===== PAGE 1 =====

IDEAS ON LIBERTY

NOVEMBER 1960

The Man Who Smelled the Future . . . John Chamberlain 3
"We Never Had It So Good” . . . . leonard E. Read 13
Painless Subsidy . . . . . . . . H.P.B. Jenkins 19
Aid, Alternatives, and Discrimination . . Armen A. Alchian and
William R. Allen 20
Seventeen Arguments Against
Socialized Medicine . . . . . . . Darryl W. Johnson, Jr. 25
The World's Worst Folly . . . . . . G. Courtney Conover 29
U.S. Foreign Aid . . . . . . . . Lawrence Sullivan 42
The Common Sense of Progress . . . . F. A. Hayek 44

Book Reviews:

The Science Called Economics . . . . Percy L. Greaves, Jr. 54
A Nation of Purposeful People . . . . John Chamberlain 58
Other Books . . . . . . . . . . 61

THE FOUNDATION
FOR ECONOMIC EDUCATION, INC.

frvingfon-on-Hudson, New York



===== PAGE 2 =====

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THE

Teemdil A MONTHLY JOURNAL OF IDEAS ON LIBERTY

NOVEMBER 1960 Vol. 10 No. 11

LEONARD E. READ President, Foundation for
Economic Education

PAUL L. POIROT Managing Editor

THE FREEMAN 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, founded in 1946, with offices
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Accepted as controlled circulation pubtication at Irvington, N. Y., with
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Permission is hereby granted to anyone to reprint any article in whole
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tives, and Discrimination,” and '‘The Common Sense of Progress.”

F’E Any current article will be supplied in reprint form if there are enough
E inquiries to justify the cost of the printing.


===== PAGE 5 =====

The Man Who
dmelled the
[Future

JOHN CHAMBERLAIN

Cul ver Service

ON JANUARY 30, 1883, William bank depositor bent on adding his
Graham Sumner, Yale’s controver- mite to the productive capital of
sial professor of political and so- the world; he might be a working-
cial science, stood before an audi- man who had scraped together
ence in the rooms of the Brooklyn enough money to build a small two-
Historical Society and delivered a family house whose second story
soon-to-be famous speech on “The could be rented to meet the mort-
Forgotten Man.” This Forgotten gage payments. But, despite his
Man, so the professor said, was own willingness to stand on his
the victim of a conspiracy. Aspir- own feet and ask nothing of the
ing to no office, desiring and giving world, the conspirators would not
no trouble, the Forgotten Man did leave him alone.

his own work without complaint. No, the Forgotten Man was the
He might be the average savings C in what was shortly to become
-_ a famous social equation — the sac-
Mr. Chamberlain, noted critic, journalist, and rificial goat whom A and B (the
editor, regularly presents “A Reviewer's Note-

book” in THE FREEMAN. Among recent works professional do-gooders and their

is his exciting analysis of The Roots of Capi- . eps. . :
talism (Princeton: D. Van Nostrand, 1959). allied politicians) forcibly levied

3


===== PAGE 6 =====

4 THE FREEMAN November

upon to support D, the chronic of church and state charities) ; nor
ne’er-do-well. The vice of such a an object for charitable aid and
formula, so Sumner informed his protection (like animals treated
Brooklyn audience, was that C was with cruelty) ; nor the object of a
allowed no real voice in the matter. job (like the ignorant and illiter-
He might vote to protect himself, ate); nor one over whom senti-
but the votes of D, a poor but nu- mental economists and statesmen
merous category that could be can parade their fine sentiments
easily manipulated by the politi- (like inefficient workmen and
cians, were as the leaves of the shiftless artisans).” No, the For-
trees compared to the meager gotten Man was none of these
strength which C could bring to things. He worked and voted, and
the polls. And so, though he might — generally — he prayed. But, said
have a bedridden aunt to support, Sumner, he always paid. “All the
or a deserving nephew to send to burdens fall on him, or on her, for
trade school, or merely some chil- it is time” — so the professor
dren of his own to educate, the added — “to remember that the
Forgotten Man had nothing left Forgotten Man is not seldom a
for the private charities that, woman.”
blessing giver and receiver alike,
make Christianity a living thing. The Young Crusader

Warming to his subject — and The Sumner who took up the
thinking, no doubt, of his own cudgels in 1883 for the steady, un-
strongly independent father, complaining, abstemious C spoke
Thomas Sumner, whom he was‘'to as a fire-breathing crusader yearn-
describe at a later date as belong- ing to right a grievous wrong.
ing to “the class of men of whom One can see this Billy Sumner as
Caleb Garth in Middlemarch is the he was in the early eighteen
type” — the Yale professor re- eighties, a tall, vigorous, some-
marked that the Forgotten Man what harsh man of 43 given to a
was “not in any way a hero (like fastidious disdain and a limp
a popular orator); or a problem handshake which warned people he
(like tramps or outcasts); nor was no backslapper. His imposing
notorious (like criminals); nor brow was already “magnificently
an object of sentiment (like the bald,” his greenish eyes were
poor and weak); nor a burden sharp and piercing, his clothes im-
(like paupers and loafers) ; nor an maculate, even a trifle foppish. An
object out of which social capital enemy of his views on the tariff
may be made (like the beneficiaries has left an unforgettable impres-


===== PAGE 7 =====

1960 THE MAN WHO SMELLED THE FUTURE 5

sion of his “iron” voice: it “shot Classes Owe to Fach Other,* no
out like a charge from a gun, com- one rose to challenge the feeling
bining a growl with its roar, and that Sumner had put his finger on
ending the sentence with a pecu- a most important problem.
liar snarl from the throat, as if This, at our particular vantage
he would rivet his statement in point which looks back on the
your mind past all removal or dis- eighties as individualistic in the
sent.” Then there was “a strong extreme, must seem something of
nose which, from its commanding an oddity. Indeed, it is even as-
central position in his face, con- tounding. For consider what the
stantly took part, as if swivelled world was in the placid days of
for the purpose, in an extraordi- 1883. Of special relevance to Sum-
nary series of smirks and grim- ner’s speech, it was a world with-
aces, some vicious, some sardonic out the graduated, or ‘‘progres-
— all mischievous and threaten- sive,” income tax. In fact, there
ing.” had been no income tax at all since
Threatening or not, the profes- the purely temporary — and uncon-
sor’s undergraduate students at stitutional — one that had helped
Yale loved both voice and grim- pay for the Civil War. True, there
aces: Billy Sumner in the eighties, had been public monies and lands
not yet the remote and ghostly fig- dispensed to railroads, and there
ure he was to become when he de- was the ever-present tariff. But the
serted economics and political sci- U.S. was, in the early eighties,
ence to pursue the folkways and still close to the soil — and the
the mores to their points of origin, necessities of life were, despite the
was invariably voted the most ef- tariff, largely produced and sold in

fective teacher on the faculty. a locally competitive world.
The politician in the eighties, in
No Record of Dissent fact, had not yet figured out a way

The audience that listened to of getting more than a pittance
Sumner on that January night of out of the Forgotten Man. Though
1883 has left no record of dissent religion, in a decade that had be-
from his idea that C — the Forgot- gun to digest Darwinism, was a
ten Man who always Paid — actu- softer, weaker thing than it had
ally existed. Moreover, when Sum- been in previous generations, the
ner later in the year expanded his —k———
thesis about the “jobbery” prac- * A 1952 edition, by Caxton Printers,
tised on C in a little classic of so- is available from The Foundation for

i . Economic Education, Irvington-on-Hud-
cial science called What Social son, N. Y. 145 pp. $1.25, °


===== PAGE 8 =====

6 THE FREEMAN November

tithes still taken by the churches consolidation of the lines into in-
as purely voluntary offerings must terstate systems was under way.
have far exceeded the “welfarist” Meanwhile, as the cyclical upswing
collections of government. A poor was on, the western roads were
immigrant in the eighties — a Car- laying thousands of miles of new
negie, say, or a Jacob Schiff — track. Immigrants from northern
could keep his money and die a mil- Europe and, latterly, from Hun-
lionaire. The Forgotten Man in the gary and Italy and Poland, had
eighties may have been forgotten been passing through Castle Gar-
— but it was hardly the “radical den at the port of New York by
vice” of the political schemes the thousands, and despite the
cooked up for hid spoliation by fears of Terence Powderly’s
philanthropists looking to spend Knights of Labor, the railroads
Other People’s Money that really and steel mills and mines had ab-
hurt him. If the Forgotten Man sorbed them without any great dis-
“always paid,” it was because he aster to the jobs of the native-
couldn’t resist an appeal to his bet- born. As an editor of the Ameri-
ter nature to give voluntarily. If can Iron and Steel Bulletin noted
he was broke, it was not because in 1883, the overloading of the
the State mulcted him. It was be- labor market, where it existed in
cause he believed in Sumner’s own the coal-mining and iron-ore min-

Law of Sympathy. ing districts, was not due to de-
} pression. It was due to “the very
A Time of Hopefulness prosperity of our country, which

The salient fact about the early tempts large numbers of foreign-
eighties, as the Forgotten Man ers to come here.”
himself looked upon them, was On the farm border of the early
their atmosphere of general hope- eighties the bad times of the
fulness. Though strikes were wor- “Granger years” had lifted. Crops
risome in a world that was just were moving to market at a profit
beginning its adventure in indus- to both the farmer and the rail-
trialism, the depression of the roads. Land could still be had for
seventies, which had been particu- the asking (and for nominal reg-
larly bad in the new railroad istration fees) in the West, and for
towns, had long since yielded to as little as $1,000 in borrowed capi-
the new business optimism. The tal a young man could put up a
railroads were running again with- shelter and buy horses, wagon,
out interruption, trainmen’s wages harness, plows, seeds, and enough
had been restored, and the big of the new Glidden barbed wire to


===== PAGE 9 =====

1960 THE MAN WHO SMELLED THE FUTURE 7

get a start on his 160 free acres. understood in the early eighties,
Though historians, accepting the the fact that a farmer could get his
Populist charges of the nineties at start as his “own man” for a thou-
face value, have argued the sand dollars in easily borrowed
“grasping” nature of eastern money made it impossible for any-
money-lenders, the fact is that one to claim with a straight face
money rafes on the Kansas and that the pioneer was oppressed by
Nebraska farm frontiers dropped a greedy East. He took his chances
from 12 per cent in the seventies like everybody else — and often he
to 7 and 6 per cent in the nineties. sold his acres on a rising market
Moreover, the ratio of farm fore- to go elsewhere as opportunity
closures to loans was not remark- beckoned all the way to the Pacific
able save in the extreme drought Coast.
years of 1888-89, which were still
far over the time-horizon in 1883. No “Big Business” Bogey

Money for the western farmer In common with most of our re-
did not come primarily from a cent historians, Allan Nevins and
greedy “Wall Street” in any event; Henry Steele Commager have shed
it was assembled for loan purposes crocodile tears over the fact that
by the insurance companies and by it took two bushels of wheat to
land mortgage companies which “buy” a dollar in 1890 where that
were organized everywhere from same dollar could have been
‘New Hampshire to Kansas to tap bought with one bushel in 1870.
the funds of individuals or fami- But these historians are forced to
lies with capital to spare. Not note elsewhere — and without any
wishing to be saddled with real es- tears — that when four men on a
tate, these companies did their farm can do the work of three
best to keep the farmer in busi- hundred by using a combine, and
ness. In many instances the record when a mechanical corn husker
of forebearance on the part of the “replaces eight men with one, [and]
lender was very good indeed; as the corn sheller fifty,” prices for
John Davenport, a New York State farm products could hardly remain
lender with extensive western in- unaffected.
terests, wrote to his Iowa agent in There remains the theory that
the seventies, “Where a man has the new “trusts” of the eighties
had bad luck in crops or sickness, bore down heavily on the Forgot-
give him time.” ten Man. But when Sumner was

Discounting the menace of the making his speech in Brooklyn, the
drought-cycle, which was not yet big movement toward consolida-


===== PAGE 10 =====

8 THE FREEMAN «November

tion was largely limited to Rocke- marked on “the effect of the crea-
feller’'s Standard Oil Co. and to tion of an immense stock of mov-
the railroads. The so-called lead, able capital, of the opportunities in
whisky, and sugar trusts dated commerce and industry offered to
from 1887; the beef and farm men of talent, of the immense aid
equipment trusts came in the nine- of science to industry, of the open-
ties. What the backward looking ing of new continents and the peo-
historian forgets is that a vast pling of them by the poorest and
number of smaller companies had worst in Europe. ... Men are in de-
to exist before they could be com- mand, and an increase in their
bined into a big one: the very crea- numbers increases their value. ...”
tion of a “trust” implied a bur- If one looks back upon the New
geoning and job-creating economy Haven to which Summer returned
at the base. Moreover, the creation after the Forgotten Man speech,
of a big company did not keep new the mystery of his forebodings in-
small concerns from springing up, creases. Here the effects of “mov-
as any comparison of old and new able capital” and “the immense aid
Stock Exchange listings will show. of science to industry” had been ap-
Small business kept its pace with parent for a generation. With the
big business in the very years linking of the railroads in the
when the feeling against “trusts” eighteen forties to New York in
was at its height. And it has been one direction, and to Hartford and
keeping pace ever since. Boston in the other, the population

In his own less gloomy moods of the old colonial town had surged
Sumner himself forgot his worries upward. Gone was the overgrown
about the Forgotten Man. Some village of Sumner’s own under-
twenty years after his speech in graduate days. The wineglass elms,
Brooklyn he inserted into his Folk- planted at the century’s beginnings
ways a salute to “our own time” as by old Senator Hillhouse and the
“one of advance on account of great Reverend David Austin with their
unoccupied territories now opened own hands at no cost to the Forgot-
at little or no cost to those who have ten Man, were still there, lifting
nothing.” “Such a period,” he said, their graceful arches over the
“is one of hope, power, and gain for downtown streets. But beyond the
the masses. Optimism is the phi- Green and its three churches, be-
losophy. All the mores get their yond the original “nine squares” of
spirit from it . . . no mistakes will the old first families, there roared
cost much.” And again, in a later the black workaday community
passage in the Folkways, he re- which had been brought into be-


===== PAGE 11 =====

1960 THE MAN WHO SMELLED THE FUTURE 9

ing by a long line of Yankee in- Townsend, a local banker, sent out
ventors spurred on by Sumner’s Colonel Edwin Drake, a railroad
own supposedly “classical’’ Yale. conductor with newfangled ideas
The streets that ran past the old about drilling, to sink the world’s
town pump and past Yale's Old first oil well. New Haven was too
Brick Row were still muddy canals far from oil country to keep con-
in late March and early April, ne- trol of the business —but it started
cessitating iron foot scrapers on it.
every doorstep; but down the mid- New Haven’s Yale had, indeed,
dle of Chapel Street ran tracks for been serving an optimistic nation
horse-drawn trolleys. The town’s in more ways than supplying it
water was supplied through mains with Congregational ministers
owned by a private company; and ever since its Jedidiah Morse, the
where gas lighting had been “father of American geography”
limited to the senior Professor as well as the sire of the inventor
Benjamin Silliman’s home in the of the telegraph, had put together
late eighteen forties, now more and the first geography book to be pub-
more home owners had thrown lished in the young nation. At the
away their old sperm candles and end of the eighteenth century

gone over to the new lighting. Yale’s President, Ezra Stiles, had
mingled his concern for Greek,
Prosperous New Haven Latin, Arabic, and Hebrew with a

Indeed, New Haven might have passion for astronomy and metal-
been summed up as “Sillimans’ lurgy and the raising of silkworms
progress.” The older Silliman had —and a later procession of far
taught his science largely from more academic and other-worldly
the books. But in the forties the college presidents had not been
younger Silliman—Benjamin, Jr.— able to eradicate the cosmopolitan
had, with a liberal outlay of his Jeffersonian effect of Stiles’ influ-
own money, set up the first college ence. The “Yankee” end of the
chemistry laboratory in the United Puritan college had split off in
States. It was from this laboratory 1861 to become the Sheffield Scien-
that there emerged, some time tific School, a development made
later, an analysis of the commer- possible by Joseph Sheffield and by
cial possibilities of a “rock oil” a group of New Haven business-
specimen from western Pennsyl- men including Oliver Winchester,
vania — and on the basis of Silli- the arms manufacturer, and Eli
man’s word a New Haven business- Whitney, Jr., son of the old in-
man, George Bissell, and James ventor.


===== PAGE 12 =====

10 THE FREEMAN November

The first Eli Whitney had taken Edward Beecher’s and Thomas
much encouragement from Ezra Sandford’s New Haven-made de-
Stiles. He had failed to make a for- vice for mass-producing the phos-
tune from his cotton gin, which, phorous match. And the new rail-
despite his patent, had been pi- roads of the young American Re-
rated all over the South by local public would not have been able to
manufacturers. But Whitney had cross a river if a New Haven ar-
recouped by pioneering the produc- chitect, Ithiel Town, had not de-
tion of interchangeable rifle parts signed a wooden truss bridge
from standardized dies out in his which would bear the weight of
factory by Lake Whitney — and this the earliest steam cars.

more than anything else had set The New Haven to which Sum-
the pattern for the town Sumner ner returned in 1883 had not yet
knew. ’ seen an automobile —or a ‘“hell-

It was a town of many “firsts” vahgen,” as Sumner was to call the
besides that of the first geography first horseless carriage that came
book and the first standardized to his attention. But already, in
dies. In little things there were the eighties, New Haven had made
Sheldon Hartshorn’s first hinged the automobile business a possi-
buckle and William Gee’s loom for bility. When cars came, they would
weaving suspender webbing, two need gasoline from Silliman’s and
products dating back to the time of Colonel Drake's rock oil; and they
Sumner’s childhood; and, going would need the rubber which New
further back to the days of the Havener Charles Goodyear had
early clockmakers, there was the first vulcanized by treating it with
inventiveness of Simeon Jocelyn, sulphur and heat until it had
who had desisted from his busi- hardened into usable forms. More-
ness of engraving grandfather over, the :industrial process that
clock faces long enough to create had been started by Eli Whitney
the first practical pruning shears. was to prove peculiarly adaptable
Amasa Goodyear, father of the to the making and assembling of
man who was to discover rubber the automobile, as Henry Leland,
vulcanization, had brought into be- a man who had been trained in
ing the spring steel tine pitch- New England gun factories, was to
fork, a famous New Haven export prove to an astounded English
of its day. With the forests of audience when he dramatically dis-
Ohio being cleared for the raising assembled and then put together
of hay and grain, the steel tine again from scrambled parts a num-
fork was as practical an object as ber of his Cadillac cars.


===== PAGE 13 =====

1960 . THE MAN WHO SMELLED THE FUTURE 11

Even as Sumner was lamenting amid scores of workmen's homes.
the sad fate of the Forgotten Man, There were cigar makers, who at-
New Haveners were pioneering tracted German and Dutch immi-
some of the first commercial com- grants; there were boot and shoe
panies to match the creativity of makers; and there were the build-
the inventors. The first telephone ers of pianos and organs. So the
directory in history, giving num- local fruits of a generation of in-
bers for all of fifty subscribers, ventiveness and enterprise were
had been issued in 1878 by the Dis- ripening in his own home town as
trict Telephone Co. of New Haven; Sumner bemoaned the fate of the
which had set up the first commer- Forgotten Man.
cial switchboard on a borrowed
kitchen table. In 1881 — two years A Profound Prophecy
after Thomas Edison had made an How are we to account for Sum-
incandescent bulb that would burn ner’s pessimism amid the evidence
for practically all of two days — that the Common Man, far from
New Haveners had started the being “forgotten,” was blessed
New Haven Electric Light Co., the with hope and opportunity in that
first after Edison’s own pioneering New Haven clime of 1883 as he had
company in New York City. It never been blessed before? Was it
failed in 1883 but was soon started merely that Sumner, who was to
up again with sufficient new capi- become America’s first trained so-
tal to provide for electric street ciological digger, had not yet
lighting and to put an end to the learned how to project a trend
horse-drawn trolley. from heterogeneous isolated facts?

In addition to the newer ven- The answer, far from being a
tures there were the old standbys testimony to obtuseness, must be
which had made New Haven the set down as a tribute to Sumner’s
industrial center of southern New “inner eye”: the man was a proph-
England even before the Civil War. et. He had studied in Germany
There was the Brewster carriage in the years of Prussia’s climb to
works (among some forty other ascendancy in the German Federa-
carriage companies); there were tion; and he had already taken the
the clock companies; there was the measure of the “socialism of the
thriving Fair Haven oyster busi- chair.” Where he nourished his
ness; and, out in the Newhallville doubts of the new German ideolo-
suburb below the Sachem’s Wood, gies, his academic colleagues, in-
there were the great Winchester cluding a whole new generation of
repeating arms works set down economists, had more and more


===== PAGE 14 =====

12 THE FREEMAN November

tended to succumb to the blandish- guine theory that silver could ar-
ments of the German “institu- bitrarily be held in a fixed relation
tional” and “historical” schools to gold. Then there was the latent
which were enamored of state in- penchant of the American for a
tervention in the industrial proc- collectivist utopianism — the old
ess. Sumner was an early believer Fourier and Brook Farm strain
in a theory later formulated by which would erupt anew into the
John Maynard Keynes, that the Bellamy clubs in the wake of Bel-
“encroachment of ideas” is far lamy’s Looking Backward. Mean-
more of a constitutive agent in the while Henry George had already
fashioning of society than any set gathered his first army of Single
of purely physical facts. The “en- Tax prophets — and Sumner sus-
croachment” of the notions set pected that any widespread appli-
afloat by the scholars of Bis- cation of George's principles would
marck’s realm was very much in put the disposal of natural re-
Sumner’s mind when he lamented sources into the hands of tax ap-
the plight of the Forgotten Man in portioning politicians, who have
1883. He knew that if the Forgot- never been solicitous of the needs
ten Man was not already being of the enterpriser in any clime or
compelled to lift the burden of the time.

ne’er-do-well D in the early It is as a prophetic utterance,
eighties, he would not long remain then, that we must take Sumner’s
immune. speech on the Forgotten Man in its

Quite aside from the academic own original setting. False though
influence there were other trends it was to the immediate circum-
which had aroused Sumner’s sus- stances of New Haven and the rest
picions. The tariff, that first monu- of America in 1883, it was to be-
ment to American statism, was al- come true as gospel for the Amer-
ready an old story in 1883; and the ica of the future. Sumner had the
tariff, as Sumner foresaw, would seeing eye as an early sociologist —
be a goad to every pressure group but more important than his eye
to get “its own.” The Greenbackers was his attunement to the hidden
and Grangers were comparatively voices of coming ideological com-
quiescent in the early eighties; but mitments. In misdescribing the
it was not for nothing that Sumner present for that Brooklyn audience
had been a long-time student of the on January 30, 1883, he smelled the
American currency, which had future. And the audience, in offer-
periodically run to wildcat issues ing no recorded protest, must have
and to the effects of an oversan- smelled the future, too. ~


===== PAGE 15 =====

“We Never Had It
SO GOOD”

LEONARD E. READ

THE CLAIM that a growing statism lower income of earlier years.
(state control of the means of pro- “The economic difficulties of
duction plus welfarism) must lead most everyone have been less-
eventually to disaster frequently ened through the establishment
evokes the rejoinder, “We never and broadening of various social
had it so good.” So far as statisti- welfare programs.

cal measurements of current ma- “The four recessions we have
terial well-being are concerned, encountered since World War II
much of the surface evidence sup- are among the milder in our his-

tory, which means an unusually

ports this cliche. long period free of serious de-
Prosperity, according to the Na- pressions.”

tional Bureau of Economic Re-
search, is reported to have in-
creased as follows:!

Now consider what has hap-
pened politically during this pe-
riod. Statism, measured in terms
“Today’s national income of of governmental expenditures per
$2,300 per capita is double what capita, has advanced from about

it was (in constant dollars) . .

forty years ago, and it is higher $80 in the years just after World
in the face of a 709% increase in War I to more than $700 now.
population and a 209% reduction Is it any wonder that most peo-
in the hours of paid work done ple, observing statism and pros-
per capita. perity advancing coincidentally

“Output. per man hour has Over so long a period, conclude
grown over the same period at that the growth of statism is the
the average annual rate of 2.6%. —————
¥ % 2 How closely does this approach what
“Today’s higher income is more Ve call the “authoritarian state”? One

evenly distributed than the way to make an estimate is to measure
governmental take of earned income. In

1917 it was less than 109%. Today it is

1 See The Fortieth Annual Report 35%. We must keep in mind, however,

(1960), National Bureau of Economic that a state of dictatorship can exist ~

Research, 261 Madison Avenue, New prior to a 1009, take — perhaps at the
York, N. Y. halfway mark.

18


===== PAGE 16 =====

14 THE FREEMAN November

cause of the increased prosperity? own supremacy as he defies and
Furthermore, it is doubtful if betrays God’s other human crea-
the comeback, “We never had it so tions. rv re SITES
good,” can be proved tobe wrong;.~= +31 That statism i$ But socialized
WIFE Statistically, anyway. A man dishonesty. It is feathering the
leaping from an airplane at high nests of some with feathers coer-
altitude will, for a time in his fall, cively plucked from others — on
have the feeling of lying on a the grand scale. There is no moral
cloud. For a moment he could distinction between petty thievery
truthfully exclaim, “I have never and “from each according to
had it so good!” If the man were ability, to each according to need,”
unaware of the law of gravitation, as practiced by the State, which
no one could prove to him by phys- is to say, there is no moral dis-
ical principles that disaster lay tinction between the act of a pick-
ahead. Yet, some of us would be- pocket and the progressive in-
lieve, by reason of certain knowl- - come tax, TVA, federal aid to ed-
edge, that the man was not long ucation, subsidies to farmers, or
for this world. whatever. There is only a legal
Some of us believe that the distinction. Legalizing evil does
chant, “We never had it so good,” not affect’ its moral content; it
is founded on an illusion, that re- does no more than to absolve the
alities we cannot measure warrant moral offender from the type of
this belief. It is our conviction: penalties inflicted by policemen.
1. That the practice of dishon-
esty is evil and that retribution A Growing Threat
follows the doing of evil. Every While many of us profoundly
evil act commits us to its retribu- believe that we cannot maintain
tion. The time lag between the the present degree of statism, let
committing of an evil act and our alone drift further toward the
awareness that retribution is be- omnipotent State, without our
ing visited upon us has nothing to great economy flying to pieces, we
do with the certainty of retribu- find it difficult to do more than
tion. It has to do only with our express our misgivings or alarm.
own limited perception. Why, precisely why, does the pres-
2. That there is no greater dis- ent course presage disaster? In
honesty than man effecting his what manner will a growing dis-
own private gains at the expense honesty tear an economy asunder?
of others. This is man’s ego gone Perhaps the following explanation
mad, the coercive assertion of his may be worth pondering.



===== PAGE 17 =====

1960 “WE NEVER HAD IT SO GOOD” 15

At the outset, imagine an im- is in an enormously advanced but
possible situation: a society com- highly artificial state. We are now
posed of individuals, each com- unnecessarily dependent on each
pletely self-sufficient, no exchange other, more dependent than we
of any kind between them. Moral have ever been before, more than
qualities, such as honesty and the any other people have ever been.
practice of the Golden Rule, would An advancing exchange economy
have no bearing whatever on the makes possible a rising standard
social situation. Each could be of living — provided the advance is
congenitally dishonest and un- natural, integrated, that tis, free
just; but with no chance to prac- market. It is possible, then, to
tice the evils, what difference buttress the technical advances by

would it make socially? a growing moral insight and prac-
! tice. But our present pattern of
We Depend on Trade specialization is artificially in-

Now, assume the development duced by state interventionism,
of specialization and exchange. and an unnatural system of de-
The greater and more rapid the pendencies has been created. This
development, the more dependent would need to be sustained by a
would be each member of the so- level of mass honesty we could
ciety on all the others. Carried hardly hope to achieve under the
far enough, each would be com- best of circumstances.
pletely removed from self-suffi- But honesty is not on the in-
ciency, utterly dependent on the crease! Statism, which forces all
free, uninhibited exchanges of of us within its orbit, is nothing
their numerous specializations. but a political system of organ-
Total failure in this respect would ized plunder, managed by every
cause everyone to perish. conceivable type of pressure

Whenever we become economi- group. Plunder is dishonesty, and
cally dependent on each other —a statism, its organizer, grows
necessary consequence of the apace!
highly specialized production and Every natural or free market
exchange economy — we also be- advance in specialization and ex-
come morally dependent on each change increases the standard-of-
other. No free or willing exchange living potential. This kind of
economy can exist among thieves, progress is consonant with the
which is to say, no such economy whole man, being a cultural ad-
can long endure without honesty. vance of self-responsible persons.

Specialization in the USA today The two advances — in insight and


===== PAGE 18 =====

16 THE FREEMAN November

technology — are integrated. exploration vehicles, and so on.
Atomic energy, for example, would To what extent will this generate
put in its appearance when the unnatural specialization? To
market — man in peaceful pursuits whatever extent people would not
— signaled its necessity. Had we voluntarily invest the fruits of
followed the signals of the mar- their own labor for these pur-
ket, atomic energy would present poses! Would this vast outlay,
itself as a boon, not as a bomb. twelve to fifteen times the entire

How, we must ask, does statism federal budget of only forty-seven
operate? It is simple enough: The years ago, be voluntarily invested
State forcibly takes vast sums — for such purposes at this stage in
fruits of the people’s labor —and civilization? Hardly!
places these sums at the disposal
of those who are ready or can be The State as Master
readied to specialize in atomic The Welfare State destroys the
energy, for instance. Thus, there market mechanisms — lessens free
is brought prematurely into exis- choice and willing exchange.
tence a vast horde of unnatural Simultaneously creating unnatu-
specialists, unnatural in the sense ral specializations, it must, grant-
that their specializations exist at ed statism’s premise, resort to
the insistence of irresponsible welfarism; that is, it must assume
politicians who cannot make good the responsibility for the people's"
on their claim to omniscience. This welfare: their employment, their
is not an exaggeration, for no in- old age, their income, and the like.
dividual has any competency what- As this is done, man loses his
ever to control the lives of others, wholeness; he is dispossessed of
to arrogate unto himself the free- responsibility for self, the very
dom of choice that is morally im- essence of his manhood. The more
plicit in the right to life of each dependent he becomes, the less de-
human being. pendable!

Try to comprehend the enor- Thus, the State inflicts itself as
mity of unnatural specialization a dangerous centrifuge on so-
in our country today. It cannot be ciety: man violently spun from
done! As this is written, a Wash- the center which is his wholeness,
ington release tells of $12 to $15 his self-reliance, his integrity,
billion to be spent by the National and thrown in fragments onto an
Aeronautics and Space Adminis- ever-widening periphery of un-
tration to carry a crew of three natural specializations; man dis-
men on a moon orbit, for moon oriented in unnatural surround-


===== PAGE 19 =====

1960 “WE NEVER HAD IT SO GOOD” 17

ings, lost in detail and trivia; man cannot or will not help with his
from whom integrity has taken own resources. In the first in-
flight; man minus responsibility stance, we observe the whole man
for self, the State his guardian as he acts self-responsibly and,
and master. in the second instance, the frag-
The only cohesive stuff that can mented man, one whose welfare
withstand this centrifugal force is responsibility rests not with self
the singular product of the whole but with the State. When there is
man: the man who engages the no responsibility for self, the mat-
universe at every level of his be- ter of honesty comes no more in-
ing — physical, mental, moral, and to question than in the case of an
spiritual. Among the fruits of animal. Honesty is a quality pe-
such an engagement are honesty, culiar to man, the whole man.
observance of the Golden Rule, This applies equally to the Golden
and justice. These hold society Rule and to all virtues.
together. But, as we have noted,
statism progressively dilutes the Material Growth Follows
cohesive stuff even as it increases Moral Growth
the centrifugal force by unnatu- Speaking solely from the ma-
ral specialization. These tenden- terial standpoint, statism is in-
cies are implicit in its nature. compatible with any long-range
Statism, to change the metaphor, goal of more goods and services
builds its tower of Babel with a for more people. But natural or
mortar of constantly decreasing free market specialization and ex-
strength. The tower, therefore, change, which we are also experi-
will be at its highest and be most encing on a large scale, are con-
admired and worshiped the mo- sistent with such a long-range
ment before it tumbles. goal. They are constructive and
We find in a growing statism creative. This explains the phe-
the explanation for our double nomena we have observed during
standard of morality. The same the past four decades: natural
person to whom stealing a penny specialization and exchange, plus
from a millionaire would be un- the greatest outbursts of inven-
thinkable will, when the state ap- tiveness in recorded history, more
paratus is put at his disposal, join than compensating for the dam-
in taking billions from everybody, age inflicted by statism. There
including the poor, to aid and could be no greater error than to
abet his private gain or his per- conclude that the statism caused
sonal compassion for those he the prosperity.


===== PAGE 20 =====

18 THE FREEMAN November

But specialization and exchange, for the first’ time in history: the
regardless of how many inven- spectacle of an economy confer-
tions, cannot long endure except ring more and more goods and
among a people more noted for services on more and more people
their virtues than for their vices. right up to the point of flying to
The first chore — indeed, our only pieces. Personal morality is the
hope — is to rid ourselves of im- cohesive stuff in an exchange
moral statism; short of this, we economy and plays a necessary
cannot possibly return to moral part in the good society; there-
ways. Unless we can succeed in fore, it is preposterous to say to-
this venture, we may well witness day, “We never had it so good.” =



===== PAGE 21 =====

PAINLESS SUBSIDY

or - PROGRESS IN FISCAL EQUITY

It was a foggy afternoon y
At story-telling time. )
Old Kaspar chewed a dead cigar
And thinned his rum-and-lime,
While Peterkin and Wilhelmine
Turned on the futurama screen.

They saw a crowd of drooping men
Go through an open door

And dump their loads of dollar bills
Upon the marble floor.

Then each would pick his dollars up

And gambol like a frisky pup.

“Now tell us what it’s all about!”
The little children cried.
“It is the Painless Subsidy,”
Old Kaspar soon replied.
“It gives a man a bulging purse,
But leaves his conscience none the worse.”

“There was a time,” Old Kaspar said,
“When fiscal arts were crude,
And people got their subsidies
By methods slow and rude —
With tax collectors breaking heads
And tearing mattresses to shreds.”

“But now a self-respecting man
Can get a subsidy

Of any size his heart desires \ .
And spend it blamelessly. ) > o

No longer need he feel remorse sl ;

For neighbors robbed by legal force.”

“But why have subsidies at all, i EN .
If each his own must pay?” Coe TN No
“We can’t have economic growth,
I've heard the Planners say,
Without abundant subsidies
To stimulate the industries.”

H. P. B. JENKINS
Economist at Fayetteville, Arkansas

19


===== PAGE 22 =====

The Economics of Rational Assistance

ARMEN A. ALCHIAN and WILLIAM R. ALLEN

EcoNOoMICS sometimes has been neighbor?” Rather, he asks, “In
described (and condemned) as the light of the scarcity of resources,
study of selfish behavior. The con- how can one squeeze the greatest
ception of the “economic man” return — which can take myriad
has been ridiculed as a bloodless forms, e.g., goods, power, utility,
abstraction which constitutes a inner glow of contentment — from
calumny on real people who are given productive services, talents,
warm in spirit and generous in and environment? Or,. alterna-
heart. For (most) real people are tively, how can one achieve his
not wholly self-centered creatures, desired goals with the minimum
coldly calculating only how best to cost?” His goals can involve not
aid themselves even at the cost of only his own immediate welfare,
injuring others, if need be. but also that of other people.
This is but a parody of the
“economic man” notion specifically @iving with Efficiency
and of the concern of economic We can usefully illustrate the
study generally. Economics, ac- matter by considering the grant-
curately conceived, is directed to ing of a subsidy or gift. The
the analysis not of selfish behavior motivation of the giver may be as
as such, but of efficient behavior. humanitarian and philanthropi-
The basic question asked by the cally pure as can be, but what of
economist is not, “In light of the the efficiency with which the aid
egocentric avariciousness of peo- is given?
ple, how can one best skin one’s Suppose that a. university — call
- it U.C.L.A. — wishes, for reasons
Professor Alchian and Associate Professor Allen good or bad which we shall not

teach economics at the University of Califor- . eq.
nia, Los Angeles. consider here, to subsidize the

20 /


===== PAGE 23 =====

1960 AID, ALTERNATIVES, AND DISCRIMINATION 21

veterans in the student body by ficiaries of the subsidy as well off
providing campus housing. U.C.- as possible with the resources be-
L.A. it can be imagined, possesses ing made available to them?
a substantial amount of land on As things stand, the veterans
which are placed a number of war- must take their assistance in a
surplus barracks. The barracks specified form, i.e, a barracks
are renovated into a total of 1,000 apartment, or not receive aid at
apartments. The rent is set at $30 all. And with more veterans than
per month, which exactly clears apartments, some veterans receive
the veterans’ market, i.e., at $30, nothing. Now, if the apartments
the veterans, of whom there are were to be opened to the whole
more than 1,000, wish to take student body, the market-clearing
1,000 apartments. (If the price is rent presumably would be higher
set at less than $30, there is at than $30; suppose it to be $40.
the outset a messy problem of ad- Some veteran might feel that, in-
ministrative rationing, for at such stead of living in the barracks at
a low price, more than 1,000 vet- $30, it would be preferable to sub-
erans will demand apartments.) lease his barracks apartment for
The U.C.L.A. administrators de- $40 and apply the excess proceeds
cree that no non-veterans are al- to the renting of a more desirable
lowed to occupy apartments, so apartment in town at, say, $60. In
non-veterans do not apply. this fashion, the veteran would in
The land being devoted to vet- effect obtain a gift in the form of
erans’ housing has some alterna- money ($10) which he then ex-
tive valuable uses, e.g., as parking pends as he pleases.
space, playing fields, or simply Who gains and who loses by this
scenic lawn; so there is a cost in- subleasing procedure?
volved in the housing program. Before subleasing was allowed,
The major question is now in the veteran had the alternatives of
order: for the given cost borne (a) a barracks apartment at $30
by U.C.L.A., are maximum bene- or (b) a town apartment at $60.
fits being bestowed, or, stated dif- But now the veteran is presented
ferently, could benefits equivalent with an additional alternative, viz.,
to those actually bestowed be at- (c¢) rent and sublease a barracks
tained at smaller cost to U.C.L.A.? apartment, gaining a $10 profit,
and live in a town apartment. Al-
Maximizing the Benefits though the town apartment may
For the moment, concentrate on be more conducive than a barracks
maximizing benefits. Are the bene- apartment to gracious living, the


===== PAGE 24 =====

22 THE FREEMAN November

veteran might prefer alternative accepting the new alternative is
(a) over (b); i.e., he might pre- evidence that he is better off by
fer the inferior apartment plus an moving into the barracks.
extra $30 to spend on other things U.C.L.A. also is involved. The
over the more expensive apart- university is financially indiffer-
ment. But in comparing alterna- ent, for it receives $30 per apart-
tive (a) to (c), staying in the ment whether or not the apart-
barracks apartment would provide ment is subleased.
only an extra $20 for other things, It appears that no one is hurt
and this extra $20 might or might by the subleasing practice, and
not be sufficient to compensate for the veteran and the other student
the poorer apartment. Finally, we are both better off. Why, then, are
certainly can say that if he pre- administrators generally loath
. fers alternative (b) over (a), he thus to widen the alternatives of
will prefer (¢) over (a), for a those they are intending to aid?
town apartment plus an extra $10 If the university wants to put
(i.e. alternative ¢) is preferable valuable resources at the disposal
to a town apartment without an of veterans, why does it prevent
extra $10 (i.e., alternative b). In the full potential benefits being
any event, the subleasing alterna- realized by restricting the use to
tive cannot hurt the veteran, and which the veterans can put the
it may help him, subsidy? Perhaps administrators
would consider it “untidy” and
“inappropriate” to provide veter-
Has the non-veteran student ans’ housing which is occupied by
who is subleasing from the vet- non-veterans. Or perhaps the ad-
eran at $40 been helped or hurt? ministrators feel that they know
He may feel envious that he is what is best for the veterans, and
not a member of the privileged barracks-living at $30 is deemed
group eligible for the barracks at by. them to be preferable for vet-
$30, but this is true whether or erans to town-living at $60 and a
not subleasing is permitted. Prior $10 profit.
to subleasing, his only alternative The moral is plain. A free price
was a town apartment at $60, but system enables men to use their
with subleasing he can now rent a resources in the ways they con-
barracks apartment at $40. He sider best. If it is felt that wel-
may prefer the latter. The sub- fare is enhanced by broadening
leasing offer has given him, too, the alternatives available, a free
an additional alternative, and his price system enlarges welfare.

Non-Veterans Also Gain


===== PAGE 25 =====

1960 AID, ALTERNATIVES, AND DISCRIMINATION 23

Alternative Land Use of them will prefer $8-and-no-bar-
Consider another possibility, racks-apartment, while some
which presents some additional would have preferred the barracks-
complications. Suppose that the apartment-and-no-$8.
land now occupied by the barracks
could be rented by U.C.L.A. at a Other Possibilities
rate equivalent to $50 per month When subleasing is allowed, it is
for each apartment —or the land again the case that 1,500 veterans
could be sold and the proceeds in- do not benefit, for they cannot ob-
vested in acceptable fashion at a tain an apartment. But the 1,000
rate of interest equivalent to $50. with apartments can either keep
With 1,000 apartments, this alter- the apartment at $30 or sublease
native income, as rent or interest, at $40 and net $10 cash. In the “no
is $50,000 per month, compared to barracks” case, with each veteran
$30,000 when the land is used as receiving $8 from U.C.L.A., those
barracks apartments for veterans. 1,000 who would have had a bar-

In this “no barracks” case, U.C.- racks apartment are worse off.
L.A. could keep $30,000, so that However, if there were only 1,600
the university would be equally veterans, so that each receives
well off under the two schemes, $12.50 from the university, those
and allocate the remaining $20,- who were willing to sublease (and
000 among all veterans, of whom perhaps even some of those who
there are, let us say, 2,500. Each preferred to keep a barracks apart-
veteran receives $8 per month. ment when the alternative was to
How would the veterans fare now gain only $10 through subleasing)
compared to the other schemes? are better off.

When subleasing of the bar- And, of course, the greater the
racks was not allowed, 1,000 vet- amount of money to split among a
erans chose to live in the barracks given number of veterans, the
at a rent of $30, and the remain- greater the share of each. If the
ing 1,500 received nothing from market value of the land is $80,000,
the university. Now, under the then $50,000 could be divided
“no barracks” plan, with $20,000 among the 2,500 veterans, giving
being distributed among all vet- each $20. That is, the better the
erans, clearly the 1,500 who would alternative use U.C.L.A. has for
not have been in the barracks are its land, the greater and more
better off: $8 is better than noth- widespread will be the benefits of
ing. However, we cannot general- utilizing the alternative and dis-
ize about the other 1,000, for some bursing cash.


===== PAGE 26 =====

24 THE FREEMAN November

The Market Maximizes sublease at $40. The veterans’ mar-
Alternatives for All Concerned ket is no longer cleared: all 2,500
Let us summarize the conclu- veterans seek an apartment, and
sions from this array of possibili- there are only 1,000 apartments.
ties. We began with veterans ob- With a pegged rent of $30 and no
taining barracks apartments at the prohibition on subleasing, the uni-
market-clearing rent of $30, with- versity is discriminating among
out the right of subleasing. The veterans in a new way, viz., in fa-
university is discriminating not vor of those 1,000 veterans who
only in favor of veterans, but also happen to acquire apartments
in favor of those particular veter- when all 2,500 want apartments.
ans who prefer a $30 barracks Suppose that U.C.L.A. decides to
apartment to a $60 town apart- get out of the veteran-housing
ment. business and sell the land or lease
Now, if subleasing is allowed, it in its most profitable use. Then
another alternative is made avail- receipts are available to disburse
able to both veterans and non- among all veterans. It may well be
veterans. Those veterans who pre- that some of the veterans who
fer to stay in the barracks have would have acquired barracks
not lost, and those who prefer to apartments will not be pleased by
sublease have gained. Similarly, giving up the apartment and re-
some non-veteran students will not ceiving cash. However, the more
be interested in subleasing, but the cash, i.e., the better is the al-
others are. Financially, U.C.L.A.is ternative use to which the land is
not affected. The introduction of now devoted, the fewer and the less
subleasing rights has not hurt any- insistent will be the complaints. In
one, and some are benefited. any case, those veterans who did
However, if subleasing is al- not have apartments will be bene-
lowed, the apartments become fited by distribution of the cash.
more valuable. Even though a par- No longer is there discrimination
ticular veteran might not demand among the veterans, for the re-
an apartment at $30 for his own sources made available to the fa-
use, he is happy to rent at the vored group are evenly disbursed
pegged price of $30 in order to among all members of the group. «


===== PAGE 27 =====

DARRYL W. JOHNSON, JR.
ARGUMENTS
AGAINST
SOCIALIZED
MEDICINE

AFTER SCHOOL recently, a student better if they are charged with per-
posed an interesting question. His sonal responsibility for their wel-
father was deceased, and he and his fare.

mother were living on a small in-
come of which social security con-
stituted a substantial portion. His
mother had recently undergone an
expensive operation, and it had
been tough to pay the bills. His
question was: “Why shouldn't 1
favor government medical assist-
ance?”

Other obligations prevented me
from answering immediately, but . .
the next morning the student re- 3. Your mother’s income is un-
ceived the following 17 points: doubtedly suffering from inflation,

1. To the extent that your mother Which is the result of prior govern-
is living on social security she is al- ment activity. Please, therefore, do
ready the victim of an actuarially Rot ask for more government pro-
unsound program classified by &rams. Inflation raises the cost of
many as an outright fraud. A large everything, medical services and
part of your difficulty in meeting supplies included, and such “hid-
bills is the product of this govern- den taxation” affects all income,
ment program designed to “help taxable and nontaxable.
the aged.” You may be sure that a 4. If you ask the government to
government program designed to force others (through taxes) to
“help the sick” would fare no bet- help you in your particular situa-
ter, and probably worse. People do tion, you cannot expect others not
Mr. Johnson is a teacher at Hialeah Senior to ask government to force you to
High School in Florida. help them. In all probability you

2. Social security payments are
reduced or eliminated if your
mother earns over $1,200 per year.
This particular inequity within the
entire inequitable program should
be remedied, yet the problems
posed by any attempt at “equity”
tend to point up the undesirability
of seeking “solutions” on a na-
tional basis.

25


===== PAGE 28 =====

26 THE FREEMAN November

will end by paying out much more 8. Since the program would be
than you will receive through this designed to help millions of others,
process. and not your mother alone, com-

5. Assuming genuine need, pri- petition for supplies and services,
vate charities and local agencies in addition to raising costs, might
would be willing and able to do make it difficult to obtain any at
considerably more along lines of 2ll. A shortage of goods and serv-
aiding you if taxes were not al- ices would immediately occur if the
ready markedly diminishing their government were to attempt to
ability and inclination to function. Mitigate the effects of its own ac-
The high progressive rate also tions through price controls. Pri-
tends to discourage many would-be ority given to more serious cases
doctors, whose terrific initial edu- Would frustrate immediate treat-
cational investment should be al- ment of minor ‘cases. A man who
lowed to pay off. To the extent that could be “back on the job” in min-
a doctor shortage exists, govern- utes might have to wait weeks,
ment must share a substantial por- with resulting loss of production to
tion of the blame. My own dentist himself and to society.
has cut his work-week from five 9. A program of socialized medi-
days to four because, in the words cine, once begun, would be ex-

of his financial adviser, he was tremely difficult, politically, to
working too many days for the 3handon, no matter how mistaken
government.” Do not, therefore, {pe program should prove to be.
add to this tax burden.
6. Even assuming that the taxes
required to run a program of ‘gov-
ernment medicine might aid your mentation, the destruction of doc-
mother in the short run, such taxa- tor-patient relationship, and the
tion would also put more people like — while important in them-

into her shoes. selves, are secondary to the ines-

"7. Government bidding for medi- capable conclusion. If the govern-
cal services and supplies would in- ment seeks to accomplish by force
crease costs. Great Britain's pro- something that would not occur
gram has slightly more than trip- voluntarily and institutes a pro-
led such costs. If you are serious in gram which doctors dislike, the re-
your alarm over high costs, you sult will be fewer, and poorer, doc-
will resist a government program tors. We hardly want this situa-
strongly. tion.

10. The vast majority, of, doctors
do;not-like socialized medicine. The
reasons they give — dislike of regi-


===== PAGE 29 =====

1960 17 ARGUMENTS AGAINST SOCIALIZED MEDICINE 27

11. The temptation to “get some- contact with the profession
thing for nothing” would prove ir- through the former, but progress
resistible for many people. Statis- occurs only through the latter. So-
tics contrasting the number and cialized medicine would cause a
length of illnesses of those who shifting of emphasis from research
have government health insurance to general upkeep, with the result
(in Great ‘Britain and elsewhere) that over-all medical progress
with those who have private insur- would be retarded. The British ex-
ance (in the U.S. and elsewhere) perience proves this beyond ques-
provide amusing proof of this. A tion.
large portion of government ex-’ 14. Since the science of medicine
penditure would go to those whose under free enterprise in the United
needs are questionable. This, also, States has given us the best medi-
would increase costs. Lack of local cal service in the world’s history;
administration and responsibility since it has prolonged life in a
might frequently deny sufficient phenomenal manner; since our
benefits to those whose needs are medical supplies and services are
genuine.! infinitely superior to those in any
other country . . . you should at-
tempt to retain these advantages
by fighting to retain the system
under which they developed.

12. Socialized medicine would be
another long step to total socialism.
Socialism, whatever else it may do,
hardly increases production. By its
emphasis on distribution, it re- 15. It is a mistake for the gov-
tards production in a thousand ernment to consider the problems
ways. This will lower the standard of the sick apart from those of so-
of living for everyone, your mother ciety as a whole. Such considera-
included. tion is a private matter, to be
solved by private and local meth-
ods. Such a narrow outlook on be-
half of the government obscures
the broader problem which is, in a
moral sense, one of promoting re-

13. The functions of medicine
are basically twofold: administra-
tion of known drugs and tech-
niques, and research. We come in

1 For an excellent discussion of the 2 Many complaints about the ‘“exces-
tragedy of socialism in Great Britain, sive cost” of drugs (particularly in rela-
including socialized medicine, see Cecil tion to the low cost of the ingredients)
Palmer, The British Socialist lll-Fare would cease if people realized that it is
State, (Caldwell, Idaho: Caxton Printers, often expensive research which makes
Ltd., 1952). The above points have been many drugs available at all. It fre-
substantially documented by British ex- quently takes millions in research to
perience. make a “cheap pill.”


===== PAGE 30 =====

28 THE FREEMAN November

spect for the individual and the 17. Finally, let us consider the
furtherance of initiative and self- moral issue. You may feel that this
providence; in an economic sense, is simple — that it is not morally
one of increasing production for correct for society to neglect those
the benefit of all citizens ;% and ina in need. But is there such a thing
political sense, one of removing as “collective morality” ?* Is not
government as a battlefield for spe- moral action exclusively individ-
cial favor and substituting cohe- ual? Can any action be moral if it
sion and solidarity for division and is induced by compulsion? Who is
disintegration. acting and thinking in moral
terms: the person who, cognizant
of those in need, seeks to remedy
the situation insofar as possible by
resorting to his own pocketbook, or
a person who thinks only in terms
of legislation to force everyone

16. No system, not even the free
economy, can give everyone every-
thing he wants at once. It is dan-
gerous to allow or encourage any
government to substitute its judg-
ment for that of its citizens. It is
well to keep in mind that no coun- else to take care of the problem?
try has come close to matching the Even if the facts were otherwise

United States in the solution of the and it could be shown that the gov-
very problem your mother pre- ernment were capable of providing

sents. I would recommend investi- Satisfactory medical care, the basic
gation of the numerous, actuarially moral question you should ask
sound private health insurance pro- Your self is this: What right have I
grams, which already insure a sub- to take another’s property without
stantial majority of all American his consent, for my personal use?
families. There are approximately Under what conditions does it be-
150 such programs in the United come proper or right for any in-
States today. Such diversification dividual or group to rob another?
provides an ability to suit individ- I feel that when you have an-
ual requirements which would be swered the questions contained in
impossible under a federal pro- this last point, you may find the
gram. first sixteen arguments superflu-

_— ous. At least I hope so. ~
3 Government cannot do this in any
positive sense, as seems to be thought

these days. Government is to do this by 4 For development of this thought,
a policy of minimum interference, and in consult William Graham Sumner, What
its capacity as referee . . . not active Social Classes Qwe to Each Other, (Cald-

participant. well, Idaho: Caxton Printers, Ltd., 1954).


===== PAGE 31 =====

A businessman and scientist examines some com-
monly overlooked aspects of the creative process

G. COURTNEY CONOVER

it he human race were interested mainly in the eco-
Jreariat a war in the nomic. problems with which gov-
var filled with ernments of the period were con-
inumerous hor- cerned. They showed only a sec-
ict the world ondary, and rather narrow interest
d fear of such in the subject of the production of
i the countless wealth. They did not deal with the
threats of tHe drganized believers subject in any comprehensive man-
in the prin fi Karl Marx. ner and did not attack the view
These doctrines, derived mainly commonly held at the time: that
from economic theories, lead up to labor alone produces wealth.
a demand for the acceptance of a The fortune of the Western
tyrannical government and a fiend- World might have been much bet-
ish code of ethics. Obviously such ter if a few of the early economists
theories should be thoroughly and had developed a lively curiosity
critically examined. about the production of wealth, or
Marx’s theories in the field of still better had interested them-
economics were taken largely from selves financially in some of the
the ideas of men who wrote on the new and rapidly growing indus-
subject of political economy in the tries that were springing up at the
late eighteenth and early nine- time, thus learning by firsthand
teenth centuries. These scholars observation and experience how
wealth is produced.
But the world was not fortunate
Mr. Conover is technically retired after many jp its early economists or their ex-

years of research and development for the

chemical manufacturing industry, but remains periences. Deep into the twentieth
actively self-employed in his special field and . "
in general research for better living. century, most men, including great

near futur [ie
greater an
rors than

29


===== PAGE 32 =====

30 THE FREEMAN November

scholars, were to believe that destruction and cruelty, followed
wealth is produced by labor. by the organization of a govern-
Karl Marx adopted some of the ment with unlimited power to
theories of the early political carry out the notions of a dictator
economists and rejected others, or governing clique.
and developed his own rather sim-
ple set of theories. His basic econ- The Production. of Wealth
omic doctrine is that all wealth . The production of wealth, a
(wealth in this case being all world-wide and ever-changing hu-
goods that people desire) is pro- man activity, is not a simple proc-
duced by labor (the term “labor” ess and it is not easy to recognize
commonly being used in its popu- all factors that take part in it.
lar sense). In this doctrine, gifts However, a thoughtful and un-
of nature evidently are taken for prejudiced person with extensive
granted and capital is incorrectly experience in, or close to, the pro-
assumed to be produced by labor duction of wealth would doubtless
alone. The doctrine is an excellent note the importance of “know-
one for propaganda purposes be- how,” risk-taking, the chance dis-
cause of its simplicity; its fault is covery of mineral wealth, and in-
that it demonstrably does not rest vention, and would conclude that
upon any foundation of truth. many factors are involved in addi-
Continuing with his doctrine tion to the “capital” and “labor”
claiming unique importance for that are so often mentioned.
“labor” in the production of A tentative. list of factors is
wealth, Marx concluded (using ac- given below. Additional factors
ceptable logic but starting with a have been suggested and may de-
false premise) that since “labor” serve inclusion. The order of the
does not receive all the value of the factors in the list is not intended
goods produced, it is being ‘“ex- to be significant.

ploited” by the “bourgeois” em- 1. Mental capital ; knowledge of
ployers who “filch” the “surplus the methods; technology;
value” of the goods. He attributed know-how

all the discomforts and privations 2. Chance discovery

endured by many of the employed 3. Risk-taking

workmen of his time to this im- 4. Invention

agined exploitation by employers. 5. Gifts of nature; natural re-
As a remedy for the imagined in- sources; “land”

justice to “labor,” Marx urged a 6. Labor

violent revolution with limitless 7. Capital


===== PAGE 33 =====

1960 THE WORLD’S WORST FOLLY 31

8. Management soils, numberless sources of water

9. Research power, petroleum, natural gas,
10. Initiative; enterprise timber, and valuable metals. These
11. Self-denial resources were present and un-
12. Foresight touched in the middle of the
13. Judgment eighteenth century; and yet at
that time the area of the state

Mental Capital supported only a scanty population

This factor comprises the whole (estimated at 130,000 people)
enormous volume of knowledge with a standard of living about as
that is available for carrying on low as human beings can endure.
all wealth-producing activities. It Their houses were mere shelters
is one of the fundamental factors in covered with thatch, bark, or
the production of wealth under the earth. Their clothing in good
conditions of civilized life, since weather was nothing at all for
some portion of this fund of men, only aprons of buckskin or
knowledge must be employed in shredded bark for women. Acorns
every one of the countless in- were their main foodstuff; this
dividual operations which make up was supplemented as opportunity
all the production processes used offered by rabbits and other small
in manufacturing, construction, game, grass seed, fish, shellfish,

mining, and agriculture. snakes, grasshoppers, snails, slugs,
Richness in, or poverty in, men- and angleworms.
tal capital can cause the difference Why did these people live in

in standards of living between a such revolting poverty in the pres-
civilized industrial nation and a ence of such an abundance of natu-
savage tribe, the same natural re- ral resources? Were they poor be-
sources being accessible to both cause they were being “exploited”
groups and the ability to work be- ‘by “bourgeois” employers? It is a
ing equal. An example from his- silly question, but no- sillier than
tory will illustrate the tremendous the theory of poverty it has refer-
effects an abundant flow of mental ence to, a theory that has been
capital into a particular region can spread with great zeal by Marxists
bring about in a relatively short for more than a hundred years.
historical period. The truth is, of course, that the

California is generously en- aboriginal Californians were al-
dowed ‘with gifts of nature avail- most totally lacking in knowledge
able for use in the production of of the methods useful in produc-
wealth; among these are: fertile ing wealth. (One example of their


===== PAGE 34 =====

32 THE FREEMAN November

extreme ignorance is that they
knew nothing of the use of wheels;
another is that they did not know
how to make cloth.) To be sure,
they not only lacked knowledge,
but also lacked physical capital in
the form of tools and machines;
but even if these had been given
them, their conditions could not
have been appreciably improved
because of their ignorance.

The stupendous natural re-
sources of California were little
used until the middle of the nine-
teenth century. At that time set-
tlers from the states to the east
and from Europe began bringing
in methods of wealth production, of
which many had been used for cen-
turies in the civilization of Europe,
and others had been more recently
developed by the invention and ex-
perimentation of the continuing
Industrial Revolution. The effect
of this influx of mental capital has
been astounding. The rise in
wealth that has taken place in
California during the last one
hundred years probably has no
parallel in a century of the history
of any other area of equal size. In-
stead of supporting 130,000 people
with the lowest possible standard
of living, the state now supports
15,537,413 with a standard of liv-
ing equal to the best ever known.

An appreciable part of the
world’s store of mental capital is
an accumulation of ‘practical in-

formation which has come down to
us from prehistoric times. Un-
doubtedly, this fund of knowledge
was acquired in the remote past in
the same way that additions to it
are obtained today; that is, mainly
from the results of chance dis-
covery, invention, and experimen-
tation. It seems probable, for in-
stance, that the first process for
making leather was developed
from a chance discovery, the meth-
ods for making cloth from a num-
ber of inventions, and the effective
use of. draft animals from a long
series of experiments.
For many centuries in Europe
the growth of this fund of useful
knowledge was slow and unsteady.
In the eighteenth century, how-
ever, the rate of growth increased
rapidly; it continued to increase
throughout the nineteenth century,
while in the present century
growth has been at a rate un-
precedented in human history.
Individuals acquire mental capi-
tal in ways of which a part may be
classed as labor; among these are,
study of the sciences and engineer-
ing, study in trade schools, and the
practice of manual skills. Another
factor also enters into these stud-
ies and practices; this is self-
denial, which must be exercised by
a large proportion of those who
choose to study the physical sci-
ences, engineering, and the me-
chanical arts rather than easier

c


===== PAGE 35 =====

1960 THE WORLD'S WORST FOLLY 33

studies. Many people, however, es- was the initiation and develop-
pecially those employed in the in- ment of the petroleum industry.
dustries, acquire a great deal of The first well ever drilled for the
mental capital painlessly and with- purpose of obtaining petroleum
out conscious effort simply by lis- was a success; and an industry
tening to verbal instructions, and that is now one of the world’s
from their effortless observations greatest began with a burst of en-
resulting from daily contact with thusiasm and excitement that has
production methods in operation. never completely subsided.
Interrelationships of consider- Karl Marx was at the height of .
able complexity exist among the his career at this time; he could
factors, mental capital, physical have learned all about this new
capital, labor, invention, chance industry if he had wished to do so.
discovery, and research. Mental But if he had learned all the facts
capital is necessary in the produc- about this new way of producing
tion of physical capital, and the wealth, he would have found that
reverse is nearly always true. those facts exposed the falsity of
Mental capital, physical capital, the dogmas which had already won
and labor are necessary in carry- him fame. The petroleum industry
ing out research; and research in in its early stages depended al-
turn is one of the most productive most wholly on chance discovery
factors in building up the world’s for its establishment and growth;
store of mental capital. Also, a and chance discovery was neces-
kind of mutual aid relationship sarily coupled with risk taking.
often is observed among the fac- And chance discovery and risk tak-
tors, invention, research, and ing certainly are not labor, which

chance discovery. the Marxists insist is the only pro-
Other interrelationships can be ducer of wealth.
pointed out, but no others are Marxist theories to the contrary

needed to lead to the conclusion notwithstanding, the early oil in-
that the production of wealth isan dustry produced wealth at a mar-
activity of much greater com- velous rate, as statistics will show;
plexity than Marxists ever have and chance discovery, and risk tak-

admitted. _ ing, together with initiative, con-
_ . } tinued to be the main factors in
Chance Discovery and Risk Taking producing this flood of new wealth.

One of the most dramatic epi- Labor, capital, and knowledge of
sodes in the history of the human the methods played secondary
race began in the year 1859. This roles.


===== PAGE 36 =====

34 THE FREEMAN November

A single example will illustrate fields. The risks involved in this
the relative unimportance of labor exploratory work have been re-
and capital with respect to the duced to a notable degree. How-
amount of wealth produced. A ever, risk taking is still an im-
blacksmith living near Franklin, portant feature of such explora-
Pennsylvania, wishing to drill for tory work and unexpected results
oil, thought it a good idea to start still are obtained.
drilling in an abandoned salt well, By the methods followed
to which he had access. He began throughout its history, the petro-
work on his project by making his leum industry has built up its pro-
own drilling tools; he obtained a duction from an annual rate of
boiler and engine; then he and his about 2,000 barrels in 1859 to
sons built a derrick, and when all 7,126,980,000 barrels in 1959.
was ready they worked as their Chance discovery, in addition to
own drilling crew. The outlay of the part it plays in producing new
money was about $200. Oil was mineral wealth, is of the highest
struck after the salt well had been importance in building up the
deepened only a short distance. store of mental capital, which in
The well was such a good producer turn adds to the world’s wealth
that the blacksmith received an of- and to humanity’s standards of liv-
fer of $100,000 for it. ing. Electron tubes, which have

It may be pointed out here, made possible many marvels of the
parenthetically, ‘that in the first present age, are examples of the
several decades of the petroleum remarkable results that may
industry capital for testing ‘un- spring from a single chance dis-
proved but prospective oil fields covery. The phenomenon discov-
always was easy to obtain. Money ered was called the “Edison ef-
that poured in from rich new fields fect.” The discovery was a mere
commonly was applied in part in observation, a by-product of -in-
exploration; and people always dustrial research, which to the
could be found who would risk great gain of science and industry
money on wildcat wells. : was correctly interpreted and

In the latter half of the rela- promptly reported. The - “Edison
tively short history of the petro- effect” has been put to practical
leum industry, scientific research; use in the numerous kinds of elec-
systematic experimentation; inven- tron tubes ‘which have been in-
tion, and the accumulated knowl: vented and ‘designed, and these
edge of years have revolutionized tubes ‘have been’‘fundamental in
the methods of finding new oil the development of such useful ad-


===== PAGE 37 =====

1960 THE WORLD'S WORST FOLLY 35

juncts of an advanced culture as stretching definitions, can be in-
television and digital computers. terpreted as labor. But much more
Research concerned with indus- often an invention results from the
trial chemistry often has been ac- effortless following of an interest-
companied by interesting chance ing line of thought —in other
discoveries. For example, in the words, from day dreaming, which
1890’s a chemist was trying to find by any sophistry cannot be con-
conditions under which sulfuric strued as labor.
acid would act as an oxidizing The Western World has a bril-
agent for the conversion of naph- liant record in the field of inven-
thalene to phthalic anhydride, an tion. The period of the Industrial
organic chemical used at that time Revolution (roughly the last two
mainly in making synthetic dyes. centuries and a quarter) is recog-
Many experiments covering a wide nized as an unprecedented epoch in
range of conditions were carried history. It has been characterized
out without any indications of by the production of an enormous
eventual success. Finally, in one number of inventions, which have
experiment a minor accident oc- brought about an extremely rapid
curred and a thermometer im- rise in total wealth, in standards
mersed in the batch was broken; of living, and in enlightenment,
later it was found that the mer- and a corresponding rapid reduc-
cury from the thermometer bulb tion in the total burden of heavy,
had acted as a catalyst and had tedious labor.
brought about the desired reaction. The Industrial Revolution
From this accidental discovery a started in England early in the
valuable large-scale process even- eighteenth century. The first evi-

tually was developed. dence of this intellectual outburst
. was a group of inventions which
Invention effected great improvements in the

Marxists do not recognize in- production of pig iron. Another
vention in itself as a factor in the series of inventions concerned
production of wealth. Possibly with the textile industries fol-
they profess to believe that inven- lowed (and partly overlapped) the
tion is simply a form of labor. If first group. The textile industries
so, they may be right in a small were completely revolutionized.
proportion of cases, but wrong in This wave of invention continued
most. An invention at times may with a rising crest into and
be the result of concentrated and throughout the nineteenth cen-
prolonged mental effort which, by tury; it surged to still greater


===== PAGE 38 =====

36 THE FREEMAN November

heights during the last quarter of invention has added so much to the
that century, and has continued to mental capital and total wealth of
rise (at least apparently) past the the world that only a very few of
middle of the present century. its contributions to the fulfillment

A sharp upturn which took place of human wishes can be cited as a
in the output of important inven- partial measure of its value. Tele-
tions and discoveries late in the vision, moving pictures with
nineteenth century coincides ap- sound, and radio broadcasting
proximately in time with the es- have been developed since 1920.
tablishment of numerous research The airplane in all its forms and
organizations for studying the ap- applications is wholly a product of
plication of science to the im- the twentieth century. Power
provement of industrial processes driven machines for planting, cul-
and products. An invention often tivating, and harvesting agricul-
stimulates ideas for other inven- tural crops, displacing the horse-
tions, and still more often it sug- drawn counterparts, are also
gests ideas to be tested by sys- mainly a twentieth century devel-
tematic experimentation, that is, opment. The gasoline engine, the
by research; and research often automobile, the phonograph, the
produces chance discoveries in ad- general distribution of electric
dition to the anticipated discover- current for domestic use, and the
ies which were the original aim of telephone were developed earlier,
the investigation. As a conse- mainly in the last quarter of the
quence, invention, research, and nineteenth century. It is astonish-
chance discovery frequently aid ing to.reflect that these inventions
each other to such an extent that have revolutionized Western civili-
results are obtained which are zation within thelifetime-of many

both unexpected and fortunate. people still living.
i oo That substantial benefits have
Society Revolutionized been conferred on the Western

In its progress the Industrial World by the Industrial Revolu-
Revolution has created countless tion cannot be denied. (The most
new industries, has transformed or gratifying of the benefits is per-
greatly modified many old ones, haps the enormous improvement in
and has affected human life in so standards of living.) And it should
many ways that a new type of be remembered that it was inven-
civilization has been created. In its tion that started the revolution,
most recent phase, a period of the and that it has been invention and
last seventy-five or eighty years, its two allied factors, chance dis-


===== PAGE 39 =====

1960 THE WORLD'S WORST FOLLY 37

covery and research, that have and neither is invention of the
kept it going and which still keep flash inspiration type; nor is the
adding one benefit after another as effortless and unintentional ac-
the revolution continues. An ortho- quisition of mental capital by daily
dox Marxist who tries to convince contact with methods and proces-
himself or others that the remark- ses of production. By the same
able era in which we are living test, that of being tiresome in
was brought about by “labor” will themselves, risk taking, initiative,
find all the facts of its history judgment, foresight, and self-de-

against him. nial are not labor.
Labor Capital
It is useless to discuss this es- Since “capital” is by definition

sential factor in wealth production that portion of wealth that is ap-
unless it is first defined with some plied to the production of more
precision, because the term “labor” wealth, the numerous factors that
brings up widely differing mental are usually involved in wealth pro-
pictures, and carries various con- duction are involved also in. the
notations, for different groups and production of capital; and the
persons. But difficulties have been demonstrable facts of the existence
found in arriving at a precise and of these multiple factors definitely
satisfactory all-purpose definition prove the falsity of the Marxian
of the factor; even Marx never de- dogma that capital is produced
fined “labor” precisely. However, solely by labor.
labor in every popular and tradi- Marxists refer to our relatively
tional sense is tiring, and this free economic system as the capi-
characteristic may be used to set it talistic system or as capitalism. By
apart from other production fac- long-continued propaganda they
tors which do not in themselves have succeeded in attaching such a
cause fatigue. degree of odium to these names
Hence, for the purposes of the that they serve as smear terms.
present discussion, “labor” is any The implication of these terms is
effort, directed toward the produc- that the use of capital is character-
tion of wealth, which produces istic of our economic system and
fatigue. It follows that chance dis- is not a feature of a hypothetical
covery, whether the result of pure Marxian system. The implication
luck, or partly brought about by is ludicrously false — an economic
the exercise of initiative, fore- system that does not segregate
sight, and judgment, is not labor; capital and use it in wealth pro-


===== PAGE 40 =====

38 THE FREEMAN November

duction never has existed and can- a trace of success — and without

not be imagined. even hope or honor. Their fault
was of course that they held too
Research tenaciously to groundless beliefs

The search for new and useful and unsound theories. However,
materials and for new and im- they made many valuable contribu-
proved methods for producing de- tions to the world’s store of useful
sired articles must have begun as knowledge in the fields: of -chemis-
soon as the human race-had vac= tr§ and metallurgy.
quired moderate powers of im- Modern research is carried on in
agination. Certainly at very low permanent organizations. It is
levels of culture men have carried characterized by the use of a ra-
on crude industries. For example, tional technique of experimenta-
they have made pottery and have tion and by the employment of all
built boats; and it seems certain applicable scientific knowledge.
that these accomplishments neces- This kind of research was not ap-
sarily must have been preceded by plied to the problems of the peace-
the development of workable meth- time manufacturing and process-
ods, and that such development ing industries until the last two
would require extensive experi- decades of the nineteenth century.
mentation. Further, it is probable Once established, however, re-
that in some cases a program of search supported its own growth
experimentation was well enough with the abundance of the discov-
planned and carried out with eries it produced, and as a result
enough thoroughness to represent it has grown during the twentieth
a primitive form of research. century at a rate that may be de-

Alchemy was a field of experi- scribed as explosive. This rapid
mentation in which an enormous growth of well-organized research
amount of misdirected energy was — such research being reciprocally
expended during the first fifteen or stimulated and aided by inventions
sixteen centuries of the Christian and by chance discoveries — un-
era. It is the subject of a large doubtedly is connected with the
amount of specialized literature similar tremendous increase in the
and has been dealt with adequately world’s store of mental capital that
by historians. The alchemists ut- has taken place simultaneously.
terly failed to reach their avowed A method for making iron that
objective of making synthetic gold was worked out in the early cen-
or silver. They ended their search turies of the iron age and used for
of a millennium and a half without many following centuries produced


===== PAGE 41 =====

1960 THE WORLD’S WORST FOLLY 39

the metal only in batches; and the The improved methods made cast
batches had to be small enough to iron cheap and abundant, and a
be lifted out of the smelting fur- rise in wealth and standards of liv-
nace by manpower. The batches as ing took place. A little research
taken from the furnace consisted could have revolutionized the iron
of white-hot, semisolid iron and industry a thousand years earlier.
liquid slag. The slag had to be
separated from the iron by an ex- Initiative, Risk Taking, Self-denial,
tremely laborious process of press- Foresight, and Judgment
ing and hammering. The furnace These factors have character-
was partly or completely cooled istics in common and hence are
down between batches. This meth- grouped together for the purposes
od, wasteful of labor and fuel, was of the present brief review. All are
used with little variation or im- intangible; all are derived from
provement for over two thousand mental abilities or traits of char-
years. For many hundreds of these acter or both; none is labor as
years it was known that iron labor is defined in this discussion.
could be melted in the. smelting Self-denial, foresight, and judg-
furnace and would flow out of the ment do not involve labor when
furnace as a liquid; but apparently exercised; initiative and risk tak-
this happened only accidentally ing may involve labor and other
and was considered a misfortune. factors.
Iron was not commonly used for Initiative is of first rank impor-
castings during these centuries, al- tance in the production of wealth
though methods for casting other since it is the factor that always
metals were known: starts the chain of events that lead
All that was needed to give the to the creation of new production
primitive iron industry a much facilities. The chain of events may
wider field of usefulness in human bring about the testing of a new
affairs and to effect a great re- machine, the discovery of a new
duction in the cost of producing process, the building of a new
the metal was a program of sys- manufacturing plant, or even the
tematic experimentation — that is, creation of a new industry. Some-
practical research. what less directly, it may start re-
Evidently the necessary experi- search projects which will lead
mental work finally was carried eventually to new production
out, since the production of molten means.
iron in the smelting process even- Initiative is always personal.
tually became standard practice. The forces of destiny may make


===== PAGE 42 =====

40 THE FREEMAN November

all preparations for an important sliding contact with a fixed
new event in wealth production; straight knife.
but only a person can produce or This method of cutting even-
recognize a key idea, make the tually was applied in the design of
resolution to take action, and per- a well-known kind of lawn mower,
form the first act leading to the only the means for rotating the
reduction of the idea to practice. knives being changed. But some
An element of chance is thus intro- seventy years elapsed before this
duced into the inception of proj- much-needed adaptation was made.
ects for increasing the production It seems highly probable that a
of wealth. Circumstances, time, lack of initiative was the only
and place may be favorable, but cause of the delay.
the right person may not be pres- Risk taking is present in nearly
ent. In this way the beginning of all wealth-producing activities, but
a project that eventually will be of is most prominent in research and:
great value may be delayed in- in new industries. Its function in
definitely. Strange intervals of helping to create new sources of
stagnation which have occurred in wealth makes it one of the most
the progress of industry may be productive of all factors. Practi-
attributed, at least in part, to this cally all investments of capital in-
uncertainty in the appearance of volve risks, and risk taking is one
the needed personal influence. of the contributions to the produc-
An example is known of a ma- tion of wealth for which investors
chine that gave excellent service have every right to receive com-
in one industry, and which after a pensation.
long lapse of time was adapted to Self-denial plays a prominent
a very different kind of work, part in the accumulation of physi-
where it was badly needed and cal capital by an individual, and a
where again it served well. The similar role in the acquisition of
machine was designed in the mental capital by individuals.
1790’s for shearing the nap of cer- Foresight and judgment, like
tain kinds of woolen cloth. Knives, risk taking, are most valuable in
each of which was bent into the research and in the development
form of an elongated helical curve,” of new wealth-producing means.
were fixed in parallel around a
horizontal axle; in operation the Conclusions
knives were rotated rapidly about The fundamental doctrine of the
the axle, The cutting was done by Marxists in the field of economics
the rotating knives coming into is that all wealth is produced by


===== PAGE 43 =====

1960 THE WORLD'S WORST FOLLY 41

labor. However, evidence of a kind of humanity they never precisely
that can be tested by observation define, is grievously “exploited.”
and by personal experience shows As a remedy for this imagined in-
that this doctrine is false. Such justice they ceaselessly advocate,
evidence shows that the produc- and when possible bring about,
tion of wealth is not a simple proc- violent revolutions with limitless
ess but a complicated one involving destruction and atrocious cruelty,
many factors besides labor. It fol- followed by the formation of gov-
lows that all conclusions based on ernments with unlimited powers.
the main Marxian dogma are fal-
lacious because based on a false It must be concluded that Marx-
premise. ism, because of its record of vio-
Starting with their basic dogma lence, cruelty, and tyranny, and be-
and other false premises, the ad- cause of its complete lack of any
herents of the Marxian cult reach foundation of truth, is Humanity's
the conclusion that “labor,” a part worst folly. ~

Individual Freedom

THERE is much written and said these days about the need for
discovering — or rediscovering — our national purpose. In these
times of swiftly changing social conditions and shifting political
and economic ideas we believe it is vital that Americans under-
stand and tie fast to the values which made the nation great.

These values — the national purpose itself —are set forth
clearly in the Declaration of Independence and the Constitution.
Nowhere have these values been better translated into practical,
positive action than in our free enterprise system.

This system today is in peril. Outside our country formidable
forces are determined to replace it with a totalitarian concept.
Within, it is in danger of being eaten away, piece by piece, by
steadily encroaching socialism disguised in such clothing as
social welfare and “public benefit” regulation.

As said by William Penn: “Governments, like clocks, go from
the motion men give them, and governments are made and moved
by men, so by them they are ruled also. Therefore, governments
depend upon men rather than men upon governments.”

From a release of August 1960
by the Phillips Petroleum Company


===== PAGE 44 =====

EC

Foreion ain

LAWRENCE SULLIVAN

TOTAL FOREIGN AID. OUTLAYS by the U.S. Treasury since World War II
add up to $78.5 billion, through March 31, 1960.

The current recapitulation, from a tabulation by the Office of Busi-
ness Economics, Department of Commerce, includes military assist-
ance, economic aid, all government credits, plus all surplus farm prod-
ucts delivered abroad for blocked currencies. Not included are U.S.
military payrolls overseas nor the direct U.S. administration costs of
some thirty different foreign aid programs under direct U.S. super-
vision and control.

The fifteen-year breakdown, by types of aid:

Economic assistance $47.9 billion
Military assistance 25.8 7
Capital subscriptions (International
credit agencies) 48 7”
Total $78.5 7

The table below shows the combined total to each of the principal
nations assisted by the various U.S. programs:

U.S. FOREIGN AID
(October 1945 through March 31, 1960)

Millions Millions
France $9,709 Formosa 4,381
United Kingdom 7,722 Korea 3,755
Italy 4,834 Japan 3,178
Germany 4,584 Greece 2,739

Mr. Sullivan is Coordinator of Information, U.S. House of Representatives.

42


===== PAGE 45 =====

1960 U. S. FOREIGN AID 43

Millions Millions
Turkey 2,642 Guatemala 94
Netherlands 2,091 Finland 87
Yugoslavia 2,026 Tunisia 77
Belgium-Luxembourg 1,867 Lebanon 70
Vietnam 1,672 Iraq 69
India 1,386 Ethiopia 64
Philippines 1,189 Burma 64
Austria 1,092 Ecuador 63
Spain 980 Haiti 60
Norway 892 Iceland 54
Indo-China 821 Cuba 53
Iran 813 Trust Territory of
Brazil 782 Pacific Islands 52
Pakistan 778 Liberia 52
Denmark 719 Ceylon 52
Poland 654 Costa Rica 47
Israel 596 Uruguay 40
Thailand 480 Panama 32
U.S.S.R. 423 Rhodesia 32
Indonesia 408 Paraguay 28
Portugal 368 Hungary 27
Mexico 321 Nicaragua 24
Laos 261 Honduras 22
Peru 257 Albania 20
Ryukyu Islands 237 Saudi Arabia 18
Argentina 229 Sudan 17
Cambodia 228 East Germany i» . "17
Chile ~~ = 228 Nepal 17
Egypt 208 New Zealand 12
Colombia 202 El Salvador 9
Jordan 194 Dominican Republic 8
Czechoslovakia 191 Venezuela 7
Bolivia 181 Yemen 5
Ireland 142 Somaliland 4
Libya 113 Ghana 3
Morocco 106 Guinea 2
Sweden 105 Malaya 1

Afghanistan 98


===== PAGE 46 =====

THE COMMON SENSE

PROGRESS

F. A. HAYEK

IF TODAY in the United States or scouts have found the goal that
western Europe the relatively the road can be built for the less
poor can have a car or a refriger- lucky or less energetic. What to-
ator, an airplane trip or a radio, day may seem extravagance or
at the cost of a reasonable part even waste, because it is enjoyed
of their income, this was made by the few and even undreamed
possible because in the past others of by the masses, is payment for
with larger incomes were able to the experimentation with a style
spend on what was then a luxury. of living that will eventually be
The path of advance is greatly available to many.
eased by the fact that it has been The range of what will be tried
trodden before. It is because and later developed, the fund of
Reprinted from Trl Coriieianio bz erty experience that will become avail-
by F. A. Hayek by permission of The Uni- able to all, is greatly extended by
iy of Ee Pre or ars” te the unequal distribution of present
Friedrich A. Hayek is an economic theorist benefits; and the rate of advance
of international reputation, perhaps best . . .
known_for his 1944 classic, The Road fo will be greatly increased if ‘the
"versity of London, he has been at the Uni- first steps are taken long before
versity of Chicago since 1950 as professor of the majority can profit from them.

social and moral science in the Committee on

Social Thought. Many of the improvements would
The Constitution of Liberty, his most re- ind ibili
cent book, analyzes the ethical foundations 11 eed never become a possibility

of a free society, the laws and institutions :
developed to secure individual liberty, and for all if they had not long before

the modern welfare-state departures from 1
freedom. The October FREEMAN carried an been available to some. If all had

excerpt from the book, presenting the case for to wait for better things until
freedom. This essay, concerning progress, is

from the third chapter. they could be provided for all, that

44


===== PAGE 47 =====

1960 THE COMMON SENSE OF PROGRESS 45

day would in many instances long as it remains a progressive
never come. Even the poorest to- society, some must lead, and the
day owe their relative material rest must follow.
well-being to the results of past The contention that in any
inequality. phase of progress the rich, by ex-
In a progressive society as we perimenting with new styles of
know it, the comparatively wealthy living not yet accessible to the
are thus merely somewhat ahead poor, perform a necessary service
of the rest in the material advan- without which the advance of the
tages which they enjoy. They are poor would be very much slower
already living in a phase of evolu- will appear to some as a piece of
tion that the others have not yet far-fetched and cynical apologet-
reached. Poverty has, in conse- ics. Yet a little reflection will
quence, become a relative, rather show that it is fully valid and that
than an absolute, concept. This a socialist society would in this
does not make it less bitter. Al- respect have to imitate a free so-
though in an advanced society the ciety.
unsatisfied wants are usually no
longer physical needs but the re- Someone Has To Be First
sults of civilization, it is still true It would be necessary in a
that at each stage some of the planned economy (unless it could
things most people desire can be simply imitate the example of
provided only for a few and can other more advanced societies) to
be made accessible to all only by designate individuals whose duty
further progress. it would be to try out the latest
Most of what we strive for are advances long before they were
things we want because others al- made available to the rest. There
ready have them. Yet a progres- is no way of making generally ac-
sive society, while it relies on this cessible new and still expensive
process of learning and imitation, ways of living except by their be-
recognizes the desires it creates ing initially practiced by some. It
only as a spur to further effort. It would not be enough if individuals
does not guarantee the results to were allowed to try out particular
everyone. It disregards the pain new things. These have their
of unfulfilled desire aroused by proper use and value only as an
the example of others. It appears integral part of the general ad-
cruel because it increases the de- vance in which they are the next
sire of all in proportion as it in- thing desired. In order to know
creases its gifts to some. Yet so which of the various new pos-


===== PAGE 48 =====

46 THE FREEMAN November

sibilities should be developed at in what sense it could ever be
each stage, how and when particu- legitimate to say that any one per-
lar improvements ought to be son is too far ahead of the rest or
fitted into the general advance, a that it would be harmful to society
planned society would have to pro- if the progress of some greatly
vide for a whole class, or even a outstripped that of others. There
hierarchy of classes, which would might be justification for saying
always move some steps ahead of this if there appeared great gaps
the rest. in the scale of advance; but, as
The situation would then differ long as the graduation is more or
from that in a free society merely less continuous and all the steps in
in the fact that the inequalities the income pyramid are reasonably
would be the result of design and occupied, it can scarcely be denied
that the selection of particular in- that those lower down profit ma-
dividuals or groups would be done terially from the fact that others
by authority rather than by the are ahead.
impersonal process of the market The objections spring from the
and the accidents of birth and op- misconception that those in the
portunity. It should be added that lead claim the right to something
only those kinds of better living that otherwise would be available
approved by authority would be to the rest. This would be true if
permissible and that they would we thought in terms of a single re-
be provided only for those speci- distribution of the fruits of past
ally designated. But, in: order for progress and not in terms of that
a planned society to achieve the continuous advance which our un-
same rate of:ddvance as a free equal society fosters. In the long
society, the degree of inequality run, the existence of groups ahead
that would have to prevail would of the rest is clearly an advantage
not be very different. to those who are behind, in the
) same way that, if we could sud-.
How Much Inequality? denly draw on the more advanced
There is no practical measure of knowledge which some other men
the degree of inequality that is de- on a previously unknown continent
sirable here. We do not wish, of or on another planet had gained
course, to see the position of in- under more favorable conditions,
dividuals determined by arbitrary we would all profit greatly.
decision or a privilege conferred The problems of equality are
by human will on particular per- difficult to discuss dispassionately
sons. It is difficult to see however, when members of our own com-


===== PAGE 49 =====

1960 THE COMMON SENSE OF PROGRESS 47

munity are affected. They stand acquire a level of material comfort
out more clearly when we consider that took the West hundreds or
them in their wider aspect, namely, thousands of years to achieve, is it
the relation between rich and poor not evident that their path has
countries. We are then less apt to been made easier by the fact that
be misled by the conception that the West was not forced to share
each member of any community its material achievements with the
has some natural right to a defi- rest — that it was not held back but
nite share of the income of his was able to move far in advance
group. Although today most of the of the others?
people of the world benefit from Not only are the countries of the
one another’s efforts, we certainly West richer because they have
have no reason to consider the more advanced technological
product of the world as the result knowledge but they have more ad-
of a unified effort of collective vanced technological knowledge
humanity. because they are richer. And the
Although the fact that the peo- free gift of the knowledge that
ple of the West are today so far has cost those in the lead much
ahead of the others in wealth isin to achieve enables those who fol-
part the consequence of a greater low to reach the same level at a
accumulation of capital, it is much smaller cost. Indeed, so long
mainly the result of their more as some countries lead, all the
effective utilization of knowledge. others can follow, although the
There can be little doubt that the conditions for spontaneous prog-
prospect of the poorer, ‘“undevel- ress may be absent in them. That
oped” countries reaching the pres- even countries or groups which do
ent level of the West is very much not possess freedom can profit
better than it would have been, from many of its fruits is one of
had the West not pulled so far the reasons why the importance of
ahead. Furthermore, it is better freedom is not better understood.
than it would have been, had some
world authority, in the course of Civilization Can Be Copied
the rise of modern civilization, For many parts of the world the
seen to it that no part pulled too advance of civilization has long
far ahead of the rest and made been a derived affair, and, with
sure at each step that the material modern communications, such
benefits were distributed evenly countries need not lag very far be-
throughout the world. If today hind, though most of the innova-
some nations can in a few decades tions may originate elsewhere.


===== PAGE 50 =====

48 THE FREEMAN November

How long has Soviet Russia or ing many persons richer than they
Japan been living on an attempt to and that their lead over the work-
imitate American technology! So ers in other countries was in part
long as somebody else provides an effect of a similar lead of their
most of the new knowledge and own rich over the rich in other
does most of the experimenting, it countries.
may even be possible to apply all
this knowledge deliberately in such A Fast Pace for Progress
a manner as to benefit most of the If on an international scale even
members of a given group at about major inequalities may be of great
the same time and to the same de- assistance to the progress of all,
gree. But, though an egalitarian can there be much doubt that the
society could advance in this sense, same is also true of such inequali-
its progress would be essentially ties within a nation? Here, too, the
parasitical, borrowed from those over-all speed of advance will be
who have paid the cost. increased by those who move fast-
It is worth remembering in this est. Even if many fall behind at
connection that what enables a first, the cumulative effect of the
country to lead in this world-wide preparation of the path will, be-
development are its economically fore long, sufficiently facilitate
most advanced classes and that a their advance that they will be
country that deliberately levels able to keep their place in the
such differences also abdicates its march. Members of a community
leading position — as the example containing many who are rich en-
of Great Britain so tragically joy, in fact, a great advantage not
shows. All classes there had available to those who, because
profited from the fact that a rich they live in a poor country, do not
class with old traditions had de- profit from the capital dnd experi-
manded products of a quality and ence supplied by the rich; it is
taste unsurpassed elsewhere and difficult to see, therefore, why this
that Britain, in consequence, came situation should justify a claim to
to supply to the rest of the world. a larger share for the individual.
British leadership has gone with It seems indeed generally to be
the disappearance of the class the case that, after rapid progress
whose style of living the others has continued for some time, the
imitated. It may not be long before cumulative advantage for those
the British workers will discover who follow is great enough to en-
that they had profited by being able them to move faster than
members of a community contain- those who lead and that, in conse-


===== PAGE 51 =====

1960 "THE COMMON SENSE OF PROGRESS 49

quence, the long-drawn-out column become very dynamic and progres-
of human progress tends to close sive, has been one of the most con-
up. The experience of the United spicuous features of the postwar
States at least seems to indicate period. The contrast in this respect
that, once the rise in the position between the advanced Welfare
of the lower classes gathers speed, States of Great Britain and the
catering to the rich ceases to be Scandinavian countries, on the one
the main source of great gain and hand, and countries like Western
gives place to efforts directed Germany, Belgium, or Italy, is be-
toward the needs of the masses. ginning to be recognized even by
Those forces which at first make the former. If a demonstration had
inequality self-accentuating thus been needed that there is no more

later tend to diminish it. effective way of making a society
. stationary than by imposing upon
Short-term Gain: Long-term Loss all something like the same aver-

Therefore, there must be two age standard, or no more effective
different ways of looking at the way of slowing down progress
possibility of reducing inequality than by allowing the most success-
and abolishing poverty by deliber- ful a standard only a little above
ate redistribution — that is, from a the average, these experiments
long-term or a short-term point of have provided it.
view. At any given moment we It is curious that, while in the
could improve the position of the case of a primitive country every
poorest by giving them what we detached observer would probably
took from the wealthy. But, while recognize that its position offered
such an equalizing of the position little hope so long as its whole
in the column of progress would population was on the same low
temporarily quicken the closing-up dead level and that the first condi-
of the ranks, it would, before long, tion for advance was that some
slow down the movement of the should pull ahead of the others,
whole and in the long run hold few people are willing to admit the
back those in the rear. same of more advanced countries.

Recent European experience Of course, a society in which only
strongly confirms this. The rapid- the politically privileged are al-
ity with which rich societies here lowed to rise, or where those who
have become static, if not stag- rise first gain political power and
nant, societies through egalitarian use it to keep the others down,
policies, while impoverished but would be no better than an egali-
highly competitive countries have tarian society. But all obstacles to


===== PAGE 52 =====

50 THE FREEMAN November

the rise of some are, in the long progress that makes many of those
run, obstacles to the rise of all; who are in its van skeptical of its
and they are no less harmful to the value. We must also admit that it
true interest of the multitude be- is not certain whether most people
cause they may gratify its momen- want all or even most of the re-
tary passions. sults of progress. For most of
With respect to the advanced them it is an involuntary affair
countries of the West it is some- which, while bringing -them much
times contended that progress is they strive for, also forces on
too fast or too exclusively ma- them many changes they do not
terial. These two aspects are prob- want at all. The individual does not
ably closely connected. Times of have it in his power to choose to
very rapid material progress have take part in progress or not; and
rarely been periods of great efflor- always it not only brings new op-
escence of the arts, and both the portunities but deprives many of
greatest appreciation and the fin- much they want, much that is dear
est products of artistic and intel- and important to them. To some it
lectual endeavor have often ap- may be sheer tragedy, and to all
peared when material progress has those who would prefer to live on
slackened. Neither western Europe the fruits of past progress and not
of the nineteenth century nor the take part in its future course, it
United States of the twentieth is may seem a curse rather than a
eminent for its artistic achieve- blessing.
ments. But the great outbursts in
the creation of nonmaterial values The World Is Not Static
seem to presuppose a preceding There are, especially, in all coun-
improvement in economic condi- tries and at all times groups that
tion. It is perhaps natural that have reached a more or less sta-
generally after such periods of tionary position, in which habits
rapid growth of wealth there oc- and ways of life have been settled
curs a turning toward nonmaterial for generations. These ways of life
things or that, when economic ac- may suddenly be threatened by de-
tivity no longer offers the fas- velopments with which they have
cination of rapid progress, some of had nothing to do, and not only the
the most gifted men should turn to members of such groups but often

the pursuit of other values. outsiders also will wish them to be
This is, of course, only one and preserved.
perhaps not even the most im- Many of the peasants of Europe,

portant aspect of rapid material particularly those in the remote


===== PAGE 53 =====

1960 THE COMMON SENSE OF PROGRESS 51

mountain valleys, are an example. ing elite) has decided on such sac-
They cherish their way of life, rifices in the interest of a better
though it has become a dead end, future as is made by a free-market
though it has become toodependent society. This does not mean, how-
on urban civilization, which is con- ever, that the achievement of most
tinually changing, to preserve it- things men actually want does not
self. Yet the conservative peasant, depend on the continuance of that
as much as anybody else, owes his progress which, if they could, they
way of life to a different type of would probably stop by preventing
person, to men who were innova- the effects which do not meet with
tors in their time and who by their their immediate approval.

innovations forced a new manner Not all the amenities that we
of living on people belonging to an can today provide for the few will
earlier state of culture; the nomad sooner or later be available to all;
probably complained as much with such amenities as personal
about the encroachment of enclosed services, it would be clearly impos-
fields on his pastures as does the sible. They are among the advan-
peasant about the encroachments tages which the wealthy are de-

of industry. prived of by progress. But most of
] the gains of the few do, in the
Progress Requires Change course of time, become available to

The changes to which such peo- the rest. Indeed, all our hopes for
ple must submit are part of the the reduction of present misery
cost of progress, an illustration of and poverty rest on this expecta-
the fact that not only the mass of tion. If we abandoned progress, we
men but, strictly speaking, every should also have to abandon all
human being is led by the growth those social improvements that we
of civilization into a path that is now hope for. All the desired ad-
not of his own choosing. If the ma- vances in education and health, the
jority were asked their opinions of realization of our wish that at
all the changes involved in prog- least a large proportion of the peo-
ress, they would probably want to ple should reach the goals for
prevent many of its necessary con- which they are striving, depend
ditions and consequences and thus on the continuance of progress.
ultimately stop progress itself. ‘We have only to remember that to
And I have yet to learn of an in- prevent progress at the top would
stance when the deliberate vote of soon prevent it all the way down,
the majority (as distinguished in order to see that this result is
from the decision of some govern- really the last thing we want.


===== PAGE 54 =====

52 THE FREEMAN November

We have so far concerned our- While superficially it may seem
selves mainly with our own coun- that two types of civilization are
try or with those countries which today competing for the allegiance
we consider to be members of our of the people of the world, the fact
own civilization. But we must take is that the promise they offer to
into account the fact that the con- the masses, the advantages they
sequences of past progress— hold out to them, are essentially
namely, world-wide extension of the same. Though the free and the
rapid and easy communication of totalitarian countries both claim
knowledge and ambitions — have that their respective methods will
largely deprived us of the choice provide more rapidly what those
as to whether or not we want con- people want, the goal itself must
tinued rapid progress. The new seem to them the same. The chief
fact in our present position that difference is that only the totali-
forces us to push on is that the tarians appear clearly to know how
accomplishments of our civiliza- they want to achieve that result,
tion have become the object of de- while the free world has only its
sire and envy of all the rest of the past achievements to show, being
world. by its very nature unable to offer

Regardless of whether from any detailed “plan” for further
some higher point of view our growth.
civilization is really better or not,
we must recognize that its ma- A Delicate Dilemma
terial results are demanded by But if the material achievements
practically all who have come to of our civilization have created
know them. Those people may not ambitions in others, they have
wish to adopt our entire civiliza- also given them a new power to
tion, but they certainly want to be destroy it if what they believe is
able to pick and choose from it their due is not given them. With
whatever suits them. We may re- the knowledge of possibilities
gret, but cannot disregard, the spreading faster than the material
fact that even where different benefits, a great part of the people
civilizations are still preserved and of the world are today dissatisfied
dominate the lives of the majority, as never before and are deter-
the leadership has fallen almost in~ mined to take what they regard as
variably into the hands of those their rights. They believe as much
who have gone furthest in adopt- and as mistakenly as the poor in.
ing the knowledge and technology any one country that their goal can
of Western civilization. be achieved by a redistribution of


===== PAGE 55 =====

1960 THE COMMON SENSE OF PROGRESS 53

already existing wealth, and they if we wished to, we could not sit
have been confirmed in this belief back and enjoy at leisure what we
by Western teaching. As their have achieved.
strength grows, they will become Our task must be to continue to
able to extort such a redistribution lead, to move ahead along the path
if the increase in wealth that prog- which so many more are trying to
ress produces is not fast enough. tread in our wake. At some future
Yet a redistribution that slows date when, after a long period of
down the rate of advance of those world-wide advance in material
in the lead must bring about a standards, the pipelines through
situation in which even more of which it spreads are so filled that,
the next improvement will have to even when the vanguard slows
come from redistribution, since down, those at the rear will for
less will be provided by economic some time continue to move at an
growth. undiminished speed, we may again
The aspirations of the great have it in our power to choose
mass of the world’s population can whether or not we want to go ahead
today be satisfied only by rapid at such a rate. But at this moment,
material progress. There can be when the greater part of mankind
little doubt that in their present has only just awakened to the pos-
mood a serious disappointment of sibility of abolishing starvation,
their expectations would lead to filth, and disease; when it has just
grave international friction — in- been touched by the expanding
deed, it would probably lead to wave of modern technology after
war. The peace of the world and, centuries or millennia of relative
with it, civilization itself thus de- stability; and as a first reaction
pend on continued progress at a has begun to increase in number at
fast rate. At this juncture we are a frightening rate, even a small
therefore not only the creatures decline in our rate of advance
but the captives of progress; even might be fatal to us. ->

Alexis de Tocqueville

NOTHING is more fertile in prodigies than the art of being free;
but there is nothing more arduous than the apprenticeship of
liberty. . .. Liberty is generally established with difficulty in the
midst of storms; it is perfected by civil discords; and its benefit
cannot be appreciated until it is already old.


===== PAGE 56 =====

THE SCIENCE CALLED Economics

"PERCY L. GREAVES, JR.

“It is no part of the task of science lems of Economics (D. Van Nos-
to examine ultimate questions or trand Company, 239 pp. $5.50),
to prescribe values and determine which first appeared in 1933 under
their order of rank. ... The sim- the German title Grundprobleme
pler task of science is to develop a der Nationalokonomie. In making
theoretical system of cause-and- this basic work available in Eng-
effect relationships enabling us to lish, Mr. Reisman and his editor,
arrange our action in such a way Mr. Arthur Goddard, have per-
that we can attain the goals we formed a valuable service for seri-

aim at. ... ous students, although in a few
“Metaphysics and science per- cases the translated words are not
form different functions. . . . They those Professor Mises would now

can work side by side without en- use. The volume contains eight es-
mity because they need not dispute says devoted to the fundamental
each other’s domain as long as problems of human knowledge
they do not misconstrue their own which had to be solved before
character. A conflict arises only man’s grasp of economics could be
when one or the other attempts to called scientific. They reveal some:
overstep the boundary between of the many steps by which the

them. . . . Reason and science deal eminent professor reached the con-
only with isolated fragments de- clusions so succinctly presented in
tached from the living whole. .. . the first two hundred pages of his
We are unable to grasp the whole great treatise, Human Action.

by reasoning, but we can experi- “The purpose of this book,” as
ence it in living.” Mises’ Preface tells us, “is to es-

These are the words of Ludwig tablish the logical legitimacy of
von Mises as translated by George the science that has for its object
Reisman in Epistemological Prob- the universally valid laws of hu-
Mr. Greaves is an economist and free-lance man action, Le, laws that claim
writer. validity without respect to the

54


===== PAGE 57 =====

1960 THE SCIENCE CALLED ECONOMICS 55

place, time, race, nationality, or perience. We conceive all this from
class of the actor. . .. I considered within... . Nor could experience
it essential to reformulate, in this ever lead anyone to the knowledge
context,” he writes, “several basic of these things if he did not com-
ideas of economic theory in order prehend them from within him-
to free them of the inconsistencies self.”
and confusions that had generally The concept of action implies, as
attached to them in previous pre- prerequisites, “a state of dissatis-
sentations. I thought it pertinent faction,” and “the possibility of
also to expose the psychological removing or alleviating it by tak-
factors that nourish the opposition ing action.” In short, the concept
to the acceptance of economic of action implies an understanding
theory.” of cause and effect. The effect that
The first and longest essay dis- each action is designed to bring
cusses “The Task and Scope of the about is ‘the removal of a dis-
Science of Human Action.” Dr. satisfaction” the actor believes
Mises defines human action as would exist if the action were not
“conscious behavior on the part of undertaken.
a human being.” “Everyone again and again finds
A man without ideas is inca- himself confronted with a situa-
pable of seeing any significance in tion in which his conduct... helps
any facts his senses may register. to determine whether or not his
He is thus incapable of acting. goals are attained. .. . The point
Ideas are “always logically prior” at which the science of action be-
to human experience or under- gins its work is the mutual incom-
standing, hence they precede hu- patibility of individual desires and
man action, and thus action is, by the impossibility of perfect satis-
definition, always rational. faction. Since it is not granted to
This means that “what we know man to satisfy all his desires com-
about our action under given con- pletely, inasmuch as he can attain
ditions is derived not from experi- one end only by foregoing another

ence, but from reason. What we ... he must choose and value, pre-
know about the fundamental cate- fer and set aside — in short, act....
gories of action — action, econo- “Economic action consists in the
mizing, preferring, the relation- endeavor .. . to satisfy wants as

ship of means and ends, and every- far as the scarcity of means allows.
thing else that, together with these, . . . Goals change, ideas of tech-
constitutes the system of human nology are transformed, but action
action — is not derived from ex- ... always seeks means to realize


===== PAGE 58 =====

56 THE FREEMAN November

ends, and it is in this sense always which “seeks the meaning of ac-
rational and mindful of utility. It tion in empathic intuition of a
is, in a word, human.” whole.” He also points out that

In a short review one cannot list “where conception is at all applic-
all the important points that Dr. able, it takes precedence over un-
Mises makes in his second essay, derstanding in every respect.” For
“Sociology and History,” which “what has been arrived at by
deals with the basic distinctions means of conception must be ac-
and overlappings of history and knowledged as established, or else
economic theory. must be shown to be either un-

His careful scalpel exposes the proved or confuted.” In short, we
fine points that historians and never “play a hunch” when our
economists must first grasp before reasoning presents us with an an-
they can add to man’s knowledge swer we consider sound.

of their subjects. He applies the We also learn that “using con-’
principles of his first essay to show cepts of changeable content, one
that men cannot even think of his- can argue excellently. ... However
tory, much less interpret it, with- ... this is not a need of scientific
out first having some ideas about thought... but the need of politi-
action and causality. cal parties that are unable to justi-

He thus explodes the “naive be- fy their programs logically. Today
lief that, unprejudiced by any these parties are striving for world
theory, one can derive history di- dominion with good prospect of
rectly from the sources.” He finds success. The masses follow them,
that “no explanations reveal them- the State has handed over all the
selves directly from the facts.” schools to them, and the literati
Since “history cannot be imagined praise them to the skies.” Written
without theory,” the historian thirty years ago, this statement
must choose between “naive ob- still stands.

solete theory” and “universally Several of the essays present de-
valid propositions about human tails of man’s slowly developing
action.” : knowledge of scientific economic

The shorter essays cover a num- thought. Mises cites many of the
ber of other important points that confusions that led to the popular
popular thinking now neglects. In fallacies of our day. He also points
one he distinguishes between “con- out the fundamental weaknesses of
ception,” which “seeks the mean- the classical economists and how
ing of action through discursive their errors led to the now ex-
reasoning,” and “understanding” ploded theory of ‘the economic


===== PAGE 59 =====

1960 THE SCIENCE CALLED ECONOMICS 57

man.” He devotes many pages to government officials. . . . It springs
the slow evolution of man’s under- directly from the views held in the
standing of the full significance of circles of the educated classes who
the subjective theory of value. He were in public service and enjoyed
indicates errors in the original a fixed salary and a politically rec-
presentations that led to later am- ognized status.” Perhaps it is only
biguities. The correct application natural that such vested interests
of this theory provides all the clues should resent a science that re-
we need to diagnose the causes of veals who are the real parasites of
the so-called “business cycle.” He our civilization.
stresses the senselessness of try- The world today is sadly in need
ing to solve this and other econom- of the knowledge that only the
ic problems by gathering and science of economics can provide.
studying facts and statistics with- Millions believe that economic laws
out benefit of a scientific theory of can be repealed and poverty wiped
cause and effect. out by voting to do so at the polls.
One valuable essay, “The Psy- Too few know that there are un-
chological Basis of the Opposition alterable laws in the social realm
to Economic Theory,” goes a long that must be learned and har-
way toward explaining present nessed if the world is to prosper
conditions. He considers here the in peace.
views of those who discount the The fallacies we hear and read
teachings of economics because every day were originally the ideas .
they are “deliberately not taught of men little known to most Ameri-
at the universities.” Such people cans, Dr. Mises has traced a goodly
“consider a theory to be finally dis- number of these fallacies to their
posed of merely because the au- sources. He then uses the lucidity
thorities who control appointments of his logic to expose them.
to academic positions want to
know nothing of it.” These people Ludwig von Mises is the modern
see “the criterion of truth in the master of the science known as
approval of a government office.” economics. His writings may be
This essay also traces the an- difficult, but if each of us would
tipathy and disdain for the crea- read and digest what he could, we
tors of wealth from Cicero to mod- would all then have a better grasp
ern times. It has been propagated of the policies we must pursue, if
throughout history by the “great ever we are to enjoy the continu-
aristocratic landowners, princely ous prosperity of a durable free
courtiers, officers of the army and society. ~>


===== PAGE 60 =====

A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN

ln

WHEN 1 OBJECTED, in a journalistic fight for his own definition of
essay taking off from the first freedom on a field which I would
articles in a LIFE magazine series not myself choose, I have no basic
on the “national purpose,” that a quarrel with his semantics other
government with a set purpose of than to point out a certain vague-
its own is likely to become an anti- ness in the formulation. But the
human monstrosity, I found my- trouble with the LIFE series as
self in an unsatisfactory argu- a whole is that the argument goes
ment with Archibald MacLeish. the way of all paradox, to conclu-
In the interchange it developed sions that can mean all things to
that we thought we were talking all men. What do we mean by “na-
about the same thing. The “pur- tional purpose”? Can it be any
pose’ of our Founders, so I in- more certain than Rousseau’s old
sisted at the outset, was to free General Will? Henry Luce, in a
men from governmental purpose foreword to the LIFE articles as
in order that they might pursue they are collected and amplified in
a thousand-and-one individual and a book called The National Pur-
group purposes of their own. But pose (Holt, Rhinehart and Win-
this, according to Mr. MacLeish, ston, $2.95), isn’t at all sure.
is hardly in contradiction of his “Peace?” he asks. “Perhaps Peace
statement that our National Pur- is the No. 1 Purpose, but what
pose has always been to Extend kind of Peace — and, even, what do
Freedom. Freedom means the pur- we do with Peace when we have
suit of individual purposes. it or if we get it? Peace, of course.
If Mr. MacLeish doesn’t pro- Peace in Freedom. But Freedom
pose using compulsion to draft to do what? And be what?”
me, whether in my person or in So Mr. Luce comes back to
the product of my energies, to questions that are fundamentally

58


===== PAGE 61 =====

1960 A NATION OF PURPOSEFUL PEOPLE 59

cosmic or religious —and hence tific aid.” But who is to wield the
out of traditional bounds in a dis- tools, the volunteer or the im-
cussion of “national” purpose in pressed agent? And are the tools
a country which accepts the sepa- to be freely granted or extorted
ration of Church and State. As for by force? Clinton Rossiter, a pro-
the majority of the contributors fessor of history, says a “mis-
to this volume, they go round and sion” has been our “historic neces-
round, grabbing for the brass sity.” But if it is currently our
ring of certainty but generally “mission” to “show the way to en-
falling off the horse just as they during peace,” how does that con-
are about to reach it. John K. Jes- sort with the Soviet “mission” to
sup, the editor of the book, is on make the world safe for com-
and off the merry-go-round when munism? Do we knuckle under to
he talks about “a consensus of pri- the Russians if they threaten
vate purposes.” He doubts that “in war? In stating a problem Mr.
the fatness of our pursy times” Rossiter has not solved it. Nor does
our private purposes add up to his attack on “threadbare preju-
any firm “national” direction. But dices about the role of govern-
where does this leave us? Mr. ment” — meaning prejudices
Jessup, quite rightly, refuses to against departing from the tradi-
call for the gendarmes. “As T. R. tional American commitment to
used to say,” he writes, “ a patriot voluntary action —inspire any con-
will make the most of himself. If fidence that Rossiter really re-
enough do, so will the nation.” spects freedom. He says “we”

But the patriot that is Adlai lure far too many talented young
Stevenson, who follows Mr. Jessup = people into advertising and far
in the book, can only think of es- too few into city planning, far too
tablishing “priorities” by govern- many into car-dealing and far too
mental force. The “patriots” are few into teaching. Just whom does
not to be trusted with their own he mean by “we”? And would he
decisions. Mr. Stevenson speaks compel young men and women to
of “restoration of compassion,” become city planners or teachers?
but the compassion is to be ad-
ministered by men like himself,
sitting in political office. Mr. Mac- The best articles in the book are
Leish, insofar as he is specific, by Albert Wohlstetter of the Rand
speaks of “tools of action — mili- Corporation and James Reston,
tary assistance and above all eco- Washington correspondent of the
nomic and industrial and scien- New York Times. Mr. Wohlstetter

Individuals with a Purpose


===== PAGE 62 =====

60 THE FREEMAN November

doubts that we have become a lion Americans a pain. “The Amer-
frivolous nation, in need of the icano, circa 1960,” says Mr. Res-
compelled sacrifices that Profes- ton, “is in no mood to rush off on
sor Rossiter suggests. “Consum- his own initiative to ‘emancipate
ers,” he notes, “have increased the human race,’ or to set any new
their spending for such sober pur- records as the greatest benefactor
poses as medical care and educa- of all time, or engage in any of the
tion faster than the rise in their other crusades mapped out for
incomes and faster than the in- him in Cambridge, Mass.” But the
crease in spending for recreation “Americano” has made a genuine
or for the iniquitous tail fins.” As effort to clear the wreckage of the
for the alleged crisis in “culture,” last war, and if he has turned
Mr. Wohlstetter is not certain away from settling all the affairs
there is one. “Myself,” he says, “I of the Middle East, the Far East,
don’t care for tail fins or Elvis or and Africa, it has been a turn
advertising jingles or even Coca- without panic toward “the com-
Cola, but I doubt that their pop- munity and the family.” In the
ularity is a national danger. An fifteen years of the atomic age,
immense sea of mediocrity sur- says Mr. Reston, the American
rounds but has not submerged people “have increased the popu-
poets such as Robert Lowell and lation of the nation by more than

Elizabeth Bishop. . . . the chore- 40 million, which is not the action
ographers Martha Graham and of a frightened people. . ..” Mr.
George Balanchine, and an abun- Reston thinks Americans will do
dance of excellent architects. . . . what they have to do to maintain

New York concert halls offer an themselves as a free people, pro-
extraordinary range of music vided they have leaders to show
from ancient to modern that is them the way. But he, too, is
unmatched in Paris, London, or vague when he speaks of bringing
Rome. ...” “spunk and spirit” into service of
In short, Mr. Wohlstetter has a the nation “by free methods.”

sense of individuals pursuing their

own purposes without hurting The “Purposeless” Past

their fellows or wishing to control Walter Lippmann’s summa-
them to the end of imposing any rizing article speaks of the domi-
particular set of purposes on ev- nant ‘national purpose” of the
erybody. As for Mr. Reston, he past. We fought the French, the
suspects that “public debates on Indians, and the British, and the
the national purpose” give 180 mil- Spanish, the Mexicans, and the


===== PAGE 63 =====

1960 A NATION OF PURPOSEFUL PEOPLE 61

Indians again, to “consolidate the The springs of purpose are
national territory.” But was this what they are, and they flow most
ever the “national purpose”? Or freely in a climate in which intel-
was it the more or less automatic lectuals do not have the power to
result of innumerable individual coerce those whom they regard as
purposes, which kept demanding their inferiors. It is only when
more room for the expansion of people are enslaved or oppressed
individual energies? (as in the Prussia of Napoleonic
Indeed, it is entirely arguable times, or in the America of 1775)
that intellectuals have always that a single “national purpose”
been wrong about the necessity can be cultivated without danger
for blueprinting the future of the to the individual human spirit. In
Republic. Ralph Waldo Emerson a nation that is already free, the
once complained that “from 1790 urge to force energies into a single
to 1820, there was not a book, a channel can have the most unto-
speech, a conversation, or a ward results. It is amid spasms of
thought in the state” of Massa- unitary thinking that nations do
chusetts. Mr. Emerson was obvi- violence in the name of Manifest
ously not privy to what his fore- Destiny or impose censorships or
bears had been thinking during a cause dissenters to jump out of
thirty-year span; what he meant windows or establish concentration
to convey is that Harvard College camps for those who refuse to ac-
had not been producing writers. quiesce in the “general will.” -~
But, as Samuel Eliot Morison has
pointed out, the Bostonians of the ) THE ECONOMIC POINT OF
1790-1820 period were sending VIEW. By Israel M. Kirzner. D.
their ships to the uttermost ends Van Nostrand. 228 pp. $5.50
of the earth to open up new enter-
prises, to give employment to
farmers’ sons who might otherwise Is ECONOMIC theory merely a body
have starved to death, and to of deductions from a highly tenu-
bring home a wealth that, in later ous assumption concerning a par-
years, was to open copper mines ticular human motive? A motive
in Michigan and to tie the United which may be present or absent,
States together with railroads. or present in varying degrees of
Was all of this to be dismissed strength, at different times and in
merely because it wasn’t written different places? Are the teachings
down in advance, as a “program’ of economics true of nineteenth
for national aspiration? century England, but not of twen-

Reviewed by George Reisman


===== PAGE 64 =====

62 THE FREEMAN November

tieth century Africa or first cen- serious criticisms by those who
tury Rome? Must the economist sought to escape the logical con-
constantly endeavor to ‘‘test’” ‘straints imposed upon the actions
whether or not his basic “assump- of governments by a science of
tion” concerning this particular economic law. For, it was argued,
human motive holds? Or is eco- such beings simply do not exist,
nomics a body of deductions from and any inferences drawn from
a logically necessary truth, a state- the postulation of such a being
ment which is true of human mo- can have no validity for the real
tivation in general at all times world.
and in all places? And is the be-
havior of men in the real world
always capable of being subsumed This criticism, Professor Kirz-
under this statement as a special ner shows, is not true of economics
case? These are some of the vital as such, but only of the doctrines
questions dealt with by Professor of a few economists. Most modern
Kirzner in his valuable and schol- economists, he argues, have come
arly book. to realize that the starting point
In the eyes of the early econ- of economics is not the groundless
omists, the author points out, assumption that men seek to ac-
economics was a science of the quire the greatest possible amount
laws of wealth, a science thought of wealth, but the logically neces-
to deal with a class of external sary fact that men seek to achieve
objects. It was impossible for the most important of their pre-
economists to maintain this view, viously unachieved purposes.
however, as soon as greater atten- Necessarily, if men have purposes,
tion began to be called to the role they must seek to achieve them,
of man in economics, particularly and to achieve their more impor-
in exchanges. Emphasis shifted tant purposes in preference to
from the treatment of wealth to their less important ones. To the
man’s desire for wealth. In short extent that men have purposes,
order, economists constructed as they must desire the means to
the starting point of their science their achievement and take the
a hypothetical being known as the actions necessary to accomplish
homo economicus, a creature them whatever the specific pur-
whose sole desire was to amass poses may be.
the greatest possible amount of It is only insofar as the posses-
wealth. Naturally, such a cons- sion of money affords a means of
truction was open to the most achieving one’s purposes that

How Money Helps


===== PAGE 65 =====

1960 OTHER BOOKS 63

money and the things which can — its acquisition becomes identical
be exchanged for money are de- with the means of achieving pur-
sired by men. The desire for poses, and, hence, must be desired.
money, the author shows, is in no
sense a reflection of a specifically
economic motive, because money
may be desired for all sorts of rea-
sons — artistic and “spiritual” as pages, cloth $3.00; paper $2.00.
well as “materialistic,” altruistic Available from The Bookmailer,
as well as egoistic, reasons. In no 209 East 34th Street, New York
sense, therefore, does one act “un- 16, N. Y.
economically” in giving money to
charity, for example, or buying at
a higher price from a nearby THE AUTHOR of Brainwashing in
store rather than at a lower price Red China and The Black Book on
from a store less conveniently Red China, experienced editor,
located. For in both cases one acts foreign correspondent, and propa-
purposefully. It is more important ganda specialist, has, in this vol-
to give to charity, in this instance, ume, “scooped” the foreign-lan-
than to acquire whatever else the guage press. This area of our
money might buy; the greater national life has never been fully
convenience of the nearby store explored until now. In eleven in-
outweighs the value attached to formation-packed chapters this
whatever else the additional money book discloses the unsuspected,
might be used to acquire. powerful undercurrent in our so-
Only insofar as other things are ciety which influences the thinking
equal does one desire to amass the of millions of Americans of more
greatest possible amount of recent foreign ancestry.
wealth, to buy.at the cheapest Sixty-five daily newspapers in
price, and sell at the dearest, and twenty foreign languages are cur-
then necessarily so. For then — rently printed and circulated in
where there is no conflict between the United States. Adding the
the acquisition of additional weekly, semimonthly, monthly, and
wealth and the achievement of quarterly foreign-language publi-
purposes which cannot be achieved cations to the dailies, the number
by means of the possession of of such periodicals reaches the
wealth, and the possession of ad- astounding figure of 655. The ma-
ditional wealth is still a means to jority of these are pro-American,
the achievement of some purpose edited by men who are grateful

p IN MANY VOICES by Edward
Hunter. Published by Norman Col-
lege, Norman Park, Georgia. 190

Reviewed by August W. Brustat


===== PAGE 66 =====

64 THE FREEMAN November

for liberty and the opportunities efforts mainly in these industrial
provided for them in this favored areas. In this way many publica-
land. But the enemies of freedom tions, even with comparatively
also use the foreign-language small circulations, exert a tre-
press to prey upon the minds of mendous impact and wield a great
foreign-born and even second gen- influence on these people. The
eration Americans. These anti- printed material serves as a dis-
American publications peddle the cussion medium in their clubs,
Communist Party line, endeavor lodges, social and business gather-
to induce defectors to return to ings, and thus exerts its weight
the “Soviet Utopias” with prom- through personal contact, if not
ises of reward, and tighten the always by wide circulation. In
grip of blackmail upon those who addition, of course, tons of com-
still have relatives in the “home munist propaganda annually enter

country.” the United States from behind the
Because many of the foreign- Iron and Bamboo curtains.
born are employed in large stra- The foreign-language press is

tegic industrial centers vital to an influence seriously to be reck-
America’s security, the communist oned with in our continuing fight
press concentrates its propaganda for freedom. ->

MODERN AGE

A CONSERVATIVE REVIEW

is pleased to announce the appointment of
its new Editor

EUGENE DAVIDSON

formerly Editor of the Yale University Press

$4.00 per year $1.25 per copy
Address: 64 East Jackson Boulevard, Chicago 4, Illinois



===== PAGE 67 =====

ESSAYS
ON LIBERTY

VOLUME VII, just published (448 pp., indexed),
contains selected writings from THE FREEMAN and
NOTES FROM FEE, from June 1959 through June 1960.

Cloth, $3.00 Paper, $2.00

he Sit —all 7 volumes ! Cloth, $16.00

Paper, $11.00

Consider these volumes, either singly or in the set, as

choice and thoughtful Christmas gifts.

ORDER FROM:

THE FOUNDATION FOR ECONOMIC EDUCATION, Inc.

Irvington-on-Hudson, New York



===== PAGE 68 =====

>