewise with the employer. As the owner of the property his capital has bought and paid for (buildings, tools, equipment etc.), he is the only proper authority to decide how his property should be used. Getting the job done involves a coming together of the two and the use of the property involved on a basis mutually acceptable to the owners concerned. And how is this accomplished? The process occurs in the market place based on the principle of voluntary exchange - a place where, and a process in which, owners come together and peace fully decide to exchange what is theirs. Who, then, should do the job? The answer comes fast and clear: The owner who can, and will, do it to the satisfaction of the owner with whom he makes the volun tary exchange; both of whom, in a free market, would be free to seek other owners who might do it better. ~ IDEAS ON LIBERTY Production and Wages WITH A FREE market, in an advanced economy, most of the returns from production go to the workers - roughly 85 to 90 per cent.

Competition forces this. If workers are supplied wi~h good tools and equipment, they are more productive and their wag~ level is higher than it would be otherwise. This is a generalization regard ing all workers. The general wage level is higher in a country where there is a relatively high investment in tools and equip ment per worker. It is just that simple! In the United States, the investment per worker :in tools may be $20,000, and it is not unheard of to find a particular business with an investment of $100,000 in tools and equipment per worker. The road, then, to a higher wage level is through savings and investment in the tools of production. There is no other. W. M. CURTISS If you have built castles in the air, yo"!rr ,....need not be losdt; ththere is where they should be ~N:;.J.jf~¢'1.i. iR~f~;~':un er em.6'T,;,·:t ,.." .~ . Castles in theAir LEONARD E. READ SCRUTINIZE TRADITION and assess it, for it bears witness both true and false; to be blindly guided by it is to risk being led astray. So, beware of conventional thinking; break with tradition whenever reason shows its folly! As Ortega warned: The so-called Renaissance was, for the moment, the attempt to let go of the traditional culture which, formed during the Middle Ages, had begun to stiffen and to quench man's spon taneity . . . man must periodically shake himself free of his own cul ture.!

Thoreau \vas a hardheaded 1 See Man and Culture by Jose Ortega y Gasset (New York: W. W. Norton & Comp~ny, Inc., 1962), pp. 72~73. 654 searcher for truth; he did his own thinking. His comment on castles in the air is a sample, a break with the conventional definition of day dreaming: "Anything imagined and desired but not likely to be realized." Thoreau is right. Contrary to popular notions, castles in the air are the birthplaces of human evo lution; all progress (and all re gress), be it material, intellectual, moral, or spiritual, involves a break with the prevailing ideol ogy. Not to break with the current conventions - to go on our dizzy way - means a headlong plunge into all-out socialism! Castles in the air might indeed become chambers of horror. On 1974 CASTLES IN THE AIR 655 the other hand, they encompass man's unrealized goals and aspira tions, the dreams not yet attained but not necessarily unattainable.

An example from the past may help show their role for the fu ture: In 1898 it was thought that intensive farming depended on the nitrate mines in Chile, and that their eventual exhaustion would bring world famine. Why did not this disaster come to pass? Three great scientists built castles in the air. They put foundations under them and thereby "solved the problem of nitrogen via am monia synthesis from air and water."2 Result? More intensive farming than ever before! So we are not now dependent on nitrate from communist Chile; we do not face famine. As to the future, such normal sources of energy as coal and oil are believed to be in critical short age. "Energy crisis" is the talk of our time. Thank heaven for castles in the air. It has been known for centuries that all heat, light, and energy for the entire solar system comes from the sun. Coal and oil are but by-products thereof, the secondary sources we have used to survive. Very well! Why not anti cipate the end of coal and oil and go directly to the sun for man2 See "Energy: The Ultimate Raw Material" by James Wei (The Freeman, August, 1972).

kind's energy? Harness energy at its source! Put foundations under it! Long steps in that direction have been taken, and it's now only a matter of time - assuming some other castles in the air - before we will be capable of extracting more energy from the sun than human beings may ever need. 3 freedom Required Why the reservation, "assum ing some other castles in the air"? It is this: If we persist in coming to be more and more like com munist Chile, solar energy for mankind is a daydream without foundation. Tapping this source on a meaningful scale is out of the question except as there be at least one country in the world where men are free. Put this stark fact another way; Solar energy will not grace mankind unless we remove our restraints against the release of creative human energy; solar energy and creative human energy are inseparably linked! Freedom does not make people strong; rather, it makes strength possible. It gives everyone an 3 "Although less than half the earth's sunlight entering the earth's atmosphere reaches its surface, just 40 minutes of that solar input equals all the energy mankind consumes in an entire year." In a word, 13,140 times as much solar en ergy as needed to serve present require ments. See "Tapping the Sun's Energy"

by David G. Lee (National Wildlife, Au gust-September, 1974).

656 THE FREEMAN November opening for intellectual, moral, and spiritual strength. With free dom, many will develop their fac ulties, some will not. The outcome depends on one's inner strength. Indeed, this inner strength oc casionally shows forth in persons living under extreme authoritari anism. While such rare stalwarts as a Solzhenitsyn may keep a few sparks aglow, it is only when freedom's flame is high and bright - when millions are free to act creatively - that such miracles as tapping solar energy are a possi bility. The ones who get the credit - the scientists out front - actu ally ride on the shoulders of others with their thoughts, insights, in tuitive flashes - countless thou sands of unknown persons. For instance, did Johann Gutenberg invent the printing press? He is given the credit. The fact is that his was but a crowning achieve ment, a final touch to literally mil lions of antecedents - including the unknown hero who harnessed fire.

In view of the politico-economic trend in all nations toward all-out statism, any prospect for progress requires a turnabout in at least one nation'. And the nation on which each of us must focus is his own. Only at home may one expect to put foundations under his dreams. The American Dream More than two centuries ago in thi.s land of ours men built castles in the air. What was their dream? A country free from authoritarian tyranny; each citizen free to act creatively as he pleased, govern ment limited to inhibiting destruc tive actions, invoking a common justice, keeping the peace! No political arrangement had ever matched this dream, even re motely. Castles in the air, indeed! The challenge they faced was to put foundations under their dreams! And they did: The Dec laration of Independence unseated government as the sovereign power and put the Creator there: "... all men are ... en dowed by their Creator with cer tain unalienable Rights, that among these are Life, Liberty ..."

The Declaration, however, was only the first stage in laying the greatest politico-economic founda tion in the history of mankind. The next step - cementing the foundation - was the Constitution, further supported by the Bill of Rights. These political instru ments held government to a more limited role than ever before. Result? The greatest outburst of creative energy ever known - the American miracle! What has happened? Our foun dations are crumbling. We are reverting to the same type of 1974 CASTLES IN THE AIR 657 authoritarianism from which our forefathers fled. We, give it new names: the planned economy, the welfare state, socialism, commu nism. But tyranny is tyranny whether the master be a King J ames, a feudal lord, a Hitler, or a majority gone mad! The remedy? Once again, castles in the air! Required is a lodestar - "a 'guiding ideal" - similar to that of our founding fathers, along with the will and the understand ing to put foundations under that ideal.

Built into this foundation struc ture are gems of thought. The mortar holding the gems in place is composed of the several virtues: steadfastness of purpose; thinking for self rather than imitating others; an insatiable desire to learn, realizing that the more one learns the more there is to learn;' an ability to explain the fallacies of all dictatorial behavior; an un derstanding of and a devotion to the creative process; and, this above all, integrity - the accurate reflection in word and deed of whatever one's highest conscience dictates as righteous. Repeal the Restraints Given such a foundation, what sequence of events might be ex pected to follow? A repeal of all laws that restrain or prohibit creative activity. A precedent for such a wholesome turn of events occurred in England following the Napoleonic wars. Richard Cobden and John Bright and a few en thusiastic supporters who under stood the folly of mercantilism and the merit of freedom in trans actions began the greatest reform movement in British history: the wholesale repeal of restrictive laws. As a consequence, England stood as a giant among nations until just before World War I when her foundations began to crumble, as ours are now crum bling. However, what happened once to achieve freedom in Eng land can happen again there and also here. It can happen if there is the will to prevail, a faith that we can succeed.

Given a return to freedom, what about the harnessing of solar en ergy? It will be as commonplace a few years hence as delivering the human voice around the earth at the speed of light is today. Taken for granted! And who knows what other things free men can and will accomplish! But far more important than these countless material blessings will be a freeing of the human spirit - tens of millions no longer wards of government but grow ing, emerging, self-responsible cit izens, each his own man. Castles in the air? Let us build founda tions under those worth keeping. I) Los ANGELEANS Jim and Bob run an advertising agency. Lisa and Yolanda make jewelry. Ivan builds ships. Edna publishes a newspaper. John operates a savings and loan company. No big deal. But these and other business people operate in districts that don't usually appear on maps of Dr. Peterson holds the John David Campbell Chair in American Business at the American Graduate School of International Management in Glendale, Arizona. He is a member of the board of governors of Investin-America Na tional Council, Inc.

658 Los Angeles. Districts like Pooh ville, Economyville, Kookie Kounty and Land of Knowledge - districts or lands or miniature societies that fly their own flags, issue their own passports and create their own money. Jim and Bob and the other business people, you see, are from 8 to 12 years of age. They are part of an experimental program by the Los Angeles public schools in teaching economics. The program has been dubbed "The Mini So ciety" by two of its creators, Drs. Marilyn Kourilsky of UCLA's ed ucation department and James Claybourn LaForce, chairman of UCLA's economics department. Professors Kourilsky and La Force, with t.he help of the Foun dation for Research in Economics and Education (FREE), headed by Dr. LaForce, and the Invest in-America National Council, Inc., a Philadelphia-based nonprofit educational organization, have produced a documentary ·film on the Los Angeles program. The film features an introduction by Robert J. Buckley, president of Allegheny Ludlum Industries and of Invest in-America, and is now being 1974 "IT"S FOR REAL" 659 shown to school teachers around the country.

"The Mini Society" makes clear Los Angeles school children are not just role-playing or simulating business. They mean business. In deed, they are business. As one very young business woman ex plained to a slightly bemused adult visitor to EconomyvilIe, "It's for real." Business in Practice All in the Classroom And so it is. Real goods and services are prod uced and ex change hands - at a price. Scar city is confronted. Resources are limited. Supply and demand hold sway, prices fluctuate, competition reigns, profits are made, losses are incurred. Businesses are born, and businesses die. Cost-benefit analy sis is stressed throughout. All in the classroom for one or two pe riods a day during the traditional curriculum. Now and then an auction is held. The bidding gets heated, with a young auctioneer typically using a couple of spotters to assure that all bids win recognition. (One bidder got so excited that he bid on his own microscope which he had put up for sale.) The embryonic societies find it necessary to pass laws protecting private property and the sanctity of contract. They have also found it necessary, alas, to deal with counterfeiters and deadbeats.

But such "crime" is very low, while responsibility, involvement and true learning experience are evidently very high. Also high are self-development and a sense of being useful to one's peers - to "society." Ivan, the model-ship builder, for example, told a vis itor: "This ship is not for sale because I don't like it. It's not made right." Thus, the spin-offs from these junior market places in the City of the Angels are interesting if not do\vnright heartening. For apart from inducing desirable personal qualities, the mini societies ap parently reinforce the 3 R's in meaningful ways. Says Paul F. Dunleavy, 5th grade teacher at the Armacost Street School: "Reading the terms of a credit card contract or filling out a job application form, as my pupils do, certainly boosts reading skills. Similarly, toting up deposits and calculating interest rates at our classroom Seal Bank sharpens math skills; and putting out The EconoJnyvilleN ews quickens writ ing skills."

At the 92nd Street School in Watts, Kookie enterprises thrive in Kookie Kounty. Its citizens found their own self-styled money wanting and switched to U.S. coins and currency - the nearest they 660 THE FREEMAN November could get to the real thing. And with an eye on the rising cost of living, some junior black entrepre neurs set up a consumer informa tion service. Now the faculty and families of the 92nd Street School look to the mini-economy class for up-to-date comparative prices on meat and produce in neighborhood stores. Most school parents in Los Angeles are excited about the program but a few parents worry tha t their children are learning the economic facts of life all too early. Yet even though there had been concern that the mini society would engender materialism, re searchers on the program re ported: "Ends which the children seek are not especially materialistic. Children participating in the model tend to spend as much of their money as possible on what adults call the 'finer things'- such as art, music and recreational pursuits."

The final upshot of the program is, of course, yet unclear. But this much seems certain: Among the fledgling bankers, entrepreneurs, professionals, craftsmen and craftswomen is a deeper appreci ation and understanding of the world of business as well as some new-found career aspirations for the reality-that-is and the reality to-come. The citizens of the mini economy have already come to grips with scarcity, inflation, cost benefit analysis and, of their own design, the free enterprise system. Indeed, in terms of economic acuity these citizens may surpass many of their parents and elected representatives. Concludes Louis Milione, execu tive vice president of Investin America, in talking to one summer institute of elementary and secon dary school teachers: ."I know of no better way to invest in America than in getting across sound eco nomics to young Americans." I agree. The future belongs to the young. As they think and act today, so will they be tomorrow. ~ IDEAS ON LIBERTY Unlimited Opportunity HIGH-BROWS turn up their noses at Horatio Alger's philosophy.

Yet Alger succeeded better than anybody else in stressing the most characteristic point of capitalist society. Capitalism is a system under which everybody has the chance of acquiring wealth; it gives everybody unlimited opportunity. LUDWIG VON MISES, Bureaucracy TheIndividual andMajorityRule~" RONALD F. COONEY BELIEF IN MAJORITY RULE as an eternal verity is so pervasive, de votion to it is so complete and un questioned, that to offer demurrals is viewed as almost a kind of her esy. What began as a formula of utility has risen by degrees to a national article of faith. One hears constantly reiterated the concept, "majority rule and minority rights," (foremost, apparently, being the right to follow the dic tates of the majority). Majority rule has the approval of the ma jority, and it seems no more need be said. Yet the doubts remain; the nagging questions cry out to be answered. Where is majority rule permissible? Where is it im permissible? What, in short, is its purpose? Does that purpose have limits, and if so, what are they?

Can majority rule be reconciled with individual and minority rights? Mr. Cooney is a freelance writer in Reno, Nevada. Underlying these questions is the paradox of every government. Man in a state of nature has max imum .freedom limited only by his strength and ability to survive. For protection he establishes a government which, to endure, must limit his freedom. One against the other, liberty and se curity are in constant conflict. The dilemma becomes acute whenever the forces of safety and order out weigh those of freedom, when even the most trifling human activity is regulated by the State, or con versely, whenever the abuses of liberty bid fair to destroy society, when civil war - in Hobbes' phrase of "every man against every man" - or anarchy threatens. How to steer between the two extremes, tyranny and anarchy, how to con serve the State for its essential functions and an ultimate of lib erty, this is at the bottom of the controversy between the individ ual and maj ority rule.

661 662 THE FREEMAN November A majority taken collectively may be regarded as a being whose opinions, and most frequently whose interests, are opposed to those of an other being, which is styled a minor ity. If it be admitted that a man, possessing absolute power, may mis use that power by wrongdoing his adversaries, why should a majority not be liable to the same reproach? Men are not apt to change their char acters by agglomeration; nor does their patience in the presence of ob stacles increase with the conscious ness of their strength. And for these reasons I can never willingly invest any number of my fellow-creatures with that unlimited authority which I should refuse to anyone of them. This eloquent passage is taken from Alexis de Tocqueville's classic Democracy In America. In that work, the author speculated on, among other matters, the phe nomenon he called "the despotism of the majority," to which, he felt, popular government was uniquely prone. Tocqueville believed that the potentiality for a democratic tyranny was greater in the United States than anywhere else, for it was the major extant democracy.

Ironically, he saw in the very strength and stability of Ameri can democratic institutions, in its public opinion, its legislatures, its executive branch, even its courts, the seeds of oppression. These were not a danger to freedom be cause they were weak, but because they were (and are) so strong, and because they took that strength from a majority of the people. In the face of such total domination, Tocqueville said, a person who felt he had been wronged had no re course but to the establishments directly or indirectly controlled by the majority. Tocqueville's concern revolved around the problem of how to preserve liberty where the majority held this immense and irresistible dominance. Doubts About Democratic Rule Tocqueville'sapprehension was, in one way, nothing new. Begin ning with Plato, political philoso phers of an anti-democratic or aristocratic bent had a dread and loathing of popular rule. Plato him self envisioned a perfect state headed by a philospher king and a carefully chosen .and specially trained aristocratic elite, with en trance from the lower classes sev erely confined. Aristotle after him wanted to alloy as much as possible government of the people with 'monarchy and aristocracy.

But his objections, like those of Plato, were largely theoretical since at that time there were no truly democratic governments worthy of the name. Tocqueville, it must be remembered, was sur veying a living democratic repub lic and sounding, in the name of liberty, a similar cautionary note.

1974 THE INDIVIDUAL AND MAJORITY RULE 663 In his discussion of American institutions, Tocqueville possibly had in mind the theories of J ean Jacques Rousseau. The heart of Rousseau's radical democracy was the idea of the General Will. More than simply another name for the will of the majority to do whatever it wishes, this general will takes on in Rousseau's hands the patina of a moral imperative. Infallible, inviolable, completely sovereign and independent, the general will is always a force of the good and the just. Rousseau would allow no disobedience of the general will once its decision had been made. Out of this belief sprang the curi ous doctrine of compelling a man to be free, of subordinating his will and abiding by the general will even though he may disagree with it. Here, indeed, was democ racy -and with a vengeance. Safeguards Against Tyranny Although Rousseau had some influence on the Founding Fathers in America, his passion concerning majority rule and majority virtue was not so readily transferable.

True, men such as Jefferson and Madison believed in popular gov ernment, but they were also real istic enough to see how overween ing majority power could quickly become mob-rule. They tried to avoid such an occurrence by build ing provisions into the machinery .of government for the separation and diffusion of power, with au thority distributed among three branches. Tocqueville was aware of this, and yet he saw nonetheless a wide latitude remaining for the abuse of power. Later observers of American republican govern ment would make a different argu ment, remarking that the system of checks and balances and separa tion of powers made it difficult to pass legislation for the "good" of the community. To what extent those prophecies have been ful filled (in other words, how well we have been saved from our sav iors), is open to debate; one won ders what would be our situation today had not those safeguards existed. If the burden of social legislation is less now than it might be, we owe yet another debt of gratitude to the Founding Fathers.

Besides the foregoing, Tocque ville perceived other difficulties which, while not novel to the American milieu, were character istic of majoritarian democracies. What happens, for instance when the majority, operating fully within the law, sanctions and puts into effect an unjust law, a law that violates an individual's per sonal notions of right and equity, one he canpot obey in good con science? Does he yield, recogniz ing the higher morality and pur664 THE FREEMAN November pose of the general will, or does he defy the law, thus affirming the superiority of conscience as a guide? Either the majority is su preme, and hence may enact any laws it deems fitting, or there is a power above the maj ori ty and dis tinct from it, to which the citizen may apply for judgment. What is this power, and who is to take the role of vanquished and of victor in the test of wills? Tocqueville answers this way: VVhen I refuse to obey an unjust ~aw, I do not contest the right which the majority has of commanding, but I simply appeal from the sovereignty of the people to the sovereignty of mankind. It has been asserted that a people can never entirely outstep the boundaries of justice and of reason in those affairs which are more pe culiarly its own; and that conse quently full power may fearlessly be given to the majority by which it is represented. But this language is that of a slave.

Stated differently, the majority may command but only consonant with reason and justice. If the maj ori ty acts to serve the causes of inj ustice and unreason, the per son (or people) so misserved must appeal to mankind at large, to state the case for right and truth in the larger court of humanity. The issue is left to one's fellow men and their common sense of decency to decide. The type of mentality that would invest in a majority the full capacity for mak ing unjust laws, and an equal capacity to pass on the morality or legality of those laws, is one, Toc queville firmly believed, more than half way to accepting tyranny. The Power 01 Public Opinion Of less dramatic interest per haps - but of no less significance - than the collision between the indi vid ual conscience and the wrongful decrees of the majority, is the intimate relationship of public opinion and majority rule. The salient difference between Eu rope and America in this regard is the attitude toward dissenting or unpopular opinions. In Europe, "every sort of religious and poli tical theory may be advocated and propagated abroad," and the man who speaks them has several allies: If he is unfortunate enough to live under an absolute government, the people is upon his side; if he inhab its a free country, he may find a shelter behind the authority of the throne, if he require one. The aris tocratic part of society supports him in some countries, and the democ racy in others. But in a nation where democratic institutions exist, organ ized like those of the United States, there is· but one sole authority, one single element of strength and of success, with nothing beyond it.

1974 THE INDIVIDUAL AND MAJORITY RULE 665 Tocqueville" concedes a certain freedom of thought and expression exists here, but insists it does so at the sufferance of the majority and its "very formidable barriers to the liberty of opinion." To pub lish and broadcast an opinion out side the pale of majority regula tion is to invite "the slights and persecutions of daily obloquy." Tocqueville cites the discrepancy between the methods of monarchi cal tyranny to prohibit free thought and discussion, and those utilized by the majority in a demo cratic republic, noting that while "the authority of a king is purely physical . . . the majority pos sesses a power which is physical and moral at the same time." European despots persecuted the body to imprison the soul, but the technique in America is milder, indirect, furtive, and sub tle. The majority disciplines un popular opinions - meaning those it does not share - by narrowing the opportunity for their expres sion, and by stifling, through group-pressure, the will that in spires them. Tocqueville lived too early to witness the horror of mod ern totalitarian states, which em ploy slave-labor camps and indoc trination, subjugating at once the body and the mind.

Tocqueville observes the equal ity of conditions in America, and advances the theory that such equality leads to a centralization of power in the State. So long as inequality is the rule, scattered instances of privilege engender little popular indignation. But when equality prevails, "the slightest dissimilarity is odious." Under a monarchy, the people look to the king, as the head of the State, to rectify the inequity. Un der a democracy, the people look directly to the State itself, the rationale being, "that each of them thinks that he strips his equals of the prerogative which he concedes to the crown." Considering the power thus rendered, it is not so unusual that the State began to enforce equality from above, prompting Tocqueville to say: "The American people would rather be equal in slavery than un equal in freedom." IIBenign Despotism" Given this extreme equality, and gi ven too this ever-expanding State-power, the chances for a form of despotism - one new in the world - are greatly enhanced.

Unlike the tyrannies of old, a dem ocra tic-egalitarian dictatorship would wear a benign aspect. It would order the life of the people for their benefit; it would have their interests in mind at all times. While it maintained an out 'ward semblance of freedom, "un der the ,ving of the sovereignty 666 THE FREEMAN November of the people," it would quietly and without resort to the rack or thumbscrews - extend its author ity into every corner of human life, regulating, managing, and dictating each activity, important and minor alike. The new dispen sation "renders the exercise of the free agency of men less useful and less frequent," the end result being that "each nation is reduced to be nothing better than a flock of timid and industrious animals, of which the government is the shepherd." A chilling prospect to contemplate this is, and none the less so since it describes precisely the state of America today - or at the very least the state to which it is tending.

As Tocqueville realized in his diagnosis of the democratic mal ady, the question of the individual and majority rule cannot be sepa rated from the more pertinent sub ject of the individual and the State. One can hardly speak of limiting the power of the majority without implying a restriction on the State's domain, for in a democ cracy the two are inseparably fused. The majority is the State and the State is the majority. And, like the confusion surrounding the proper sphere of the State, there is an equally gross misconception with respect to what majority rule is meant to do, what it may do, and what it may not do. It is, in fact, a utilitarian principle in tended to expedite the operation of government, to aid in the trans fer of the reins of power, and to give a raw consensus for proposed legislation. It is not a carte blanche for one transiently ascend ant group to violate the rights of any minority or individual. At most, it is supreme in those mat ters that are the necessary and correct duties of the State, those which the State alone can dis charge, and more especially in those whose design is the defense and survival, in freedom, of the nation.

A Legacy to Keep Perhaps it will be argued, in response to the preceding, that if the warrants of the Bill of Rights remain intact, freedom will be amply protected, and conse quently all this talk of the dangers of majority rule is so much super erogation. The intention here is to find fault neither with the Bill of Rights nor with the men who gave us our government. The Found ing Fathers were wise and pre scient men who believed in limited government, in Jefferson's oft quoted but still resonant words, "the government which governs best governs least." Having them selves escaped the grip of mon archical tyranny, they were cog nizant also of the possibility of a 1974 THE INDIVIDUAL AND MAJORITY RULE 667 democratic tyranny arising in America. They knew a despotism bearing the imprimatur of a nu merical majority was a despotism still, and that sheer weight of numbers sanctified nothing. To avert both types of oppression, by one man or by many men, was the aim of the Bill of Rights.

But we have witnessed how even the Bill of Rights may be turned against freedom, as in the Dred Scott case where the Fifth Amend ment was used to keep millions of blacks in bondage, and how far, especially in the last forty years, government can go while remain ing, on the surface, faithful to Constitutional guarantees (Toc queville's comment concerning the "outward forms of freedom" bas a piercing aptness here). And it could be that placing restraints on the State is not a matter for legislation at all but an attitude of mind which must grow out of the people themselves. The Found ing Fathers had this attitude, but somehow the legacy has been lost. It may be that the impulse to be stow absolute supremacy upon a majority, like the related urge to confer unrestricted power upon the State, admits of no easy rem edy. It is too deeply rooted in the common conviction that because to day government is conceived to be a force for good, it can be en trusted with power it will not use for evil tomorrow; that because the majority now shares this con ception, it will always share it; that because ours is a democracy and the majority chooses our lead ers, it will never choose one who will misuse the power once given with such good faith and with such fond hope, so freely and so willingly. , IDEAS ON LIBERTY Constitutional Barriers FORTUNATE it is for the body of a people, if they can continue attentive to their liberties, long enough to erect for then1 a temple, and constitutional barriers for their permanent security: when they are well fixed between the powers of the rulers and the rights of the people, they become visible boundaries, constantly seen by all, and any transgression of them is immediately dis covered: they serve as sentinels for the people at all times, and especially in those unavoidable intervals of inattention.

RICHARD HENRY LEE, during debates concerning the Constitution and Bill of Rights.

IMPOSSIBLERIDDLES BERNARD H. SIEGAN CITIES AND TOWNS do not come packaged in boxes like erector sets. I hope this revelation does not unduly shock the journalistic pro fession. Reading the newspapers and watching TV have led me to the conclusion that the reporters think that's about the way cities are created. Cities are arising in the West near new mining operations, and reporters seem disturbed that housing, schools and shopping fa cHities are not standing in these desolate areas waiting for people to arrive. They keep interviewing the new inhabitants who say what most should be expected to say, that conditions 'are not very pleas ant. The reporters are quite surprised by it all. But how can it be otherwise? Anyone who would have demanded the creation of housing in these areas several years ago, before the energy and r.esources crisis made such areas economically imporCopyright 1974 Bernard H. Siegan Mr. Siegan is the author of Land Use Without Zoning and many articles on the subject. He practiced law for 20 years in Chicago before moving in 1973 to La Jolla, California where he is professor of taw at the University of San Diego Law School.

668 tant, might have been committed as a looney. On the other hand, if mining and production are delayed until all workers are comfortably ensconced in their respecti ve dream homes, the resources will not be mined for years to come if ever. The workers would suffer along with the rest of us. It is inevitable that boom towns bring living problems for those attracted by the prospect of new riches and lush jobs. This was the story of the American West, now probably the best housed section of the country. The settlers usu ally anticipated the kinds of hard ship they found, but chose them in preference to the life they left behind in the East. They devel oped great portions of the country and succeeding generations were well served. The best to be hoped for in these situations is that the developers and builders will be allowed to re spond to the demand for housing and shopping, and not be ham strung by zoning and building re gulations. Schools and other fa cilities will follow.

This course of action, however, can bring added fury from the 1974 IMPOSSIBLE RIDDLES 669 press. They may charge that the builders and speculators are de secrating the landscape, selecting sites that are scenic attractions or perhaps the habitat of unique four-legged creatures. And it may well be true of some of these po tential sites. However, the buildings will have to go somewhere on earth; no one has yet invented any which float in the sky or are subterranean. If new construction is required to by pass the challenged areas, houses will be located longer distances from other housing, shopping and employment. These are the char acteristics of that notorious vil lain: Urban Sprawl. And the argu ments about how the land should be used will delay considerably new construction. Well, what do we do now? The usual way out of this dilemma is to demand planning and regula tion, and then more and more of the same when the prior doses don't work. That's today's auto matic cure-all for those who keep insisting on perfect solutions to these problems, with the same probability of success as the bot tled stuff the hucksters used to sell.

Greater and greater powers will then be given to politicians, bu reaucrats, and planners, hardly a winning combination. But regard less of their knowledge or wisdom, they will be unable to accomplish the politically or physically impos sible. Yet, that is what will be de manded of them. Thus, to conserve land by ob taining a greater yield per acre re quires taller structures. The mere mention of this, however, tends to evoke deletable expletives from en vironmentalists and planners. They prefer bigger lots to provide more open space, but want them to cost less and take up less land. They would like more housing but less construction. Even Albert Ein stein couldn't have solved those rid dles. The regulatory process invaria bly curtails development. Fewer housing units will be created and there will be additional horrors to report. A more realistic and responsi bIe approach to these difficulties is required. While new growth may create problems for people, the history of new development in this country shows that most of them will be solved within a few years. I doubt that conditions in Hfe were idyllic where these peo ple previously lived - else why did they migrate? When individuals move they usually do so to better themselves.

The more we allow normal mar ket processses to operate unham pered, the quicker the solutions will arrive. • TheRight toFeel Alienated LIFE, LIBERTY, and the pursuit of happiness are not the only basic rights man should enj oy. The right to feel alienated .must be added to the list of man's inherent rights. Out of alienation can come great fruition. As the saying goes: Better Socrates dissatisfied than a pig satisfied. Those who fashionably portray alienation in our age as an indi vidual defect or sickness which must be uprooted or overcome at aU costs miss a fundamental point. A sense· of alienation in today's society is··not necessarily a buga boo, an undesirable affliction like hali tosis or dandruff to make one feel ashamed or inferior. It fre quently is not a clinical disease of weak persons or neurotics. Rather, alienation in today's society can be an early warning sign that something is wrong with the world.

Mr. Rubanowice is Assistant Professor, special izing in modern European intellectual history, at Florida State University at Tallahassee. 670 ROBERT J. RUBANOWICE Alienation is a legitimate re sponse of an individual to insti tutions and practices which deny him the maximization of meaning in his life. To repress the right to feel alienated is to repress free dom of choice for the individual. In the face of dehumanizing pres sures and demands, the right to feel alienated may be the most important basic defense mechan ism to reaffirm one's individual humanity. Collectivist institutions alienate because they curb the latitude of the individual's freedom of choice. When one feels alienated in the face of collectivist pressures, where does the fault lie? Not in the individual, but in those very inhuman or ahuman institutions that are intervening in his life. Shakespeare wrote: "The fault, dear Brutus, lies not in the stars, but in ourselves." It is necessary to widen this viewpoint to enter tain a third possibility - that the fault lies in the oppressive politi1974 THE RIGHT TO FEEL ALIENATED 671 cal, economic, social, and educa tional institutions and their prac tices that surround the individual and suppress his freedom. In an age of bigness - of big govern ment, big management, big labor, big education - to stand alone and resist being gobbled up by huge institutions which feed on masses of people is a right to be cherished, not a plight to be lamented.

Alienated from what? Alienation involves feelings of estrangement, anxiety, isolation, pessimism, disenchantment, and frustration. Are these feelings wrong? Should one feel guilty or inferior when one feels estranged from remote bureaucratic concen trations of power; when one feels anxious about being trapped in a workaday-world rat-race; when one feels isolated rather than will ing to be absorbed into a nihilistic social order; when one feels pes simistic in light of growing stock piles of overkill bombs; when one feels disenchanted by irresponsible political structures and processes; or when one feels stifled by au thoritarian institutions? The real problem is not to be alienated, but to be adjusted to such a sorry state of affairs. If we live today in a veritable "Age of Alienation," as many cul tural critics suggest, I think we are amiss in rushing to conclude that something is wrong with us as individuals. It is not necessarily we who are wrong thinkers. It is the system that is wrong. If we tamper with the right to feel alienated, and allow the state or any collectivist institution to be the final arbiter in these j udg ments, we dangerously let power ful forces further batter individ ual freedom, which alre~dy is a fragile thing.

Concentrations of power tend to be self-aggrandizing, self-perpetu ating juggernauts. Political con trols devised to ensure the pro tection of the nation, the species, or whatever the group might be, regard personal individuality as an undesirable, divisive, centrifugal force to be exterminated. Earlier in this century, the sociologist Max .Weber predicted that the growing bureaucratic cast of so ciety would eventually stifle all spontaneous individual activity. This danger should be our concern today, as we view the growth over recent decades of greedy, large scale institutions which intervene crushingly in the lives ofindi, .. viduals. Removing Individuality When I hear talk about the need to end alienation, I cannot help but recall the case of Adolf Hitler. Among Hitler's primary goals was the end of alienation, by coordi672 THE FREEMAN November nating all activities of the nation into one gigantic Yolk-community where group identity and loyalty to the state took precedence over the needs of the individual person.

There is an insidious connection between the desire to end aliena tion and the desire to abrogate individual rights. But the zealous wish to over come and eradicate alienation does not appear in totalitarian fascist regimes alone. One need not be in an already established garrison state to suffer loss of liBerties. One should not forget that when George Orwell wrote 1984 he had in mind not to describe totalitari anism as such, but to warn against the collectivist and interventionist tendencies which he saw around him in allegedly democratic sys tems. Orwell's 1984 is essentially a story about Big Brother's at tempt to stamp out alienation. It certainly does happen in a totali tarian dictatorship, but it can also happen in a totalitarian demo cratic setting as well. Is a return to "community" the answer? Not necessarily. True communities are hard to come by, wherein the individual is totally respected and can properly retain and develop his full personality.

To escape from freedom into the illusion of community may result in the loss of a feeling of aliena tion but the gain of a Big Brother - what William H. Whyte calls the "imprisonment of brotherhood." The cure could be fatal. When one gets engulfed by a group, regardless of the size, the authentic human self is lost. Too much "togetherness" spells the death of the individual. Becoming enmeshed in any institutionalized role can lead one to forget - or never learn - to know himself. A popular ballad today, about a girl who both loves someone yet re luctantly consents to get married, has the memorable line: "But I'll never learn to be first just me by myself." It is human to need rela tions, but not to be fettered by these. It is human to need roots, but not to the extent that they immobilize. Return to Basics We must return to basics. From at least Rousseau's time to the present, original thinkers have detected the tendency in the mod ern world to separate, on the one hand, the meaning of an inner life, and, on the other hand, the outward reality of institutional ized roles. When there is a serious clea vage between these two spheres, alienation can occur. At that point, we might heed Pascal's advice, given several centuries ago: Try one of the most difficult things for a person to do, namely, withdraw alone to a place where 1974 THE RIGHT TO FEEL ALIENATED 673 no distractions or diversions occur except one's own thoughts and feelings. Withdraw to find the core of one's inner life, rather than forcing that inner life to corre spond to dehumanizing outward institutions. And then, once more in the world outside, set about curing alienation by dismantling those oppressive man-made insti tutional monstrosities which kill the spirit, and rebuild with a closer look at the human element and individual needs. I) IDEAS ON LIBERTY In Defense of the Indit,idual ONE of the great practitioners of the inner life has told us, "To mount to God is to enter into oneself. For he who so mounts and enters and goes beyond himself, he trulw mounts up to God."

I There are certain things that no one can dlo for us but ourselves. But we are not encapsulated monads whic~ develop in a shell in sulated from social contacts. Weare bor1n into a family and a community. An immense social heritage is put at our disposal - a storehouse into which has been distilled the contributions of an enormous number of individual men and women, some famous and some nameless. Knowledge, wisdom, .skill, and some of the very thought-forms by which we may avail ourselves of this trea sure are handed down to us. The problem here is not analogous to rationing a given quantity of goods to a. certain number of peo pIe; it is analogous to keeping a conduit. open so that the spiri tual accumulations of previous generations can flow unimpeded, to be enriched through understanding and application by this generation and passed on to those to come. Diminution of politi cal liberty is comparable to the silting up of the conduit; freedom is the removal of obstructions to the flow of energy.

EDMUND A. OPITZ Itlsh BOOkS€ll€ eaQnto COmp€ WILLIE E. NELMS MANY PEOPLE who supposedly sup port the concept of the free market are bitterly opposed to what they consider "cutthroat competition." According to these individuals, competition is acceptable, as long as it is not completely unbridled. If totally unregulated price re duction is allowed to occur, the industry or business in question will be ruined, the quality of goods will decline, and small entrepre neurs will be driven out of ex istence by larger producers. Thus, not only consumers but also businessmen are harmed when price decisions are left solely to the parties involved. The solution suggested is always the same: the state should regulate prices to "protect" both buyers and sellers. Any student of freedom readily recognizes the errors in the above argument. It is only through the Mr. Nelms is a professional librarian in Evansville, Indiana.

674 working of the market that the true price of goods and services can be established. If the govern ment interferes, it can only con fuse the issue, inhibit efficiency in production, cause shortages, and prevent consumers from getting the best available products. An excellent example of how the interests of both businessmen and consumers are best served by the competitive free market is the British bookselling trade of the nineteenth century. A careful re view of this story will demon strate how, without government interference, monopolies were avoided, consumers were provided inexpensive reading matter, and an acceptable income was earned by retail merchants. The history of English book selling is rooted in the eighteenth century. The Enlightenment, with its emphasis on intellectual im provement and industrialization, 1974 BRITISH BOOKSELLERS LEARN TO COMPETE 675 promoted the cause of .literacy ..

Despite the increasing level of ed ucation, however, by the turn of the nineteenth century, books could still be purchased only by the wealthy. Most publishers pre·· ferred to issue expensive limited editions of books, instead of pro·· ducing cheaper works for the ex panding middle class. As one Iit erary historian has observed: "ironically, as a climax· to a cen tury that prided itself on its un precedented diffusion of learning, new published books were com pletely out of the ordinary man's reach."1 An Innovator An interesting exception to this trend in the book trade was James Lackington, "an ex-shoemaker, random amorist, and converted Methodist." Lackington scandal ized the conservative book trade by buying volumes which other bookmen could not market and selling them at very low prices. Instead of maintaining the high prices and mark-ups of his com petitors, he hung a sign over his bookstore proclaiming, "Cheapest Bookseller in the World." No one challenged his claim, and his bus iness grew until he had the largest bookstore in London. 2 Lackington's success encouraged other retailers who were willing to accept his belief that "small profits do great things." Ignoring the protests of the older bookmen that underselling was against the best interests of the book trade, these entrepreneurs reaped accept able profits, provided reading ma terial to people with moderate incomes, and helped spread lit eracy throughout England.

Alarmed by the practice of com peti tive pricing, several leading members of the London Book sellers' Association met on Decem ber 9, 1829 to formally approve a document sanctioning control of retail book prices. According to this agreement, no retailer was to sell new books or reprints below the price suggested by the pub lisher; if he did, publishers could refuse to supply him with works at trade or wholesale prices. A permanent committee was estab lished to enforce these regulations, and within a year 560 members of the book trade had promised to abide by the regulations. The 1829 agreement brought outcries from booksellers who were unwilling to sacrifice them selves to save the more inefficient members of their trade. Many of these hardy individuals fought the regulations and continued to cut prices. 3 The Committee of the Book sellers' Association was deter mined to· enforce the 1829 accords, and it promptly responded to stop 676 THE FREEMAN November underselling. In addition to boy cotts and blacklisting, publishers were told to deny obstreperous sellers credit, and habitual of fenders were excluded from pub lic auctions and trade sales. The Committee later began issuing trade tickets to members who abided by the regulations. If a dealer violated the prescribed standards, his ticket was revoked and all privileges of the trade withheld.

Without a doubt, the most ob noxious of all techniques used by the organized book trade was es pionage. Not only were merchants encouraged to report to the Com mittee any violations by fellow members of the profession, but spies were also hired to harass undersellers. 4 As the harshness of the Book sellers' Association increased, the determination of the undersellers also hardened. This explains the necessi ty of the Committee to meet on July 12, 1850 to reaffirm its 1829 agreement. Such a gather ing would have been unnecessary if members had faithfully obeyed the dictates of the organized trade. The truth is that while only a handful of merchants openly refused to obey the Committee's commands, many did so covertly. As in any market where prices are held artificially high, the profit motive encouraged producers to engage in black market operations. The covert under sellers were en couraged by the booksellers who openly defied the Committee.

Needless to say, many of these men paid heavily for their actions, and some even went bankrupt. But the profitability of underselling was great enough to make the risk worthwhile for the few who cou rageously battled the organized book trade. Bucking the Association Among the most remarkable of these men was John Chapman, a publisher and importer of Ameri can books, who was only twenty eight in 1850. Although threat ened with blacklisting, boycotting and a cutoff of supplies, he con tinued to sell at less than the list price. Once, when the Committee promised to take sterner action against him, Chapman replied, "I'd gladly give ten pounds toward the expense of commencing hostil ities against your association." He often smuggled books from other areas and bought indirectly from publishers trying to put him out of business. 5 Chapman continued his defiance of the Association, and he printed several letters about its coercive activities in the London Times.

These letters attracted such public attention that two of the Com mittee's most respected members, 1974 BRITISH BOOKSELLERS LEARN TO COMPETE 677 William Longman and John Murray, felt compelled to respond. They replied that the Booksellers' Association represented a maj 01" ity of the London bookmen and that the question of the Commit tee's activities was being consid-· ered by several prominent London literary figures. Although this last statement was untrue, the pub licity it generated forced the Com mittee to submit the controversy to formal arbitration. A mutually agreeable group of arbiters was selected, and both parties began preparing their cases. 6 Encouraged by the possibility of victory through arbitration, Chap man and other undersellers set out to convince the authors of the books they sold that the Associa tion did not serve their best in terests. The Coromi ttee responded with a circular expounding the dire consequences of unrestricted competi tion. 7 From this debate came a most notable occurrence. On May 4, 1852, while the question of the Committee's actions was still awaiting arbitration, Chapman called a meeting of distinguished authors to get their opinions of the Booksellers' Association. Those present included Charles Dickens, Wilkie Collins, and Herbert Spencer. All of the authors de·· cried price fixing and caned for the institution of free trade. The words of Henry Cole, a contemp orary art critic-who was at the meeting, aptly expressed the feel ing of all present. He said, "I think the price of books should be allowed to find its own natural level, as in all other manufac tures."8 Free Trade Prevails When the question finally came before the arbiters, the under sellers argued that the regulations were monopolistic, oppressive, in efficient, and contrary to the prin ciples of free trade. The Commit tee replied that it represented a vast majority of the booksellers and that if "cutthroat competi tion" continued, publishing and bookselling would suffer irrepar able damage. They graphically de scribed a future in which book sellers would be forced out of business and in which the number of books in circulation would be drastically reduced.

After hearing the arguments of each side, the arbiters adjourned to make their decision, which was delivered on May 19, 1852. Their judgment was unequivocal: the Committee's regulations were crit icized as "harmful and vexatious," and inconsistent with the princi ples of free trade. As a result of this decision, the Committee was disbanded, and the Booksellers' Association was dissolved. 9 678 THE FREEMAN November Following the breakup of the Association, free trade returned to bookselling with predictable re sults. Price competition caused discounts to grow, and they were applied to nearly all. books in the trade. Between 1852 and 1890 the discount rate rose from two pence to three pence on the shilling, and in some places these rates were exceeded. This process was not confined to London, but extended into the provinces. Provincial booksellers not only competed among themselves but also faced the challenge of London mer chants. The rate of gross profit secured by booksellers was even tually half of what it was during the days of the Booksellers' Asso ciation. Naturally, this was to the advantage of the consumers as books became available to people with even the most modest of incomes. lO Many members of the book trade moaned the fall in· profit margins and argued that it was no longer possible to make an adequate in come. This argument has been cited by many historians to show the horrors of unrestricted com petition. ll In reality, however, a comparison of the figures avail able for the period discloses that profits were such that the number of booksellers actually increased by nearly 25 per cent, instead of decreasing as the critics have claimed. As the most careful stu dent of the nineteenth-century book trade has observed: "it is unlikely that there could have been any decline in the number of bookshops; and it may be con jectured that the average size of bookshop must have been increas ing. This conclusion would not be surprising in view of the growth of the economy and the continu ing spread of literacy."12 Another criticism of the price competition of the period is that booksellers were forced to supple ment their earnings by selling other merchandise, such as second hand books, fancy goods, and sta tionery. This was quite natural, however, as the traditional di visions between different branches of retail business were beginning to break down under the impact of changes in sale methods .and the growing standardization of products. This argument further loses it significance when one re alizes that similar circumstances obtained when there was regula tion of the trade by the Book sellers' Association. 13 Having dealt with the argu ments against free trade, it is necessary to assess the benefits of such freedom. As price competi tion increased, inefficient publish ers and retailers were forced to either become more productive or retire from the business. The 1974 BRITISH BOOKSELLERS LEARN TO COMPETE 679 drive for efficiency led to numer ous technologjcal innovations, es pecially in the binding of books, which further decreased the cost of printed matter to consumers.

In addition, novel advertising methods were used to inform the public of new works, and advances were also made in the distribution of books. Bookmen began to realize the vast market formed by the middle and lower classes, who were eager for reading material. With the developments in technology and the increased efficiency promoted by the free market, the rewards to the consumer were great. In the words of one hi~torian, "whatever its effects on the professional bookseller, the discount system en couraged the reading habit both by reducing actual prices and by increasing the availability of books."H All of the above circumstances were possible because of the un hampered workings of the free market. Without governmental in terference, it was impossible for the Booksellers' Association to maintain fixed prices. The lure of substantial profits was very tempt ing, and there were always busi nessmen willing to risk the dis pleasure of the organized trade.

Even if the Association had not agreed to have its activities arbi trated, it would not have been able to maintain its control. The mar ket for cheap printed matter was expanding, the technological ad vances were available, and under sellers were ready, willing and able to respond to the public's needs. These bookmen deserve much credit for their courage, and they deserve our thanks for dem onstrating how the free market can solve the problems of produc tion and consumption. • FOOTNOTES • 1 Richard D. Altick, The English Cotn-· mon Reader (Chicago & London, 1957), pp. 51-52. 2 Paul Hollister, Comp., The Author's Wallet (New York, 1934), pp. 8-12. a James L. Barnes, Free Trade in Books (Oxford, 1964), p. 14-16; Russi Jal Tara·· porevala, Cornpetition and its ContTol in the British Book Trade, 1850-1989 (Bom bay, 1969), pp. 16-17. ..J: Barnes, FTee Trade in Books, pp. 15-17, 22. ;) Hollister, The Author's TVallet, pp.

36-38. H Barnes, F?'ee Trade in Books, pp. 24-25. 7 Ibid., p. 25. H Hollister, The Author's Wallet, pp. 38-44. 9 Barnes, Free Trade in Books, pp. 28-29. 10 Taraporevala, Competition and its Control, pp. 21-26. 11 Ibid., p. 28-29; Thomas Joy, The Truth About Bookselling (London, 1964), p.20 . I:.! Taraporevala, Competition and its Control, p. 27. 1:{ Ibid., pp. 29-30. 14 A.ltick, The English Cornmon Reade?', p.305.

PAUL STEVENS The~'NEW" Protectionism .f" / THE TERM PROTECTION I ~ is most often used to mean int/~rnational trade restrictions. However, its root is implanted in government power to "protect" men from com petition and the free market. Thus, protectionism begins at home. Wage and price controls are a form of protectionism in that government tries to "protect" men from the effects of inflation. Ra tioning, too, is a form of protec tionism in that government tries to "protect" men from shortages. Both the domestic and interna tional aspects of protectionism arise from the same assumption: that government must enter the economy and make decisions for its citizens, which they allegedly Mr. Stevens is a freelance writer who special izes in the field of economics and monetary policy. 680 are incapable of making for them selves. When governments (politicians) attain the power to impose their ideas and values on other men do mestically, it is not surprising to see the same kind of protectionist policies extended into the interna tional economic and monetary spheres. And for the same reasons tha t men are not protected by protectionism internationally, they are not thereby protected domes tically.

Though our main concern may be with the international reper cussions of a recently renewed in terest in protectionism, the root of the matter lies embedded in domes tic political economic theory. It is at this root that we must begin pulling if we wish to reach a major source of today's economic and monetary problems.

1974 THE "NEW" PROTECTIONISM 681 The Essence of Protectionism The essence of protectionism is compulsion. For example, some men expect and demand that gov ernment· provide public programs, services, and favors to certainciti zens. This will allegedly protect men from an "uncertain world" and provide guarantees against the "harmful" consequences of "change." Such services as unem ployment benefits, welfare hand outs, health care, business subsi dies, and the like can be provided only at the expense of other citi zens; and government, by taxa tion, compels men to finance these services. Since men do not like taxes, the government resorts to inflation as a method of financing expensive programs. Thus, gov ernment must also compel men to accept paper money which govern ment controls and depreciates. But men dislike inflation, too, and usu ally demand that price rises be reduced or eliminated. Since to day's generally rising prices are simply an effect of inflation, there can be no cure to rising prices un less the artificial creation of money substitutes and credit by govern ment is halted.

In the guise of protecting men from inflationary effects, govern ment compels men to buy and sell goods at government-decreed prices and work for government decreed wages. Such political compulsion does not protect anyone it violates man's right to defend himself and his property. Clearly, buying and selling or working at voluntarily established and mutu ally agreeable prices does not en tail coercion. But the prohibition of such peaceful and voluntary ac tion is coercive. Controls on wages and prices, then, result in certain economic effects, Le., shortages. Men dislike shortages, and again, when social pressure mounts for government to protect men against these gov ernment-caused effects, govern ment enters the economy and im poses rationing. Men are then compelled to produce and trade at government-decreed rates, and they are told what they can and cannot do with their property.

Again, the call for· government ac tion against economic eff eets leads to compulsion (a loss of freedom) but not to a cure for the immedi ate cause of shortages - not to a cure for inflation combined with wage and price controls. Another .example of domestic protectionism is consumer protec tion. The result of freedom, free enterprise and free markets is economic diversity and an abund ance and variety of goods and ser vices for consumers to choose from. Not all goods and services are of the quality that consumers anticipate; some goods are of 682 THE FREEMAN November poor quality, others are better than expected. In a free society, the consumer must learn to shop in the market place. He can have no prior ex perience with or knowledge of many new products, and since the economic world is forever a chang ing and uncertain place to live in, a consumer must constantly de cide which actions best serve his self-interest. To help him make these decisions there are maga zines, books, and private organi zations supplying information on how to shop and what to buy.

If the consumer buys a product and is disappointed with it, he will not buy it again. If the product ,harms him in any objectively mea surable waY,he can sue for dam ages. But when the government attempts to "protect" men from purchasing shoddy or "poten tially" harmful products, economic diversity is reduced and profit (the incentive to produce) dwindles. Government thus gains a monop oly on "shopping sense", i.e., what politicians consider shoddy or "po tentially" dangerous merchandise. This kind of regimentation sub ordinates the majority of men's freely chosen values to the values of a few "omniscient" politicians. This leads to injustice because the government is necessarily arbi trary. This leads to a reduced standard of living as the market place is constricted and confined to government-determined "stand ards" of what should be produced and its quality. Again, the act of prod ucing and selling products or services does not entail coercion, but preventing peaceful and vol untary production, sales, and pur chases is coercive.

In all forms of domestic pro tectionism where the government enters the economy to protect men from the effects or "potential" effects of an economically uncer tain future, there exists govern ment-initiated force, Le., govern ment's attempt to subordinate the consumer's judgment and action~ to the judgments and decrees of politicians. This is the antithesiE of government's proper role - the protection of individual rights, The protection of individual rights means protection from compulsion, be it initiated by private citizens or government agencies. Domestic Protectionism At Work All economic controls and regu lations are established in the name of protecting some men, yet all economic controls and regulations result in the loss of freedom and economic well-being for all men. As decisions, judgments, and choices are taken out of the hands of individuals and regimented by government, the economy shifts from a market economy to a gov1974 THE "NEW" PROTECTIONISM 683 ernment controlled economy; and to control an economy means to control men.

One of the great economic bene fits of a market economy is the efficient production and dish'ibu tion of goods and services. Do mestic protectionism (Le., con trols and regulations over produc tion, prices, wages, and consumer choices) strangles the economy to the point of economic stagnation - depression. Domestic protectionism has al ways existed to some extent in the United States, but its recent alarming growth comes with the assumption that government has an obligation to care for and pro tect its citizens economically. The movement toward economic pro tectionism is not new - it has been developing most rapidly in this country since the turn of the century.· The signs of economic deterioration are becoming more and more visible domestically, yet the results of applying protection ist policies internationally are only now surfacing. Governments have so completely adopted the political philosophy of controls and regulations to "solve" domestic economic prob lems, that the same kinds of con trols have been extended without question into the international economic and monetary spheres.

But, just as domestic protectionist policies have the power to cause a depression na tionally,in terna tional protectionist policies can cause a worldwide depression. To understand the 'nature and poten tial danger of international pro tectionism, a brief history of its development and the role. it played in contributing to the Great De pression is in order. International Protectionism At Work The world has never achieved a period of free, unregulated inter national trade. It has, moreover, vacillated between periods of greater freedom in, and greater restrictions on, trade. It is not merely coincidental that freer in terna tional trade was more prev alent during times of greater domestic freedom, and that re strictions on international trade \vere more prevalent during times of greater domestic statist con trols and inflation. Prior to the 18th century move ment toward greater individual freedom, the trade policies of the world developed as an extension of statism. The years from 1500-1700 were in general an era of mercan tilism, which dominated trade pol icies of governments. Both domes tic and international economic ac ti vity during this era can only be described as stagnant.

But during the 18th century 684 THE FREEMAN November there developed a genuine intellec tual movement against statist domination and for greater per sonal and economic liberty. From the works of a series of writers, there began a movement toward laissez-faire which resulted in po litical revolution (culminating in the Industrial Revolution). The free-trade movement emerged from men's interest in greater individual liberty. Mercan tilist theories which had domi nated the policies of state were thoroughly and expertly demol ished. By the 1800's, the world's major powers embraced both a philosophy of freer domestic trade and greater political liberty. This led to an unprecedented expan sion of world trade and produc tivity and to over a century of peace between nations. Statism, fiat money, and protectionism had given way to capitalism, an inter national gold standard, and an era of international free trade.

But this transition was not complete. Statist principles were not entirely rejected; the gold standard was not free of govern ment meddling; and free trade was only more free - not fully free. These remnants of statism were not eliminated, so they con tinued to grow. Toward the end of the nineteenth century, statist trends began to again dominate the world - a condition which later led to abolition of the gold standard and free trade. The U.S., a bastion of freedom and a growing world power, proved no exception to the statist trend. Greater government intervention into the economy led to greater restrictions over domestic ex change. A growing populist move ment .urged government to engage extensively in economic matters. Inflationists began propagating massive government programs that would not likely gain popular support if financed through direct taxation. By the 1920's, government had gained total control over the issu ance of money substitutes and was using this power to finance new and ever-growing government pro grams. Although the gold stand ard was not officially abandoned, for all intents and purposes it be came non-operational. Meanwhile, international trade was faltering; the accumulated debts of major nations and the undercutting of gold flows (which, under normal circumstances, would lead to price equilibrium among nations), were creating serious international eco nomic and monetary distortions.

The Depression hit the world after only a relatively few years of implementing statist-inflation ist policies. And the political re sponse was a resort to greater do mestic and international protec1974 THE "NEW" PROTECTIONISM 685 tionism to "solve" the world's problems. In 1930, protective tariffs were raised to the highest level in United States history - an aver age of over 52 per cent on dutiable imports. Of course, foreign na tions retaliated with their own im port restrictions. As a result, be tween 1929 and the third quarter of 1932, the volume of world trade contracted by one-third while the gold value of world trade fell by nearly two-thirds. One of the main justifications offered for raising tariffs was to increase exports. Did the in creased tariffs increase exports? Not at all. In 1932, the volume of United States exports had in fact dedined by 53 per cent from the 1929 level. The trade "war" of the early 1930's is just one more elo quent illustration of how protec tionist measures contract world trade and reduce men's standard of living.

How could the world move to ward such an insane trade policy? How, after centuries of evidence on the vices of trade restrictions and the virtues of free trade, could such protectionist policies be re enacted into law? The answer is that when governments chose stat ism and inflation as a way to deal with social, economic, and mone tary problems domestically, they chose force as their primary method of dealing with men. And do mestic problems and policies soon enough became international pol icies and problems. In a time of emergency, good sense, reason, and truth became "impractical" nothing less than brute force would do. Protectionism, a world trade "war," and economic chaos were (and will always be) the product of this kind of thinking. Past folly and Current Nonsense Unfortunately, the lessons of history and common sense seem seldom sufficient to prevent a re currence of past folly.

Ask any economist if wage and price controls work or have ever worked. With rare exceptions, the answer will be, "No; wage and price controls are only a tempo rary panacea that attempts to deal with the symptoms of inflation rather than the cause and, at best, leads to economic dislocations and shortages." Ask if rationing is the best way to deal with shortages and, again with exceptions, the answer will be, "No; rationing re quires an army of bureaucrats and this is no substitute for the free market. It's expensive to ration, it's inequitable to ration, and it is economically dangerous to ration." Such policies as wage and price controls and rationing are not sci entific or reasoned approaches to problems, nor are they historically 686 THE FREEMAN November proven solutions. Why, then, are they forever plaguing men, like a recurring disease? The answer be comes apparent if one goes to the root of today's political action.

There he will find statism at work and a statist mentality to generate it. "The nation is in a crisis, in flation is raging, something must be done. This is an emergency!" Whenever one hears these words, he can be sure that new statist measures are about to be advo cated. The statist sees there is a pressing problem, but has no idea of the solution. He offers, with great confidence and moral indig nation, "something must be done," in place of exactly what should be done to end the emergency. He cannot be bothered to check into causes, scientific investigations, rational or historical evidence. His only concern is to forcibly prevent men from doing whatever it is they're doing to cause a crisis. While rationing and other re lated proposals are being advo cated to meet problems such as the energy crisis, the one potential proposal that has the power to do perhaps the greatest economic harm lingers in the background. It is rarely mentioned by politicians, yet is· a very real threat to the world. The threat is that politi cians may repeat the past follies of the 30's, and by dramatically increasing trade restrictions, throw the world into a new trade "war."

Toward a "New" Era of Protectionism Despite much talk about (and even some action on) reducing trade and money barriers, there is a growing protectionist mood in the world. The European Econom ic Community (EEC) has been hailed for its increased free trade policies, but these policies are of dubious merit. While trade be tween EEC nations has been lib eralized, trade policy between the E E C and other nations has changed little since World War II. Further, the kind of Hfree" trade that exists within the EEC is highly suspect: it is enveloped in controls over men, money, and markets in an attempt to legally fix exchange rates and support con trolled prices. The EEC has for years shown artificial export surpluses, by re tricting imports, discouraging for eign investment, and undervaluing their currencies. EEC intervention to keep the value of its currencies at unrealistic rates indicates the true sentiment in Europe. Europe demands from .the rest of the world both the right to inflate and to export, but governments refuse to allow their citizens the use of export revenues to freely import foreign goods.

Japan likewise· has erected in1974 THE "NEW" PROTECTIONISM 687 surmountable trade barriers for many goods, and has imposed a protectionist web of exchange con trols. Meanwhile, the United States imposed a temporary 20 per cent surcharge on all foreign goods at the first sign of "trouble" in 1971. The fact that this surcharge has ended would be encouraging ex cept for another fact: Congress granted the President power to determine trade policy, which means the power to decrease or increase tariffs and quotas as he sees fit. In the past, trade "wars" have been sparked by currency depreci ation and the attempt to legally fix exchange rates. This caused great distortions and disequilib ria, which resulted in devaluations, then in a series of "competitive" devaluations, and finally in a trade "war" as all nations attempted to "protect" the home industries from competition. While it is cer tainly possible that a trade "war"

could result once again from the mone:tary turmoil of "competitive" devaluations and the attempt to artificially increase exports and restrict imports, a new factor on the horizon warrants examination: the energy crisis. The Mid East's oil embargo rep resented a major step toward pro tectionism. Oil is now often re ferred to as a "weapon." The export ban on oil led to a renewed awareness of the importance of energy and natural resources. The energy crisis began to cause short ages of goods .throughout the world, and the massive amounts of existing fiat money (plus the new ly created fiat money printed to "stimulate" national economies) resulted in hoarding of goods and to skyrocketing prices. Call for Intervention It is always in this kind of panic atmosphere that protectionists step forth: "The government must do something! We must preserve our natural resources and combat the threat from the Mid East."

Governments have not yet serious ly increased protectionist restric tions, but the mood in the world is ominous. Here are a few of the questions that nations must face: How will nations obtain more oil? Will they encourage the domestic exploration and production of oil by decreasing restrictions on pro duction domestically, or will they increase international protection ist policies and restrict exports of scarce goods? How will nations pay for the higher-priced oil they must obtain? Will they increase their national money supplies (in flate) to pay for oil, will they re strict imports of other foreign products in order to run artificial trade surpluses, or will they re688 THE FREEMAN November duce trade barriers in order to achieve maximum exports? What will become of the billions of dol lars that flow to the oil-abundant Arab nations? Will Arabs be al lowed to freely invest and spend this money in other nations, or will they be discouraged from doing so by "new" protectionist policies? How will the balance of payments problems (the huge deficits of oil importing nations) be handled? Will the currencies of defici t nations be free to seek their market level, or will they be legally prevented from doing so?

The answers to these questions and others like them will help de termine whether the world em braces a new era of free trade or a new era of protectionism. The potential· sparks that can kindle a new world trade "war" are numerous. Governmental re fusal to allow the free export of natural resources is one potential spark. When nations jealously pro tect natural resources it is only a matter of time before other na tions retaliate with similar pro tectionist measures. The attempt to artificially increase imports and decrease exports - or vice versa never increases natural resources; it only serves to reduce world trade and contract the amount of imports on which nations depend. Attempts to pay for higher priced oil by means of inflation is another potential spark. The· Arab nations are very conscious of mon etary depreciation and ·thus will not tolerate massive artificial in creases of money. This can only add an inflationary strain to an international monetary system that is already being strained to the breaking point. Similarly, any attempt to artificially devalue na tional currencies in .order to stim ulate exports or artificially revalue national currencies in order to pay for oil and "solve" balance of pay ments problems, can only result in "competitive" devaluations or re valuations by other nations. And this could lead to the kind of mon etary turmoil that sparked the trade "war" of· the 30's.

What can be done to head off or combat the threat of a world trade "war" ? Men must speak out against iTrational fears with ra tional arguments. It must be urged that nations begin to decrease re strictions on men, money, and markets. This is the only moral and economically practical course of action open to nations. Men must realize that the at tempt to solve economic problems by imposing progressively greater protectionist policies will fail as it has always failed, and that it has the potential of culminating in a world trade "war." Such a trade "war" will not end adverse eco nomic effects such as shortages, or 1974 THE "NEW" PROTECTIONISM 689 balance of payments problems, nor will it stimulate exports or imports. It will only multiply present prob lems, just as past problems were increased during the trade "war" of the 30's. One point must be stressed: while it appears the world is cer tainly moving toward a "new" era of protectionism, a trade "war" is not inevitable. It can only occur through submitting to ignorance and fear and can be averted by combatting statist-inflationist pol icies in general and protectionist policies in particular.

Toward a New Era of Intellectualism The free trade movement did not come to the world accidentally - it came as the result of applying reason to the political and eco nomic sciences, i.e., as a result of moving toward capitalism. Like wise, protectionism did not come to the world accidentally, but re sulted from increased coercive government power and men's fail ure to properly challenge that power, i.e., as a result of moving toward statism. The proper way to suppress government power in a free soci ety is with ideas. One good idea by one thinking individual is worth more than any number of guns and laws aimed at forcing men to blindly take actions. It is far easier for men to identify with common sense and facts than with blind force. Men are recep tive to reason, and as such are likely to learn, to correct errors of thinking, and to act rationally and productively. When men are com manded to obey laws, they are more likely to 1ge confused, frus trated, apathetic or rebellious.

This nation was born as the re sult of an intellectual revolution. Ideas on liberty led to economic heights previously inconceivable. Then came the anti-intellectual "revolution" of the twentieth cen tury, and with it regression to ward ignorance, concern for ef fects rather than causes, and the politicaleconomic expression of such regression: increased statist controls. The result of the anti intellectual "revolution" has been greater economic and political problems and the beginning of a steady decline in the material well being of United States citizens. But not all men are satisfied with their political leaders and the stale, meaningless "answers" sup plied by today's "intellectuals." In creasingly, men question the cred ibility and worth of their leaders' statements. There may be only a handful of true intellectuals today, but from these men of reason, and out of the dissatisfaction and questioning of millions of Ameri cans, there can evolve a new in tellectual revolution.

690 THE FREEMAN November A new era of protectionism may well be awaiting the world; but this time, to combat it, hopefully to avert it, and perhaps to end it once and for all, a new era of in tellectualism may also be awaiting. It has always been character istic of Americans that when they are given the choice between force and reason as a way of life, they will in the last analysis choose reason. The main task today is to rationally speak out against the government initiated coercion that fuels economic controls and regu lations, so that Americans will be provided with that choice. t) IDEAS ON LIBERTY "Why clon't you propose something constructive?" FROM TIME TO TIME, readers of analysis urge upon me the espousal of some program they are pleased to call "constructive." ... Everyone of the proposed refOrlTIS has something to commend it, while the sincerity of the proponents makes one wish that they might succeed. The fact remains, however, that the reform invari ably rests its case on the good-will, intelligence and selflessness of men who, invested with the power to do so, will put the reform into operation. And the lesson of history is that power is never so used.

Never. I am convinced, on the other hand, that all of the evils of which these honest people complain can be traced to the misuse of power, and am therefore inclined to distrust political power of any kind .... The only "constructive" idea that I can in all conscience advance, then, is that the individual put his trust in himself, not in power; that he seek to better his understanding and lift his values to a higher and still higher level; that he assume responsibility for his behavior and not shift his responsibility to committees, organizations and, above all, a superpersonal State. Such reforms as are necessary will come of themselves when, or if, men act as intelligent and responsible human beings.' There cannot be a "good" society until there are "good" men. ANALYSIS, July 1949 FRANK CHODOROV. Editor All Different GEORGE ELLIS ,CRITICS of the United States are quick to point out that ours is not a truly democra tic system be cause people are not aU on a level and alike. But when did democracy offer to guarantee the similarity of people or grade mankind down to a dead flat? Democracy declares that men, unequal in their endow ments, shall be equal in their right to develop those endowments.

Classes must exist in every so cial order. The moment you have men developed by different kinds of work, on different sides of their nature, you have classes. What democracy says is that there shall be no locked door be tween these classes. Every stair way shall be open. Every oppor tunity shall be free. Every talent shall have an equal chance to earn another talent. Democracy is based upon the conviction that there are extraordinary possibilities in ordi nary people. Our system may not be perfect, Mr. Ellis is a freelance writer from Aurora. Illinois. but it is the best thing we have de veloped so far. It would be phys ically impossible for all the farm ers' sons in the country to become President. But any of them may do so,. and several of them have done so. These cases are not accidents. They are logical evidences of an equality among men in the only sense in which equality is possi ble - equality of opportunity.

The malcontent who has given nothing to his country, but pro tests against its principles in spite of the fact it has given him the best life in the world, must be taught, that we have created on this continent, in less than two centuries, a civilization that is the envy and inspiration of nations five or ten times as old. They must be made to remem ber that men do not make bloody footprints crossing a frozen Del aware River just to see what is on the other side. They do it to leave a well-marked trail that others may follow toward a worthwhile destination - Freedom. ~ 691 "\V4LUE and the . WELFARE STATE BRIAN SUMMERS SOCIETY MOVES as its individual members move. And individuals act according to their ideas. Thus if one wants to know where society is going, one needs to examine the ideas held by its members. If one wishes to change the course society seems to be tak ing, one must present one's fellow men - society - with better ideas.

The ideas that nurture and sus tain the welfare state are in numerable, but a few basic con ceptions run through them all. And one such notion is that wel fare programs somehow "increase the general welfare." In conventional usage, "general welfare" is taken to mean some sort of sum of the welfares of the individuals composing society. To form any such sum, one must as sume that the welfares of individ uals can sornehow be measured. The "welfare of the individual" is a subjective value judgment. Mr. Summers is a member of the staff of The Foundation for Economic Education. 692 Unless one considers himself somehow superior to his fellow men, he will readily assert that the only judgment of the welfare of the individual that matters is the judgment of the individual himself. Can a person measure his own welfare and then report the re sulting number back to the state? Welfarism is based on the assump tion that an individual not only can do this for himself, but a case worker can do it for him.

The measure used, of course, is the material well-being of an in dividual - in rough terms, how much money he has. That is, the material wealth of a person is taken as the measure of his wel fare. The state, using these fig ures, then forcibly takes from those with "too much" wealth and gives to those with "too little." Thus are the actions of the wel fare state founded on the assump tion that ·an individual· can mea sure the values he places on ,goods and services. That is, state wel1974 VALUE AND THE WELFARE STATE 693 farism is based on the notion that personal values can be measured and that the appropriate measure is money. Subjective Values Change This notion is false. For money to be a measure of value, the value an individual places on a unit of money, say a dollar, would have to be constant. In reality, as an indi vid ual changes, and as his economic circumstances change, the value he places on each dollar also changes.

To confirm this, merely reflect on your own experiences. If you received a raise, did not the value of each dollar in your eyes de cline? Were you not more willing to spend these dollars for luxuries you wouldn't have bought in the past? Also, as prices change, does not the value of each dollar in your eyes also change? Reflection upon your own experiences, and your own changing tastes and val ues, will show that a unit of mon ey is no more a standard of mea surement than is an elastic ruler. Thus is it seen that the welfare of the individual is not amenable to measurement. This reveals the folly of egalitarian leveling schemes, for they are based on the assumption that individual wel fares can be measured and com pared, usually in terms of dollars. There is no reason to believe that equally wealthy people are "equally happy" people. In fact, one has only to look among his acquain tances to find graphic evidence to the contrary.

The immeasurable nature of hu rnan welfare also demonstrates that there is no way of determin ing if the welfare state helps bene ficiaries more than it harms tax payers because there is no way to measure the help and the harm. That is, there is no way of telling if welfare programs "increase the general welfare." In fact, "general welfare" - viewed as a sum of the welfares of the individuals com prising society - is a meaningless expression. One may thus conclude that the welfare state has no meaningful criterion to judge its effects on the welfares of the people. Voluntary Charity As Alternative to Welfarism Fortunately, welfare is not the only way that people may give di rect aid to the needy. There is one alternative: charity. Charitable acts are voluntary acts. An indi vidual accepts charity because he feels he is better off doing so than not. That is, he feels his wel fare is improved. A bestower of charity does so because he betters his own standing in his own eyes.

That is, he experiences a psychic profit. Hence he also feels that his 694 THE FREEMAN November welfare is improved. Thus in charitable transactions, as in all free market transactions, each party feels that he is better off. If both parties didn't feel this way, they wouldn't have made the transaction. We may thus conclude that in charitable acts all parties involved improve their own welfares from their own points of view - the only points of view that matter. The voluntary nature of char ity, in contrast to the coercive "pay these taxes or else" nature of welfare, convinces me that charity is far the better alterna tive. ~ IDEAS ON LIBERTY Hope for the Oppressed ONLY when the state is restricted to the administration of justice, and economic creativity thus freed from arbitrary restraints, will conditions exist for making possible a lasting improvement in the welfare of the more miserable peoples of the world. It is often this very lack of justice in the poorer countries that keeps the people in their low economic state. An English economic advisor to an African state was shocked at the prevalent low wages and suc ceeded in securing a minimum wage law for the land. The result was that the thousands of workers who had earned forty to fifty cents a day were put out of work. Only the more efficient and essential workers remained and the whole economy suffered. It had been interventions in the market by the government, a lack of justice, that had kept the wages down in the first place by pre venting capital accumulation and investment. Further interven tion, in the form of the minimum wage law, only aggravated the situation, removing the one chance many had for some economic improvement. Were justice present in these lands, there would be no shortage of investment capital, for there would then be no fear of unjust confiscation or nationalization. Justice is the one condi tion that will lead to economic improvement. Where there is little justice, there is little charity. Only where there is justice and freedom will there be the opportunity for extensive charity.

FRANCIS E. MAHAFFY, "Social Justice A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN WHAT IS the justification for the United Nations? It is hard to see what it has done to further any interests that might be helpful in preserving the values that have made western civilization what it is. Clarence Streit's "Atlantic un ion" would have done better. The UN, as it has evolved, has become the happy hunting ground of all the two-bit bully boys who talk about liberty and use stolen prop erty to bolster their one-party re gimes. So why do the inheritors of the Judeo-Christian-Greek tradition put up with it? Abba Eban, the civilized Israeli who was Golda Meir's Foreign Minister, when pressed to explain why he made his periodic visits to the UN slab in New York City, put it wittily when he said that "if one is to work behind the scene, one must have a scene to work be hind." That just about sums it up: the UN is a scene.

William F. Buckley, Jr., who has a sound theatrical instinct, saw it as such when, against his own first impulse, he decided to 695 696 THE FREEMAN November accept an appointment, in 1973, as a public delegate member of the U.S.A.'s UN mission. Bill differed with Abba Eban on one thing: he wanted to work in front of the scene. In what he calls his "only experience ... in pure, undiluted Walter Mittyism," he saw himself dramatically exposing hypocrisy as a missionary to the Third Com mittee (the one that deals with human rights). He had never vis ited the great assembly at the UN in his twenty years in New York, but he saw no reason why he couldn't use the rostrum to read to the world certain passages from Solzhenitsyn or to plead the case of the. trapped Soviet dancer Panov. After all, Mrs. Franklin D. Roosevelt had unexpectedly used the UN scene to fight the Cold War in a day when not every Liberal was categorically expected to be in favor of detente, so why couldn't a worthy tradition be re vived to fight for western values within the limits imposed by Rich ard Nixon's "low profile" foreign policy stance?

Alas, Bill Buckley discovered that he was not a free agent to conduct a Mittyesque operation of any consequence. In an age that is concerned with ethnic sensibilities and national appearances rather than with individual rights, Mitty ism on behalf of Christian values or John Locke's old triad of "life, liberty and estate" would not be understood. "Race" had become the overwhelming preoccupation of the UN since Mrs. Roosevelt's day, and working for Mr..Nixon and Henry Kissinger had to be accepted in a limiting context that Harry Truman and Dean Acheson had only dimly foreseen. A De/egatels Diary At this point Bill Buckley would surely have offered his resignation if he had not formed a most ad miring opinion of John Scali, who was doing his best to fight rear guard actions in defense of Eight eenth Century individualist values as the U.S. Permanent Represen tative to Abba Eban's "scene."

Having elected to stay on and see it out, Bill decided on the limited Mittyism of keeping a diary. It is now published as United Nations Journal: A Delegate's Odyssey (Putnam, $6.95), and it says ev erything that Bill couldn't say in the open on the few occasions that he was called upon to address the "scene." The result is that the tone and texture of a period in the UN's affairs has been caught with ex quisite sensitivity. Human rights, in the year of the Buckley odys sey, made no appreciable advances, for the manipulators behind Abba Eban's "scene" were too busy con certing the maneuvers that were 1974 UNITED NATIONS JOURNAL 697 to end in pushing all the old "co lonial" powers of the West up against the wall in the little mat ter of assuring their economic systems of enough energy to keep going. The Arabs and the African dictatorships worked in harmony with the Soviet Union to exploit the Yom Kippur War with the Is raelis in a way that has drastically altered an ancient economic bal ance of power.

Bill Buckley does not say in so many words that the Afro-Asian bloc, edged along by the Commun ists, has been singularly success ful in using the excuse of the Israeli war to defeat the whole West in a relatively bloodless bat tle. But the theme peeks out from the Buckley descriptions of such events as General Mobutu's ap pearance before the General As sembly or Saudi Arabia's Ambas sador Baroody's interminable incursions into what Buckley calls "pop history." The diarist quotes and observes, setting down the minutiae. Buckley is here engaged in beautiful intaglio work. The broad-stroking can be left to those who use the diarist's nota tions to substantiate the general conclusions of the historian and analyst. Oil on Troubled Waters What interests me as an analyst is that Bill has caught the UN at a period that is certainly destined to pass into history within short order. The rise of the Arab money power will surely cause great splits in what, to date, has been the Afro-Asian united front. The so called Third World, which has been utilized by both the Soviet and the Chinese Communists to fight the "capitalists," will soon be convulsed with arguments about disposition of the greatly enhanced income that is now ac cruing to hitherto "underdevel oped" countries such as Nigeria, Kuwait and Saudi Arabia, which have oil. The needs of India, which has little to pay for fertilizer, or of the sub-Saharan poverty zones, are no longer identical with the needs of the "have" nations in the Third World. And with capital flowing into their treasuries, the new Third World "haves" must face the truth that neither Mos cow nor Peking offers an invest ment area that will pay nine per cent for the use of the money surplus that is now being con jured out of the possession of oil and other natural resources. Peo ple with funds to invest inevitably become capitalists.

Strange New Alliances In the new power struggles that are even now shaping up, the UN is bound to see some strange new alliances. The old "colonial" pow698 THE FREEMAN November ers - the United States, the na tions of western Europe - will be using their technological and man agerial advantages to bid for posi tion. They still have something to use in a trade. The communists, who have shamelessly utilized what has been an Afro-Asian united bloc to· further their own strategies, cannot talk about "re cycling" possibilities to the new Third World "haves." Starvation in the Third World "havenot" countries will pose special compli cations. So, too, will the disappear ance of the Portuguese Empire. Israel, which has been the butt of history, may, curiously enough, find itself in a somewhat better position now that huge oil profits have satiated some of the Arab countries. With money to spend, the "have" Arabs must come to look upon future wars as unwel come interruptions in more im portant business. J ami! Baroody may have to get some new speeches.

In the coming struggles for po sition at the UN, what will be the fate of the human rights which were Bill Buckley's big concern when he accepted his UN assign ment? No doubt the rhetoric will continue as usual. I suspect, how ever, that the fight for human rights must be won everywhere as a local struggle. The UN in its very nature remains Abba Eban's "scene." ~ AN INTRODUCTION TO CHRIS TIAN ECONOMICS by Gary North, The Craig Press, Nutley, New Jersey, 413 pp., $6.50, paper. Reviewed by Edmund A. Opitz THE SOLID CORE of. this excellent book - nearly half of it - consists of the brilliant articles contrib uted by North to The Freeman. They treat expertly of such mat ters as inflation, urban renewal, property taxes, money and bank ing, and even range afield into such delicate areas as women's lib and the family. The writing has verve and wit. Some potential readers of this book may be put off by the title.

An "introduction" connotes an el ementary treatment of a subject, and easy reading -which this book is not. The writing is clear, but it is in the nature of the sub ject matter treated here to make demands of the reader. Economics, and especially monetary theory, are tough going. The book, how ever, will repay the effort put into it. The adjective "Christian" will, in the second place, mislead many of our contemporaries who have only the vaguest of notions of what the term means. North is clear on this point, and pretty hard nosed about his own commitment to Christianity and what this por tends for economic theory. What 1974 OTHER, BOOKS 699 he refers to as "the starting point for all economic analysis," is the curse upon the earth recorded in the third chapter of Genesis, re sulting in a scarcity of almost everything we need to survive. Be cause things are scarce, men must learn to cooperate with one an other. (Something of a blessing, one would think!) And because the earth now does not yield up its fruits unless human effort is ex pended, labor is an unavoidable necessity. "If any would not work," wrote St. Paul, "neither should he eat." Impossible to square welfarist policies with the New Testament! Economics, then, is the human effort to mitigate the curse of scarcity, and its primary ethical mandate requires that every able-bodied person contrib ute his labor.

There are some things no Chris tian economist will spend a mo ment's time on, the author points out. He will, for instance, spend no time trying to devise ingenious ways of inflating the money supply, nor will he try to provide a ratio nale for fractional reserve bank ing. To the contrary, he will de nounce the immorality of inflation and work toward sound banking practices and the use of real money, gold and silver. A significant portion of this book deals with monetary theory, so the author felt called upon to devote a lengthy chapter to the funny money people, by whom some conservatives are led astray. The Social Credit scheme associ ated with the name of C. H. Doug las has gained many disciples, and so have the monetary panaceas of Frederick Soddy and Silvio Gesell. These ideas come together in the writings of one Gertrude Coogan, and it is her two books which North dissects and disposes of.

Gary North offers interesting discussions of usury, the limited liability corporation, education and the schools, philanthropy, and even a little handbook of economic survival when and if the crunch comes. There is a freshness of ap proach to these various topics that makes this book recommended reading for even the well-schooled libertarian or conservative. The author's earlier work, Marx's Religion of Revolution, has here a worthy successor.

700 THE FREEMAN November ~ ECONOMIC GROWTH AND STABILITY: An Analysis of Eco nomic Change and Policies by Gottfried Haberler (Los Angeles: Nash Publishing, 1974) 291 pp., $10. Reviewed by Tommy W. Rogers DR. HABERLER'SWORK is the eighth volume in the Principles of Free dom series, sponsored by the Insti tute for Humane Studies, Inc., of Menlo Park, California. The pur pose of this study is to identify the public policies and the monetary and financial instruments that are best suited to achieve the two eco nomic objectives of stability and growth, grounded in what Haberler considers the more basic objective of personal freedom. In other words, the economic objectives of stability and growth must be re stricted to those which preserve the personal freedom of the individual and are consistent with the modus operandi of the free enterprise sys tem. . freedom of consumer choice, freedom of choosing one's residence and occupation, and free enterprise are values and policy objectives more important than those of growth and stability. Their preservation requires free markets and absence of price controls. Fortunately, these free doms, far from being in conflict with the goals of growth and stability, are conducive to bringing about rapid growth and stability. These free doms, thus, are means and ends at the same time.

In a chapter on "Growth and Growth Policy," Haberler deals with the meaning and measurement of growth, determinants of growth, the influence of government poli cies in promoting or retarding growth, and a discussion of recent popular attitudes toward economic growth. "Policies for Stabilization" looks at business cycle and anti-de pression policies, the effects of "fine tuning" discretionary mea sures, the "monetarist position" of Milton Friedman and others, the Keynesian position of "functional finance," and the argument of "monetary" vs. "fiscalist" policy. In other chapters, Haberler identi fies the inflationary practices fol lowed by various mature indus trial nations as well as the govern mental attempts to set "wage guide posts" and "incomes policies" and other forms of protectionism, as distinguished from free markets and international free trade. The ideal of the gold standard is dis cussed, along with the Bretton Woods or "adj ustable peg" system, and the propensity to impose con trols under :t system of fixed rates.

The concepts, principles, and in struments are clearly defined to give the reader a history of the ap plication of different approaches to 1974 OTHER BOOKS 701 economic stability and growth. The compilation will be of interest and value to more advanced students of economics as well as to intelligent citizens with no formal training in the subject. ~ ROOTS OF THE NEW REPUB LIC: A NEW PERSPECTIVE ON EARLY AMERICAN CONSTI TUTIONALISM by George Dargo. (New York: Praeger Books, 1974), 187 pp. $8.00 Reviewed by Allan C. Brown/eld AT A TIME when the Constitu tional processes have been severe ly tested, it is proper that we re call the beginnings of the nation and gain some perspective on where we've been and where we're headed. Professor George Dargo of the City University of New York ex amines the foundations of Ameri can constitutionalism in a broad survey of government, legal rights, church-$tate relations, the press, and political life in the colonial period. Unlike a number of earlier studies which have stressed legal doctrines, ideological constructs, and social attitudes, Professor Dargo's book is concerned primar ily with the historical reality un der lying the accepted notions about the period. "What is ex traordinary about American colonial history is the degree to which a new society, beset by enormous physical problems and located on the edge of a hostile wilderness, succeeded in generating institu tions that, in retrospect, represent ed significant breakthroughs and advances in the evolution of West ern constitutionalism."

While the 18th century saw the entire thrust of English policy as one toward centralization and sub ordination, either to the will of the Parliament or to that of the Crown, the author believes that, "Precisely the reverse was the theory of the American federal union. The evolution of territories into states was to be an evolution from dependency to autonomy." Government was not a positive good, the early Americans be lieved, but a necessary evil. The most important thing was to sev erely limit and circumscribe it. Re calling the "Body of Liberties" adopted in 1641 in Massachusetts, an early "Bill of Rights," the author states that it was "the first mod ern code of the Western world, designed to limit the discretion of legisla tors and magistrates to fixed principles-an idea that was to reach fulfillment and conceptual clarity only in the constitutional period and the latter part of the 18th century."

The ear ly Americans wanted written guarantees and did not 702 THE FREEMAN November wish to trust their liberties to the benevolence of the men who hap pened to be their rulers. Dr. Dargo writes that, "... by the end of the 17th century, the American con stitutional experience-as reflected in royal charters and concessions handed down by the Crown or by the proprietors of royal grants as well as in legislation initiated from below by the people's dep uties-recognized the central im portance of legal guarantees of personal liberty secured by some kind of written enactment whose authority was beyond ordinary statutory control." While Americans at this time reject the idea of a property test for voting, Dr. Dargo reports that such a test was widely used in the colonial period, and for reasons quite different from those we might suppose. He reports that, "The property restriction was a device-originally a liberal reform - for preventing local men of wealth, power, and influence, from controlling the outcome of elec tions. Given that most voting was oral and that a man's choice was public knowledge, it was necessary to insulate the voter as much as possible from social pressure. A tenan t was not very likely to risk his lease by voting against the known inclination of his landlord; nor would an apprentice or bound servant vote against his master or a debtor against his creditor. The theory was that tenants and ser vants, like women, slaves and chil dren, did not have 'wills of their own,' and only a man with a mini mum of property was sufficiently self-possessed to exercise a free choice ... it was believed that in the absence of a property qualifi cation the rich and powerful would be able to march to the polls at the head of a parade of dependents prepared to vote at their dicta tion."

Professor Dargo is not happy with those historians and critics who have seen fit, in recent years, to denigrate the American past. To argue against calling the early American experiments with gov ernment "constitutional" because they "did not promote tasks that we, more than two centuries later, consider central, is to distort colo nial America's real achievement and its primary contribution to the betterment of man." Reflecting upon our current period and the abuse of power which we have witnessed, Profes sor Dargo recalls the lessons we should be busy learning from our colonial experience. He concludes that, "Constitutionalism is our best and safest foundation for dealing with the social ills that be set us. It is, after all, primarily out of our constitutional tradition that the notions of social justice 1974 OTHER BOOKS 703 and equality that we as a people profess have emerged. Constitu tionalism supplied to colonial Americans the values, the tools, and the assurance that enabled them to respond to tyranny when they perceived it. We, too, draw upon that rich legacy when we re spond to threats to liberty in our time-threats that the early Amer icans would have understood, and which they taught us how to meet."

., PAGANS IN THE PULPIT by Richard S. Wheeler (Arlington House, 81 Centre Ave., New Rochene, N.Y. 10801, 1974, 137 pp., $7.95) Reviewed by N O1'man S. Ream THIS BOOK is better than its title. The alliteration may attract atten tion but it is not an accurate' des ignation of most of those about whom the author writes. A so cialistic, left-wing position in po litical and economic thought does not forsooth make one a pagan. One cannot argue the fact that many clergymen are oriented to ward increased government con trol of the economy. Some may indeed be pagans, but a great ma jority are misguided idealists whose education in economics and experience in the business world have been terribly neglected. It is about these persons, charged with being our religious and moral leaders, that Richard S. Wheeler writes well. He concludes that they "suffer under the most terrible theological delusion of our age, the delusion that substitutes wel fare for charity, the state for God, bureaucracy for mercy and equal ity for justice." If indeed these religious leaders are so terribly misled then perhaps the kindest thing we can do is to pray, "Fa ther, forgive them for they know not what they do." Unfortunately that commendable moral position will not undo the vast harm they have done during the past three or four decades.

The author makes a strong point in demonstrating that it is not a mere difference in means that di vides the liberal clergy from their more conservative counterparts who believe in the limited govern ment, private property, free-enter prise tradition of our American heritage. It is not true that our goals are the same and only our projected means are different. "Christianity and socialism are not cousins, but enemies. The one is a secular political enterprise that employs government coercion as its motor. The other is a reli gion, concerned above all with the relationship of persons, of souls, with God." The end of one is free dom; the end of the other is total itarianism.

704 THE FREEMAN November Mr. Wheeler makes his point with force and clarity while dis cussing from a Biblical basis the problems of suffering, egalitarian ism, women's rights, civil disobe dience and peace. This reviewer, a clergyman, found his Biblical ex egesis to be thoughtfully and care fully done. Here is a book that will be helpful and supportative in demonstrating that socialism is neither Christian nor moral. HANDSOME BLUE LEATHERLEX FREEMAN BINDERS $2.50 each Order from: THE FOUNDATION FOR ECONOMIC EDUCATION, INC. IRVINGTON-ON-HUDSON, NEW YORK 10533 the Freeman VOL. 24, NO. 12. DECEMBER 1974 AlexsandrSolzhenitsynSome Lessons for Americans George H. Douglas 707 It is never easy to detect the losses of liberty within a familiar system of attrition. Capitalisma,nd the Wages of Virtue Roger Donway 719 Removing some barriers for those who would extol the virtues of competition.

The Ugly Market:Why Capitalism Is Hated, Feared and Despised Israel M. Kirzner 724 A scholarly analysis of the attitudes and premises underlying the criticisms of capitalism. Mud Pies for Sale What if they were legal tender? Paul L. Poirot 737 Lower InterestRates by Law Percy L. Greaves, Jr. 740 Control of interest rates is control of people, with highly harmful consequences. Ta.les of Three Cities Joan Wilke 748 Examples of what private enterprise can do in building communities. Book Reviews: "The Free Man's Almanac" compiled by Leonard E. Read "Competition and Entrepreneurship" by Israel M. Kirzner Index for 1974 Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding. 753 761 t11e Freeman A MONTHLY JOURNAL OF IDEAS O-N LIBERTY IRVINGTON·ON-HUDSON, N. Y. 10533 TEL.: (914) 591-7230 LEONARD E. READ PAUL L. POIROT President, Foundation for Economic Education Managing Editor THE F R E E MAN is published monthly by the Foundation for Economic Education, Inc., a non political, nonprofit, educational champion of private property, the free market, the profit and loss system, and limited government.

Any interested person may receive its publications for the asking. The costs of Foundation projects and services, including THE FREEMAN,are met through voluntary donations. Total expenses average $12.00 a year per person on the mailing list. Donations are in vited in any amount-$5.00 to $10,000-as the means of maintaining and extending the Foundation's work. Copyright, 1974. The Foundation for Economic Education. Inc. Printed in U.S.A. Additional copies, postpaid, to one address: Single copy, 50 cents; 3 for $1.00; 10 for $2.50; 25 or more, 20 cents each. THE FREEMAN is available on microfilm from Xerox University Microfilms, Ann Arbor, Michigan 48106. Some articles available as reprints at cost; state quantity desired. Per mission granted to reprint any article from this issue, with appropriate credit.

Some Lessons for Americans GEORGE H. DOUGLAS WITHIN the past fe,v years, Mr. Aleksandr Solzhenitsyn has gained a certain amount of notori ety in the United States, most ob viously after his expulsion from the Soviet Union and his well publicized confrontation with the Russian government. Needless to say, his literary reputation has grown steadily in this country with the publication in English of such major works as The Cancer Ward, August 1911+, One Da,y in the Life of Ivan Denisovith, The First Circle, and most recently, The Gulag Archipela.go. It is generally understood by Americans that SoIzhenitsyn has been a .great :fighter for freedom in our time. But the truth is that his impor tance in this regard is greatly un.. dervalued in America - taken as a matter of course, we might say. Mr. Solzhenitsyn is in fact one of the great libertarians of our time, Dr. Douglas is Assistant Professor of English at the University of Illinois, Urbana.

and the lessons he has for us are not regional or narrowly histor ical. They are not intended for Russians alone. They are directed not only at the Soviet government and the Communist system, as it is convenient and pleasur-able for Americans to believe, but to all people who value freedom and see it slipping from their grasp. To a certain extent Mr. Solzhen itsyn has been something of an enigma to Americans. A great many who read of his difficulties with the Communist government in Russia were not able to under stand his desire to stay on his native soil when he could easily have accepted a comfortable asy lum in any' number of countries. A great many could not under stand his feeling of tragic loss at having to leave his homeland when it seemed so much simpler to wage his fight from a distant position of safety. (Actually there was nothing at all strange about S01707 708 THE FREEMAN December zhenitsyn's desire to stay in Rus sia; it was no more strange than George Washington's desire to stay in the United States when he had to face up to the English king's tax collector and garrison troops.) And doubtless many Americans were puzzled, if not in jured, by Solzhenitsyn's dark hints to the press that the United States was not his idea of a libertarian's paradise; that in spite of our his tory we have tended to allow our liberties to erode and decay; that we are a decadent culture.

Solzhenitsyn's latest book to ap pear in the West, The Gulag Archipelago, is the strongest state ment thus far of his political be liefs and his most forceful condem nation of Communist totalitarian ism. In the Western or non-Com munist world we have been offered over the years a number of books exposing the horrors of the Stal inist regime, so it may seem nat ural for many people to accept the book's conclusions more or less routinely. Among certain intellec tuals of the Communist world, on the other hand, it must have come as something of a shock. It is a treatise, not a novel; its truths are explicit not implicit. In recent years Solzhenitsyn has been praised both in Russia and in the Satellite countries as one of the great social/humanitarian novel ists who accept the Communist verities in their purity, but in veigh against the excesses of the Stalinist era. Spokesman for Communism?

Georg Lukas, for example, the well-known Hungarian literary critic and aesthetician wrote a book on Solzheni tsyn several years ago, in which one of his major theses was that Solzhenitsyn is a throwback to the literary tradition of "social realism" of the twenties. He speaks, so it is said, for an un tarnished Communism of a kind tha t was beginning to be estab lished in Russia before the rise of Stalin. To thinkers like Lukas, the Stalin era was a time of distortion and corruption, and what we need is a return to the simon-pure, humanitarian Communism of Len in and others of his stripe. Solzhe nitsyn, according to this kind of thinking, was just the sort of man to effect the return and the puri fication. But to defenders of the faith like Lukas, The Gulag A rchipela,go must have hit like a bolt of light ning. For it appears that Solzhe nitsyn is not their man at all. The weight of the book does not sup port the theory that there ever was a pure, humanitarian form of Communism. It suggests instead that from the very beginning Communism was a corrupt politi cal ideology, that it never served 1974 SOLZHENITSYN - LESSONS FOR AMERICANS 709 humanitarian or libertarian ends, but was always autocratic, des potic, and totalitarian in spirit.

The lesson of the book seems to be that if you want to find the truth about any given political regime you must pay attention to what it actually does, not what it says. Outward ideology is a cipher, a nothing, a vapor; it is actual polit ical practice, the presence or ab sence of individual liberty, that counts; this is the all, the every thing, the alpha, the omega. A Myth Dispelled For many European intellectu als (and many Americans, too, needless to say) it became a con venient myth that Communism just needed to be put back on the track, that the thirties was a dec ade of excess. What was necessary was a corrective hand, a new Com munist regime to correct the abuses and restore the virtues of democratic humanitarianism. The thesis of The Gulag Archipelago is that at no time - from the very moment of the 1917 revolution to the present - did the Communist regime in Russia show the slight est concern for freedom and in dividual liberty, that the political system of the Soviet government was largely an extension, a re newal, even an intensification of the kind -of tyranny practiced for centuries by the Tsarist regime.

The Gulag Arc'hip-ela,go is a book about prisons - prisons, interro gations, beatings, the general sys tem whereby human life is or dered and systematically con trolled in the Soviet Union. Gulag is an acronym for Russian words meaning Chief Administration of Corrective Lnbor Camps. The nr chipelago is not a geographical locale, a string of islands, as one might immediately suspect, but a string of prison camps, scattered, says Solzhenitsyn, "from the Ber ing Strait almost to the Bos porus" - which is to say, across the whole of Russia. During the Stalin years these prisons, or camps, held between twelve and twenty million prisoners. The point is, however, the prisons were not an outgrowth of Stalin's twisted, paranoic mind, but a long standing system of control, devel oped in Russia under the Tsars and welcomed by Lenin when he came to power in 1917. In away, the system of prisons, labor camps, night-time arrests whatever name we may give to it as a whole - became a more essen tial and central part of the Com munist regime than it had been at any other time in Russian history, perhaps the history of the world.

Terror became a branch of gov ernment, almost as we in America speak of our executive, judicial, legislative "branches"; namely, as 710 THE FREEMAN December a functional, essential, necessary way of operating. It was not just a temporary expediency, an his torical wrinkle; it was a founda tion-stone of the system. The Evidence is Clear Very remarkably, and with steady, relentless determination, Solzhenitsyn makes his case that the system of terror was not just a wave in Soviet history, but the whole ocean. The book is docu mented in great detail, although it is the documentation of the artist, the seer, that we see, not mainly the documentation of the rigorous historian; for Solzhe nitsyn had to gather his evidence as best he could, in bits and pieces, from here and there. He was deal ing, after all, with a system of government that does not make much information available. to critics and historians.

Still, the weight of the histor ical evidence is clear. Soviet his tory, of course, is hard to assem ble, and the Russian people them selves as Mr. Solzhenitsyn re marks, have a tendency to remem ber "not what actually happened, not history, but merely that hack neyed dotted line they have chosen to drive into our memories by in cessant hammering."Ask a Rus sian about public political trials. He will remember one or two. "He will remember those of Bukharin and Zinoviev. And, knitting his brow, that of the Promparty too. And that's all. There were no other public trials. Yet in actual fact they began right after the October Revolution. In 1918, quan tities of them were taking place in many different tribunals,"l and Solzhenitsyn supplies a whole chapter full of them, showing un equivocally that all of the abuses of the judicial system under Stalin were present from the very early days.

The book is full of superb iron ies and devastating contrasts contrasts of the tyrannies of old feudal Russia with those of the twentieth century, and invariably the modern, "humanitarian" Sovi et system suffers by the contrast. Prisons were better under Peter the Great we find; torture was used less often; indeed it would seem tha t all the arts of oppres sion are more highly refined in the twentieth century than in the sixteenth. What had been acceptable under Tsar Mikhailovich in the seventeenth century, what had already been re garded as barbarism under Peter the Great, what might have been used against ten or twenty people in all during the time of Biron in the mid eighteenth century, what had already been totally impossible under Cath erine the Great, was all being. prac ticed during the flowering of the glorious twentieth century - in a so1974 SOLZHENITSYN - LESSONS FOR AMERICANS 711 ciety based on socialist principles, and at a time when airplanes were flying and the radio and talking films had already appeared - not by one scoun drel alone in one secret place only, but by tens of thousands of specially trained human beasts standing over millions of defenseless victims. 2 Solzhenitsyn's mood shifts from irony to rage, but his indictment is always the same: conditions of life were actually more humane under the Tsars. Reception at prison camp?

They would assign the newcomers brigade leaders from among the camp veterans, who would quickly teach them to live, to make do, to submit to discipline, and to cheat. And from their very first morning, they would march off to work because the chimes of the great Epoch were striking and could not wait. The Soviet Union is not, after all, some Tsarist hard labor Akatui for you, where prison ers got three days' rest after they ar rived.3 Treatment of peasants? Consider the crime of six collective farmers who were tried and executed as plotters against the people. After they had finished mowing the collective farm with their own hands, they had gone back and mowed a second time along the hummocks to get a little hay for their own cows. The All-Russian Central Executive Committee refused to pardon all six of these peasants, and the sentence of execution was carried out . ... What cruel and evil Saltychikha, what ut terly repulsive serf-owner would have killed six peasants for their miserable little clippings of hay? If one had dared to beat them with birch switches even once, we would know about it and read about it in school and curse that name. 4 Yes, tyranny never disappeared in Russia, even in the early joyful days of the Revolution. But why, one wonders, would a political movement, conceived in lofty hu manitarian and democratic terms choose the path of totalitarianism and almost immediately find itself devoted to practices that were as bad or worse tha,n anything found in the regime it was displacing?

One might answer the question in historical terms by pointing out that Russia had no long tradition of liberty behind it, that a new government could not, after all, be expected to differ very much from one which had been entrenched for a thousand years. Or one may answer, in more philosophical terms, that Marxist doctrine .itself never really had any libertarian inclinations; that it was from the start dogmatic, doctrinaire, in tolerant, despotic, collectivist, to tali tarian. Either of these answers may be true. But they are not of great in terest to Mr. Solzhenitsyn who is 712 THE FREEMAN December neither an historian nor a philos opher - just a dogged individual ist and libertarian who calls things as he sees them. His viewpoint is always nothing but that of a man who knows freedom when he sees it, and refuses to countenance the substitutes that use its name in deceit. Twisting the Language This relabeling and obscuring of things, the distorting and twist ing of language is, of course, one of the most salient characteristics of modern Communism, as we in the non-Communist world have long been aware. George Orwell, for example, one of the most pow erful and incisive critics of totali tarian governme'nt in the twenti eth century described it to perfec tion back in the 1930s during the Spanish Civil War in his Homa.ge to Catalonia, and later in Animal Farm and 1984. Political language, Orwell perceived, was used to ob scure political reality. If you tor ture somebody or slap somebody in a cell, you find some euphemism or abstract phraseology that some how hides the fact and convinces others that you are not really do ing something bad after all. Need less to say, the Communists are not the only offenders, but they have probably been the most per sistent and ingenious. Under this system poljtical language has to consist largely of euphemism, question-beg ging and sheer cloudy vagueness. De fenceless villages are bombarded from the air, the inhabitants driven out into the countryside, the cattle ma~ chine-gunned, the huts set on fire with incendiary bullets; this is called paci fication. Millions of peasants are robbed of their farms and sent trudg ing along the roads with no more than they can carry: this is called transfer of population or rectification of fron Uers. People are imprisoned for years without trial, or shot in the back of the neck or sent to die of Scurvy in Arctic labor camps: this is called elimination of unreliable elements. 5 As a. literary man, a man of words, Solzheni tsyn takes pains to document this tendency to rename things - to obscure, to befuddle, to confuse. Once again, of course, the practice goes back historically to the very roots of the Commu nist regime. During and immedi ately after the 1917 Revolution, for example, there was a tendency to rename everything that had to be held over from the Tsarist re gime. "Thus the death penalty was rechristened 'the supreme measure' - no longer a punish ment, but a means of social de fense." In 1927, the Russian Cen tral Committee abolished capital punishment except for crimes against the state and army. One such crime was "banditry," but in time it was obvious that "every 1974, SOLZHENITSYN - LESSONS FOR AMERICANS 713 armed nationalist who doesn't agree with the central government is a 'bandit,' " and, similarly, "any participant in an urban rebellion is also a 'bandit.' "6 Or consider prisons. In Febru ary 1917, all the political prisons of the Tsar, both those used for interrogation and for the serving of sentences were emptied. But, by December of that same year, "it had already become clear that it was altogether impossible to do without prisons, that some people simply couldn't be left anywhere else except behind bars, because well, simply because there was no place for them in the new society."

All the same old institutions were needed, nothing was really new; but it had to be made to seem as if everything were new. Of course they proclaimed immedi ately that the horrors of the Tsarist prisons would not be repeated; that fatiguing correction would not be per 111itted; that there would be no com pulsory silence in prison, no solitary confinement, no separating the pris oners from one another during out door walks, no marching in step or single file, not even any locked cells.... What was really necessary, however, was to repudiate all those old, be smirched words. So now they called them political isolators - political de tention centers - demonstrating with this phrase their view of the men1 bers of once revolutionary parties as political enemies and stressing not the punitive role of the bars but only the necessity of isolating (and only temporarily, it appeared) these old fashioned revolutionaries from the onward march of the new society.7 Solzhenitsyn lays much of the blame for the perversions of lan guage on the great Lenin himself.

Stalin and his henchmen were carrying on a tradition that went back to the revolution and this can be seen clearly manifested in Lenin's letters and state papers. Lenin is thus not the simon-pure man of the people that Communist visionaries have assumed him to be; the truth is that he was every bit as inclined to self-deception and verbal trickery as any of the apostles of terror who held sway in the thirties and forties. As early as 1917, Lenin called for the "merciless suppression of attempts at anarchy on the part of drunk ards, hooligans, counterrevolution aries, and other persons."8 Later on he came to see the enemies of the workers in rather broader terms, and in his essay of 1918, "How to Organize the Competi tion," he proclaimed the common purpose of "purging the land of all kinds of harmful insects." This classification of "insect" became a remarkably large one: Under the term insects he included not only all class enemies but also "workers malingering at their work"

714 THE FREEMAN December - for example, the typesetters of the Petrograd Party printing shops. (That is what time does. It is diffi cult for us nowadays to understand how workers who had just become dictators were immediately inclined to malinger at work they were-doing for themselves.) The forms of insect-purging which Lenin conceived of in this essay were most varied: in some places they were placed under arrest, in other places set to cleaning latrines; in some, "after having served their time in punishment cells, they would be hand ed yellow tickets"; in others parasites would be shot . ... It is not possible for us at this time to fully investigate exactly who fell within the broad definition of insects; the population of Russia was too het erogeneous and encompassed small, special groups, entirely superfluous and, today, forgotten. The people in the local zemstvo self-governing bod ies were, of course, insects. People in the cooperative movement were also insects, as were all owners of their own homes. There were not a few in sects among the teachers in the gym nasiums. The church parish councils were made up almost exclusively of insects, and it was insects of course who sang in church choirs. All priests were insects - and monks and nuns were even more SO.9 What of Lenin?

What then must we conclude about a man like Lenin and the system of government he spawned? VVas Lenin a good man corrupted by power? Was he a man whose humanitarian ideals were lost when faced with political reality and the complexities of govern mental administration? Actually the biographical details are not important; nor are the specific historial reasons for the develop ment of Russian Communism into a form of totaliarianism. What is more important is the more gen eral lesson we learn from it all, which is nothing other than the fact that it is a characteristic of political systems that they tend to mask their power and true style under some kind of smoke screen., some kind of symbolic or mythical legerdemain, some kind of verbal deceit. Older forms of, absolutism - a monarchy, let us say - might justify themselves by spinning out myths about the relationship be tween the monarch and some kind of diety; tyranny might be justi fled by drawing a parallel between royal whim and divine law. Under the Soviet system, where a great pretense is made that the people themselves are the rulers and pro prietors, the techniques get a little more sticky and much more in genuity is called for. Everything must go on behind some kind of doctrinal smoke screen. While - there is the assumption that "the people," or "the workers" are sovereign and hold the reins of government, we can see from pas1974 SOLZHENITSYN - LESSONS FOR AMERICANS 715 sages like those above, that the doctrine, the professed beliefs, are nothing but elaborate charades.

Is there Liberty? ·Ultimately the only kind of con crete reality in the political sphere is individual liberty. It either ex ists or it doesn't exist, and no reference to abstract vapors like "the people," or "the workers" makes any difference one way or the other. In the case of the Soviet system it is plain from the evi dence offered by Mr. Solzhenitsyn that the system never provided anything but a continuation (in fact, an intensification) of the kind of tyranny that it pledged to replace - all else was window dressing, tissue-thin fa~ade meant to distract the attention of the masses as a new set of rulers took the helm. Again it will be remarked that all this may be obvious to large numbers of Americans who have never been slow to perceive the lessons that can be learned from other people's political systems. But what is the relevance and ap plication to American history of the experiences of this, an alto gether different kind of political system? How can we compare, in any way, our experience with that of a regime which makes use of political prisons, of torture, of brutality, of secret police, and all the other tools and techniques of modern dictatorship?

At first blush no comparison seems possible. But remember the main lesson that Russian history has to teach us. It is that no form of political ideology or meta physics can be entirely trusted; no system of government should catch us asleep. We must always get around behind the outward ideology and seek out the reality. Is there individual liberty or is there not? We Americans are sure that we enjoy it ourselves because we have institutions and tradi tions guaranteeing it, because it is talked of everywhere, and be cause our political institutions regularly trumpet the blessings they confer. But remember that the institutions and traditions are abstractions, and when we look at the philosophical abstractions in a mind like Lenin's - with its full complement of "workers," "in sects," "hooligans," and so on we can see that any set of political beliefs must be looked upon cri tically. Any given political leader is wedded to and inseparable from the set of political shibboleths and platitudes in which his roots are planted. Liberty, on the other hand, is not tied to temporal dog mas; still, it is easy to forget be cause it is stern, hard and unglam orous; there is nothing soporific about it. How easy it is to forget 716 THE FREEMAN December liberty and live instead in a world of diverting and comforting ab stractions which enable us to gain power over others or force our will on them.

And of course we Americans are susceptible to our own set of poli tical myths. While we have no tor ture chambers, no Gulag Archi pelago, we, too, are manipulated by candied ideologies, and our freedom of action is far more severely restricted than we care to admit. And it is restricted by means that are not very different from those which are used to j us tify a police state in the Soviet Union. We, too, tend to live in a world of hazy political abstrac tions and bromides; we have faith in vague, misty, and poorly defined notions - yes, "the people," for example. It is always urged that this or that political act is "for the good of the people," even though most politicians who abun dantly use the term would be hard put to explain what they mean by it. (The fact that two such utterly different political personalities as George McGovern and George Wallace both claim that their own personal appeal is "to the people"

shows how nebulous and foolish the idea is.) The concept of "peo ple" is usually used very much like the Communists use the concept of "worker" or "proletarian" namely as a means of forestalling the necessity to think or actually grapple with reality. Freedom of Speech? Freedom of speech? It may seem obvious that in America the newspaperman can write whatever he likes; the citizen can mount a stump with impunity or publish a tract against the government without fear of winding up behind bars. Nevertheless, . freedom of speech is not by any means as widespread as one may think. Anyone may speak freely, to be sure, as long as he doesn't chal lenge the prevailing standardized beliefs, the current mythology of uplift and social reform; the non conformist always faces the pos sibility of professional 'suicide, social ostracism or oblivion. One may speak freely within a certain very carefully circumscribed framework; outside of this frame work freedom of speech is very restricted indeed. It will be an swered that all kinds of wild men and eccentrics are allowed to speak their minds, but usually this is only after having been safely labeled as wild men or eccentrics.

A George Lincoln Rockwell, for example, would have little diffi culty speaking on a university campus, even though his neo Nazism would be repellent to the vast majority of the community. But then it must be remembered 1974 SOLZHENITSYN - LESSONS FOR AMERICANS 717 that his views are so outrageous - expressed almost entirely in bold cartoon form - that he could be admitted under the assumption that he was innocuous and that his views would not sway or mislead his audience. He challenges noth ing; he touches no raw nerves. But consider the case of the Nobel prize winning physicist, William Shockley, who was not permitted to speak at Harvard and present his unconventional and unpopular views on genetics; indeed, he was physically prevented from making himself heard. True, freedom of speech is guaranteed under our constitution, but very often free dom from having to go to jail is of little comfort to a person whose ideas are unpopular and contrary to present superstitutions. It is thus often best to express ideas that are conventional or in some other way certified harmless to the prevailing social stereotypes.

What of restriction by the gov ernment of individual freedom of action? Well, to be sure, the gov ernment makes no large-scale at tempt to control individual be havior, at least in the full Orwel lian sense; but we can hardly say that it makes no attempts at aU. Needless to say, the existence of any government implies some limi tations on individual freedom of action since the state must, at the very least, protect its citizens from injury at the hands of other citi zens. But the degree to which our government looks after the "wel fare" of its citizens today would certainly be shocking to the writers of our constitution. (Strange it is that so many Amer icans fail to see that "looking after somebody" is a form of control.) The government is in the "regula tion" business in a way that would at one time not have been thought possible. It tells citizens in great and patient detail what kinds of drugs they can buy, what kinds of schools and colleges they can at tend and what kinds of things they should expect to learn there, what foreign 'countries they may visit, who they must rent their houses to, how they must equip their auto mobiles, and even what time they must wake up on a cold winter morning - all, to be sure, under the guise of protecting the inter ests of "all the People."

A Bill of Grievances When he wrote his bill of griev ances against the English king in the Declaration of Independence, Thomas Jefferson noted that the king had "erected a multitude of new Offices, and sent hither swarms of Officers to harrass our People, and eat out their Sub stance." But today we have a mul titude of offices and officers that would have staggered the imagi718 THE FREEMAN December nation of a Jefferson and sent it reeling; the tax collector of the federal government is much more assiduous than anything that could have been dreamed of by the Han overs, and his methods of spying and snooping are so sophisticated that they would make the methods of the Russian secret police look like amateur triflings. Remember, though, that this ex plosion of governmental "aids" and "services" is called for by "the people"; it is meant to answer to perceived social needs. But this brings us back once more to the main point. The government acts to meet the needs which are imag ined to arise from some mythical collective. Individual liberty or in dividual will is not its main con cern, or even its secondary con cern, or even its tertiary concern.

In fact, individual liberty or free dom of expression are hardly its concern at all. The atmosphere in which it moves is not one of con crete, tangible realities, but of steamy vapors and myths, sim plistic formulas, bromides and shibboleths. Being closely im mersed in this system it is not easy to see how we may be de ceived by it (as we can easily see how the language of Marxism and Leninism cozens the Russians), but if we expect our liberties to survive, we mURt be careful to see that we do. This, it seems to me, is the uni versal lesson Mr. Aleksandr Solz henitsyn has to teach. The twen tieth century is the century of massive government control of individual liberty. Liberty is a concrete entity, not very different from a hat, a table, or a snow shovel. One ought to be able to recognize it when one sees it. But it is no longer very much in evi dence because we have so consist ently been fed and nourished on political myths - to the exclusion of freedom. Most of us living in the twentieth century have not noticed the erosions of freedom since our political leaders have ingeniously directed our minds to myths by which they may most easily control and direct our destinies. ~ - FOOTNOTES 1 The Gulag Archipelago, 1918-1956: An Experiment in Literary Investigation, tr. by Thomas P. Whitney, New York: Harper & Row, 1974, p. 299.

2 Ibid., pp. 93-94. 3 Ibid., p. 5'tll. 4 Ibid., p. 437. 5 George Orwell, The Collected Essays, Journalism and Letters of George Orwell, ed. by Sonia Orwell and Ian Angus, New York: Harcourt, Brace & World, 1968, Vol. IV, p. 136. 6 Gulag, p. 436. 7 Ibid., pp. 459-60. 8 V. 1. Lenin, Sobrannye Sochineniya (Collected Works), Fifth edition, Vol. 35, p. 68. Quoted in Gulag, p. 27. 9 Gulag, pp. 27-28.

and theWagesofVirtue ROGER DONWAY AMONG DEFENDERS of capitalism, there is virtually no dispute about the proper justification of that system. There is no dispute be cause there is too much disagree ment. What we hear is largely the silence of antagonists who refuse to speak to one another, remind ing us again that civil wars are the most ferocious, and the least civil. One of the more prominent standoffs, at the moment, involves those who would use some form of natural rights defense for capital ism, and those who would prefer to point out its social conse quences: the moralists and the pragmatists., as they are some times styled. On this split, I would myself join with those who see free enterprise as a necessary part of freedom, and freedom as apMr. Donway deals 88 a free lance student and writer with the social implications of certain philosophical issues. propriate to man. I would even maintain that those who defend liberty in terms of its social con sequences are not so much taking freedom's side as taking its side effects.

But I would point out, too, that this standoff has had an unfor tunate aspect. The problem is not that there is something to be said on both sides; it is that there. is everything to be said on one side. Yet, such are the traumas of hos tility that it is generally not being said. Because the moralists see a fatal giveaway in defending capitalism by its social effects, they some times sound as though the social e:tfectswere of no eoncern to them. In the attemp·t to be essential, they have often pruned their theory to a nubbin; they have even cut off the branches, lest anyone should mistake thenl for roots. The con sequences of capitalism, which 719 720 THE FREEMAN December should be the boast of its defend ers, are denied and spurned. Sure ly, this is wrong-headed. Competition's Effects on Innovation, Quality, and Price To see why, the example of com petition is helpful. It might be held, and it would be true, that economic competition is a rightful use of man's freedom, and that for political purposes nothing more needs to be said in its behalf. But that does not mean that there is nothing more to be said about competition. It hardly follows that capitalists must so fear falling into collectivist presuppositions that they cannot point with pride to competition's effects on innova tion, quality, and price.

In the matter of competition, this is generally recognized. Less well recognized is the wider appli cation of the principle. I particu larly have in mind a debate, which Irving Kristol sponsored in Public Interest a few years ago, on the relation between "merit" and ma terial acquisition in a free society. This is perhaps the prime example of a question to which capitalists respond by affirming utter indif ference, on the grounds that any concern could only be based on col lectivist assumptions. I do not want to enter the debate directly or thoroughly, but I do think it would be helpful to point out how such an issue might be legitimate ly approached. Three principal barriers are usually alleged by capitalists for the avoidance of such a question: (1) the collectivist terms of the argument; (2) the alleged amoral ity of profit-seeking; and (3) the impediment to prediction created by free will. I think that each of these can be dispelled, however, if one recurs to the truth that in dis cussing economics we are discus sing human action.

Wrong Assumptions The first and foremost problem, then, concerns the terms of the argument. They are quite unac ceptable. These money/merit ques tions generally assume, in one form or another, that capitalist society is a kind of feudalistic hierarchy, or social great chain of being, in which position is sig naled by wealth. Apparently it is further supposed that within this hierarchy God makes men high and low, and audits their estates. For it is asked whether relative rankings of wealth under capital ism are adjusted in proportion to the net virtue possessed by the in dividuals - and in proportion, it should be noted, to whatever the author cares to call virtue. No such challenge can be of any concern. So put, the question ultimately rests on what has been called "the 1974 CAPITALISM AND THE WAGES OF VIRTUE 721 puppy-bowl theory of values." This is the idea that all wealth belongs, at basis, to society as a whole, and is disbursed by that whole to the various members of the society.

Under such an outlook, all gain is deprivation; what one person gets is at the expense of others, and the distribution must therefore be justified by some merit in the gainers. But the scheme is simply false. We are not dealing with scores and prizes, or with points and rewards. We are dealing with individual acting men who are trying to accomplish something. There is no need to justify so cial disbursements and depriva tions in a free societY,because there are none. Distribution is precluded by attribution, some times called ownership. Where wealth is created and freely con veyed, what one person. possesses as a result of this process can be of no moral concern to others. To try to make it of concern is sim ply to pander to envy. Unfortunately, some have at tempted to defend capitalism· by accepting the puppy-bowl theory of values. They have asserted that, under capitalism, if all are given an equal opportunity, (equal pup pies beginning an equal distance from the bowl), the resulting dis tribution will. be roughly propor tional to striving. This gives rise to the image of a society-wide competition, a metaphor that can be utterly discredited, as Garry Wills proved in Nixon Agonistes.

The problem at issue, though, is really with other defenders of cap italism, with those who have taken the position that once capitalism is properly defended as an adjunct of freedom, no more ought to be said about the relation between merit and acquisition. This stance, I think, is susceptible to Irving Kristol's charge of retreat. It is giving up on one of the earlier boasts of capitalism. Can Virtue Succeed? Though comparative, wealth is of no legitimate concern. in a free society, it surely is proper for a person to wonder whether the means of economic success in that world are virtuous, or whether he must sin for his dinner. This does not mean he can expect all virtues to find a correlate in financial re ward.Nor does it mean that none but good men will gain· in·· income. It does mean that actions which tend toward success can he found among the virtues; and one might even argue tha t only among the virtues are to be found means that one can count on to bring success.

Conversely, one might argue that corresponding vices tend toward economic failure,and even that no vice can be counted on for eco nomic gain.

722 THE FREEMAN December That, I take it, is the moral of those inspirational novels in which virtuous young men rise and dis solute heirs fail. (I mention them since both. Wills and Kristol use success stories as a focus of argu ment.) The point is not that merit must always end up wealthier than evil, nor that there is any injustice if it does not. The point, rather, is that certain virtues give one the facility for achieving and main taining success; and certain vices deprive one of those facilities. In this view, the existence of un worthy rich is more democratizing than otherwise. It reminds us that there is a deeper awkwardness than lack of breeding, and that the parvenu who drops his silverware is still more fittingly accomplished than the heir who lets money slip through his fingers. When the problem is cast in such terms, I do not see why those who defend freedom as befitting to man need shrink from making some such answer. On the con trary, precisely those who hold free-enterprise to be appropriate to,human nature should be anxious to show that virtues appropriate to human nature have a special rapport with that economic sys tem.

'S Business Amoral? That is the first, and main, bar rier to connecting merit and money. The second concerns the alleged amorality of enterprise. It is widely held that business oper ates according toa morally neutral process called "meeting demand." By this image, a businessman looks up demand in his field, much as he might look up a telephone number, and finds that the maxi mum profit can be made from pro ducing so much of a certain good or service. As· a businessman, so the story· goes, he must produce that good whether he considers it valuable or worthless; he must provide the service whether he thinks it virtuous or vicious. But this is a mechanical parody. It is, again, a failure to see eco nomics as human action. The en trepreneur, like all men, is acting into an incompletely known fu ture. Not for him, nor for anyone else, is there an automatic guide to appropriate economic activity.

One of the entrepreneur's basic unknowns, as it happens, is how people's wishes will change from what they are. Moreover, he must know better than his fellows how those wishes will change, for the entrepreneur makes a profit only from future and widely unex pected demand. He must guess the likely future desires of·· his cus tomers, and he must guess them more accurately than others who are trying to guess them. And what means does he have 1974 CAPITALISM AND THE WAGES OF VIRTUE 723 to do this? I suggest he has no better means than to bring his own values to bear. A businessman· does not, of course, consider himself the sole and single mold of all. his cus tomers. But he does use his idea of what· is helpful, attractive, ex citing, and so on, to predict what others, in their context, will find so. The alternative is absurd: an entrepreneur has quite enough un knowns without wondering of what possible value his product could be. Since he cannot base his actions on. what people do want, and cannot act on what it isgen erally thought they will want, why would he take a risk on what he believed they could have no good reason for wanting?

Capitalists have too long ac cepted, and indeed insisted upon, the image of amoralists, and it is just not accurate. A businessman makes offerings to his customers that are generally compatible with his own values. The notion of his placidly pandering to what he knows is vice is largely a myth, and for· the simple reason that he could not expect to succeed if he did pander to it. A Presumpfionof Reasonableness Thirdly and finally, then, we turn to the block raised by free will. It is said that one cannot predict the results of politicaleconomic freedom - whether vir tue or vice will prove economically gainful-because one cannot know for certain what people are going to do. And that is correct. What needs to be mentioned, ob viously, is that though free will is a barrier to strict prediction, we can often cite strong and worthy motives for a certain kind of behavior. Then, to the extent that reasonableness prevails, we can expect such behavior to occur.

This is· the moral of the better mousetrap. In the case at hand, we can cite overwhelming motives for people in a free society to pre fer the work of diligence to that of idleness, the products of in ventiveness to those of imitation, the style of independence to that of sycophancy. To the extent that reasonableness prevails, we can thus expect those virtues to be a means of gain in a free society. This is clearly not an answer to the question of how capitalism comports with virtue. But I have not been attempting an answer. I have only tried to· remove three hindrances frequently thought to preclude any reply at all. For a reply there should be: not because the case. for freedom re quires more testimony, but be cause freedom should have more testimonials. Capitalism is not under a cloud, but it is all too often under a bushel. • THE UGLY MARKET: Why Capitalism Is Hated, Feared and Despised ISRAEL M. KIRZNER ONE of the most intriguing para doxes surrounding modern capi talism is the hate, the fear, and the contempt with which it is commonly regarded. Every. ill in contemporary society is invari ably blamed on business, on the pursuit of private profit, on the institution of private ownership.

Those who have pierced the shrouds of hate and ignorance with which the critics of the market have enveloped it, inevita bly come to ask themselves why so valuable a social institution is held in such universal contempt and dislike. The question is one which has a scientific fascination of its own. But· the question has significance extending far beyond mere scientific curiosity. As Mises pointed out, "A social system, however beneficial, cannot work if it is not supported by public opin ion."l Those who are convinced that the market· system is uniquely capable of mobilizing and devel724 oping the resources available to a society in a manner able most faithfully to reflect the wishes of its· members, while it protects and nourishes their political and eco nomic ·liberties, have for a long time been aware of the unfortu nate validity of this statement. The ability of the market to serve society has been and is continu ally being undermined by the at tacks levelled by its ideological opponents and by the powerless ness of the public to withstand these attacks. Public opinion has come to be moulded in a direction overwhelmingly antithetical to a market orientation. The "anti capitalist mentality" has come to pervade the thinking of the masses who are the market's chief bene ficiaries, of the intellectuals and social scientists who might have been expected to be its principal Dr. Kirzner is professor of economics at New York University. He is the author of numerous articles and books, the latter including The Economic Point 0/ View, Market Theory and the Price System, and, most recently,Compe tition and Entrepreneurship.

1974 THE UGLY MARKET .•. 725 interpreters and exponents, as well as of the entrepreneurs and business leaders who constitute its pivotal instrumen ts. It is surely a tribute to the extraordi nary vitality and power of the market system that in the face of such deep mistrust, and in the teeth of massive and well-nigh crippling state interventions (de riving largely from this anti capitalist mentality), the system still continues to support anenor mously complex division of labor and to generate an unprecedented ly high flow of goods and services. How long this can be continued in the face of widespread lack of confidence in the efficiency and morali ty of the system, must seri·· ously trouble those concerned for the very survival of the system. An understanding of the nature and sources of this anticapitalist mentality is, therefore, crucially important. If this mentality is to be dispelled, its principal features must be clearly pointed out, and its sources identified. A number of scholars have addressed them·· selves to this task. A series of papers by various writers was published under the editorship of Hayek two decades ago,2 drawing attention to the anticapitalist bias of historians, and relating this to the hostili ty towards the ear ly emergence of capitalism in the eighteenth and nineteenth centuries evinced at the time by the aristocracy and the intellectuals~ Almost four decades ago Hutt3 brilliantly analyzed the causes, not so much of the existence of the anticapitalist mentality itself, as of the surprising inability of the economists to influence public opin ion towards an appreciation of the beneficent operation of the com petitive market process .. More re cently both Mises 4 and Stigler 5 have sought to explain the emer gence of the strong antipathies shown towards the market system by so many,. including the intellec tuals who might have been ex pected to be its most enthusiastic supporters. Historians of economic thought have, and no doubt will, chart the vagaries in the attitudes of economists themselves towards the social usefulness of a decen tralized system of decision-making based on private property.

The following discussion of the anticapitalist mentality will at tempt to identify three distinct levels at which this mentality de mands analysis: First, we will notice the objections explicitly raised by the critics of capitalism. It is through these charges, criti cisms and denunciations that the anticapitalist mentality finds overt expression. Second, we will identify the;; analytical premises which inform (or misinform) the stated criticisms expressive of the 726 THE FREEMAN December anticapitalist mentality. Any at tempt to respond to the criticism raised at the first level must sooner or later search out the weaknesses of the analytical bases - at the second level-for these criticisms. Third, we will take note of the deeper. attitudes which haye in spired the various forms of anti capitalist mentality. Whatever the stated, specific denunciations of capitalism, whatever the errors in economic analysis which are im plicit in these denunciations, a thorough understandng of the anticapitalist mentality cannot avoid ultimately coming to grips with the deep-seated prejudices and engrained habits of thought which are,' both consciously and unconsciously, resp?nsible for the antipathy shown to the market system. We will now take up in turn the three levels which we have identified.

The Stated Criticisms The list of denunciations of the market system is both well-known and long. They range from those which condemn the system on moral grounds to those which attack it on more narrowly eco nomic grounds. We will make no attempt to do more than merely recite this list. It is not our main purpose here to grapple with these criticisms. Rather we .list them to indicate the range of expression ..of the anticapitalist mentality, and more importantly, to distin guish these stated criticisms sharply from their theoretical un;.. derpinnings, and from the un stated attitudes to which they are, in large measure, to be ascribed. The market system is indicted as feeding and responsible for the mat eri,alistic aspects of modern society. It is blamed as promoting and permitting the expression of selfishness and greed. It is charged with enc'ouraging fraudulent be havior. It is denounced a8 debas ing the tastes of the public through advertising, fraudulent or otherwise, leading them to de mand products and services which are in fact harmful and degener ating. The system is held account able for the destruc'tion of the environment. It is denounced for destroying the self-esteem of its workers, for generating profound alienation, despondency and de spair within society, as well as for widespread insecurity and anxie ties. The inequality in incomes which characterizes capitalist countries is denounced as evil in itself and socially deleterious in its consequences. This inequality is: condemned as exemplifying the fundamental injustice of the mar ket system; it is perceived as expressive of economic oppression and exploitation. The market sys tem is made to shoulder responsi1974 THEUGLY·MARKET .•. 727 bility for racism, for sexism, for imperialism. The market is given failing grades in its strictly eco,· nomic functions. It is seen as producing shoddy, dangerous prod ucts, for the profit of the business manra,ther than for the use of the consumer. It is seen as generating cataclysmic spasms of overpro duction,unemployment and mone tary crisis. It is seen as subverting the operation of political democ racy. It is blamed for thecorrup tion of government and for the concentrations of dangerous c'en ters of economic power in big business.

No doubt this list is an incom plete one. But it does present the range of anticapitalist cliches with which we are all familiar. Sooner or later the anticapitalist mentality expresses itself in one or several of these charges, de nunciations and criticisms. ~efore reviewing the theoreti cal bases for these criticisms, it is important that one observation be made. This is that while in most cases, these denunciations can be sustained only in the context of particular theoretical views (so that the revelation of fallacies in these views renders these objec tions harmless) the objections themselves are usually raised without benefit of any explicit theoretical framework. An unde sirable aspect of capitalist reality is observed, whether it is the prevalence of fraud or unemploy ment, or racism, or greed. This aspect is then uncritically attrib uted to capitalism itself. The cir cumstance that, in the nature of things, undesirable :features of capitalist reality - or, for that matter of any reality - abound, must in some measure account for the continual reappearance of old denunciations of capitalism in new guises despite their earlier refutations.

Anti~Capitalist Theory The Stigler-Zweig Thesis We now turn then, to examine the theoretical bases which nour ish the overt denunciations of the market system listed in the pre ceding section. In this we confine ourselves to those (often merely implicit) views of anticapitalists which seem most. clearly vulnera ble to critical scrutiny. It is not, to repeat, our purpose here sub stantively to deal with the objec tions listed in the preceding section. Nor, in fact, do we neces sarily maintain that each and everyone of these objections is entirely· without force. But in ex amining the analytical "vision" expressed by the anticapitalist mentality, we find it expedient to draw· attention only to those as pects of it Which, we believe, dis passionate consideration reveals to 728 THE FREEMAN December be flawed. In fact our purpose in setting forth the theoretical un derpinnings of anticapitalism is to illustrate what may be termed the Stigler-Zweig thesis.

This thesis is that the tradi tional training of the professional economist predisposes him towards a free enterprise view on' eco nomic affairs. This thesis has sup port from more than one quarter within the ideological spectrum. In a well-known paper a dozen years ago, Stigler advanced this thesis: "the professional study of economics makes one politically conservative," (with a "conserva tive" defined as one "who wishes most economic activity to be con ducted by private enterprise, and who believes that abuses of private power will usually be' checked, and incitements to efficiency and prog ress usually provided, by the forces of competition.") 6 More recently Michael Zweig has ex pressed, on behalf of the New Left, the similar view long held by socialist critics of orthodox eco nomics: that marginalist analysis (with which orthodox economics is held to be completely identified) is not only "irrelevant," but that it can be "pernicious," so that "mar ginalism is fundamentally counter revolutionary."7 In an essay in troducing a volume of readings which includes many contribu tionsfrom both the New and Old ~eft, Lekachman, too, has reg istered his opinion that marginal ism is "a highly conservative notion."8 Our survey of the theoretical groundwork of the anticapitalist mentality will confirm this thesis.

We will discover, that is, that this theoretical vision is inconsistent (to say the least) with that which underlies economic analysis. So that this level of discussion of the anticapitalist mentality must per ceive it, as Mises has insisted again and again, as the denial of eC'onomic science. It is to be observed that the Stigler-Zweig thesis, or a variant of it, is relevant not only to the theoretical bases for these anti capitalist objections which are strictly economic in character, but also to those which underlie the denunciations concerned with the morality of the market system. The habits of thought engendered by economic analysis enable one to avoid ethical judgments which are mutually inconsistent or which otherwise rest on logically· invalid foundations. If the preceding section con sisted of a list of well-worn de nunciations of capitalism, the fol lowing' pages will turn out to offer a catalogue of those fallacies which teachers of introductory economic theory find themselves again and again forced to unmask.

1974 THE UGLY MARKET ••. 729 (a) One man's gain must be another's l088: Innocence of eco nomics is often most clearly man ifested by the refusal to recognize that free exchange must have been viewed as (at least prospec tively) beneficial by both sides to the deal. The error of insisting that gain in the market must be at someone else's expense is re sponsible for a wide range of de nunciations of the market. These include charges of exploitation of sellers by buyers (as in the case of labor), and of exploitation of buyers by sellers (as in the case of landlord relations). This error is responsible for the perennial willingness of critics of capitalism to prohibit exchanges in which they perceive one of the parties to be receiving inordinate benefit. The error is, further, one of the foundations for the condemnation of profits in general, and thus of the entire market system insofar as it is the social manifestation of the profit motive.

(b) Blaming the waiter for obesity: Failure to perceive the degree to which the notion of con sumer sovereignty manifests it self in the market is responsible for what Stigler has called blam ing the waiter for obesity. In the most naive forms of this fallacy, the market system is condemned for the efficiency and abundance with which it ministers to con sumer tastes which the critic does not share. To a large degree the condemnation of capitalism for "materialism" reflects this aberra tion. (One recalls that not only the market has been condemned for its materialism, but economists have been denounced for their interest in such a debased topic as the material side of human ex istence.) To some degree the con demnation of business for produc ing shoddy or dangerous prod ucts reflects a failure to understand that consumers are simply un willing to sacrifice as much as would be necessary to enj oy a higher level of quality and safety.

There can be no doubt that current denunciations of capitalism for its effect upon the environment must, to some extent, be seen as reflect ing a value placed upon the qual ity of the environment which is higher than that placed by con sumers in general. To a certain extent, the charges of racism and sexism levelled against capitalism are expressive of the same blindness towards the direction in which causes and ef fects are related in the market process. At somewhat less naive levels of discussion, the "blaming the' waiter for obesity" fallacy re surfaces as an attack on advertis ing and selling effort in general. If it is not the, waiter himself 730 THE FREEMAN December who is to be the culprit, it is .the neon sign outside the restaurant, or the tempting aroma of good food escaping therefrom, which are perceived as the villains. It is perhaps because elementary eco nomics in fact generally fails to make clear the role of selling ef fort in the entrepreneurial process of seeking to serve the market, that this particular form of the obesity fallacy is advanced so triumphantly by economists who ought to know '.' het~er.

(c) Petulance at Costs (or the denial of scarcity) :To a surpris ing extent the criticisms of anti capitalists turn out to' reflect merely an impatience at the costs inevitably associated with the achievement of desired goals. Again and again undesirable fea tures. of the economic landsc.ape are cited as evidence of the failure of the market. (Incidentally, the same fallacy is, to be sure, often committed in the course of pro capitalist criticisms of socialist economies.) Here it is not so much that the critic ignores or disagrees with the values of consumers, as that he simply refuses to recog nize that efficiency in achieving more highly valued goals may ne cessitate the deliberate renuncia tion .of otherwise important goals which happen to be less' urgently valued. Long working hours, poor working' conditions, loss of pris tine environmental beauty may, elementary economics teaches us, be evidence not of the failure of the economic system (whether capitalist or socialist) to achieve its goals, but of the very efficiency with which it channels resources away from less crucial goals to wards those more highly valued.

Some aspects of what the critics deplore as worker alienation, or of. the anxiety and insecurity felt by market participants, would surely be appraised rather differ ently were they r.ecognized as the inevitable costs of division of la bor or of.a social system in which freedom. of entry for competitors is the prime motive force. At a somewhat more subtle level, the often deplored garishness and pervasiveness of modern advertis ing take on a different aspect when perceived as a social cost made necessary by the sheer mul titude of products from which the consumer in successful capitalism must choose. The very affluence of capitalism, it turns out, reveals a new guise in which scarcity mani fests itself - the scarcity of infor mation on what to consume out of the available riches. Anticapital ist critics - it turns out - are ill equipped to perceive these insights of elementary economics ..

(d) The fear of ana.rchy: As 1974 THE UGLY MARKET ... 731 Hayek has repeatedly pointed out, one of the cliches of our age sees a blemish in anything that "is not consciously directed as a whole," that this is a "proof of its irrationality and of the need completely to replace it by a delib-, erately designed mechanism."9 In particular, this fallacy .is re-· lated to "the inability, caused by the lack of' a compositive theory of social phenomena, to grasp how the independent action of many men can produce coherent wholes, persistent structures of relationships which serve impor·· tanthuman purposes without hav~ ing been designed for that end."Io There can be no doubt that this "lack of compositive theory' of so cial phenomena" is the view un·· derlying an enormous volume of anticapitalist criticism. The anti·· capitalist mentality, it is clear, is to a great extent,coextensive with ignorance of, or a refusal to acknowledge, the insights· into the market system which economic8 theory reveals. Once it is taken for granted that a society un planned from the top must gen erate incessant chaos, it become8 easy enough to seize on targets th:lt m:lY he held to exemplify that chaos. Even where critics of capitalism .recognize the deter minateness·· of market forces,' they see them as nonetheless chaotic in the sense that these forces; 'are believed to lead in socially undesir able directions.

(e) Fear of the consequences of greed: Closely related to the pre ceding analytical prej udice is that which tends to attribute un desirable consequences to the mar ket simply because the market permits greedy or selfish individ uals to act out their impulses. Be cause freedom to trade means freedom to act greedily or selfish ly, it is believed the consequences of laissez-faire must inevitably tend to be nasty, brutish and jun gle-like. What is being implicitly denied. in this respect is the abil ity of the market process to har ness' the greed of its participants so as·. to serve the wishes of the other participants. Refusal to per ceive the constraints upon individ.;. ual. actions imposed by the market permitsanti--capitalists to inter pret those aspects of theeconom ics landscape which they ·deplore as the only-to-be-expected, sinister consequences of asocial system based on selfishness and greed.

(f) Blaming, the m,arket for the results of intervention: As is well known,.'.the market system. is ire.;. quently criticized for features of contemporary economic society which are,' in fact, to be' attrib uted to state interference with the market. .Of course, to the extent 732 THE FREEMAN December that it is contemporary capitalism which is being attacked, there can be no objection to this. However, such criticisms of capitalism, it all too frequently turns out, are in fact deployed to attack not the statist interference with the mar ket process, but the market system itself. We have here a simple ana lytical failure to recognize, within the complex tangle of modern cap italism, the consequences of its market elements, from those of nonmarket admixtures. This ana lytical failure manifests itself in many of those objections to capi talism which relate to absence of competition generated by govern ment-imposed barriers to entry (or from limitations on interna tional trade), or to maladjust ments arising from government price controls of various kinds or to cyclical maladjustments (in cluding large-scale unemployment) generated by massive government monetary expansion. In all such criticisms, what is at issue is the theory maintained (perhaps im plicitly) by the critics that the un desirable features being exposed are to be attributed, not to depar tures from the market, but to the untrammeled workings of the market process itself.

(g) The HNirvana Falla,cy": As the final entry in our (doubtless incomplete) list of analytical fallacies, we present what Professor Demsetz has labeled the "Nirvana Approach."ll (In fact we will pre sent it in a somewhat broader con text than that identified by Dem setz). Demsetz explains that "those who adopt the Nirvana viewpoint seek to discover dis crepancies between the ideal and the real and if discrepancies are found, they deduce that the real is inefficient."12 There can be no doubt that many critics of capital ism are judging its efficiency and/ or morality by comparison with some ideal norm that can have little relevance for real problems. In so doing they overlook the fact that improving an imperfect world must take place against the back ground of that imperfect world; that it is usually simply impos sible to remake whole systems in their entirety; that even where this is possible, the costs of doing so may make imperfection rela tively attractive and efficient.

The nirvana attitude of many anticapitalists manifests itself in various ways. Thus the market is frequently blamed for the distri bution of incomes to which it gives rise without regard to the circum stance that the market presup poses some initial distribution of resource ownership (especially in regard to the resources embodied in human beings themselves). Or, where marginal analysis is indict1974 THE UGLY MARKET ... 733 ed for accepting without chal lenge the institutional structure (including the existing property rights system) within which mar ginal adjustments are contem-· plated to be made, there is no awareness on the part of the cri t-· ics, of the costs (transaction and policing) of remaking the social system from the very foundations. Or, again, as Demsetz has shown, critics who have pointed to ex·· ternalities or other circumstances spelling inefficiency, have fre quently ignored, in their calcula-· tions, the cost of resources that would be required to correct these inefficiencies.

The Sources of the AntiCapitalist Mentality Our survey of anticapitalist criticisms of the market, and our identification of the analytical confusions which have frequently supported these criticisms make it of special interest to review now the underlying psychological attitudes and prejudices which might fuel this mentality. The very recognition of the confusions which abound in the theoretical underpinnings for so much anti capitalist criticism, make it clear that such criticism must be nour ished by deeply held values and prejudices. The literature cited earlier in this paper, together with several additional sources, yield the following inventory of attitudes from which anticapital ism might easily be expected to spring. (a) Mises has dwelt at length on the resentments which can arise from frustrated ambitions, of the envy on the part of the intellectuals and the white collar workers of the good fortunes en joyed by successful entrepreneurs.

(b) Similar in important re spects must be judged the wide spread views that economic in equalities are somehow immoral and seriously undesirable per see Here the often vicarious envy of the wealthy and sympathy for the poor must be judged as predispos ing observers of capitalist inequal ities towards "sinister" interpre tations of the sources of these inequalities. (c) Deep-seated contempt for greed and for self-centered activ ities is clearly responsible for a readiness to believe the t worst about capitalism. I3 (d) An almost similarly deep seated contempt for the low tastes of the masses and thus for the businessmen who cater to these low tastes is responsible for treat ing the market as vulgar and crass. It becomes, in fact, all the easier to blame the vulgarity of mass tastes upon the: businessmen who minister to them. (e) Closely related to high-brow 734 THE FREEMAN December disdain of mass tastes, must be listed man's love for the natural over the artificial, his pr,eference for more spaciousness and sim plicity over urban congestion and complexity. Since the spectacular success of industrial capitalism was accompanied by the loss of the simple,natural .life for which so many of us yearn, capitalism itself has come to be the villain. 14 (f) And again, the yearning for simplicity abuts on the deep rooted unwillingness of men to be forced to be efficient. Modern cap italism is despised and feared be cause it successfully mobilizes available resources to serve soci ally needed purposes.

(g) Widespread fear of eco nomic power must be considered one of the attitudes responsible for anticapitalism. While what Professor Petro has recently called the "economic power syndrome"15 is often accompanied by an ex plicit theoretical position which denies the role of consumer sov ereignty, .it seems clear that in many instances the syndrome in fact precedes the theoretical posi;. tion needed to support it. Thus the very success of' capitalism in or ganizing production in efficient, large scale productive units is responsible in fact for the sus'pi cionswhich have led to its being so bitterly attacked. (h) Frofessor Hutt has pointed out that opponents of economics are often the victims· of what he calls "custom-thought"16...;... intel lectual inertness. To be sure cus tom-thought may work in more than one direction. But the long list in the preceding section of this paper of economic fallacies sub scribed to by anticapitalists sug gests that intellectual inertness might indeed playa notinsignifi cant role in the anticapitalist mentality.

(i) Finally we notice, as an ex.., planation for the persistence of so many elementary fallacies, the role of the "corruption .' of opinion by interest." Professor Hutt 17 has provided a full review of the role of "power thought" in this re gard. Here again, of cours€:, opin ion can be corrupted by interest in more than one directio:n. But when one thinks of the business men who stand to gain frOlTI gov ernmental protection against do mestic or foreign con1petition and of the many who, rightly or wrongly, believe that a different order of things would redound to their benefit, it cannot be denied that this must be. counted an im;.. port ant source of anticapitalism. Wrestling with the AntiCapitalist Mentcdity Traditionally apologists· for cap...; italism have addressed therJaselves to the specific stated objl~ctions 1974 THE UGLY MARKET .•• 735 and accusations advanced by the detractors of the market. In at tempting to do this they have, of course, found it necessary to search out the logical fallacies which support these objections.

At the same time awareness of the more deeply rooted prej udices which seem to be responsible for the continued vitality of the anti capitalist mentality, raise doubts as to the efficacy of this strategy for the ideological defense of the market. Recognition of the three level character of the anticapital ist mentality emphasized in this paper can be of help in identifying what must be faced. At the level of stated objections, there is an enormous variety of possible man ifestations of the mentality. Re futation of one particular objec tion in one form does not prevent its reappearance in some other form. Clearly, for this reason, theory has a crucial role to play in refuting the analytical fallacies responsible for entire groups of possible objections and denuncia tions of the market. On the other hand, the very generality of theo retical discussion makes it pos sible for critics of capitalism to fail to see how the theories relate to partieular features of the mar ket which seem to invite criticism.

The proper application of theory is, of course, in many ways lnore difficult than theorizing itself. Moreover, economic theory is for .various reasons not well adapted for the task of combat ing anticapitalism. Theorists are scientists whose attempts at main taining value-freedom in their work seem to render. them unpre pared to serve as apologists for a particular system ·of social or ganization. Again, the sophistica tion of modern theory is hardly conducive to the correction of pop ular misconceptions. (We recall that Edwin. Cannan, for this rea son, appealed for simple econom ics). There are grounds for believ ing that the character of much contemporary theory, especially in its .emphasis on equilibrium con ditions, is not well suited for the explication of the social function of the market. IS At the ideological level defense against the anti capitalist mentality seems to re quire continual new applicatioOns of fundamental theory to new sit uations~ But on the other hand, our awareness of the role of theoret ical fallacy and of the impact of the multitude. of' specific denun ciations of the market, must make us cautious in imagining ,that the anticapitalist mentality can be dispelled by. any device that fails to come to grips with each of these. levels of. its manifestation.

No matter how successfully one or more of the underlying anti-capi736 THE FREEMAN December talist prejudices may be neutral ized, the possibili ty of logical error yet remains and the avail ability of apparently undesirable features of capitalism ready to be used in its denunciation has not yet been eliminated. Moreover, the formidable list of anticapitalist prejudices must raise doubts con cerning the likelihood that they can be successfully neutralized by any simple means. To be sure, any advance is desirable if its costs are acceptable. But the degree of advance needed to make a visible dent in the anticapitalist mental ity must require the most careful examination of the costs involved in any proposal. Many students of capitalism have pointed out that, despite its advantages, there may well be grounds for predicting its replace ment by other systems. One thinks of Schumpeter's thesis in this re gard. One possible reason for ar guing that capitalism is unstable, is that it is a social system which generates a negative public opin ion so powerful as to spell its ulti mate death. This paper has at tempted to identify the sources of this tendency. Only by recogniz ing the nature and the power of these forces can we hope, through patient teaching and discussion, to dispel the hate and the ignor ancewhich surround the free market. ~ - FOOTNOTES 1 L. Mises, Human Action (Yale, 1949) p.861.

2 F. A. Hayek (Ed.), Capitalism and the Historians (Chicago, 1954). 3 W. H. Hutt, Economists and the Pub lic, A Study of Competition and Opinion (London, 1936). 4 L. Mises, The AntiCapitalistic Men tality (Van Nostrand, 1965). 5 G. J. Stigler, "The Intellectual and the Market Place", National Review (Dec. 1963). 6 G. J. Stigler, "The Politics of Politi cal Economists"; Quarterly Journal of Economics (November 1959); reprinted in Essays in the History of Economics (Chicago, 1965), pp. 52-53. 7M. Zweig, "A New Left Critique of Economics", in D. Mermelstein, (Ed.) Economics: Mainstream Readings and Radical Critiques (New ~ork, 1970), p. 25. 8 R. Lekachman, "Special Introduction" in Mermelstein, Ope cit. p. xi. 9 F. A. Hayek, The CounterRevolution of Science (Free Press, 1955), p. 87. lOOp. cit., p. 80 (italics supplied). See also F. A. Hayek, Individualism and Eco nomic Order (London, 1949), pp. 7 ff.

11 H. Demsetz, "Information and Ef ficiency: Another Viewpoint", Journal of Law and Economics (April 1969). 12 Ope cit. p.l. 13 One thinks here in particular of Ruskin. 14 See the above cited Capitalism and the Historians. 15 See S. Petro, "The Economic-Power Syndrome", in Toward Liberty (Mises Festschrift) Vol. II, p. 274. 16 Economists a~d the Public,p. 50. 17 Ope cit., Chapters III and IV. 18 One thinks here in particular of Professor Buchanan's plea that economics be understood as a sophisticated cataIIac tics, the· theory of exchanges and of mar kets, see his "What Should Economists Do ?", Southern Economic Journal (Janu ary, 1964).

THE AMERICAN PEOPLE finally know the truth about Watergate: it didn't stop inflation. But there persists some honest confusion in Washington, if not elsewhere, as to the cause of high prices and how to combat them. It seemed for a time that the culprit might be General Motors, the rumor being that prices of new models would rise by as much as $500. A bit later, New York subway fares were said to be the key: any increase over the prevail ing 35 cents would be infl.ationary. Meanwhile, others allege that higher wages demanded by labor unions have been chiefly respon sible for rising· prices. And the Office of Communication of the U. S. Department of Agriculture explains that food· prices reaHy haven't gone up, comparatively speaking. But if it seems that they have, it could. be attributed PAUL L. POIROT -.-:= to the fact that 1973 wasn't a nor mal beef year, that hog and poul try producers lowered their pro duction plans when costs rose; that worldwide drought and afflu ence drained American stocks of wheat, corn, soybeans and the like; and that more Americans ar~ dining out instead of home cook ing.

Ask any youngster at his lemon ade stand why he doesn't diversi fy, and he'll promptly give you economics in one lesson : "Well, mister, it's a lot more fun to make mud pies, but there's just no mar ket for them." How come we grow up forget ting what every youngster knows instinctively? Would you believe that some two-fifths of the time and effort and scarce resources· of we the adults of America are go ing into mud pies! Roughly 40 per cent of our factors of production 737 738 THE FREEMAN December are being diverted to purposes for which "there's just no market." So what have mud pies to do with inflation? The answer is: "Almost everything." But let's take it step by step. And our first step is to get off the back of General Motors, or at least off the very silly idea that the most efficient producers of the goods and services we want to buy are the ones who are causing high prices. It ought to be clear that the people who are not producing and selling cars are more likely the caUse of high priced cars than are the largest and most efficient producers. By and large, most of the customers for cars are persons who at least think their time and property is better invested at something other than auto produc tion. Are the customers then to be blamed for high priced car~?

Are Customers at Fault? Well, don't let the customers off scot-free. Noone would be mad at a .. little old mud pie maker if he doubled his price. But if some customer willingly paid that price, who should be held responsible? If General Motors hikes its price $500 and finds no customers, does General Motors cause inflation? There may be chapters in the history and performance of Gen eral Motors worthy of criticism. If so, let the critic document his case. But let us not believe that browbeating producers of the goods and services customers want is a reasonable way to combat in flation. General Motors is not the cul prit. And for the same reason, neither do the unionized laborers of America possess direct powers of inflation or deflation. The per son who demands a wage higher than anyone is willing to pay may find himself unemployed, which is indeed depressing. But if there's no market for his kind of mud pie, how can the result be infla tionary?

Well, there is a way. If organ ized labor can marshall votes enough to badger Congress to ap propriate the funds and create the new money needed to pay for an other batch of mud pies (in this case, pay men who are out on strike) that, in effect, makes a market for an otherwise unwanted item; American citizens lose their right of refusal to buy mud pies. This governmental action with draws scarce resources from the market place, just as if customers had willingly paid men to produce mud pies or to idle themselves on strike. So, to the extent that un ions or any other political pres sure groups are permitted to ex ercise the governmental power to force customers to buy unwanted mud pies (the process is to print 1974 MUD PIES FOR SALE 739 new money to cover the subsidy), that is inflation. Subsidies Upset the Market As for subway fares, it is not the 35 cents paid by riders that is inflationary; it is the balance of the cost which is covered by sub·· sidy, which is in turn translated through a Federal deficit into ad·· ditional fiat money. It's the added supply of fiat money that spells in·· flation, and the money is printed in order to withdraw from the market place goods or service8 customers demand if "someone else" pays for them.

The high prices housewives are willing to pay for beef, sugar,and other foods are not inflationary, nor is drought or blight in the corn b~lt inflationary. These things, of themselves, do not add to the supply of fiat money. But if the Federal government lends (gives) Russia dollars with which to draw foodstuffs from the market, the great likelihood is that those will be extra dollars printed; and that is inflationary. So are the new dol lars printed to cover farm subsidy and school lunch and food stamp and other welfare programs. If taxpayers were happy and willing to pay for mud pies, and if Congress resolutely abstained from all deficit spending and re fused to authorize the printing of fiat money, the problem of infla tion would be ended. Ah, yes, but what would the poor people then do for money? Ask the young fellow at the lemon ade stand, and he'll tell you: all you have to do is earn it; offer a service or supply a good that cus tomers want to buy. And what precisely would all these traders use for money? Why, anything they pJease. Whatever they think might best serve as a medium of exchange. Perhaps they'd choose gold, as free men customarily have chosen down through the ages whenever the choice was theirs.

To be sure, other commodities have also been .used as money cattle, wampum, cigarettes, gourds - some things that seem very strange to us. But the nearest thing to mud pies that men ever have tried as money are the little green scraps of paper redeemable in nothing. If our lemonade salesman could get Congress to declare that mud pies are legal tender, he could do a land-office business. In addition to commandeering 40 per cent of the time and effort of adults, he could have all the youngsters "making money" too! ~ I I I LOWER WHY would it be a mistake for Federal Reserve officials to lower interest rates? Wouldn't it help the building industry? It would seem that a reduction in interest rates would lead to a renewal of building ac tivity. This would put a lot of people to work and provide a lot more homes for those who want them. In fact, wouldn't lower in terest rates be· a spur to other industries and be good for the country as a whole?

The answer is easy. If lower interest rates were free market interest rates, business would boom and bid up wage rates. However, if lower interest rates were the result of a government Professor Greaves is a free lance economist and lecturer. His recent books include Understand ing the Dollar Crisis and Mises Made Easier (Glossary for Human Action). 740 PERCY L. GREAVES, JR. InterestRates Bylaw fiat, the effects would be disas trous. As the late Professor Lud wig von Mises frequently stated, every political interference with free market processes makes mat ters worse, not better, even from the viewpoint of those who pro pose such political interferences. The reason for this is often difficult to understand. Unfortu nately, those who attempt to push down interest rates by legal edict do not foresee the inevitable un desirable consequences. In recent years many people have learned the hard way about the conse quences of political price and wage controls. Learning from ex perience the consequences .of po litical interest rate controls could be even more painful.

When the government attempts to maintain prices above those of the free and unhampered market, 1974 LOWER INTEREST RATES BY LAW 741 as it has with some farm products, this inevitably leads to surpluses. Too much land, labor· and scarce materials are devoted to produc ing such subsidized goods. This has two results. First, there are surpluses which must be stored, destroyed or given away. Second, the land, labor and scarce rnate rials are not available to produce those goods and services which consumers desire in larger quan tities. We know this because there are people willing to pay more than the free market production costs of such goods and yet can not find them on the market. When the government attempts to maintain prices below those that would prevail in a free and unhampered market, as it recently did with price controls, this in evitably leads to shortages such as we experienced in a matter of months. In addition to· the short ages, we soon had more .unem ployed workers, factories and transportation facilities, not to mention the increased welfare ex penses this made necessary.l Busi nessmen, being human, will not continue to produce what they cannot sell at prices that cover their costs. Their available capital will not long permit it.

1 People who sanction laws which de·· prive some workers from earning a liv ing for themselves and their families are honor bound to provide the necessities of life for such second class citizens. When the government attempts to raise wage rates above those that would prevail in a free and unhampered market, as it has for some forty years, it inevitably produces unemployment or under employment with an accompany ing demand for welfare payments. Such welfare payments are a bur den on all who buy goods and services in the market place. The unemployment and underemploy ment mean higher prices because fewer goods and services are pro duced to compete for the con sumers' limited number of dollars. When the government grants privileges to labor unions to raise wage rates above those of a free and competitive market, it raises the costs of producing union-m~de goods and services. The resulting higher prices inevitably reduce sales. This in turn reduces em ployment in such industries, or in other industries whose sales fall off because consumers, paying higher prices for union-made goods and services, have less for other things. This means that those who could have worked in the curtailed industries must look elsewhere for jobs and accept lower wages or remain unem ployed and eventually increase the need for welfare payments.

Those who take jobs at lower wage rates than they could have had in a free market will be un742 THE FREEMAN December deremployed. That is, they will be producing goods or services less desired by consumers than those that have been priced out of the market by the legal privi leges which permit labor unions to extort higher than free market wages from society. Such illfated attempts to raise wage rates above those earned in a free market inevitably force more and more unfortunate work ers to take lower-paying jobs. Eventually, with the growth of labor union power, the competi tion' for" such lower-paying jobs drives some wages so low that many workers find it difficult to maintain their previous standard of living. Those who believe that political power can raise aU wage rates then advocate minimum wage laws. Such laws compel em ployers to pay all their employees at least the minimum wage.' Em ployers, being human and having limi ted resources, soon refuse to employ those for whom the min imum wage rate raises production costs above what customers will pay. Such unfortunate persons, including many youngsters, mem bers of minority races and others with limited skills, then become legally unemployable. Their bleak choice is between a life of crime or subsistence on welfare payments until the value of the dollar is reduced by inflation to the point where they become employable at the legal minim urn wage rate.

There was no long term mass unemployment in this country when everyone was free to take the highest wage rate that any employer could and would offer for his or her services. Market competition forced employers to pay their workers the full market value of their contribution. If they failed to do so, other employers would ,bid away such underpaid workers. Political interferences in the labor market, with the inten.., tions of raising aU wage rates, have created our present mass unemployment, underemployment and the growing need for welfare payments. Only a return to a free and unhampered labor market will bring to an end such unemploy ment and underemployment. In a free market there are jobs for all2 and no need to subsidize in idle.,. ness those who are able to work. The Marlcet Produces Interest Rates Interest rates, like prices and wage rates, are market phenom ena. Political interferences with interest rates, like price and wage controls, create economic chaos.

Such chaos leads to a general loss of freedom and inevitably reduces the living standards of every mem2 See author's "Jobs for All," The Freeman, February 1959. Copy on request.

1974 LOWER INTEREST RATES BY LAW 743 her of society. It is thus vital that we all understand why the. gov ernment should not interfere with free market interest rates. Market interest rates are a sum of three contributing market fac tors. (1) The first is true or pure interest; what Mises called "origi nary interest." This is payment for time preference. A person cur rently short of cash may wish to spend $1,000 for something now, and pay for it later when he ex pects to have more cash. If he wants that object so badly now that he is willing to promise to pay $1,100 a year from now, he may be able to obtain an imme diate loan of $1,000. That would mean he values spending the $1,000 now so much more than waiting a year to do so that he is willing to pay 10 per cent, or $100, more to have the object now. In order to borrow this $1,000, the borrower must find someone who has saved $1,000 and is will ing to lend it to him for one year for an interest rate of 10 per cent or less. Few people will lend their savings, except for charitable pur poses, without receiving some ben efit in return. The prospective lender may want to buy a car or take a trip at the end of a year.

He will make the loan only on condition that he be repaid an extra sum for making the sacri fice of not spending his money now. That extra paym~nt, called interest, must be high enough for the prospective lender to value the future repayment, with interest, higher than he values spending the $1,000 now. So the loan de pends on each party's placing a higher value on what he receives than on what he furnishes the other party. The difference be tween the sum loaned and the sum to be repaid is true or pure inter est - a payment that will compen sate a saver for postponing his own spending for the· time of the loan. (2) The second factor in mar ket interest rates is the certainty or uncertainty that the loan will be repaid as specified.· If there is valuable collateral or if the lender thinks the chances of repayment are good, this factor will be min imal. However, if the borrower has few resources and there is reason to believe that the loan might not be repaid if he died or lost his job, this would be a factor the lender would consider in arriv ing at the total interest rate he would request before making a loan to that specific person. This factor would differ from person to person and from loan to loan, but it is present to some extent in the interest rate on every loan.

744 THE FREEMAN December (3) The third and currently most important factor in market interest rates is what is expected to happen to the purchasing power of the dollar during the term of the loan. If the lender expects prices to rise 10 per cent in the next year and he only gets 10 per cent more dollars back from the borrower at the end of the year, he does not receive one cent of pure interest. Pure interest is only the amount the lender gets back over and above the purchas ing power he has lent. So in times of inflation, when the value of the dollar is going down, this third factor must rise. As it rises, so does the market interest rate, which is the total of the three fac tors just discussed - (1) pure in terest based on time preference, (2) uncertainty of repayment and (3) change in the dollar's pur chasing power. Current market interest rates are considered high because this third factor, reflecting an antici pated drop in the dollar's purchas·· ing power, is high. The way to reduce this factor is to reduce the expectation" that the purchasing power of the dollar will drop in the next year. So the only satis factory way to reduce current high interest rates is to eliminate the expectation that future prices will be ever higher. This means we must stop the inflation.

More Savings are Needed Lower interest rates that repre sent free market interest rates are always helpful to society in general. Lower interest rates in a free market society mean there are comparatively more savers with funds they want to lend than there are borrowers who will·pay high interest rates. These savers seek to lend their funds so as to earn as much money as possible. Rather than spend their savings now, they seek more funds at a later date when their current in come may be lower, as when they retire, or when their expenses may be higher, as when they may want to buy a car or a house or send a child to college. It is the higher amounts of such savings, bidding in the market place for borrowers, that produce lower in terest rates in a free society . To bring about such lower interest rates, government should protect and encourage voluntary loans made with the expectation they will be repaid in dollars with the same or an increasing purchasing power.

But the question in many minds today is, why not have the Fed eral Reserve System lower market interest rates by fiat? The answer is simply this: If the FederalRe serve lowers interest rates when there are no increased savings available for lending, there will 1974 LOWER INTEREST RATES BY LAW 745 be a bigger demand for loans at the lower interest rate than can be made with available savings. Under present laws and condi tions, the banks meet this in creased demand for loans at the lower interest rates by creating more loan money out of thin air (or should we say paper?). The borrowers get their loans in the form of an addition to their bank accounts on which they can draw checks. Noone else has chosen to reduce his spending so as to make his savings available to the bor rower, as is always the case with free market credit transactions. Why Interest Rate Controls Hurt When the Federal Reserve Sys tem reduces interest rates by fiat, it must create more spendable money than was previously earned or saved. It puts into the market dollars which do not represent any contribution to society. You have more dollars in the hands of borrowers and no reduction in the numbers of dollars which sav ers may spend currently. This has several undesirable effects, some obvious and others largely unseen.

The most obvious effect is that with more .money bidding for the same quantity of goods and ser vices in the market .place, prices must be higher than they would otherwise be. Largely unseen are the ways in which this increased quantity of money enters the mar ket place and how it affects the structure of production and the welfare of different· individuals. Those who borrow the savings of people who must reduce their current expenditures and those who borrow artificially created bank money cannot be distingu ished in the market place. In fact, most borrowers from banks do not know whether they are bor rowing the funds of the bank's stockholders and depositors or newly created funds. The borrow ers of the newly created funds are in a position to bid away available goods from the earners and savers who would have bought them if the quantity of dollars had not been increased. What such borr9wers buy drives prices up and leaves less for all who earned or saved the money they take to market. In the short run, these artificially lower interest rates help borrowers and those who sell to them - the construc tion industry if the borrowers buy houses-at the expense of all workers, savers and those who would have profited from supply ing what the workers and savers can no longer buy.

Outstanding Contracts Affected Although some may be helped by such artificial lowering of in terest rates, all who have earned 746 THE FREEMAN December or saved money are hurt. Such creation of more dollars not only hurts all workers and savers, by reducing the value of their dol lars, but it also affects the value of every outstanding contract. It means every preexisting dollar is worth less and every contract promising to pay dollars iIi· the future has been altered in favor of the payer and to the disadvan tage of the recipient. This means a reduction in the real value of all bank accounts, insurance poli cies, wage rates, salaries and pen sions as well as all rental con tracts, time payments and other purchase agreements. When sav ers foresee such effects, they re fuse to make any more loans un less the interest rates will more than compensate them for the ex pected drop in the value of the dollars they lend.

The most important, generally unrealized, effect of such artificial increases in the quantity of spend able dollars is that they redirect the whole economy. They do so in a manner that cannot be contin ued without an ever increasing quantity of newly created dollars to compensate for the resulting higher prices. As the· political in crease in the quantity of dollars accelerates, more and more of the nation's production facilities are devoted to supplying the spenders of the newly created dollars. This means a smaller and smaller part of the production facilities are devoted to supplying the nation's workers and savers. Eventually, if the process is not stopped in time, the system breaks down and the dollars become worthless. Stopping Inflation Has a Price Of course, the process can be stopped at any time, but not with out consequences. Once the gov ernment stops increasing the quantity of dollars artificially or even slows down the rate of arti ficial increase in the quantity of dollars, producers supplying goods and services to the spenders of newly created unearned dollars lose a large number of their cus tomers. They must then layoff men and there is a recession or depression - until production is adjusted to supplying only those with earned or saved dollars to spend.

Under present policies the gov ernment is continually faced with deciding whether to inflate arti ficially the quantity of spendable dollars or permit market forces to readjust the economy. If free and unhampered market forces are permitted to emerge, free market prices, wage rates and interest rates will quickly redirect the economy toward a more efficient satisfaction of all those who con tribute toward production. Those 1974 LOWER INTEREST RATES BY LAW 747 who had spent newly-created dol lars will have to curb their spend ing or earn the dollars they spend. The available supplies of workers and capital goods will be quickly redirected toward producing sole ly for those spending dollars they have earned or saved in the ser vice of their fellowmen. In short, when Federal Reserve officials .lower interest rates arti ficially, they send a part of the economy off on a spree at the expense of the nation's workers and savers. The spree can only be continued by an ever increas ing inflation of the quantity of spendable dollars. If we want to end that inflation and all its un desirable consequences, we must permit the free market to deter mine interest rates as borrowers compete for the real savings made available by those willing to re duce their potential spending tem porarily for a price, commonly called interest. Only freely deter mined interest rates, without any artificial manipulation or control of the quantity of dollars, will eliminate the inflation problem from our economy.

The best way to reduce market interest rates is to remove the expectancy of further inflation. Once this is done, more people will be encouraged to save more dollars and their competition for borrowers will bring lower market interest rates. Then there can be a profitable expansion of those industries that will direct avail able supplies of labor and capital into producing more of the things that workers and savers want most. The only way Federal Reserve officials can help workers, in vestors and consumers is to stop increasing the quantity of dollars - stop inflating - and permit free market forces to set interest rates that reflect the actual supply of, and demand for, such savings as are available for lending. Any in terference with free market inter est rates must upset the economy and produce results that all hon est and intelligent people consider undesirable. ~ IDEAS ON $ LIBERTY Monetary Madness As MONEY is the sinews of every business, the introducing of a doubtful medium - and forcing it into currency by penal laws must weaken and lessen every branch of business in proportion to the diminution of inducement found in the money.

PELATIAH WEBSTER, Strictures on Tender Acts, 1780 Talesof ThreeCities JOAN WILKE A RECENT ENVIRONMENTALIST LAW in Montana prohibits changes, and developments that have an adverse social impact on a community. The law is being invoked by some to prevent expansion of Montana Power Company's gen erating facility at Colstrip. It is argued that the school facilities would be overburdened by new residents. Actually, the company is pro viding temporary classrooms until new school facilities can be built. And that's not all. Having had the community master-planned, the company is also building houses, apartments, motels, mobile home facilities and a. commercial com plexwith air-conditioned mall, shops, stores, professional offices, medical facilities ... even a post office. In addition, it is providing a 748 community center with bowling alleys, tennis courts, park and pic nic areas and other recreation, as well as providing fire protection and' putting in sidewalks, sewers, water lines and other street im provements.

Of course, the company isn't doing this out of the goodness of its corporate heart. It simply must provide housing and facilities in order to attract the hundreds of additional people it will be em ploying in this previously semi abandoned town. Strangely, these things are rare ly mentioned even by company of ficials when under attack. So, the best kept secret in the world con tinues to be the fact that private interests are in the public interest. Since Montanans are being deMiss Wilke is an advertising writer.

1974 TALES OF THREE CITIES 749 prived of th~ opportunity to pay taxes for all those services, it's a wonder the community hasn't been called unconsti tutionaI. That's precisely the word heard lately to describe another city. This city, too, was built with private capital and the profit mo tive. That's how it was possible for it to be so well-planned and to serve such a great need. The streets are wide and wind ing and alwt\ys clean. Shopping and commercial centers' are well locat ed for convenience and traffic ease. Green belts are beautifully land scaped with a variety of trees from the community's ownnur sery. This city isn't on the most beautiful land in the state. The government owns most of that. But the developers took an avail able piece of desert waste near feedlots and a railroad and made it green and beautiful with lakes, streams, waterfalls, flowers, golf courses, country clubs and nume rous r~creation centers with all kinds .of sports, entertainment, educational activities, hobbies and crafts. There's even a bandsheU bowl and baseball parks.

Sun City is a beautiful answer to a million prayers. It fills a need that should never have existed, but it was a needed response to a society that has sought to force inactivity on some of its most vital, creative, active and fun peo ple. Sun City is now being called un constitutional by some because houses are not sold to people with children under 18. Such critics ar gue that there should not be a com munity without children - espe cially since communities without children don't seem to want to pay for new schools in the next town. They do not say that it is uncon stitutional to force some people to educate several generations of other people's children. Aside from the absurdities Sun City is occasionally subjected to, it seems to be one of the happiest communities in the United States and has been the model for many other fine recreational and adult communities. And it clearly dem strates that when a community is privately planned, controlled and marketed, the results far exceed ordinary municipal standards.

Advantages 01 Private Development Including Schools In a privately developed commu nity, you know what you're get ting. Streets, commercial areas, church locations - everything is planned on the drawing board. You know the restrictions when you buy the property. No hamburger stand can pop up unexpectedly next door. No billboards. No trashy empty lots.

750 THE FREEMAN December Everything. bad destroys value. Everything good increases it. De veloperslike increased values. The community grows progressively better. It was after the success of Sun City's phase I that Del Webb was able to add lakes, country clubs, bowling alleys, minature golf, ten niscourts - and a mammoth indoor swimming pool, artificially land scaped with giant palms, rock gar dens and grass. The purchasers at Sun City con tinue to enjoy an outstanding ap preciation on their investment along with the progression of pro fitability that has made it all pos sible. Compared to the certainties of private control, purchasing a polit ically manipulated lot under any municipal jurisdiction is just a grab-bag proposition. One of the most rapidly devel oped states in recent years, Ari zona has seen the construction of many new subdivisions, and its most successful developers are well aware of the profitability of community services.

These new communities usually include streets, street lighting, sidewalks, water, sewer systems, underground utilities, clubhouses, swimming pools and all kinds of recreation. And since there's no use trying to sell a house to families with children if there are no schools around, schools, too, are often built with private funds, not taxes. It would be interesting to see what the developers would do if we didn't have a politicalized edu cation system. Imagine the ben efits that could result if they tried to outdo each other in providing educational services as they do in providing recreation. And it would be interesting to see what sales packages of im proved materials and methods ed ucators could come up with in their competitive efforts to convince developers of the superiority, and therefore salability, of their ser vices over another company of educators. A City of the Future But let's leave Arizona and look at another city in the United States built with private funds.

This is a city where the side walks are resilient so you won't get tired from walking. A city where the streets .are never torn up. A city with a "basement" an underground infrastructure of tunnels, walkways, wires, ducts, cables, water lines and sewage systems that are easily accessible and readily repaired. All city operations are moni tored by computers and closed circuit TV - methods ·that sug1974 TALES OF THREE CITIES 751 gest· the possibility of developing crime-proof communities. There's a hotel in this city with a pollution-free monorail running through its ten-story lobby. The rooms for the hotel were completely prefabricated units _. wired, partly furnished, and hoist·, ed into place by cranes. The mod ules are complete with artificial moonlight. This city had a mass transit system from its inception. People are also transported by non-pollut ing aerial tramways and "people movers" that run on the most basic of all principles - friction.

And it's the only city in the United States with a STOL (short take-off and landing) airport. The community is served by over 200 watercraft and has the 5th biggest navy in tonnagein the world - a navy that exists only for purposes of entertainment. This city has houses that are experimentally powered by fuel cells, a hospital that utilizes closed circuit· TV to diagnose cases by remote control. Half the power for this com munity is generated by gas tur bines whose waste heat is· turned into chilled water for air con ditioning. The city extends over 37,443 acres with 7500 acres set aside a.s a well-protected wildlife pre serve. It also includes a $7 -million water reclamation project with 40 miles of canals that look like nat ural rivers. Garbage disappears from the streets of this city at a velocity of 60 miles an hour through vacu um tubes. It's sucked into a com pacting plant equipped with an in cinerator that purifies its .own emissions with filters and scrub bers so that nothing comes out of the stack but clean steam.

Waste water is recycled toa "Liv ing Farm" of trees and plants. This city, built on a swampy wasteland, owes its existence to the genius and energy of one man - Walt Disney. It exists in a country of cities that never trusted their street maintenanoe, sewage responsibili ties, power generation, parks, con servation and recreation to private· enterprise. Cities where trucks still haul refuse and streets are torn up regularly in .order to repair pipes. Cities where recre ation is always swings, sandboxes and monkey bars - certainly not African safaris and Snow White's castle. Cities that have polluted rivers and streams with the waste from their treatment plants and, as .public bodies, are never an swerablefor their actions. Their answer to a messy environment is never action but always exhor tation to "keep the city clean." Part of Disney's success was in 752 THE FREEMAN December expecting people to be as they are.

The Disney communities are meticulously clean - and under cotton candy circumstances. He expected sticky little fingers and spilled popcorn. He planned for it - and his plans led to undoubt edly the most efficient waste dis posal methods in use in the coun try today. Can Dreams Come True? There are more new cities too. Cities of dreams. Cities we'll never see - not as long as we consider communities to be political enti ties instead of private properties. Not as long as we trust politicians and distrust private enterprise and corporate bigness. Ifa city is a political entity, property rights don't exist. There's eminent domain to prove it. And building codes. And zon ing. And rezoning. And permits. And fees. And taxes. And graft. And favors. One reason for the startling in novations at Disney World is that it was constructed with its own building codes. This allowed the use of new materials and tech niques and specifications.

Modules could be made wider, for example, because they weren't transported over state roads. Disney's independent code also resulted in much stricter safety and fire protection than the law allows under municipal mandate. Building codes, in fact, estab lish minimum requirements that usually become standard. Their effect is simply to stifle progress and substitute repetition and mo notony for innovation and im provement in building. Largely because of these codes, we build and rebuild the same houses over and over. And mostly because of zoning regulations, we build the same cities again and again and then complain about them, calling for more of the city planning that has already contrib uted so largely to their deficien cies. Our best hope for better cities is private development and profit ability - corporate prosperity. Al though "big business" is popularly deplored, it is the big corporation that is capable of the biggest ac complishments.

And fundamentally, we need new respect for private property and enterprise with the long overdue recognition that the public welfare inheres in private interests -- and only in private interests. We won't have really new cities until we first enjoy the depolitical ization of human relationships. That would not only give us new cities. It would give us a new world. f) A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN IF THIS COUNTRY is to be saved, it will be saved outside of Washing ton, D.C., by people who have ab sorbed the sort of wisdom provid ed by Leonard Read in his beauti fully bound The Free Man's Al manac (Foundation for Economic Education, $5). This book, which provides a more or less epigrammatic quota tion for each day of the year with out reference to the zodiac (~r. Read is concerned not with the stars, but with ourselves), is far less heterogeneous in its substance than it is in its styles. The varia tion in sty les gives a pleasing modulation; the concentration in basic content, on the other hand, provides a formidable educational wallop.

To begin with the negative the inability of the political arm to solve our problems - the theme is sounded by a couple of political theorists who had plenty of prac tical grounding in public affairs (Thomas Jefferson, Woodrow Wilson), by historians (Clarence Car son is an example), and by econo mists (~urray Rothbard and others) . Jefferson and Wilson did not al ways practice what they preached, but what. they preached was good. So ignore the fact that Wilson, as a wartime President, once spoke about "force, force to the utter753 754 THE FREEMAN December most, force without stint or limit" (My quotation is from memory), and concentrate on Leonard Read's exact quotation from Wilson as a political theorist: "The history of liberty is a history of the limita tion of governmental power, not the increase of it. When we resist, therefore, the concentration of power, we are resisting the proc esses of death, because concentra tion of power is what always pre cedes the destruction of human liberties ... Government, in its last analysis, is organized force."

Why does the "organized force" of government lead to the stagna tion that is the forerunner of death? Clarence Carson says it forthrightly: "Government is not capable, by nature, of being productive or constructive it acts to restrain and restrict " Murray Rothbard and David A. Stig nani put it more whimsically. Rothbard notes that no private firm would dream of trying to solve a "shortage" by telling peo ple to buy less. It is "only govern ment that 'solves' its traffic prob lems ... by forcing trucks ... off the road ... the 'ideal' solution to traffic congestion is to outlaw all vehicles!" Stignani, leaving a de partment store just before Christ mas, noted the salesgirl's reaction to the crowd ("Our best day yet," she said). But the postman, de positing a heavy mail at Stignani's home, remarked that it was "the worst day we've ever had!" The Self-Starting Individual Turning to positive entries, and beginning with the self -starting individual, Mr. Read prints Alexis de Tocqueville on the "greatness and genius of America." The ge nius was not, in Tocqueville's day, to be found in fertile fields and boundless forests, nor even in schools or the "matchless Consti tution." Not until he had gone to the churches of America did Toc queville understand that "America is great because America is good."

(Query: what would he find in the churches today, where the preoc cupation of many a pastor is with the "social," not the personal gospel ?) Mr. Read finds plenty of modern Tocquevilles around. Says Frank Chodorov: "There cannot be a 'good' society until there are 'good' men." Says Cardinal Gib bons: "Reform must come from within, not from without. You can not legislate virtue."The morality on which Tocque ville, Chodorov and Cardinal Gib bons have been all agreed is grounded in the grain of the uni verse as it applies to human soci ety. William Graham Sumner sometimes talked against "natural rights," but, fundamentally, he be lieved in natural law, from which 197J" THE FREE MAN'S ALMANAC 755 natural rights must be deduced. Said Sumner, about the accumula tion of property: ". . . the devel opment of character, or of any other good whatever, is impossible without property. The invectives against capital in the hands of those who have it, are doublefaced, and when turned about are no thing but demands for capital in the hands of those who have it not, in order that they may do with it what those who have it are now doing with it." (Doesn't this amount to a recognition of the "natural right" to capital?) The Origin of Rights Clarence Carson is clearer than Sumner on the origin of "rights."

"If government can create rights," he says, "it can withhold and de stroy rights." Shortsighted or stupid people can, of course, give up their rights to organized force. Edmund Burke, quoted by Leon ard Read, tells us how this hap pens. "Men," wrote Burke, "are qualified for civil liberty in exact proportion to their disposition to put moral chains upon their own appetites ... it is ordained in the eternal constitution of things, that men of intemperate minds cannot be free. Their passions forge their fetters." The government that is "organ ized force" takes over by insens ible degrees as men let their greed master their better impulses. John Adams, a greatly neglected source of political wisdom, said that "to expect self-denial from men, when they have a majority in their fa vor and consequently power to gratify themselves, is to disbelieve all history and universal experi ence."

Once a maj ori ty has turned to government to satisfy its desires, we are on our way to the condi tion noted by Herbert Spencer: "The more numerous public in strumentalities become, the more is there generated in citizens the notion that everything is to be done for them, and nothing by them. Every generation is made less familiar with the attainment of desired ends by individual ac tions or private agencies; until, eventually, governmental agencies come to be thought of as the only available agencies." So, if you want to strike a blow for freedom, stop asking Wash ington for protection of all sorts. The protection may help you for the moment - but, multiplied over thousands of individuals, it will most assuredly "forge your fet ters." Trust Freedom Freedom alone is to be trusted to serve the individual. Montes quieu said it long ago: "Countries are well cultivated, not as they are 756 THE FREEMAN December fertile, but as they are free." Lud wig von Mises, speaking for free production, wrote that "the very principle of capitalist entrepre neurship is to provide for the com mon man. In his capacity as con sumer the common man is the sovereign whose buying or absten tion from buying decides the fate of entrepreneurial activities. There is in the market economy no other means of acquiring and preserv ing wealth than by supplying the masses in the best and cheapest way with all the goods they ask for."

Paul Poi rot, expanding on Mises, remarks on the extra-mar ket value of a market place kept free from compulsion. "The free market," he says, "and not its displacement by governmental controls, is the only route to the kind of personal security which makes for harmonious social re lationshi ps." President Ford believes in WIN buttons. But it is Leonard Read who knows that you don't "win" by sloganeering; you need the sort of wisdom that he has assembled for all the days of the year in The Free Man's Almanac. ~ COMPETITION AND ENTRE PRENEURSHIP by Israel M. Kirzner (Chicago: University of Chicago Press, 1973) 246 pages, $7.95 Reviewed by Henry Hazlitt THIS IS A FIRST-RATE contribution to the theory of competition and entrepreneurship. Professor Kirzner is a former student of the late Ludwig von Mises. He tells us in his Preface that his book can be viewed as a critique of contemporary price theory from an "Austrian" per spective, and he modestly declares: "Above all I owe whatever under standing I have of the market process to almost two decades of study under L. Mises, whose ideas as expounded in a lifetime's work are only beginning to be properly appreciated."

This does not mean that Kirz ner's own work lacks originality. On the contrary, by applying his "Austrian" concepts and analysis very thoroughly and patiently to the immense body of literature on price theory that has appeared in England and America over the last generation, he has not only succeeded in exposing its central fallacies but has arrived at pene trating insights and advances in market theory. His first attack is on the "ortho dox" theory of marketequilibri um. (By "orthodox" he means the 1974 OTHER BOOKS 757 bulk of the technical economic lit erature of the last few decades. This may be confusing to older readers brought up to regard classical or neo-classical economics as orthodox. But he is right in his implication that this recent price theory, which began as hetero doxy, has itself become a new orthodoxy. ) The central error of this new orthodoxy is that it regards mar ket "equilibrium" as a situation that tends to be arrived at auto matically, because every person in the market must recognize and do what is to his own advantage.

Kirzner points out that this "me chanical" theory of decision-mak ing unconsciously assumes a world of perfect knowledge and predic tion. In such a world there would be no need or scope for the entre preneur. As defined by Kirzner, the en trepreneur is the decision-maker who is alert to hitherto unnoticed opportunities. His function is to increase productivity by providing consumers with types of goods with which they have not previ ously been provided, or goods of a better quality or at a cheaper cost. Contrary to the theory of Joseph Schumpeter, the entrepreneur's actions move the economy closer toward equilibrium rather than away from it. The reward for his alertness is profits. The Market Process The error of the current "mar ket equilibrium" doctrine, Kirzner emphasizes again and again, is that it overlooks or takes for granted the proc1essthat moves the market toward equilibrium.

Kirzner goes on to analyze cur rent theories of competition and monopoly. He politely points out the fallacies both in theconcep tions of "perfect competition" and of "monopolistic competition." Both arise from regarding com petition as a "situation" rather than as a process. Both are equi librium theories. "The theory of monopolistic competition was on balance a decidedly unfortunate episode in the history of modern thought." One insight of Kirzner's helps beget others. In a chapter on Sell ing Costs, Quality and Competi tion he points out that so-called "selling costs" are an essential part of production costs, and can not be legitimately separated from them in economic theory. In the final analysis, all costs are "sell ing costs." Pushing this still further, he shows that advertising is not only an inseparable part of selling costs, but on net balance a service to the consumer. It makes him aware of a buying opportunity, at the same time as it is an essential part of the process which spurs the indi758 THE FREEMAN December vidual producer to try to turn out a better product than his competi tors.

A chief function of competition and entrepreneurship, as Kirzner sees it, is to bring a closer and clos e coordination in the decisions of ~ ~~';/ ers and sellers through which og..,~£C/ bo~h secure an advantage. It is ~J 'c: ,r:~e heady scent of profits" that Vvl,.(/~"<>\/'\:,pt!omotes alertness to hitherto un ~~~t,/.v,(\, discovered opportunities for re 1~ vt"/'~lducing costs or developing new or 1lTV 0 !~1bet ducts. o Among other things, Kirzner iJ~ makes a devastating attack on the ~' ~criticism by socialists and others ~0-4 that competition is "wasteful." ~I)~J(I' J During the competitive process (0" y1-' t~rough which the market ap ~ ,,*~roaches equilibrium, he points ~ \.0-," 2Y' out, there is imperfection of ~{(!'k\nowledge. But it is the market ~., 1.~OV.\Y~1ocess itself that steadily moves et.lit' L't,li)oward eliminating previous ig-t 'ftl)"'" (l."( \.' norance. :1.\ From the point of view of an ,,;.t~4jIL o"mniscient observer, the market ~. \ \ t' t, ,would indeed display waste and mis\ allocation at every stage. We in the "1970's, for example, can look back amused condescension on the 1920's, when a thousand inven tions and discoveries known today had not been made. We can see that any number of resources were not then being put to the best uses now known for them. But it was the competitive process that led to these discoveries. Even the best economists (not to speak of engi neers or other technicians) of the 1920's did not then recognize these "wastes" and "inefficiency." Sure ly the efficiency of the competitive process is entitled to be judged, as Kirzner puts it, "not on the degree of conformity to the ideal alloca tion as seen from the perspective of omniscience, but on the degree to which currently known informa tion is being optimally deployed."

In a similar way, critics often declare that it is obviously waste ful for someone to put up a new competing factory to make wid gets when the first could produce all that are needed. But we cannot know until after the competing production starts which of the two factories, the old or the new, is truly "wasteful." I have· a few minor criticisms. Professor Kirzner believes that the function of the "entrepreneur" can be completely separated from the function of the "capitalist." The "pure entrepreneur," he tells us (p. 40), can be "a decision maker who starts out without any means whatsoever" (his italics). And again (p. 99), "purely entre preneurial activity involves no element of resource ownership." This is questionable. The en trepreneur-producer is by defini tion a man who takes risks, and with his own capital. If he is tak1974 OTHER BOOKS 759 ing risks simply with other peo-on an assumed future condition.

pIe's capital he is merely a hired 'What he acts on may not be a per manager. True, he may borrow his eeption but a guess. As Kirzner capital from others; but if his himself concedes at one place (p. project fails he must pay back, 86), the entrepreneur's action and he must have previous capital "must to some extent constitute of his own to do that. The entre-a gamble." preneur, in short, must be a capi-The point is important, particu talist plus. He is a capitalist will-larly in view of Kirzner's criticism ing to take unusual risks. Kirzner of Frank H. Knight's emphasis on seems to me sometimes to reserve uncertainty and his view of pure the term "entrepreneur" merely profit as a residual. Kirzner re for the successful entrepreneur. plies that "every entrepreneurial Again, Kirzner identifies the decision taken envisages only distinguishing feature of the en-profits.... Treating profits as a trepreneur as alertness (which residual fails to disclose that from he frequently italicizes). He is the the point of view of the pro spec one who perceives an opportunity. tive entrepreneur the profit op (Kirzner also usually italicizes portunity is, with all its uncer"perceives.") tainty, there."

/ But two qualifications shoul But this is precisely the quespe made. It is not enough that th tion. /s it there? Every entre~ntreprenuer be "alert" and tha preneur is pitting his own guess the "perceive" an opportunity; he or "perception" against the com must act on his alertness and per-posite guess or perception of all ception. No doubt Kirzner means the rest. As Knight saw, they can to imply this, but does not always not all be right. make it sufficiently explicit. By Yet Kirzner seems to me to be omitting this link he tends to justified in his criticism of overstress the entrepreneur's Knight, though for a different rea alertness and perception while son than he himself explicitly under-emphasizing his courage in gives. Net pure profit, as Knight taking risks. pointed out, may come to only half This brings us to the second the entrepreneurs: those who qualification. It is not always true follow the pioneers too late may that the entrepreneur perceives suffer comparative losses. But an opportunity. He thinks he per-pure profits are, after all, essen ceives it. He perceives an a/pparent tially a by-product of increased opportunity. In fact, he is be~;:~C_~:~4 -in reducing the cost of 760 THE FREEMAN December a product, improving its quality, or inventing or exploiting a com pletely new product. It is this in creased efficiency or productivity that individual entrepreneurs strive for in order to increase their profits. The successful pio neers do reap increased profits; their followers and imitators may not. Yet, regardless of what it finally does or does not do to in crease overall profits, the whole process immensely benefits all of us as consumers, as the history of the last two centuries so dramat ically demonstrates. Profit-seeking may not always lead to profits, but it does lead to progress.

Some of my criticisms may ap ply more to oversights in Dr. Kirzner's exposition than to de fects in his theories. In making them I hope I do not draw atten$2.50 each ORDER FROM: THE FOUNDATiON FOR ECONOMIC EDUCATION IRVINGTON-ON-HUDSON, NEW YORK 10533 In de THE FREEMAN - Volume 24, January-December1974 Prepared by BETTINA BIEN GREAVES of the Foundation staff NOTE: In page references, the number preceding the colon designat~s the mo~th, those fol~ow ing refer to pages. All articles have at least three entries-aut~or, subJec~, and tttle-except In a few cases when title clearly indicates subject matter. Books reviewed are ltsted on page 768. A ALIENATED, right to feel (Rubanowice) 11:670-673 ALL different (Ellis) 11:691 ANARCHY In quest of justice (Foley) 5:301-310 Necessity of government, The (Kelley) 4: 243-248 ANDERSON, C. W. Price, the peaceful regulator. 5:265-266 ANDERSON, Robert G.

Windfall profits. 5: 286-290 See also Book reviews (Kooiman) ANOTHER case history of government failure (Siegan) 6: 362-364 ANTITRUST Competition, monopoly, and the role of government (Petro) 2:91-100 See also Competition ARE you concerned? (Blanco) 6: 334-337 B BACK door press control (Barger) 2: 106-113 BADHW AR, N eera What does America owe to the "Third World"? 10:585-591 BARGER, Melvin D. Back door press control. 2: 105-113 Socialism seeks its own level. 6: 356-361 See also Book reviews (Blumenfeld; Harrison) BASTIAT, Frederic Motive force of society, The. 4: 228-237 BELEAGUERED businessman, The (Gresham) 9: 536-544 BEST housing hope (Siegan) 4:221-223 BICENTENNIAL - spirit of Political freedom is not enough (Upton) 9: 549-559 Theme for the Bicentennial, A: the Founding Fathers' fear of power (Brownfeld) 10: 579-584 See also Freedom; U.S. history, etc. BLANCO, Ernesto E. Are you concerned? 6: 334-337 BLESSINGS of diversity, The (Read) 5: 295-297 BLINDNESS of macro-economics, The ( LaDow) 11: 643-651 BRADFORD, Ralph Enigma, The. 9: 564-572 On "using" the government. 1: 24-34 Our lives and goods. 2:74-79 What are you worried about? 8 :451-463 BRITISH booksellers learn to compete (Nelms) 11:674-679 BROWNFELD, Allan C.

False god of politics, The. 2: 101-104 Theme for the Bicentennial, A: the Founding Fathers' fear of power. 10: 579-584 See also Book reviews (Candlin; Dargo; Koerner; Kuehnelt-Leddihn; Machan) BUECHNER, M. Northrup Dog-eat-dog competition. 10: 614-626 BUILDING/construction/housing Another case history of a government failure (Siegan) 6: 362-364 Best housing hope (Siegan) 4: 221-223 Land use regulation - a tool of politics, not of planning (Siegan) 3: 138-141 Lower interest rates by law (Greaves) 12: 740-747 Public goods and fear of foreigners (North) 3:131-137 BUSINESS/corporate "responsibility" Beleaguered businessman, The (Gresham) 9: 536-544 Public interest of private enterprise, The (WHPeterson) 2: 82-87 See al80 Profits BUSINESS and its image (Watts) 7:393-408 BUSINESS of undermining business, The (Zupan) 8:490-494 BUTZ, Earl L. There's no such thing as a free lunch. 7: 431-435 c CANADA Welfare fifty years hence (Shumiatcher) 3:174-183 CAPITAL conservation (Speer) 3:142-151 CAPITALISM Makers or takers (Don way) 9: 532-535 Marx, Mises and socialism (Osterfeld) 10: 605-611 Price competition and expanding alternatives (North) 8 :467-476 Ugly market, The: why capitalism is hated, feared and despised (Kirzner) 12: 724-736 CAPIT ALISM and the wages of virtue (Donway) 12:719-723 CASTLES in the air (Read) 11:654-657 CHAMBERLAIN, John. See Book reviews CHARITY, private/voluntary Give thought how you give (Patrick) 6: 365-370 761 762 THE FREEMAN December Value and the welfare state (Summers) 11: 692-694 Welfare fifty years hence (Sh umia tcher) 3:174-183 What is philanthropy? (LaDow) 9:526-531 CHOICE or chains (Foley) 4:199-204 CITY /local government Another case history of a government failure (Siegan) 6: 362-364 "Free parking" - space not available (North) 1: 50-52 Impossible riddles (Siegan) 11: 668-669 Land use regulation-a tool of politics, not of planning (Siegan) 3:138-141 Public goods and fear of foreigners (North) 3: 131-137 Regulation helps the rich and harms the poor (Siegan) 10:612-613 Tales of three cities (Wilke) 12:748-752 COMMUNISM. See Russia; Socialism COMPETITION British booksellers learn to compete ( Nelms) 11: 674-679 Capitalism and the wages of virtue (Donway) 12:719-723 Dog-eat-dog competition (Buechner) 10: 614-626 Price competition (Buechner) 10: 614-626 Price competition and expanding alternatives (North) 8:467-476 COMPETITION: key to consumer dominance (Siegan) 5: 298-300 COMPETITION, monopoly and the role of government (Petro) 2:91-100 CONSERVATION, capital (Speer) 3: 142-151 CONSUMER sovereignty Competition: key to consumer dominance (Siegan) 5: 298-300 Economic calculation (Summers) 10: 602-604 Windfall profits (RGAnderson) 5: 286-290 See also Prices/pricing CONSUMERISM Do you want to live forever? (LaDow) 3: 155-162 Liberty vs. coercion: the burden of proof (Machan) 1: 35-38 "New" protectionism, The (Stevens) 11: 680-690 Voluntarist's role, The (Foley) 1:10-17 COONEY, Ronald F.

Individual and majority rule, The. 11: 661-667 CUBA Are you concerned? (Blanco) 6: 334-337 CURTISS, W. Marshall. See Book reviews (Trueblood) D DAVENPORT, John. See Book reviews (Chamberlain) DEMERS, R. W. From whence comes the wind. 2: 88-90 DEMOCRACY Individual and majority rule, The (Cooney) 11: 661-667 Political freedom is not enough (Upton) 9: 549-559 DIVERSITY, blessings of (Read) 5:295-297 DO you want to live forever? (LaDow) 3: 155-162 DOG-eat-dog competition (Buechner) 10: 614-626 DONWAY, Roger Capitalism and the wages of virtue. 12: 719-723 Makers or takers. 9: 532-535 Markets and morals. 4: 195-198 DOUGLAS, George H. Aleksandr Solzhenitsyn - some lessons for Americans. 12: 707-718 DRAFT, high cost of (McNown/Lee) 10: 627-631 E ECONOMIC calculation Marx, Mises and socialism (Osterfeld) 10: 605-611 Socialism seeks its own level (Barger) 6: 356-361 See also Prices/pricing ECONOMIC calculation (Summers) 10:602-604 ECONOMIC development/progress Great objective of a free people, The (Prochnow) 6: 338-340 Multinational corporation, The (MPeterson) 1: 18-23 What does America owe to the "Third World"? (Badhwar) 10:585-591 EDUCATION, schooling/public "It's for real" (WHPeterson) 11: 658-660 On "using" the government (Bradford) 1: 24-34 Why is liberalism endemic? (LaDow) 10: 595-601 ELLIS, George All different. 11: 691 ENERGY "crisis"

Alternative futures (Kizer) 8: 495-500 Are you concerned? (Blanco) 6: 334-337 Castles in the air (Read) 11: 654-657 FEO and the gas lines (Friedman) 5: 263-264 How not to cure an energy crisis (North) 2: 67-73 Made in Washington (Poirot) 5:267-269 Matter of self-responsibility, A (Poirot) 2: 118-122 "New" protectionism, The (Stevens) 11: 680-690 ENIGMA, The (Bradford) 9: 564-572 1974 INDEX 763 ENTREPRENEUR. See Capitalism: Consumer sovereignty; Profits ENVY jgreed/egalitarianism Puritan experiment with sumptuary legislation, The (North) 6:341-355 Ugly market, The: why capitalism is hated, feared and despised (Kirzner) 12: 724-736 What does America owe to the "Third World"? (Badhwar) 10:585-591 Why is liberalism endemic? (LaDow) 10:595-601 F FALSE god of politics, The (Brownfeld) 2: 101-104 FEO and the gas lines (Friedman) 5: 263-264 FOLEY, Ridgway K., Jr. Choice or chains. 4: 199-204 In quest of justice. 5: 301-310 "Speak for yourself, John" revisited.

9: 522-525 Voluntarist's role, The. 1: 10-17 See also Book reviews (Dietze) FOR the sake of the poor (Poirot) 7: 409-412 "FREE parking" - space not available (North) 1 :50-52 FREEDOM Motive force of society, The (Bastiat) 4: 228-237 Our lives and goods (Bradford) 2:74-79 What are you worried about? (Bradford) 8:451-463 FREEDOM of press/speech/thought Aleksandr Solzhenitsyn - some lessons for Americans (Douglas) 12:707·718 Back door press control (Barger) 2: 105-113 Individual and majority rule, The (Cooney) 11: 661-667 FREEDOM'S bounty (Keyser) 9:560-563 FRIEDMAN, Milton FEO and the gas lines. 5: 263-264 FRIEDMAN, Milton - ideas of You cannot trust governments with your money (Hazlitt) 7:387-392 FROM whence comes the wind (Demers) 2: 88-90 FUTURE of the dollar, The (Hazlitt) 1:39-49 FYFE, David A. Inflation: harbinger of monetary upheaval. 6: 327-333 G GIVE thought how you give (Patrick) 6: 365-370 GOVERNMENT intervention/regulation I control Blindness of macro-economics, The ( LaDow) 11: 643-651 Business and its image (Watts) 7: .393-408 Do you want to live forever? (LaDow) 3: 155-162 Energy crisis, The: alternative futures ( Kizer) 8: 495-500 How not to cure an energy crisis (North) 2: 67-73 Lower interest rates by law (Greaves) 12:740-747 Made in Washington (Poirot) 5:267-269 "New" protectionism, The (Stevens) 11:680-690 Political freedom is not enough (Upton) 9: 549-559 "Social security" mirage, The-current production paramount (Paton) 3:167-171 "Speak for yourself, John" revisited ( Foley) 9: 522-525 Ugly market, The: why capitalism is hated, feared and despised (Kirzner) 12: 724-736 GOVERNMENT licensing Back door press control (Barger) 2: 105-113 Competition, monopoly, and the role of government (Petro) 2: 91-100 GOVERNMENT, nature/role of Competition, monopoly, and the role of government (Petro) 2:91-100 False god of politics, The (Brownfeld) 2: 101-104 Necessity of government, The (Kelley) 4: 243-248 Proper distrust, A (Wallis) 8:476-477 Our lives and goods (Bradford) 2: 74-79 GO VERNMENT spending On "using" the government (Bradford) 1: 24-34 There's no such thing as a free lunch (Butz) 7: 431-435 What is seen and what is not seen (Summers) 3:172-173 GREA T objective of a free people, The (Prochnow) 6: 338-340 GREAVES, Percy L., Jr.

Lower interest rates by law. 12:740-747 GRESHAM, Perry E. Beleaguered businessman, The. 9: 536-544 GROVE, Cecil V. Who owns the job? 11: 652-653 GUARNIERI, Robert L. Why gold is money. 10:592-594 GULLIBLE society, The (Paton) 1; 3-9 GULLIBILITY, reflections on (Read) 9: 545-548 H HAZLITT, Henry Future of the dollar, The. 1: 39-49 You cannot trust governments with your money, 7:387-392 See also Book reviews (Greaves; Hayek; Kirzner) HIGH cost of the draft, The (McNown/Lee) 10:627-631 HILLENDAHL, Wesley H. Inflation: by-product of ideologies in collision. 7: 413-425 764 THE FREEMAN December HISTORY, Mises and Fisher on ( WHPeterson) 6: 323-326 HOW not to cure an energy crisis (North) 2:67-73 IDEAS/ideologies, anticapitalistic Beleaguered businessman, The (Gresham) 9:536-544 Business of undermining business, The (Zupan) 8: 490-494 Dog-eat-dog competition (Buechner) 10: 614-626 Enigma, The (Bradford) 9: 564-572 Gullible society, The (Paton) 1: 3-9 Individual and majority rule, The (Cooney) 11: 661-667 Inflation: by-product of ideologies in collision (Hillendahl) 7: 413-425 Ugly market, The: why capitalism is hated, feared and despised (Kirzner) 12: 724-736 IDEAS/inventiveness/ingenuity Castles in the air (Read) 11:654-657 Energy crisis, The: alternative futures (Kizer) 8: 495-500 Rare moment, The (Read) 7:426-430 Strive for the simple life (Read) 3:163-166 IMPOSSIBLE riddles (Siegan) 11: 668-669 IN quest of justice (Foley) 5:301-310 INDIVIDUAL actions/values/variations All different (Ellis) 11: 691 Blessings of diversity, The (Read) 5:295-297 Capitalism and the wages of virtue (Donway) 12:719-723 Choice or chains (Foley) 4: 199-204 Give thought how you give (Patrick) 6: 365-370 Liberty vs. coercion: the burden of proof (Machan) 1: 35-38 Motive force of society, The (Bastiat) 4:228-237 INDIVIDUAL and majority rule, The (Cooney) 11: 661-667 INFLATION: by-product of ideologies in collision (Hillen dahl) 7: 413-425 INFLATION: harbinger of monetary upheaval (Fyfe) 6:327-333 INTEREST rates, market or manipulated Lower interest rates by law (Greaves) 12:740-747 INVISIBLE hand, The (Read) 2: 114-117 IS inflation here to stay? (Markovitz) 4:238-242 "IT'S for real" (WHPeterson) 11: 658-660 J JOHNSON, Thomas. See Book reviews (Burleigh) JUSTICE, in quest of (Foley) 5:301-310 JUSTICE, peace and (Russell) 5: 311-313 K KELLEY, David Necessity of government, The. 4: 243-248 KEYSER, Carl A.

Freedom's bounty. 9: 560-563 KIRZNER, Israel M. Ugly market, The: why capitalism is hated, feared and despised. 12: 724-736 KIZER, John B. Energy crisis, The: alternative futures. 8 :495-500 L LABOR - unions/wages/employment Competition, monopoly, and the role of government (Petro) 2:91-100 Lower interest rates by law (Greaves) 12: 740-747 Multinational corporation, The (MPeterson) 1:18-23 Who owns the job? (Grove) 11: 652-653 LaDOW, Charles R. Blindness of macro-economics, The. 11: 643-651 Do you want to live forever? 3:155-162 What is philanthropy? 9:526-531 Why is liberalism endemic? 10:595-601 LAND, ownership/use of Capital conservation (Speer) 3: 142-151 Public goods and fear of foreigners (North) 3: 131-137 Puritan experiment in common ownership, The ( North) 4: 209-220 Taking issue, The (Siegan) 8: 464-466 Those fellows with black hats-the speculators (JASparks) 8:478-489 See also City/local government LAND use regulation - a tool of politics, not of planning (Siegan) 3: 138-141 LA W versus tyranny (Read) 10: 632-636 LEE, Dwight (and McNown, Robert) High cost of the draft, The. 10:627-631 LIBERTY vs. coercion: the burden of proof (Machan) 1: 35-38 LIVING with shortages (Sabroff) 5:259-262 LOWER interest rates by law (Greaves) 12: 740-747 M MACHAN, Tibor R.

Liberty vs. coercion: the burden of proof. 1: 35-38 MACRO-ECONOMICS, blindness of (LaDow) 11 :643-651 MADE in Washington (Poirot) 5:267-269 MAJORITY rule, individual and (Cooney) 11: 661-667 MAKERS or takers (Don way) 9: 532-535 MARKETS and morals (Donway) 4: 195-198 MARKOVITZ, Morris J. 1$ inflation here to $tay? 4: 238-242 1974 INDEX 765 MARX, Mises and socialism (Osterfeld) 10:605-611 MARX, Karl - ideas of Price competition and expanding alternatives (North) 8:467-476 What does America owe to the "Third World"? (Badhwar) 10:585-591 MATTER of self-responsibility, A (Poirot) 2: 118-122 McDONALD, Stanley C. On misery and rule. 4: 205-208 McNOWN, Robert (and Lee, Dwight) High cost of the draft, The. 10:627-631 MISES and Fisher on theory and history (WHPeterson) 6: 323-326 MISES, Ludwig von - ideas of Competition, monopoly, and the role of government (Petro) 2:91-100 Lower interest rates by law (Greaves) 12: 740-747 Markets and morals (Donway) 4:195-198 Marx, Mises and socialism (Osterfeld) 10:605-611 Socialism seeks its own level (Barger) 6:356-361 Ugly market, The: why capitalism is hated, feared and despised (Kirzner) 12:724-736 MONEY and inflation Future of the dollar, The (Hazlitt) 1:39-49 Inflation: by-product of ideologies in collision (Hillendahl) 7:413-425 Inflation: harbinger of monetary upheaval (Fyfe) 6: 327-333 Is inflation here to stay? (Markovitz) 4 :238-242 Lower interest rates by law (Greaves) 12:740-747 Why gold is money (Guarnieri) 10:592-594 Yielding to temptation (JCSparks) 7: 436-438 You cannot trust governments with your money (Hazlitt) 7:387-392 MONOPOLY. See Antitrust MORALS/morality /ethics Capitalism and the wages of virtue (Donway) 12:719-723 Choice or chains (Foley) 4:199-204 Law versus tyranny (Read) 10:632-636 Markets and morals (Donway) 4:195-198 Yielding to temptation (JCSparks) 7 :436-438 MOTIVE force of society, The (Bastiat) 4: 228-237 MUD pies for sale (Poirot) 12:737-739 MULTIN A TION AL corporation, The (MPeterson) 1:18-23 N NECESSITY of government, The (Kelley) 4:243-248 NELMS, Willie E.

British booksellers learn to compete. 11: 674-679 "NEW" protectionism, The (Stevens) 11: 680-690 NO more repeat performances (Siegan) 7: 438-440 NORTH, Gary "Free parking" - space not available. 1: 50-52 How not to cure an energy crisis. 2:67-73 Price competition and expanding alternatives. 8: 467-476 Public goods and fear of foreigners. 3:131-137 Puritan experiment in common ownership, The. 4: 209-220 Puritan experiment with price contro.Js, The. 5: 270-285 Puritan experiment with sumptuary legislation, The. 6: 341-355 o ON misery and rule (McDonald) 4:205-208 ON "using" the government (Bradford) 1: 24-34 OPITZ, Edmund A. Socialism. 3: 152-154 See also Book reviews (Nock; North) OSTERFELD, Dave Marx, Mises and socialism. 10:605-611 OUR lives and goods (Bradford) 2:74-79 p PATON, W. A. Gullible society, The. 1: 3-9 "Social security" mirage, The - current production paramount. 3: 167-171 PATRICK, James C.

Give thought how you give. 6: 365-370 PEACE and justice (Russell) 5:311-313 PETERSON, Mark Multinational corporation, The. 1: 18-23 PETERSON, William H. "It's for real". 11: 658-660 Mises and Fisher on theory and history. 6: 323-326 Public interest of private enterprise, The - and the private interest of public policy. 2: 82-87 PETRO, Sylvester Competition, monopoly and the role of government. 2:91-100 prETRUSZA, David A. See Book reviews (Sutton) POrROT, Paul L. For the sake of the poor. 7: 409-412 Made in Washington. 5:267-269 Matter of self-responsibility, A. 2: 118-122 Mud pies for sale. 12: 737-739 See also Book reviews (Velasco) POLITICAL freedom is not enough (Upton) 9: 549-559 766 THE FREEMAN December POLITICS, false god of (Brownfeld) 2: 101-104 PORTER, Bruce D. See Book reviews (Bahr, et al) POVERTY, relief of For the sake of the poor (Poirot) 7:409-412 On misery and rule (McDonald) 4: 205-208 Rewarding failure (Renstrom) 9: 515-521 PRESCRIPTION to soothe one's wounds, A (JCSparks) 2:79-81 PRICE competition and expanding alternatives (North) 8:467-476 PRICE controls, Puritan experiment with (North) 5:270-285 PRICE, the peaceful regulator (CWAnderson) 5: 265-266 PRICES/pricing Economic calculation (Summers) 10: 602-604 Living with shortages (Sabroff) 5: 259-262 Mud pies for sale (Poirot) 12: 737-739 See also Consumer sovereignty; Government intervention PROCHNOW, Herbert V.

Great objective of a free people, The. 6: 338-340 PROFITS/losses, entrepreneurial Business and its image (Watts) 7:393-408 Economic calculation (Summers) 10: 602-604 For the sake of the poor (Poirot) 7:409-412 Windfall profits (RGAnderson) 5: 286-290 PROPER distrust, A (Wallis) 8:476-477 PROTECTIONISM, "new" (Stevens) 11 :680-690 PUBLIC goods and fear of foreigners (North) 3:131-137 PUBLIC interest of private enterprise, The and the private interest of public policy (WHPeterson) 2: 82-87 PURITAN experiment in common ownership, The ( North) 4: 209-220 PURIT AN experiment with price controls, The, (North) 5: 270-285 PURITAN experiment with sumptuary legislation, The (North) 6:341-355 R RARE moment, The (Read) 7:426-430 READ, Leonard E. Blessings of diversity, The. 5: 295-297 Castles in the air. 11: 654-657 Invisible hand, The. 2: 114-117 Law versus tyranny. 10:632-636 Rare moment, The. 7: 426-430 Reflections on gullibility. 9: 545-548 Sanctifying of plunder, The. 4: 224-227 Strive for the simple life. 3: 163-166 REAM, Norman S. See Book reviews (Wheeler) REFLECTIONS on gullibility (Read) 9: 545-548 REGULATION helps the rich and harms the poor (Siegan) 10: 612-613 RENSTROM, Richard C.

Rewarding failure. 9:515-521 RESPONSIBILITY, individual In quest of justice (Foley) 5:301-310 Invisible hand, The (Read) 2: 114-117 Matter of self-responsibility, A (Poirot) 2: 118-122 Prescription to soothe one's wounds, A (JCSparks) 2:79-81 "Speak for yourself, John" revisited (Foley) 9: 522-525 REWARDING failure (Renstrom) 9:515-521 RIGHT to feel alienated, The (Rubanowice) 11 :670-673 ROGERS, Tommy W. See Book reviews (HaberleI') ROLE of savings, The (Summers) 5:291-294 RUBANOWICE, Robert J. Right to feel alienated, The. 11: 670-673 RUSSELL, Dean Peace and justice. 5: 311-313 RUSSIA Aleksandr Solhenitsyn - some lessons for Americans (Douglas) 12 :707-718 Freedom's bounty (Keyser) 9:560-563 Inflation: by-product of ideologies in collision (Hillendahl) 7: 413-425 Marx, Mises and socialism (Osterfeld) 10: 605-611 5 SABROFF, Dick Living with shortages. 5: 259-262 SANCTIFYING of plunder, The (Read) 4: 224-227 SA VINGS and investment Business and its image (Watts) 7:393-408 For the sake of the poor (Poirot) 7: 409-412 Lower interest rates by law (Greaves) 12:740-747 Role of savings, The (Summers) 5:291-294 SCHMIDT, Emerson P. See Book reviews (Cutler) SENNHOLZ, Hans F. See Book reviews (Reinach) SHUMIATCHER, Morris C.

Welfare fifty years hence. 3: 174-183 SIEGAN, Bernard H. Another case history of a government failure. 6: 362-364 Best housing hope. 4: 221-223 Competition: key to consumer dominance. 5: 298-300 Impossible riddles. 11: 668-669 Land use regulation - a tool of politics, not of planning. 3: 138-141 No more repeat performances. 7:438-440 Regulation helps the rich and harms the poor. 10: 612-613 Taking issue, The. 8: 464-466 1974 INDEX 767 SIMPLE life, strive :J;or the (Read) 3: 163-166 SLAVERY Freedom's bounty (Keyser) 9: 560-563 "SOCIAL security" mirage, The - current production paramount (Paton) 3: 167-171 SOCIALISM (Opitz) 3: 152-154 SOCIALISM seeks its own level (Barger) 6: 356-361 SOCIALISM - Marx, Mises and (Osterfeld) 10:605-611 SOLZHENITSYN, Aleksandr - some lessons for Americans (Douglas) 12:707-718 SPARKS, John A. Those fellows with black hats - the speculators. 8:478-489 SPARKS, John C.

Prescription to soothe one's wounds, A. 2: 79-81 Yielding to temptation. 7 :436-438 "SPEAK for yourself, John" revisited (Foley) 9: 522-525 SPECULATION, entrepreneurial Those fellows with black hats - the speculators (JASparks) 8:478-489 Windfall profits (RGAnderson) 5:286-290 SPEER, Edgar B. Capital conservation. 3: 142-151 STEVENS, Paul "New" protectionism, The. 11: 680-690 STRIVE for the simple life (Read) 3:163-166 SUMMERS, Brian Economic calculation. 10: 602-604 Role of savings, The. 5:291-294 Value and the welfare state. 11: 692-694 What is seen and what is not seen. 3: 172-173 T TAKING issue, The (Siegan) 8:464-466 TALES of three cities (Wilke) 12:748-752 THEME for the Bicentennial, A: the Founding Fathers' fear of power (Brownfeld) 10: 579-584 THERE'S no such thing as a free lunch (Butz) 7: 431-435 THORNTON, Robert M. See Book reviews (Kelton; Miller) THOSE fellows with black hats - the speculators (JASparks) 8:478-489 TRADE, international Future of the dollar, The (Hazlitt) 1:39-49 Matter of self-responsibility, A (Poirot) 2: 118-122 Multinational corporation, The (MPeterson) 1: 18-23 "New" protectionism, The (Stevens) 11: 680-690 TREICHLER, Martha. See Book reviews ( Solzhenitsyn) U UGLY market, The: why capitalism is hated, feared and despised (Kirzner) 12:724-736 U. S. history On "using" the government (Bradford) 1 :24-34 Puritan experiment in common ownership, The (North) 4:209-220 Puritan experiment with price controls, The (North) 5: 270-285 Puritan experiment with sumptuary legislation, The (North) 6:341-355 Theme for the Bicentennial, A: the Founding Fathers' fear of power (Brownfeld) 10:579-584 UPTON, Miller Political freedom is not enough. 9: 549-559 V VALUE and the welfare state (Summers) 11: 692-694 VOLUNTARIST'S role, The (Foley) 1:10-17 W WALLIS, W. Allen Proper distrust, A. 8:476-477 WATTS, V. Orval Business and its image. 7: 393-408 WELF ARE fifty years hence (Shumiatcher) 3:174-183 WELF ARE state philosophy Reflections on gullibility (Read) 9: 545-548 Rewarding failure (Renstrom) 9:515-521 Value and the welfare state (Summers) 11: 692-694 What is philanthropy? (LaDow) 9:526-531 Why is liberalism endemic? (LaDow) 10: 595-601 WHA T are you worried about? (Bradford) 8: 451-463 WHA T does America owe to the "Third World"? (Badhwar) 10:585-591 WHAT is philanthropy? (LaDow) 9:526-531 WHAT is seen and what is not seen (Summers) 3: 172-173 WHO owns the job? (Grove) 11: 652-653 WHY gold is money (Guarnieri) 10: 592-594 WHY is liberalism endemic? (LaDow) 10: 595-601 WILKE, Joan Tales of three cities. 12: 748-752 WINDFALL profits (RGAnderson) 5; 286-290 WOLFE, Charles Hull. See Book reviews (Lesly) y YIELDING to temptation (JCSparks) 7 :436-438 YOU cannot trust governments with your money (Hazlitt) 7:387-392 Z ZONING. See Land; Siegan ZUPAN, M. L.

Business of undermining business, The. 8: 490-494 768 THE FREEMAN BOOK REVIEWS (Reviewer's name in parentheses) December BAHR, Howard M.; Chadwick, Bruce A.; Thomas, Darwin L. (eds.) Population, resources and the future (Porter) 5:318-320 BL UMENFELD, Samuel L. How to tutor (Barger) 6: 379-383 BUCKLEY, William F., Jr. Four reforms (Chamberlain) 3: 184-186 ----. United Nations journal (Chamberlain) 11 :695-698 BURLEIGH, Anne Husted (ed .. ) Education in a free society (Johnson) 2:126-127 CANDLIN, A. H. Stanton. Psycho-chemical warfare: the Chinese Communist drug offensive against the West (Brownfeld) 4:254-256 CAUTE, David. The fellow-travellers: a postscript to the Enlightenment (Chamberlain) 9: 573-576 CHAMBERLAIN, John. The enterprising Americans: a business history of the United States (Davenport) 5:317-318 CUTLER, Richard L. The liberal middle class: maker of radicals (Schmidt) 3: 187-189 DARGO, George. Roots of the New Republic: a new perspective on early American constitutionalism (Brownfeld) 11:701-703 DIETZE, Gottfried. Two concepts of the rule of law (Foley) 1:61-64 FISHER, Antony. Must history repeat itself?

( Peterson) 6: 323-326 FLYNN, John T. As we go marching (Chamberlain) 2: 123-126 GIBBON, Edward. See WITONSKI, below. GREAVES, Percy L., Jr. Understanding the dollar crisis (Hazli tt) 1: 59-61 HABERLER, Gottfried. Economic growth and stability (Rogers) 11:700-701 HARRISON, Allen E. How to teach children twice as much (Barger) 6: 379-383 HAYEK, F. A. Law, legislation and liberty. Vol. I, Rules and order (Hazlitt) 8:504-507 HAYES, Paul. Fascism (Chamberlain) 2: 123-126 KELTON, Elmer. The time it never rained (Thornton) 8:511-512 KIRZNER, Israel M. Competition and entrepreneurship (Hazlitt) 12:756-760 KOERNER, James D. Hoffer's America (Brownfeld) 6:377-379 KOOIMAN, Helen. Walter Knott, keeper of the flame (Anderson) 6:374-375 KUEHNELT-LEDDIHN, Erik von, Leftism: from de Bade and Marx to Hitler and Marcuse (Brownfeld) 7: 444-448 LESLY, Philip. The people factor: managing the human climate (Wolfe) 4:252-254 MACHAN, Tibor R. (ed.) The libertarian alternative: essays in social and political philosophy (Brownfeld) 8: 507-509 MILLER, Roger LeRoy. The economics of energy-what went wrong and how we can fix it (Thornton) 8: 509-511 NOCK, Albert Jay. Our enemy, the state (Opitz) 6:383-384 NORTH, Gary. An introduction to Christian economics (Opitz) 11: 698-699 PADDOCK, William & Elizabeth. We don't know how: an independent audit of what they call success in foreign assistance (Chamberlain) 7:441-444 READ, Leonard E. (comp.) The free man's almanac (Chamberlain) 12:753-756 ----. Having my way (Chamberlain) 5:314-317 REINACH, Anthony M. The fastest game in town: trading commodity futures (Sennholz) 3:190-192 RICKENBACKER, William F. (ed.) The 12-year sentence (Chamberlain) 8:501-504 SOLZHENITSYN, Alexander. August 1914 (Treichler) 6: 375-377 ----. Gulag Archipelago (Douglas) 12:707-718 SUTTON, Antony C. National suicide: military aid to the Soviet Union (Pietrusza) 3: 189-190 TONSOR, Stephen. Tradition and reform in education (Chamberlain) 6:371-374 TRUEBLOOD, Elton. Abraham Lincoln theologian of American anguish (Curtiss) 1 :56-59 VELASCO, Gustavo R. Labor legislation from an economic point of view (Poirot) 2: 127-128 WHEELER, Richard S. The children of darkness: some heretical reflections on the kid cult (Chamberlain) 1: 53-56 ----. Pagans in the pulpit (Ream) 11:703-704 WIEGAND, G. C. (ed.) Toward a new world monetary system (Chamberlain) 4:249-252 WITONSKI, Peter P. Gibbon for moderns (Chamberlain) 10:637-640

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Title: The Freeman 1974

Author: Foundation for Economic Education

First published: 1950

Series: The Freeman, volume 24

Source file: The Freeman 1974.pdf

Source page: https://freecapitalists.org/books/the-freeman-1974/

Converted: 2026-08-09 by The Liberty Archive (freecapitalists.org), converter v6

Table of Contents

The Freeman 1974

- The Gullible Society; W. A. Paton
- The Voluntarist's Role; R. Foley, Jr.
- The Multinational Corporationl M. Peterson
- On Using the Government; R. Bradford
- Liberty v. Coercion; T. Machan
- The Future of the Dollar; H. Hazlitt
- Free Parking; G. North
- Book Reviews

February

- How Not to Cure an Energy Crisis; G. North

- Our Lives and Goods; R. Bradford

- A Prescription to Soothe One's Wounds; J. Sparks

- The Public Interest and Private Enterprise; W. Peterson

- From Whence Comes the Wind; R. W. Demers

- Competition, Monopoly, and the Role of Government; S. Petro

- The False God of Politics; A. Brownfeld
- Back Door Press Control; M. Barger
- The Invisible Hand; L.E. Read

- A Matter of Self-Responsibility; P.L. Poirot

- Book Reviews

March

- Public Good and Fear of Foreigners; G. North

- Lang Use Regulation; B. Siegan
- Capital Conservation; E. Speer
- Socialism; E. Opitz
- Do You Want to Live Forever; C. LaDow
- Strive for the Simple Life; L.E. Read
- The Social Security Mirage; W. A. Paton

- What Is Seen and What is Not Seen; B. Summers

- Welfare Fifty Years Hence; M. Shumiatcher

- Book Reviews

April

- Market and Morals; R. Donway
- Choice or Chains; R. Foley, Jr.
- On Misery and Rule; S. McDonald

- The Puritan Experiment in Common Ownership; G. North

- Best Housing Hope; B. Siegan
- The Sanctifying of Plunder; L.E. Read
- The Motive Force of Society; F. Bastiat
- Is Inflation Here to Stay? M. Markovitz
- The Necessity of Government; D. Kelley
- Book Reviews

May

- Living with Shortages; D. Sarroff

- FEO and the Gas Lines; M. Friedman

- Price, the Peaceful Regulator; C. W. Anderson

- Made in Washington; P.L. Poirot

- The Puritan Experiment with Price Controls; G. North

- Windfall Profits; R. Anderson
- The Role of Savings; B. Summers
- The Blessings of Diversity; L.E. Read

- Competition: Key to Consumer Dominance; B. Siegan

- In Quest of Justice; R. Foley
- Peace and Justice; D. Russell
- Book Reviews

June

- Mises and Fisher; W. Peterson
- Inflation; D. Fyfe
- Are You Concerned? E. Blanco

- The Great Objective of a Free People; F. Prochnow

- The Puritan Experiment with Sumptuary Legislation; G. North

- Socialism Seeks Its Own Level; M. Barger

- Another Case History of a Government Failure; B. Siegan

- Give Thought How You Give; G. Patrick

- Book Reviews

July

- You Cannat Trust Governments with Your Money; H. Hazlitt

- Business and Its Image; V. O. Watts
- For the Sake of the Poor; P. L. Poirot
- Inflation; W. Hillendahl
- The Rare Moment; L. E. Read

- There is No Such Thing as a Free Lunch; E. Butz

- Yielding to Temptatoin; J. Sparks
- No More Repeat Performances; B. Siegan
- Book Reviews

August

- What Are You Worried About? R. Bradford

- The Taking Issue; B. Siegan

- Price Competition and Expanding Alternatives; G. North

- A Proper Distrust; W. A. Wallis

- Those Fellows With Dark Hats; J. Sparks

- The Business of Undermingin Business; M. L. Zupan

- The Energy Crisisl;J. Kizer

- Book Reviews

September

- Rewarding Failure; R. Renstrom
- Speak for Yourself, John; R. Foley, Jr.
- What is Philanthropy; C. LaDow
- Makers or Takers; R. Donway
- The Beleagured Businessman; P. Gresham
- Reflections on Gullibility; L.E. Read
- Political Freedom is Not Freedom; M. Upton
- Freedom's Bounty; C. A. Keyser
- The Enigma; R. Bradford
- Book Reviews

October

- The Founding Fathes; A Brownfeld

- What Does America Owe to the Third World; N. Badhwar

- Why Gold is Money; R. Guarnieri
- Why Is Liberalism Endemic? C. LaDow
- Economic Calculation; B. Summers
- Marx, Mises, and Socialism; D. Osterfeld

- Regulation Helps the Rich and Harms the Poor; B. Siegan

- Dog-Eat-Dog; M. N. Buechner

- The High Cost of the Draft; R. McNown and D. Lee

- Law vs. Tyranny; L.E. Read

- Book Reviews

November

- The Blindness of Macro-Economics; C.R. LaDow

- Who Owns the Job; C. V. Grove
- Castles in the Air; L.E. Read
- It's For Real; W. H. Peterson
- The Individual and Majority Rule; R. Cooney
- Impossible Riddles; B. Siegan
- The Right to Feel Alienated; R. Rubanowice

- British Booksellers learn to Compete; W. Nelms

- The New Protectionism; P. Stevens
- All Different; G. Ellis
- Value and the Welfare State; B. Summers
- Book Reveiws

December

- Alexandr Solzhenitsyn; G. Douglas

- Capitalism and the Wages of Virtue; R. Donway

- The Ugly Market: Why Capitalism Is Hated; I. Kirzner

- Mud Pies for Sale; P.L. Poirot

- Lower Interest Rates by Law; P.L. Greaves, Jr.

- Tales of Thre Cities; J. Wilke;

- Book Reviews

Index
Book Reviews
About this edition