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

~~ IKEEMAN

Ideas On Cldeas On Liberty

July 1998 Vol. 48, No. 7

FEATURES

388 For the Children by Russell Madden
Surviving the age of “bureaucrats know best.”

391 The Heritage We Owe Our Children by Leonard E. Read
Passing down the legacy of properly limited government.

v 394 Character and Government Policy by Dale E. Walsh
A teacher learns from his state-nurtured students.

400 Educational Decarceration by Daniel Hager
Dismantling government schooling.

403 The Origins of the Public School by Robert P. Murphy
How American private education was displaced—and why.

407 Guess Who Paved the Road to Socialized Medicine by Sue A. Blevins
The Republicans’ role in creating a new health-care program for children.

410 Let’s Not Throw American Medicine into Boston Harbor by Jane M. Orient
Restoring the medical and economic well-being of individual patients.

414 Climate-Change Worries in the Eighteenth Century by Aubrey Drewry
Concerns about global climate change are not new.

418 Should There Be a Carbon Subsidy? by Roy E. Cordato
Are the advocates of energy taxes arguing from good faith?

422 The Taiwan Model by Hugh Macaulay
An economic success story.

¥ 327 The Wild West Meets Cyberspace by Andrew P. Morriss
The fruits of spontaneous order, then and now.

434 Whose Rules? Whose Law? by Jesse Walker
Ill-begotten spending programs (such as the American Heritage Rivers Initiative) just keep rolling along.

COLUMNS

Center NOTES from FEE—What Is the American Constitution? by Donald J. Boudreaux
398 IDEAS and CONSEQUENCES—Billions for a Misconception by Lawrence W. Reed
412 POTOMAC PRINCIPLES—America’s Permanent Criminal Class by Doug Bandow
420 PERIPATETICS—Such a Deal! by Sheldon Richman

¥ 432 ECONOMIC NOTIONS—Social Cooperation and the Marketplace by Dwight R. Lee
437 ECONOMICS on TRIAL—Milton Friedman, Ex-Keynesian by Mark Skousen

© 447 THE PURSUIT of HAPPINESS—Social Justice by Walter E. Williams

DEPARTMENTS

386 Perspective—Barbarians at the Gates by Sheldon Richman
440 Book Reviews

*The Fire of Invention: Civil Society and the Future of the Corporation by Michael Novak,
reviewed by John Hood; 1998 Index of Economic Freedom by Bryan T. Johnson, Kim R. Holmes,
and Melanie Kirkpatrick, reviewed by William H. Peterson; Hot Talk, Cold Science: Global
Warming’s Unfinished Debate by S. Fred Singer, reviewed by Ben Bolch; The Twenty-First
Century City by Stephen Goldsmith, reviewed by George C. Leef; Drawing Life: Surviving the
Unabomber by David Gelernter, reviewed by John Attarian.


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I NLLIVIAIN ESS a EAE

Barbarians at the Gates
Published by . CL.
The Foundation for Economic Education I stand second to none in my admiration for
Irvington-on-Hudson, NY 10533 Bill Gates. He is the model of a man who gets
Phone SA nrg (914) 591-8910 pure pleasure from exercising his intellect. In
FEE Home Page: http://www.fee.org the process, he has helped bring on the tech-
President: Donald J. Boudreaux nological revolution that has made life so
Editor: Sheldon Richman much better. That explains his astounding for-

tune. It also explains the envy on display,

Managing Editor: Beth A. Hoffman
sins among other places, at the travesty of a hear-

gh Frio ing held by Senator Orrin Hatch’s Judiciary
Book Review Editor Committee last winter. Senators whose efforts
George C. Lee? consists in looting productive people to fur-
Edina! eval ther their careers in power had the gall to sit in
Columnists judgment of one whose achievement obvious-
Charles W. Baird ly surpasses their powers of comprehension.
Doug Bandow Gates’s rivals were also there. Scott McNealy
Dwight R. Lee of Sun Microsystems, which still resists the
Lawrence W. Reed personal-computer revolution, called Gates
Mark Skousen “the most dangerous industrialist of our age.”
Velez Wiliams I waited for the derisive laughter. I forgot that
Contributing Editors McNealy was talking to distinguished mem-
Clarence B. Carson bers of the U.S. Senate.
Thomas J. DiLorenzo A few weeks earlier in Europe, someone
Burton W. Folsom, Jr. stepped from the shadows to throw a pie in
Joseph S. Fulda Gates’s face. I had an “Ayn Rand” reaction:
Bettina Bien Greaves here was a self-loathing nonentity trying to
Robert Higgs humiliate the world’s best symbol of success.
John Hospers Who was humiliated?

Raymond J. Keating Then there were the comments the day of

_— fo the big stock-market drop last year. Peter Jen-
en cElro . . .
gd Moc nings of ABC News, in an afterword, pointed
Ronald Nash out to his smarting viewers that, on paper, Bill
Edmund A. Opitz Gates had lost over a billion dollars—*“if that
James L. Payne makes you feel any better.
William H. Peterson As a Gates admirer, I'd like to offer some
Jane S. Shaw advice: don’t be embarrassed by your success
Richard H. Timberlake or ambition. When interviewed by Matt Lauer
Lawrence H. White on the “Today” show in February, you were
The Freeman is the monthly publication of The Foundation for Eco- just that. The occasion was your appearance at
nomic Education, Inc., Irvington-on-Hudson, NY 10533. FEE, : :
established in 1946 by Leonard E. Read, is a non-political, educational the first library, in Alabama, to benefit from
champion of private property, the free market, and limited government. your project to wire “public” libraries to the
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Copyright © 1998 by The Foundation for Economic Education. Per- Internet. (Leave aside for now the tax-funding
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for calendar years 1972 to date. The Freeman is available in microform
from University Microfilms, 300 N. Zeeb Rd., Ann Arbor, MI 48106.

386


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men are going to have to stop being ashamed Dr. Jane Orient broadens the discussion to
of the fact that in all transactions freely under- demonstrate what is wrong with the entire
taken, all parties profit. Until you do so, liber- medical system. At the bottom of every prob-
ty will continue to be in jeopardy. lem lies the visible hand of government.
Concern about global climate change is
nothing new. Some great Englishmen worried
Every few years the statists come up witha about it in the 1770s and devised a startling
new reason for their meddling. Once statism plan to counteract it. Aubrey Drewry intro-
was justified by the market’s alleged deficien- duces us to the Lunar Society of Birmingham.
cy in producing wealth or “distributing” it And speaking of climate, believers in glob-
fairly. Then it was the environment. Now it’s al warming want to tax the use of fossil fuels
the need to assure our children a decent to make up for the alleged damage from car-
future. Several Freeman contributors this bon dioxide emissions. By that logic, Roy
month focus on this excuse for violating our Cordato asks, if CO, is beneficial, would
liberty. environmentalists want to subsidize it?
Russell Madden begins with an overview of Taiwan has every reason to be a backwater
the issue, showing how a legitimate concern island nation. But it’s rich. Hugh Macaulay
with children has turned into a blank check resolves the paradox.
for the state. Critics of the Internet compare it to the Old
Next we reprint another classic essay by West. An apt comparison, Andrew Morriss
FEE’s late founding president, Leonard E. writes, but not quite the way the critics intend.
Read. This installment of our year-long series Can the President of the United States,
celebrating the 100th anniversary of Mr. without the consent of Congress, ignore the
Read’s birth reminds parents of their obliga- Constitution and start a new spending pro-
tion to pass the appreciation of liberty on to gram in the name of the environment? Appar-

* k %

their children. ently so. Jesse Walker explains.

Dale Walsh draws on his experience as a Our regular columnists harvest an interest-
teacher to show how the welfare state corrupts ing crop of insights. Lawrence Reed says there
the character of children. is another reason to not worry about population

Daniel Hager contemplates the ways that growth. Doug Bandow muses on the career of
children are hurt by their “incarceration” in a congressmen caught in the act. Dwight Lee
that alleged institution of learning, the public explains how social cooperation arises out of
school. millions of people seeking their own good.

Robert Murphy takes us back to the origins Mark Skousen looks at a lesser-known side of
of government schooling to demonstrate that, Milton Friedman. And Walter Williams consid-
by intention, it undermines the family, indis- ers the meaning of “social justice.”
putably the best setting for raising children. In the book section, our reviewers check

The current occupants of the White House, out volumes on the nature of the corporation,
the would-be First Parents, are of course mas- economic freedom, global warming, the
ters at exploiting children for political pur- future of the city, and life after the
poses. Sue Blevins dissects their new, Repub- Unabomber.
lican-backed plan to throw the net of medical —SHELDON RICHMAN
care over this vulnerable segment of society.

387


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FREEMAN

Ideas On (Ideas On Liberty J

For the Children

by Russell Madden

Me parents love their children and seek dark road that is becoming increasingly diffi-
only the best for them. Indeed, the cult to exit.

notion that the next generation should have A desire for safety is, of course, no more
better and easier lives is best illustrated by the inherently odd than is an interest in the devel-
countless immigrant parents who suffer back- opment and well-being of one’s children. Par-
breaking labor, long hours, and economic ents rightly seek to protect their children from
deprivation. That motivation is an integral life’s multiple and endless hazards, provide

part of the American vision. them a secure and stable environment in which
The focus on children and their needs and to grow, and ensure their general safety.
desires permeates our society. Whether repre- When those goals are achieved, however, by

sented by a mother enduring long lines and violating the rights of neighbors, the patina of
jostling crowds to purchase this year’s hottest respectability overlaying self-professed good
toy or by indulgent grandparents spoiling intentions quickly chips away to reveal the
their grandchildren, the trend seems to be corrosive essence of tyranny. Need can never

intensifying. be a claim on the wealth, property, or lives of
As long as such activities are confined to one’s fellow citizens.
the home, no harm is done . . . except, per- Through increasingly restrictive and intru-

haps, to the family’s budget or a parent’s sive laws, regulations, and rules that strangle
patience. Even childless people may gain civil society, politicians offer bribes that few
some amusement, pleasure, or relief when constituents can or will refuse. If challenged
observing the lengths to which modern-day that their actions undermine freedom and
parents will go to please their tiny alter egos. install paternalistic control, the dispensers of
Unfortunately, the boundaries of child- largesse purchased at others’ expense right-
centered concern long ago expanded to eously reply that they are doing this “for the
include government action. The increasing children.”
politicization of the intimate bonds and Who could be against children?
responsibilities of parents to their children has The debate is thus skewed in favor of middle-
restricted our freedom in innumerable ways. class entitlements and protection dressed up
Many of the policies designed “for the chil- as benevolence toward poor, defenseless chil-
dren” dovetail neatly with an odd fixation on dren unable to care for themselves. The fun-
“safety at any cost.” The combination of these damental principles involved in this slow-
two rationales drives us inexorably down a motion takeover of American family life are
lost in a political sleight of hand. Freedom,

Russell Madden teaches at Mt. Mercy College in Justice, and equality before the law become
Cedar Rapids, Iowa. disposable abstractions.

388


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

389

A Transformation * In a direct assault on freedom of speech,
politicians seek to regulate that same Internet
The for-the-children mantra magically and World Wide Web . . . for the children.
transforms acquisition of goods provided by Ignoring the primary role of parents in govern-
unwilling others. Theft, robbery, and extor- ing their children’s activities, the state declares
tion become caring, compassion, and gener- that only it can keep innocent children safe
ous concern. Since few are willing to expose from the disturbing images of pornography, the
the sleight of hand, such assaults on our liber- dangers of conversing electronically with sex-
ty continue. ual predators, and the politically incorrect
A few examples make the point: ideas floating uncontrolled in cyberspace.
* Paralleling these efforts at censorship,
* Government indoctrination, also known politicians force television manufacturers to
as public schooling, was imposed on our place a “V-chip” in new televisions to block
country ostensibly to ensure that our children out violent images. Computer monitors are
did not grow up to become ignorant and next on their list. In a similar vein, the state
incompetent adults—despite any compelling “persuades” television networks “voluntarily”
evidence that parents had failed in their oblig- to rate their programs to protect impression-
ations in this arena. Even Thomas Jefferson able young minds. Music recordings, comic
advocated (limited) government support for books, and other media designed to attract
nurturing students in their education. The a youthful clientele also fail to escape
consequences of losing autonomy in this sin- the scrutiny of our ever-vigilant government
gle realm continue to reverberate in our coun- nannies.
try, providing a source of continual friction * Advertising on children’s television
and contentious wrangling that hungrily gob- shows is limited even as networks are forced
bles up not only countless billions in wasted to provide a set amount of “children’s educa-
wealth but big pieces of our freedom as well. tional programming,” which invariably proves
In a kind of self-fulfilling prophecy, govern- to be a ratings loser.
ment-run schools make certain that children » “Joe Camel” is declared animal non
learn only the versions of history, politics, and grata lest his image corrupt kids and trap
economics that cast the current political status them into a lifetime of nicotine addiction.
quo in a favorable light. Other cigarette promotions are outlawed for
* Meanwhile, parents lacking power are similar reasons. Humorous beer commercials
forced to subsidize the teaching of ideas and that might appeal too much to underage con-
values they may abhor. Childless adults stag- sumers are also threatened with banishment if
ger along under heavy property taxes to sup- they are not changed.
port institutions providing a service they do » Large breakfast-cereal companies are
not need. To add insult to injury, constant bond the subject of congressional ire when the
issues add to their burden as pretty new build- prices of their products seem to pose a barrier
ings hide the ugly truth of a dumbed-down, to consumption by our youngest citizens.
increasingly ignorant and incompetent student Of course, when the supply is readily pur-
body—the very result used to justify govern- chased, the products are castigated for con-
ment’s invasion of education in the first place. taining too much sugar and not enough nutri-
» Telephone rates on second phone lines tional value.
and other services are increased to provide The Family Leave Act is passed with
money to wire every school in America to the great fanfare. Mothers can take months off
Internet regardless of whether this is truly the their jobs to bond properly with their children
best avenue for providing a sound foundation and yet still have their positions guaranteed
of knowledge for children. As a bonus, many on their return. Childless couples are left to
educators and families obtain “free” Internet pick up the slack, working longer hours or
access for which others must pay monthly out taking on additional duties to cover for their
of their own pockets. absent coworkers.


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

390 THE FREEMAN e JULY 1998

Fearing that children will suffer physical- are incapable of making the best decisions for
ly, emotionally, or socially from caregivers their children, that only a bureaucrat who has
unlicensed—and uncontrolled—by the state, never met any particular family or knows its
our political leaders call for greater regulation unique context is qualified to make such pro-
of the day care industry. To aid parents even found and long-reaching decisions regarding
more with their child-care needs, the Presi- the children of this country. Sad to say, too
dent calls for billions of dollars in subsidies. many of those self-same parents, obsessed

e To further safeguard the health of the with safety or befuddled by the complexity of
nation’s youth, the government moves to extend the modern world, apparently agree with that
health coverage to young, uninsured children, dismal assessment of their abilities; either that
providing a matching bookend to the seniors or they drop the responsibility for their lives
it already controls via Medicare. (See Sue A. and that of their children into the eager, grasp-
Blevins’s article beginning on page 407.) ing fingers of the state, relieved to have some-

* To overcome the lax care of less-than- one else do the worrying for them. If con-
vigilant parents, government orders air bags fronted with the resentment of those whose
for cars, skillfully avoiding any mention of freedom is diminished as they are forced to
the dangers to children they represent. pay for another’s consumption, these parents
Demanding that babies be secured in car seats evade the consequences of what they do and
and toddlers by seat belts, the state provides indignantly claim that anything and every-
further opportunities for creating unwitting thing the government offers them is theirs by
criminals of distracted parents. Helmets for “right.”
young bicyclers become another symbol of Doubtless, many parents are sincere in their
government sovereignty. beliefs. Equally certain is the error at the base

* The rights of adults to defend themselves of their reasoning. Engaging in a quixotic
as recognized by the Second Amendment are quest for a risk-free existence is a fool’
infringed by “gun-free zones” near schools, by errand—even more so when done while vio-
laws requiring that guns be locked up or bro- lating the rights of others. As Benjamin
ken down and stored separately from ammuni- Franklin said in 1759, “They that can give up
tion, or banned entirely, all so children will be essential liberty to obtain a little temporary
safe—despite the fact that accidents involving safety deserve neither liberty nor safety.” Not
firearms have steadily decreased even while only do they not deserve those values, ulti-

gun ownership has soared. mately they will lose what they so desper-
Even the intellectual development of ately seek.
infants falls under the purview of the govern- Anyone truly concerned with promoting

ment as a Southern governor, Zell Miller of the welfare of children now and into the dis-
Georgia, declares that each newborn shall be tant future should do everything he can to peel
provided with a cassette or CD of classical away the multitudinous layers of constraints
music—paid for by the taxpayers. smothering our nation. If safety and full per-
sonal development of our people are the
goals, the best course is one that restores jus-
tice and freedom.

Implicit in these programs, proposals, and Let’s do it for the children . . . and
laws is the insulting assumptions that parents ourselves. Ud

Too Many Parents Agree



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

Anything That's
Peaceful

The Heritage We Owe
Our Children

by Leonard E. Read

“But he who looks into the perfect law, the law of liberty,
and perseveres, being no hearer that forgets but a doer that acts,
he shall be blessed in his doing.”

—James 1:25

few men who did look into “the law of bequeathed to us carries an obligation that we,

liberty” bequeathed to present-day if we be doers who act, bequeath this heritage
Americans a unique heritage. They were the to our children, to oncoming generations!
authors of the Declaration of Independence, Indeed, it has been written, “It is more blessed
the Constitution, and the Bill of Rights. In to give than to receive.”
what respect were these political documents It is easily demonstrable that giving is the
unique? First, they unseated government as precedent to receiving. The more we give the
the endower of men’s rights and placed the more we receive. Thus, if we would retain and
Creator in that role. Second, they more strengthen that heritage bequeathed to us, we
severely limited government than ever must bequeath it to our children. The dis-
before—for the first time in history, hardly charge of this obligation is, in fact, nothing
any organized coercion standing against the more than enlightened self-interest, precisely
release of creative energy. Result? The great- as is the payment of any debt. When one
est outburst of creative energy ever known, strives to be a pattern for oncoming genera-
simply because the millions were free to act tions—our children—he reaches for the best
creatively as they pleased. Political power in himself. Help them, help oneself.

diminished and dispersed beyond the ready Most Americans who give it serious
grasp of authoritarians who would run our thought would approve acting according to
lives. That was the American miracle! the law of liberty. Yet, in today’s world, this is

Each of these founders is thus—according more of a challenge than first meets the eye—
to the biblical prescription—*blessed in his more, far more, than was the case with our
doing.” There are, however, two sides to this Founding Fathers. Our politico-economic
law-of-liberty coin. That which has been sires were familiar with the tyranny—author-
itarianism—from which they found escape. It

Leonard E. Read established FEE in 1946 and served . . : :
. Their chil-
as its president until his death in 1983. This article, was close to their skins, as we Say. cir

reprinted from the September 1976 Notes from FEE, dren, however, were a generation removed
is the seventh in a monthly series commemorating the from the actual experience. We, in our times,

100th anniversary of Mr. Read's birth. are seven generations removed, and have little
391


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392 THE FREEMAN e JULY 1998

to go by except a dwindling hearsay. We lack and livelihood. The argument, till then, had
the stimulus to draw a sharp distinction not been between freedom and authoritarian-
between the Command Society and the Free ism, but over what degree of bondage. Our
Society. heritage stems from this glorious triumph of
There is yet another deterrent to becoming human liberty—everyone free to act creative-
“a doer that acts.” By reason of our heritage, ly as he chooses. I devoutly believe, along
a vast majority of this later generation are with our Founding Fathers, that the source of
inclined to take the American miracle as human creativity is the Creator.
much for granted as the air we breathe—nei- The next step is to recognize the real mean-
ther of which is much regarded as a blessing. ing of the Constitution and the Bill of Rights.
The “hearer that forgets” —one who lacks As a student of American history some 65
awareness of liberty as a blessing—is unlike- years ago, I was taught to pay obeisance to
ly to be “blessed in his doing.” Nor can such these political documents. But even then, it
“hearers only” confer on their children the was scarcely more than a gesture, comparable
heritage their ancestors bestowed on them. to a salute or a pledge of allegiance to the flag
Because of an abysmal unawareness, they or singing “My Country, 'Tis of Thee.” Few
receive without gratitude and, for this reason, teachers knew the real meaning in 1776,
their failure to give is attended by no sense of fewer still when I was a boy. And today? Pos-
wrongdoing. Indeed, unless they act accord- sibly one in a thousand!
ing to the word, they will continue digging For the true significance, reread the Consti-
ever deeper into the pocketbooks of their chil- tution and the Bill of Rights and note that
dren—a far cry from the law of liberty. there are 45 “no’s” and “not’s” circumscribing
What steps are required, then, for a return governmental power. Reduced to a sentence,
to liberty by the millions who have innocent- they decree: “Government, keep your coer-
ly gone along with “leaders” of the Command cive fingers out of these activities; we reserve
Society? Assume that our well-meaning indi- these—all of them—to ourselves as free and
vidual would do not unto his children that self-responsible citizens!” The beneficial
which he would not have had his ancestors do results were more than I can count but three
unto him, that he would give to his progeny at should be obvious:
least as much as he has received—if not more:

where must he begin and where should he go 1. Fewer political know-it-alls meddling in
in his thinking? Because it is more blessed to private affairs than ever before!

give than to receive, how best can he attend to 2. More free and self-responsible men and
his own self-interest? These are questions women than ever before!

each of us must try to answer, for no one 3. A greater outburst of creative energy

among us is flawless. Improvement in under- than ever before!
standing and clarity in exposition is a poten-

tiality of everyone who lives! An agency of society to invoke a common
It seems obvious that the initial step is to justice and to keep the peace is a social neces-
grasp the very essence of Americanism: “. .. sity. Its role is to codify the taboos—injus-

that all men are endowed by their Creator tices—and punish any trespass on individual
with certain unalienable Rights, that among rights. Bear in mind that coercive force is
these are Life, Liberty. . . .” This acknowl- implicit in such an agency. Ideally, it is our
edges the Creator as the endower of our rights protector. But to expect that coercive force so
to life and liberty and, for the first time in the delegated will be or even can be self-limiting
history of nations, casts government out of is utterly absurd. Yet that is the common view
that role. today. This carelessness is fatal to a good soci-
Until 1776, men had been killing each ety. Why? Our hoped-for protector turned
other by the millions over the age-old ques- plunderer, as we are witnessing. !
tion as to which form of authoritarianism There is one remedy, and one only: eternal
should preside as sovereign over human lives vigilance on the part of the citizenry is the


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

THE HERITAGE WE OWE OUR CHILDREN 393

price of liberty. How be vigilant? Master the He reacts: This is to claim that more goods
“no’s” and “not’s” set forth in the Constitution result from increased taxes.
and the Bill of Rights and insist with all the

reason one can muster that the taboos limiting He hears: The road to recovery is to
runaway power be strictly observed. If we increase wage rates.
would bequeath to our children that which our He reacts: This is to say that recovery

Founding Fathers bequeathed to us, this is the depends on higher costs of production. On
price. Is that price too high? Not if we can dis- and on, ad infinitum!2
cover where our self-interest lies!

Given these foundations for enlightened A good guideline by John Stuart Mill:
self-interest, one may appreciate, with Henry “Whatever crushes individuality is despotism,
Hazlitt, that economics “is the science of trac- by whatever name it may be called.” Our
ing the effects of some proposed or existing Founding Fathers saw eye to eye on despotism
policy not only on some special interest in the and declared their independence of it. May we
short run, but on the general interest in the follow in their footsteps! And more good
long run.” Our children’s interest, as well as counsel: “Don’t hoard good ideas. The more
our own! you radiate [share], the more you germinate.”

A sampling of how one, thus enlightened, This is another way of asserting that “It is
will react to some of the modern proposals for more blessed to give than to receive.”

political intervention: The heritage we owe our children is to look
into the perfect law of liberty, be doers of the
He hears: The way to prosperity is to word and, thus, blessed in our doing. OJ

increase farm PIICES. . 1. There’s a delightful story of how Congressman Davy Crockett
He reacts: This makes food dearer to City  swumbled into a keen awareness of the distinction between protection
workers. and plunder. See “Not Yours to Give” on our website, www.fee.org.
Or contact FEE for a printed copy. (Please enclose a stamped self-

addressed envelope.)

. : : 2. These examples paraphrase ideas from Economics in One Les-
He hears: The way to national wealth is by son by Henry Hazlitt, available from the Foundation for Economic
means of governmental subsidies. Education, Inc.

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

i REMAN ® Education

Ideas On Lib C Ldeas Ou Liberty J

Character and
Government Policy

by Dale E. Walsh

hile growing up, | assumed that all peo- They would feel so much better about them-
ple valued freedom and therefore did selves if they could begin to effect positive
not want intrusive government. Throughout change in their lives. In market terms, I aimed
my early schooling I was taught to admire our to help them see that the only capital they had
country’s Founding Fathers, who threw off was themselves. Therefore, their best immedi-
British tyranny to unleash the most free soci- ate action would be to invest in their personal
ety the world had ever known. But when I capital by focusing on education and develop-
went to college I encountered classmates who ing good work habits.
contended that ending the welfare state was a I lavished encouragement on my students
bad idea—and unfair for economically disad- and made daily mention of historical and
vantaged people. In class after class my argu- present-day achievers. To my dismay, my plan
ments against welfare seemed, at worst, self- failed. As far as I could see, breakfast and
ish or, at best, quaint. Part of the problem was lunch were the only scholastic events of inter-
that I was unable to furnish real-life examples est to them. Sure, teenagers are notorious for
to support the idea that people could be irresponsibility, but if one looks deep enough,
harmed by government largesse. some evidence of concern for the future nor-
My opportunity to see government “help” mally shows itself. But lack of focus was
firsthand came when I began teaching high endemic throughout our school. I could not
school in the small southeast Georgia town of understand it. These young people were intel-
Waycross. No new industry had moved there ligent. Why weren’t they using education as a
since 1969, and poverty was rampant. As a way out of their poverty? Achievement
conscientious newcomer, I decided that class- seemed meaningless to them.
room education would mean nothing to my
students unless it made them want to better Character Throu gh Hard Work
their lives. It sounded simple, but I soon real-
1zed that government “help” could influence My own parents had taught me to see life in
people not to want to improve their lot in life. terms of effort. They were hardy blue-collar
My first step was to show my students the people who believed that survival and pros-
advantages of self-empowerment. This perity required constant struggle. To develop
appeared to be the best approach because ado- strong character in me they had constantly
lescents are self-absorbed and an appeal to stressed the importance of hard work. For as
their self-esteem theoretically could not fail. long as I could remember, they had required
that all my endeavors be performed to the best

Dale Walsh, who resides in Atlanta, is a former public- Of my ability. They also made sure I recog-
school teacher. nized work as the only provider of needs and

394


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

395

privileges. “Money doesn’t grow on trees,” ingratitude toward the kitchen was intolerable
my mother often said. My father responded to given that to receive this daily meal these
. poor effort by commenting, “No boss will pay young people merely had to pick up a tray.
you to do it that way.” In other words, wealth Common courtesy dictated that even if one
did not just appear out of thin air. It had to be received a horrible gift, the giver should at
earned by producing something worthwhile. least receive a “thank you.” However, these
Without realizing it, my parents had used students had been taught to believe that they
character lessons to teach me the basic tenets were entitled to government gifts. Simply
of market economics. stated, the government owed the benefits to
My mistake in dealing with my students them and furthermore, if something is owed it
had been to assume that their world view was can even be demanded. To make matters
the same as my own. It turned out that their worse, the attitude, demeanor, and character
perception of the world was vastly different. of the recipient had no bearing on whether or
Unfortunately, their parents had taught them not the benefit will be given. As long as the
to function in a world that was not shaped by students could demonstrate need, why should
market influences. They had received entirely they bother with gratitude?
different lessons on the provision of needs This notion of being owed something had
and privileges. For instance, I soon found that infected all areas of their lives, with disas-
95 percent of our student body received sub- trous consequences. The benefits received
sidized breakfast and lunch at school. Welfare were not earned in any usual sense of the
checks provided income for most of their word. Certainly no personal labor had been
households. Likewise, the exchange of food exchanged for the wealth received. This in
stamps for groceries was an everyday occur- turn affected their respect for private proper-
rence. Federal programs also paid for their ty. If they saw something they wanted, they
medical care. took it. From their point of view, this made
In fact, government policy had made it perfect sense. If they were entitled to or owed
unnecessary for my students to learn much benefits from the government without any
about work. It had created a misguided eco- work being exchanged, then why should they
nomic system in which income was not based bother to work for any of their possessions?
on production of goods and services but The concept of ownership implies that some-
rather on “need” (defined as eligibility for thing, usually work, has been exchanged for
government programs). I saw why school had the created or transferred wealth. How could
no meaning. Why on earth would a rational these young people be convinced of the
person do anything toward self-improvement immorality of stealing when everyday they
when such betterment would render one less received wealth (government benefits) they
needy, and therefore, less likely to receive had not earned? In other words, if they
benefits? In other words, my students were a were owed item A (benefits) without the
living demonstration that people do become exchange of labor, then why were they not
dependent on government assistance. also owed item B (another individuals shoes
Faced with this situation, I thought of the or jacket)?
arguments my college classmates had made.
Could it be that I was just trying to inflict my

world view on disadvantaged people? Wasn't Community Framework

it nice that I could indulge in this noble free- This clashed with the private-property
market philosophy from a position of health rights I had been taught as a child. I had
and moderate prosperity? learned to respect my own labor and belong-

Then the students provided the concrete ings as well as those of others. Furthermore,
examples I had been unable to offer in college our community had tended to be wary of
discussions. The first clue came when the threats to any property because destruction of
teenagers complained about their “free” a neighbor’s wealth could lead to the destruc-
lunches (which were really quite good). This tion of our own. The whole community frame-


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

396 THE FREEMAN e JULY 1998

work was built on personal labor provided to Security Administration issues disability
the marketplace for the purpose of wealth cre- checks to them and to drunks.)
ation. My students had not experienced any of Government policy even subsidized negli-
this. Neither their wealth nor their neighbor's gent parenting. Usually parents would be
had been earned, so neither was valued. The quite upset if their child failed a class, for it
government had taught them that based on would mean time wasted retaking the class
their need they were entitled to a living. If and money wasted if the class was made up in
society furnishes wealth to people without summer school. Neither of these considera-
requiring labor in return how are the recipients tions ever entered the thinking of parents in
to learn respect for private property? our school. Extra time in school was just an
To my students, being entitlement recipi- opportunity to receive extra benefits. If the
ents meant they did not have the same obliga- child attended summer school, no financial
tions as the rest of society. One result of this hardship ever reached the parent, because the
was a remarkable lack of compassion for their government paid summer-school tuition.
fellow man. The mere thought of being the Government subsidy of parental neglect
least bit inconvenienced for the sake of anoth- went even further. Parents of an unmanage-
er person was abhorrent to them. The idea that able child could receive disability checks for
the school would look more presentable if him. In the community these were known as
they cleaned up after themselves made no “crazy checks.” Mothers would qualify their
sense to them. In their view, they were owed children by deliberately making them irritable
the subsidized meals and since they were or excited before taking them to the Social
needy it was not fair to ask them to return Security office; sometimes they would even
their dirty tray to the dish room. Likewise, it give the children candy and soft drinks in an
was an unjust demand to ask them to pick up attempt to make them “hyper.” Once in this
trash that did not belong to them. program, a status was created that later quali-
The focus on being needy had the addition- fied the child for special programs and treat-
al unfortunate consequence of teaching them ment in school. (This had disastrous effects
to be helpless. My students’ typical response on school discipline, for children in special
to difficulty was to quit. If an assignment was education could not be expelled from school.
the least bit taxing they would just give upand Our school had 10 to 15 percent of the student
turn in nothing. When told they were acting body in special education.)
like quitters, they were unfazed. In my par-
ents’ work-focused household, quitting meant
one was guilty of cowardice, laziness, or
unwillingness to accept responsibility. Quit- There were even programs guaranteed to
ting had no such meaning for my students. make the entire process self-perpetuating.
This was frustrating, but it made sense. Once Teenage girls saw their mothers receiving
again their actions were in total agreement benefits for having babies because additional
with their life experience. Quitting in life (for children created more need. By becoming
example, drunkenness, drug addiction, poor pregnant the teenager herself could receive
money management, abandonment of one’s benefits. How does one inspire a 15-year-old
family, not going to work) resulted in the girl to delay becoming a mother so she can
receipt of government benefits. After all, quit- devote herself to school and later have a
ting demonstrated need, not ability. Govern- decent job and self-respect? What argument
ment policy had a pattern of actively reward- can sway her when all she has to do to receive
ing wrong, unhealthy, imprudent, and unprof- immediate income is to prove to the govern-
itable behavior, so there was no reason to ment that she has conceived a child? Ready
bother trying. Cash was available for failure, examples of sisters, close friends, cousins, or
even for being “disabled” by enslaving one’s aunts receiving benefits only made the wrong
life to drugs. (No one in his right mind would decision easier. Children of children were
ever give cash to drug users, but the Social ignored and neglected, and the whole cycle

Self-Perpetuation


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

CHARACTER AND GOVERNMENT POLICY 397

was ready to begin again. How can such a acters, the government had intervened to
government policy for disaster be called a destroy character and therefore them as
“benefit”? human beings.

Another terrible consequence of the entitle- Some might argue that the government has
ment culture was that time was no longer pre- no business being concerned with what is
cious to my students. The idea that they might proper character, but this argument misses a
make something of their lives did not matter key point. It is one thing for “benefits” to
to them. This explains why they were uncon- cause a person not to learn the rewards of hard
cerned about receiving low grades. An F has work. It is something else when the “benefits”
no meaning in itself. Students trying to make actively assist people in destroying their lives.
something of themselves fear an F because of It might be asked how society should respond
its consequences. In the short term, time is to need? Does not human compassion pre-
wasted. In the long term, doors are possibly scribe that we as individuals buffer another’s
closed forever. But wasted time and opportu- hardship? Yes, but with all of the recipient’s
nities are only significant if achievement is being in mind. Help in the present is of little
valued. Another year of school to my students use if it prevents a person from achieving suc-
only meant another year of receiving “free” cess in the future. To actively encourage the
breakfast and lunch from the government. continuation of need and to remove the incen-
They did not see the time involved as being tive to end the cycle of dependence—that is
wasted or lost because for them time had no enslaving, dehumanizing, and immoral. The
value. Furthermore, crime was also not a cost in individual lives is just too high to think
problem because at worst it would result in otherwise. The emphasis on qualifying for
prison. As they frequently stated, “What’s so government programs takes away the recipi-
bad about prison? It’s air conditioned and ent’s dreams and future. It teaches him to live
you get free food.” Such emptiness from a in failure by not encouraging him to succeed.
14-year-old is frightening, but it was a com- A further concern is that all these individ-
mon view. ual examples of poverty affect society as a

This entire phenomenon can be expressed whole. Consider the values necessary for a
in market terms. Normally, people see each nation to grow: respect for private property,
human life as valuable; they realize each life honest labor, and one’s fellow man. We know
is different and can only last a given amount these as the principles of freedom and the
of time. In other words, human life is scarce. foundation of judicious government. History
This combination of value and limited time has demonstrated that without these convic-
usually fosters a sense of urgency in using tions, a nation cannot be prosperous and free.
one’s life as efficiently as possible. The short- Unfortunately, government agencies have
ness of life motivates people to accomplish as been indoctrinating millions of people to live
much as possible, and so all areas of life in total disregard of these principles. The
become important. Good grades are just the results can be seen in the ruined lives of my
beginning. Following school, wise choices students and their families. These individual
must be made regarding a mate, a career, and examples compound to affect our nation’s
the manner in which one raises one’s children. character.

I then realized that the welfare state had It had been easy for my college classmates
addressed the problem of poverty in material to argue that poor people need government
terms. Note that government policy treats help. Now I know firsthand that limited gov-
people as physical beings only. Merely sup- ernment is not only good political theory, but
plying food and shelter does not address the also a practical way to protect the poor from
humanity of the recipient. To fully meet the government “benefits.” Unfortunately, it is
needs of a human being, the provider of phys- possible for people to forgo achievement for
ical necessities must consider the effect on the the sake of mere existence. Government wel-
recipient’s character. At each instance where fare policy cheapens human life when it
difficulty would have built my students’ char- encourages such a way of life. J


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

Ideas and Consequences by Lawrence W. Reed

Billions for a
Misconception

he children of David Packard, the late Sil- Sometimes, the scare talk has been such to
icon Valley entrepreneur who co-founded make even Paul Ehrlich’s prophecies seem
the Hewlett-Packard Company, have a monu- reasonable. A British scientist in the early
mental job on their hands. Since their father’s 1960s calculated that in less than a thousand
death in 1996, they have been charged with years, “people will be jammed together so
fulfilling his most passionate desire: to spend tightly that the earth itself will glow orange-
billions of the family foundation’s dollars on red from the heat.” An article in the July 23,
behalf of world population control. 1962, issue of Newsweek warned that “By the
If Mr. Packard had understood this issue as year 6000, the solid mass of humanity would
well as he knew how to generate a fortune in be expanding outward into space at the speed
the computer business, he would not have of light.”
been a population alarmist and his heirs
would be spending his money on more pro-
ductive things than abortion training in
Ethiopia or contraceptives in Seattle. This is a A wealth of information, cited in two recent
classic case of misinformation compounding eye-opening articles in the mainstream media,
itself into a colossal misdirection of energy makes Chicken Littles out of Ehrlich and the
and resources. doomsayers. If there’s a danger to the world
Ever since anyone was willing to listen, from its human population, it is from the
scaremongers have been warning us of the prospect of too few people, not too many. The
imminent dangers of world overpopulation. Packard family does not have to worry that
Thirty years ago in his 1968 best-selling humans will overrun the planet before their
book, The Population Bomb, Paul Ehrlich told billions run out.
us that governments would have to take an In the Fall 1997 issue of Public Interest,
active role in forcing population growth down Nicholas Eberstadt writes that some of the
or “we will breed ourselves into oblivion” world’s best demographers are seriously
Ehrlich warned that in the 1970s, “hundreds proposing the possibility that the world’s pop-
of millions of people (including Americans) ulation, rather than continuing to increase in
are going to starve to death.” He said he the next century, will actually peak and then
“would take even money that England will not begin to decline. Eberstadt cites a publication
exist in the year 2000.” from the United Nations Population Division
that includes a credible projection that the

—_— : world as a whole will reach zero population
Lawrence Reed, economist and author, is president of wth by 2040 and will shrink th f
the Mackinac Center for Public Policy, a free-market gro y and will shrn erealter

research and educational organization in Midland, bY roughly 25 percent with each successive
Michigan. generation.

398

A Population Implosion


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

399

Wars and famines are not factors at all in Longer life expectancies have masked the
these surprising numbers. Tumbling fertility decline, but current trends will, if they persist,
rates are. A revealing article by Ben J. Wat- produce an actual decline in the total number
tenberg in the November 23, 1997, New York of Americans within two or three generations.
Times Magazine puts it bluntly: “Never before
have birth rates fallen so far, so fast, so low, Free Versus Unfree
or so long all around the world.

If women were having children at the Overpopulation, in essence, is an imbal-
rate of 2.1, the population would simply ance between the number of people and the
replace itself, with no net increase or supply of food and living space. Even a cur-
decrease. From an explosive fertility rate of 5 sory view of the world’s nations reveals that
just a half century ago, fertility worldwide has free countries don’t have overpopulation
plummeted to 2.8 and continues to sink. problems and that unfree, or socialist, coun-
Drawing largely from the same UN. publica- tries do. Socialism squanders resources at the
tion as Eberstadt, Wattenberg illustrates how same time it crushes the incentives for people
dramatically this decline shows up in certain to produce their way out of poverty.
countries: The fact that free countries are producing

declining birth rates is explained by what the
The rate in Bangladesh has fallen from experts call the “theory of demographic tran-

6.2 to 3.4 in only the last ten years. India sition”: if there is a general improvement in

now has a fertility rate that is lower than economic conditions, a decline in mortality,

America’s in the 1950s. In 30 years, the and better education (all invariably the result

rate in Tunisia has dropped from 7.2 t0 2.9. of a free economy), then there will be a tran-

Mexico’s rate has plunged as well, and is sition toward a declining birth rate. As tech-

now “80 percent of the way toward nology and freer markets the world over pro-

replacement level.” duce ever-higher standards of living and a fall
in infant mortality, couples neither need nor

In Europe, the decline is precipitous, too. desire a large number of children.

Birth rates reached record-breaking lows in Where couples commonly had six or more
the 1980s and have fallen another 20 percent children a few hundred years ago, with per-
in this decade to an astonishing 1.4—match- haps two or three surviving beyond the age of
ing those of Japan and Russia. Even if Euro- five, most couples today have one or two chil-
pean fertility rates rise back to 2.1, the conti- dren with a reasonable assurance that none
nent will likely lose 24 percent of its popula- will die at an early age. This fact, plus more
tion by the middle of the 21st century. reliable and widespread methods of birth con-

Italy’s birth rate of 1.2 is the lowest in trol and birth-control education, largely
Europe and the rest of the world. Wattenberg explains the population bust.
says that is the lowest national rate ever A decline in population produces problems
recorded in the absence of famines, plagues, of its own, but overcrowding is not one of
wars, or economic catastrophes. What makes them. The Chicken Littles like Paul Ehrlich,
Italy’s low rate all the more remarkable is that can go home and leave the rest of us in peace
it is happening in one of the world’s most to work out the problems they never foresaw.
Catholic countries. And the Packard family, assured that people

In the United States as well, the population won’t someday overwhelm the Earth, can
explosion is a bust. The U.S. birth rate has spend their father’s fortune promoting free-
been below replacement for 25 straight years. dom instead of condoms.


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

FREEMAN

leas On [Ideas On Liberty)

Educational Decarceration

by Daniel Hager

hen I was a teacher I reached a conclu- concept. By virtue of being born as creatures
sion that put me at odds with the mys- of the state, youths are forced into a condition
tique that surrounds government schooling: of incarceration, with a mandatory sentence
the most beneficial times during the school imposed on them at the age of five years that
year for many of my students were snow days. is not fully served until they are 16.
These kids were sixth-graders. They had
already spent more than half their impression-
able young lives being regimented by the state The Challenge
through compulsory schooling. In many cases Change is pending, however. One factor
the experience had been bad from the begin- that will break up the present system is tech-
ning. School had become for them a series of nology. But attitudes must also change, and
negatives building on negatives. By sixth beliefs calcified by unquestioned assumptions
grade this reinforcement had turned them into will continue to provide support for the status
academic cripples and colored their entire quo. Therein lies the challenge to those who

outlook on life. maintain that tax-supported schooling should
A snow day was good because at least it did be abolished.
no additional harm. Proponents of the system argue that stu-

What these students needed was to be able dents are not its only beneficiaries. The entire
to drop out of school for a while, to do some- society benefits, they say, by receiving needed
thing good or useful, such as suitable com- infusions of “educated” young people. The
pensable work. Unfortunately, the state’s nar- theory conflicts with the reality. America’s
rowly circumscribed concept of child welfare government schools are plagued by medioc-
forced them to remain in school. One lad who, rity and are turning out vast numbers of intel-
despite normal intelligence, was a basket case  lectually ill-prepared young people, many of
when faced with schoolwork was already them subliterate.
adept at driving a tractor on his parents’ small Students are urged to stay the course
farm. But he would be compelled to continue beyond the end of their sentence on the
his antiproductive routine for another four or grounds that they need to “get an education”
five years until he could be legally released and graduate from high school. Formal
from schooling. schooling becomes a mystical rite that

The problem with state-mandated “public accords higher status to an ignorant person
education” is that it is based on the prison with a diploma than to a more knowledgeable

person without one. This irrationality is fos-
Daniel Hager is a senior research associate with tered by the fallacious interchanging of the
Patrick Henry Associates in East Lansing, Michigan. terms “education” and “schooling.” The for-

400


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

401

mer is a nebulously definable process of men- with alien culture systems. Mann’s philoso-
tal enhancement that need not terminate at phy was a steppingstone toward Frances
any time of life, even in old age. Schooling is Wright’s ideal of a religion-less society. That
a particularized transaction intended to con- ideal was further promoted by turn-of-the-
tribute to the educative process. century educational theorists led by John

As in other transactions, the consumers of Dewey, whose goal was to transform public
education, or their representatives, should be schools into indoctrination camps to prepare a
the payers. That relationship worked well in tractable socialized citizenry to adapt to an
early America. Parents controlled schools by ostensibly egalitarian state run by an intellec-
directly purchasing the services of teachers. tual elite.

Teachers were responsive to their customers. Their disciples later reintroduced the previ-
Children used Noah Webster’s “Blue-Backed ously discredited look-say method of reading
Speller” to learn to read and simultaneously instruction, which forces students to memo-
absorbed moral lessons drawn from Aesop rize instead of teaching them the analytical
and the Bible. French traveler Alexis de skills to decipher unfamiliar words. The latter
Tocqueville noted that American pioneers liv- method, phonics, can produce a 100-percent
ing in privation in isolated wilderness clear- literacy rate, as attested by H.O.P.E. Academy,
ings were not only literate but literary. Typi- a private school in Lansing, Michigan, which
cally in a log house “on a solitary shelf of serves mostly minority low-income and
badly squared boards . . . you find a Bible middle-income families and offers a money-
whose cover and edges are already worn by back guarantee if students do not become pro-
the piety of two generations, a book of ficient readers. (See my article, “Competition
prayers, and sometimes a song of Milton or a in Education: The Case of Reading,” in The
tragedy of Shakespeare.”! Freeman, April 1997.) By contrast, the mem-

orization approach yields high rates of failure
The Anti-Family School and concomitant frustration and belligerence

in youngsters in their formative years.

Pious parents were anathema to those seek- Michael Brunner’s Retarding America: The
ing to create a society without the influences of Imprisonment of Potential (1993) documents
the then-preponderant religion. State-run the strong links between subliteracy and vio-
schooling was to be the means and the earliest lent crime.

Prussian systems the models, for they were Look-say (or “whole language” or “whole-
successful in turning out young people mal- word instruction,” as it is now termed) serves
leable to those who dominated the state. the purposes of state schooling well. Students
Frances Wright, a member of the cadre that who are discharged without serious socializa-
established the 1828 collectivist experiment tion problems tend to blend into society com-
at New Harmony, Indiana, and later the pliantly as intended, but the antisocial dis-
anti-Christian Working-Men’s Party, pro- rupters the system creates move on to exacer-
posed schooling “Free for All at the Expense bate social decay and disorder, conditions that
of All, Conducted under the Guardianship those who hold the reins of the state can seize
of the State,” with parents forced out of the on to further strengthen state power.
equation.?

In 1837 Massachusetts became the first
state to adopt a statewide regulatory educa-
tional board, developed under the leadership However, socialistic enterprises shielded
of Horace Mann. He was a Unitarian moralist from marketplace feedback eventually col-
whose vision of the good society was an lapse, and government schooling is no excep-
application of New England rectitude stripped tion. The accelerating trend to homeschooling
of Trinitarianism, both the traditional Protes- is a sign of a major crack in its stability.
tant variety and the threatening Catholicism Modems stand poised to deliver the coup
of increasingly numerous immigrants arriving de grdce.

Cracks Developing


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

402 THE FREEMAN e JULY 1998

The telecommunications revolution that is present educational establishment, those who
decentralizing myriad public and private insti- profit ideologically from its continuation, and
tutions will have the same effect on education. the entrenched public preconception that kids
Lewis Perelman, in School s Out: Hyperlearn- are supposed to go to conventional schools
ing, the New Technology, and the End of Edu- and that property taxes to support such
cation (1992), notes that the traditional “box schools are simply an unavoidable part of life.
of a classroom” is already obsolete, even Arguments for the abolition of school taxes
though school districts around the nation con- should spark favorable responses from the
tinue to build monuments based on this out- many who now have to pay them and receive
moded model. In an extraordinarily wasteful nothing in return. In addition, parents will
exercise, they are also clamoring to install benefit from liberation from school taxes by
redundant computer technology to access keeping their own money just as entrepre-
remote learning resources that can be neurs are forcing down the costs of learning.
accessed by computers in students’ homes. As technology proliferates, it will drive

Distance-learning technology, including increasingly deep wedges into the structure of
the developing arena of interactive communi- tax-funded schooling and open the system’s
cation, should lead to an explosive growth of rationale to widespread critical examination.
homeschooling. Other organizational settings From that process families can hope to wrest
for learning will likely evolve, such as clus- control of their children from the state, and
tered multi-home schooling and neighbor- children can hope to be sprung from their
hood storefront schooling. Entrepreneurs will prisons. []
flood the marketplace with low-cost learning
systems to tap the burgeoning demand. The 1. George Wilson Pierson, Tocqueville and Beaumont in Ameri-
poor, who are largely pillaged of future suc- ca (New York: Oxford University Press, 1938), p. 243.
enormously. A recent commercial depicts an (New York: Oxford University Press, 1983), p. 220.
apparently poor lad who opens the universe to
himself through his television connected to a
network computer—priced at less than a con-
ventional TV.

As the momentum builds for dismantling
government schooling, the cry will be raised
that “education” cannot be accomplished
without professionally certified teachers.
However, effectiveness in teaching is largely
the application of common sense. (One of the
co-owners of H.O.P.E. Academy, an expert in
common-sense pedagogy, is a nurse by profes-
sion.) Parenting is itself essentially teaching,
and the superior performance of home-
schooled youngsters confirms the ability of
parents to substitute for state-certified teach-
ers. As Rita Kramer revealed in Ed School Fol-
lies: The Miseducation of America’s Teachers
(1991), what passes for professional teacher
training today has little to do with pedagogy
and consists mainly of indoctrination into ide-
ology. In higher education, some exceptional
teachers never took courses on how to teach.

The primary obstacles to schooling’s
decentralized, parent-controlled future are the



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

FREEMAN

Ideas On Libe [Ideas On Liberty

The Origins of the Public School

by Robert P. Murphy

ardly anyone disputes the contention that vide modest aid to schools, albeit in an unsys-
the modern public school is seriously tematic manner. But there certainly was no
flawed. Test scores continue to be poor while conception of a “public” school, neither in the
metal detectors are found in the more violent United States nor anywhere else in the West-
schools. Welfare-state liberals argue that ern world. The distinction between private
schools in poor areas need more money to and public schools was not crystallized until
place them on an equal footing with their the “school wars” of the 1840s, which offi-
richer counterparts. Conservatives usually cially ended the use of public funds to support
reply that the solution is a voucher system that Catholic schools.3
would break the government monopoly on What were the causes of that shift from pri-
education by restoring choice and control to vate to public education? It is impossible to
parents. But virtually all participants on both review the period in question and fail to con-
sides of the debate concede the nobility of the clude that the drive for public education was
original reformers; in their view, the “good largely a response to the huge influx of poor,
intentions” of such school champions as non-Protestant immigrants. Between 1821
Horace Mann and John Dewey led to “unin- and 1850 just under 2.5 million Europeans
tended consequences.” emigrated to the United States, over one mil-
Such admiration is misplaced. As historian lion of whom were Irish Catholics. Nativist
Michael Katz writes, “The crusade for educa- and “Know-Nothing” backlashes occurred,
tional reform led by Horace Mann . . . was not which included the burning of Catholic build-
the simple, unambiguous good it had long ings and other forms of bigotry.# Many
been taken to be; the central aim of the move- viewed Catholics as owing their loyalty to the
ment was to establish more efficient mecha- Pope. One editor wrote that “a Romanist
nisms of social control, and its chief legacy minority, trained by nuns and priests . . . fur-
was the principle that ‘education was some- nishes the majority of our criminals.”
thing the better part of the community did to The increase in Catholics naturally led to
the others to make them orderly, moral, and construction of more Catholic schools. Many

tractable.’ Protestants felt that they had to take action to
check the rising prevalence of a false creed.
Private Education Displa ced Doubtless many would have supported gov-

ernment establishment of the Protestant
Before the 1830s, education was largely an
“informal, local affair,” in which Catholic,

Protestant, and other schools competed for Robert Murphy is a recent graduate of Hillsdale Col-
pupils.2 Often local governments would pro- lege in Michigan.

403


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

404 THE FREEMAN e JULY 1998

church. Mann himself lamented that “there children were more likely to attend the “free”
had never yet been a Christian government on public schools than were children from poor-
earth.”’6 The general respect for religious tol- er families (who often had to work). Thus
erance, however, made such a bold move poor families and childless citizens subsi-
politically impossible. Instead, control of reli-  dized those with enrolled children.!!

gion was cleverly instituted through the pub- The Protestant schools were losing “market
lic school. “The public school, an important share,” and turned to government to pad their
socializing institution, became the substitute budgets and restrict the actions of their chief
for the American national church,” Susan competitors, the Catholic schools. In other
Rose writes.” arenas, people can quickly see through such

The “nondenominational” religious educa- self-interested “altruism.” When a corpora-
tion eloquently described by Horace Mann tion clamors for an import restriction on for-
was a farce—the schools employed Protestant eign competition, most observers agree that it
hymns, prayers, and the King James Bible. It is acting to increase its own profits, not to pro-
was in response to such non-neutrality that tect the public from “dumping.” Why then do
the Catholic parochial system was established most people accept at face value the humani-
in 1874.3 tarian justifications offered by the advocates

As with all who rely on government, of state education when such a bureaucracy
Protestants would eventually rue the unholy confers immense wealth and power in the
alliance of state and school that their prede- hands of an elite?
cessors had established. As America became Once education is viewed as an industry,
increasingly secularized, so went the public the consequences of restricted competition
school. Like the Catholics before them, are all too predictable. Sever the link between
Protestants felt compelled to establish their payment and service, and the quality of the
own private schools to protect their children product—education—declines. Because the
from the humanist and agnostic education schools are “free,” parents are not as interest-
they would now receive at the hands of the ed in assuring their child’s attendance. Public
state.? Their forefathers had failed to see the schools are guaranteed the revenues associat-
danger common to all “democratic” coercion: ed with each pupil in their geographical dis-
one day the comfortable majority may find tricts; there is no need for them to strive for
itself in the oppressed minority. excellence. If parents are dissatisfied, what
can they do? The rise in taxation and lack of
“free” private schools renders any alternative
to the state system unattractive.

While the particular reasons for school Although such an analysis of the financial
consolidation were thus religious at heart, the “winners” of the change to a bureaucratic
extension of government influence in the edu- education system is invaluable for the expla-
cation industry can also be analyzed as an nation of specific policies, such materialist
attempt by inefficient “firms” to hinder com- interpretations are not helpful in determining
petitors, a feature common to all expansions the reasons for the broad popular support of
of state power. (Indeed, in Oregon, private the “common-school” movement. Clearly, a
schooling was literally forbidden until the large number of Americans were convinced
Supreme Court in 1927 declared the prohibi- that a centralized, standardized school system
tion unconstitutional.!%) The primary support- would be beneficial, and not merely in narrow,
ers of Mann’s drive to standardize curricula pecuniary terms. Earlier it was shown that
and centralize the disbursement of public Protestants viewed the public school as a
funds were precisely those who would benefit vehicle for inculcating the true faith in the
financially from such policies. They included next generation. This view can be expanded.
the trade unions, whose members benefited Not only were the public schools to create
from the removal of children from the labor Protestants; they were also to instill docile
market, and the upper middle class, whose obedience to the state and industry.

Schools as Protectionism


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

THE ORIGINS OF THE PUBLIC SCHOOL 405

Was It a Conspiracy? ing such decisions. In this case, that group
happened to be the leaders of industry. But it

To those who dismiss such claims as a certainly was not—and never will be—the
“conspiracy theory,” I ask: how can the public majority of voters who wield such power.
school not inculcate obedience to the state? A Thus far readers may not be horrified by the
conscious choice must be made regarding the behavior and comments of the early reform-
content of education. Neutrality is not an ers. The Protestants sincerely believed they
option. Given this, why would a ruling elite were saving their children from the devil.
not transmit those same values that it itself And who can complain that the schools aided
possesses? Do the conspiracy-theory doubters the Industrial Revolution? But when one
truly believe that a teacher extolling the val- delves into those justifications of public edu-
ues of violent revolution would long remain cation that fall outside the merely religious
on the state’s payroll? Or a teacher who ques- or industrial, its tyrannical and elitist nature
tioned the legitimacy of the democratic sys- is seen clearly. Fundamentally, the purpose
tem? Or a teacher who cast aspersions on the of state education was to take children from
public-school system itself? Do the doubters parents judged incompetent and prevent
deny that children educated in Texas are those children from becoming dangerous,
exposed to teachers and textbooks that blame antisocial elements. The politically powerful
the War Between the States on the North, arrogated to themselves the right to determine
while children in New York are taught that which parents were unfit to rear their own
Lincoln was a great president? Weren’t every children.
single one of these doubters forced to chant, Thus Henry Brown, second only to Horace
every single school day of their childhoods, Mann in championing state education, com-
the words “I pledge allegiance, to the flag, of mented, “No one at all familiar with the defi-
the United States of America. . . ’? cient household arrangements and deranged

The common-school movement paralleled machinery of domestic life, of the extreme
the industrialization of American cities. As poor, and ignorant, to say nothing of the
such, the public schools were seized on as a intemperate—of the examples of rude man-
tool for the transformation of children into ners, impure and profane language, and all the
complacent workers. Katz writes that “The vicious habits of low bred idleness—can
values to be instilled by the schools were pre- doubt, that it is better for children to be
cisely those required for the conduct of a removed as early and as long as possible from

complex urban society. . . . The connection such scenes and examples.”!3

was unmistakable; schools were training Such an attitude inevitably led to the con-
grounds for commerce. . . . The common sideration of children as wards, nay, as prop-
school made company men.”!2 erty, of the state. Mann wrote, “Our common

Thus the public schools did not simply schools... reach, with more or less directness
transmit, say, the values of honesty and peace and intensity, all the children belonging to the
among men; they specifically inculcated those  State,—children who are soon to be the
traits necessary for city life and passed over in ~~ State.”!4
silence those values held by rural and ethnic This diminution of individualism made
Americans. This is not to suggest that such a possible ever greater encroachment of gov-
decision was detrimental to the students, but ernment in all spheres of life. And, as is the
merely to again emphasize that it is impossi- case with all accretions of state power, each
ble to establish a school that is neutral—the increment in government authority itself justi-
views of one faction will be taught to the fied the next increase. This served to further
exclusion of those views held by the political- affirm the need for government-controlled
ly weak. Whoever controls the schools will education. After all, when the voting citizenry
control the next generation. If such a power is has the ability—via the newly acquired power
nearly monopolized by the government, then of the federal government—to wreak great
the politically powerful will be the ones mak- havoc, it becomes tremendously important to


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

406 THE FREEMAN e JULY 1998

regulate their ideas. Thus Mann’s famous dic- of Horace Mann are followed: “[T]he educa-
tum is cast into a new and ominous light: “In tion of the whole people, in a republican gov-
a republic, ignorance is a crime.” With the ernment, can never be attained without the
establishment of compulsory attendance laws consent of the whole people. Compulsion,
in the 1850s, Mann’s statement was no longer even though it were a desirable, is not an
metaphorical. available instrument. Enlightenment, not

Most people—who were themselves edu- coercion, is our resource.”!3 Od
cated either in the public schools or who used 1. Michael B. Katz, Class, Bureaucracy, and Schools (New
state-approved textbooks and state-licensed York: Praeger Publishers, 1971), pp. ix-x.

2. Anthony S. Bryk, Catholic Schools and the Common Good
teacher S—were taught that the founders of the (Cambridge, Mass.: Harvard University Press, 1993), p. 18.
American public-school system were simply 3. Ibid, p. 23.
: : : 4. Mary A. Grant and Thomas C. Hunt, Catholic School Educa-
devoted to cnsuring opp ortunity to all Ameri- tion in the United States (New York: Garland Publishing, Inc.,
cans, rich or poor. But we have seen that the 1992), p. 43.

. SS 5. Bryk, p. 28. Although the text is unclear, it is likely that this
main thrust of the system was to assimilate quote was actually penned in the late 1800s, following another wave

those elements of the population, such as the of Irish immigration. It has been included, however, for it accurate-
Catholi d forei ho did ly reflects earlier Nativist opinions.
atho ICS, poor, an orcigners, who di not 6. Louis Filler, Horace Mann on the Crisis in Education (Yellow

fit the mold of what a “proper” American Springs, Ohio: Antioch Press, 1965), p. 242.
7. Susan D. Rose, Keeping Them Out of the Hands of Satan (New
should be. School was transformed from a York: Routledge, Champion, and Hall, Inc., 1988), p. 29.

voluntary setting of learning into a coerced : dP 2
detention center, with its wards being fed con- 10. See Bryk, p. 28.

: : : 1 11. See David B. Tyack, The One Best System (Cambridge,
sciously selected information 10 an attempt to Mass.: Harvard University Press, 1974), p. 71, and Katz, p. 43.
produce acquiescence in the status quo. 12. Katz, pp. 32-33. Also see Tyack, p. 73.

America’s current education crisis will only 13. Katz p. 31.

. . 14. See Filler, p. 86.
be solved when, ironically enough, the words 15. Ibid., p. 41.

ail
mL

EET 1 “5 ]

I did fi
I] 0 ie

5
Lil Ji Ak (il

Public School No. 17, New York City, c. 1848


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

ldeas On Lib [ dcas On Liberty

Guess Who Paved the Road to
Socialized Medicine

FREEMAN

by Sue A. Blevins

early one year ago, Congress passed and When you ask Republicans why they
President Clinton signed into law the helped create a new government health-care
largest expansion of government health care program for children, they will say that it’s
since 1965, when Medicaid and Medicare what the American people wanted. But that is
were created. This new federally funded pro- not exactly honest. Republicans are quite
gram, titled “State Children’s Health Insur- aware that Americans don’t want socialized
ance Program” (SCHIP), gives states the medicine—or any new entitlement program
authority to enlarge government health- for that matter. Even public-opinion polls
insurance programs for children, including confirm that. In fact, a recent Harvard Uni-
medical services in public schools. Congress versity survey found that while most Ameri-
estimates SCHIP will cost taxpayers $48 bil- cans think that children have a right to health
lion over ten years. care, the majority believes that families are
How ironic. When the Democrats con- responsible for securing that right—not gov-
trolled Congress in 1993, the Clinton admin- ernment. Only 20.6 percent of those polled
istration was unable to pass its national plan would consider giving that responsibility to
for socialized medicine. Yet with Republicans the federal government. (Respondents were
in charge of Congress, the administration was asked, “Who, if anyone, do you think should
able to implement its backup plan. According be most responsible for paying to make sure
to the Association of American Physicians that children get this right [to health care]?”
and Surgeons (AAPS), previously secret doc- Results were: parents, 52.4 percent; federal
uments from Hillary Rodham Clinton’s government, 20.6; state government, 9.1;
Health Care Task Force show that a “kids employers, 7.5; local government, 2.7; chari-
first” strategy which could be implemented ties, 0.3; and other answers, 7.4 percent.)
through Medicaid was the backup option in
case the larger plan failed. The AAPS is the .
doctor’s group that successfully sued the task Really, Why Did They Do It?
force to make it release all its documents. The So why did the Republicans help create the
government was ordered to pay more than largest federally funded health-entitlement
$285,000 to AAPS because of the White program since 1965? It seems the Republi-
House and Justice Department’s cover-up of cans merely caved into the Democrats’ savvy
task-force information. political strategy, which went something like
this: Let’s propose a new government program
for children and fund it with cigarette taxes.

Sue Blevins is president of the Institute for Health Then, if Republicans oppose “KidCare” we'll
Freedom in Washington, D.C. charge that they don’t care about children and

407


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

408 THE FREEMAN e JULY 1998

that the only reason they oppose it is because to Medicare to see how that would happen.
the Republicans get large sums of money Medicare was created with the purported goal
from the tobacco industry. This was a brilliant to help reduce the elderly’s out-of-pocket
political strategy. Yet the consequences of health-care expenses. However, their medical
SCHIP will affect many, if not all, Americans. costs have increased dramatically since 1965.
One of the greatest dangers of SCHIP 1s Medicare grew much faster than ever antici-
that it will reduce the number of privately pated, and consequently, the elderly are now
insured children. That is because SCHIP cre- forced to pay higher deductibles and copay-
ates incentives for families and employers to ments. In terms of absolute dollars, their out-
drop private health insurance and instead take of-pocket expenses were reduced by only $9
government subsidies for health care. The during Medicare’s first five years, from $234
Congressional Budget Office expects that half to $225 per capita between 1966 and 1971.
of the participants in the new program will be Since then, Medicare out-of-pocket costs (co-
families that give up private insurance. payment and deductible amounts) have grown
“That’s what happened when Medicaid to $757 per beneficiary in 1995—about $26
opened in 1987 to pregnant women and their billion total. Additionally, seniors pay mil-
children with incomes 250% of the poverty lions out of pocket for non-covered services,
level,” Robert Goldberg of George Washing- such as prescription drugs. Clearly, Medicare
ton University writes. “Between 1988 and did not meet its stated goal. It is unlikely that
1995, the percentage of children covered by SCHIP can do so either.
private insurance fell to 64% from 72%. At
the same time, the percentage of children cov- .
ered by Medicaid climbed to 23.1% from A Dangerous Alliance
15.5%. Studies show that at least three- The greatest danger of SCHIP lies in its
fourths of the shift was the result of parents expansion of government health care in public
dropping private coverage for themselves and schools. More than 30 states across the coun-
their children. This new program will have the try are already in some stage of implementing
same effect.” KidCare in their public schools. Currently,
Another concern is that SCHIP could even- public schools can provide health services
tually become mandatory for all children, under a Medicaid program titled “Early, Peri-
regardless of family income or need. That is odic, Screening, Diagnosis and Treatment”
what happened to the elderly. Consider that (EPSDT): Medicaid pays for any service to
initially Medicare was established to help treat or prevent medical problems, including
only poor elderly people, while the better-off family planning, unclothed physical examina-
were told they could keep their private health tions, immunizations, and psychological coun-
insurance. However, after Medicare was seling. Among the providers covered are
passed in 1965, the federal government gar- physicians, nurses, psychologists, social work-
nered enough muscle to force private insurers ers, and physical therapists. Since 1967, Med-
to drop the nonpoor elderly, leaving them no icaid has required states to offer EPSDT pro-
alternative but to join Medicare. Moreover, grams to all Medicaid-eligible children up to
the federal government has made it mandato- age 21. Then in 1989 Congress mandated that
ry to enroll in Medicare Part A (which pays states increase the proportion of eligible chil-
for hospital care) if you receive Social Securi- dren receiving those services from 30 percent
ty benefits. Given government’s track record, to 80 percent by 1995. To reach more children,
it is quite likely it could force children to par- the states turned to the public schools.
ticipate in SCHIP. It is only a matter of time There is no doubt that increased EPSDT
before we start seeing state laws that say, services will mean a loss of parental control.
“Your child must join SCHIP or he can’t Some school districts provide screening ser-
attend public school.” vices to all children, whether or not they are
SCHIP is also likely to lead to higher eligible for Medicaid. A report by the Center
health-care costs. Again, one need only look for the Study of Social Policy on how to cre-


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

GUESS WHO PAVED THE ROAD TO SOCIALIZED MEDICINE 409

ate school-based Medicaid programs explicit- ine the labels applied to some students. Also,
ly states that “School districts should not con- the school-based Medicaid programs create
sider the EPSDT/Medicaid program if their perverse economic incentives: the more chil-
philosophy is that it is the sole responsibility dren diagnosed with psychological disorders,
of parents to attend to the health care needs of the more money schools can obtain from
children.” Medicaid.

Clearly, the program implies greater gov- But the trouble with psychological exami-
ernment control over children, coupled with nations does not end with the child’s school
the view of parents as potential child abusers. days. The results, as subjective as they may
A case in point is a recent incident in Penn- be, are entered on the students’ permanent
sylvania where a public-school physician school records, which then can affect their
gave genital exams to 59 sixth-grade girls career opportunities.
without parental consent and over the strong SCHIP will help expand school-based
objection of some of the girls. The physician health centers. Consequently, we will see
claimed she was looking for sexually trans- more psychological testing and group coun-
mitted diseases and for signs of sexual abuse. seling in public schools across the country.
The new children’s health-care program The Republicans won control of Congress
increases the likelihood that public schools by promising to reduce government. But once
will examine or treat children without in charge, they got scolded for their attempts
parental consent. to cut the growth in Medicare spending. One

Parents should also be concerned about the would think they would have learned a good
lack of privacy at school-based health centers. lesson from that experience: it is almost
Once a program is established, children are impossible to roll back entitlement programs
subjected to intrusive psychological testing once they're created, especially health-care
without parental consent. Schools can then entitlements. Yet instead of learning that les-
share psychological information and records son, Republicans helped create the largest
with private foundations and state agencies. health-care entitlement in 30 years. Thus, it is
With so many behavioral problems labeled as fair to say that the Republican-led Congress
psychological disorders, one can only imag- paved the road to socialized medicine. 0

The Freeman Goes to School!

The apple icon § identifies Freeman articles that are appro-
priate for teaching high-school students four major subjects:
economics, history, government, and philosophy.

We also provide sample lesson plans for these articles on our
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schooling parents need only to visit our website or request writ-
ten lesson plans to take advantage of this unique service.



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

FREEMAN

ideas Ou Lihe (ideas Ou Liberty

Let’s Not Throw American
Medicine into Boston Harbor

by Jane M. Orient

he ongoing battle over “health-care the Patient Access to Responsible Care Act,
reform” may be portrayed as a war sponsored by Representative Charles Nor-
between the American Medical Association wood of Georgia).
and the Good Guys. The AMA is supposed to To get it right, we have to change the focus
stand for Corporate Greed, and the Ad Hoc from doctors’ incomes (and the politics of
Committee to Defend Health Care, headquar- envy and class warfare) to patients’ well-
tered at Harvard University, is supposed to be being, both medical and economic. Yes, prof-
on the side of Social Justice and everything its are involved in medicine—as in every
good. The latter group (called “Doctors human activity. But remember that govern-
Against Profits” in the Wall Street Journal) ment and managed-care bureaucracies (which
recently dumped boxes of annual reports from are more similar than different) are both
investor-owned hospitals and health plans into focused on the bottom line: their budgets and
Boston Harbor. their concept of the collective good. The
In reality, the issue is Managed Care versus AMA is ineffective at fighting them because
Single Payer, even though neither group its bureaucracy has the same problem and is
openly acknowledges its ultimate political 1n bed with the others.
goal. Medicine is supposed to serve patients. If
While the two groups appear to be at odds, patients are served well and at an affordable
it is interesting that the AMA gives the Ad cost, then doctors should be well rewarded
Hoc Committee a lot of column inches in its (and rewards are not all financial). If doctors
publications. The truth is that the two have are rewarded for reasons that are largely unre-
much in common—and they both have the lated to good service to patients, as opposed
wrong answer to the problems with American to corporate or government masters, then
medicine. So do Congress and the Clinton patients will surely suffer.
administration, which are likely to pass still Patients have succumbed to one terrific
more bad laws that will push us further down sales job by insurers and the government,
the yellow-brick road to the Single Payer Wiz- which were aided and abetted by physicians
ard (despite their advertised intentions, as in out for easy money from third parties. They
all want patients to believe that happiness is a
rich insurance plan that covers everything.

Jane Orient, M.D., is the executive director of the Such “Insurance,” with first-dollar coverage

Association of American Physicians and Surgeons ini -of- t nse, 1
and a member of the FEE Board of Trustees. She is or minimal ou of-p ocket expe di i i
the author of Your Doctor Is Not In: Healthy Skepti- prepayment for consumption and 1s definitely

cism About National Health Care and a new novel Dot a good deal. As one consumer, who hap-
about where the money is in medicine, Sutton’s Law. pens to be a doctor, said, “I have sent about

410


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

411

$75,000 to Blue Cross in the past ten years mandates that prevent insurance companies
and have absolutely nothing to show for it” from offering low-cost benefits suited to what
Had he had a serious illness, he might still patients want rather than what special-interest
have had nothing to show for it. These days lobbies demand.
the covered services are “covered” by a gate- If this is done, there will be winners: insur-
keeper and layers of committees. ance companies that offer no-nonsense,
If this sounds like a pitch for medical sav- patient-tailored coverage at a reasonable cost;
ings accounts, it is and it isn’t. MSAs are a employers who can offer workers the equiva-
kind of gimmick, a partial answer to the basic lent of a raise without sacrificing competitive-
problem, which is the abuse of the concept of ness; workers who can have more money
insurance—in large part due to tax discrimi- under their own control (rather than that of an
nation against true medical insurance and in insurance bureaucrat); patients who can buy
favor of prepayment for consumption, the medical care they want instead of insur-
ance that they don’t want; and doctors who
are best at satisfying their patients.
There will also be losers: Those who profit
Both the type of insurance and the payment from managing or gaming the present sys-
mechanism are at fault. By “payment mecha- tem—whether they are managed-care or
nism” I mean the “assignment of benefits,” or insurance executives, government bounty
payment, to the “provider” rather than to the hunters, bureaucrats, overpriced doctors and
supposed beneficiary. This is an invitation to hospitals, insurance salesmen, and even
fraud and abuse. (Nonetheless, Medicare does patients who are constantly demanding more
everything to encourage it.) Moreover, it medical care (often of dubious value) as long
tends to disguise the wastefulness and absur- as it is at someone else’s expense. Some of
dity of processing huge numbers of claims for these folks can better themselves by finding
trivial sums of money. useful, soul-satisfying work. And the congen-
Bureaucracies with a lust for power, insur- ital thieves can go back to robbing banks.
ers with a lust for profit (they get paid for all Such a system would be correctly called a
that ridiculous paperwork), doctors with free market. The transactions that occur there
extravagant tastes (who know they get more would be peaceful and voluntary.
from the third party than they could ever get The system that we have now may be called
directly from patients), and patients with a a market, but it is truly anything but. It is best
distaste for personal responsibility—they all described as a system of legal plunder,
have a vested interest in the status quo. More- marked by class warfare and increasingly dra-
over, everyone fears, and with good reason, conian coercion.
that the first one to get off this merry-go- The way out 1s to take back our freedom,
round will take a financial beating. not to turn back the clock to old methods
Probably the only way out is to stop the rightly called fascism, serfdom, or mercantil-
merry-go-round, all at once, for everybody. ism, even if dressed up in new names like
No more tax preferences for employer- managed competition or single payer, and
provided “health benefits”: pay the workers even if advocates stage a perverted version of
with real money, not HMO money, and give a stunt (the Boston Tea Party) once pulled by
an across-the-board tax cut from which all real Sons of Liberty.
profit (not just those with employer-provided Remember, that historic event was about
“health benefits”). No more “assignment of throwing out British mercantilism. How iron-
benefits”: pay all claims directly to the bene- ic that the actors in the recent parody would
ficiary, with a dual-payee check if that is con- destroy American free enterprise and import
sidered necessary. And no more government British or Canadian socialism. OJ

Faulty Insurance


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

Potomac Principles by Doug Bandow

America’s Permanent
Criminal Class

an Rostenkowski is on the comeback Since most of what America’s unindicted
trail. Although convicted of and jailed for and unconvicted legislators do is criminal,

misusing his office, the former Democratic perhaps voters should be more forgiving of
chairman of the House Ways and Means those who get caught. That seems to be the
Committee has become a senior statesman of practice in other nations.
sorts, dispensing political advice to business- In India, for instance, criminals frequently
es and his former colleagues. Obviously nei- run for office. Of course, they don’t always
ther crime nor punishment is an impediment win. Dharam Pal Yadav was defeated for re-
to success in Washington. election in the recent election. He had been

Still, the number of convicted criminals in charged with 25 crimes, including six mur-
Congress seems remarkably low. After all, ders. An aide explained: “It all depends on
events in Washington appear to offer defini- what you call crime. If it’s a political crime,
tive proof that politicians are congenital crim- it’s not really a crime.” Dan Rostenkowski
inals. How else to explain the lying, cheating, could not have put it better.
and stealing that permeate the legislative Taiwan has created a positive incentive for
process? How else to explain the unending criminals to enter politics. Officials usually
looting of the body politic justified in terms of aren’t prosecuted for their crimes. The police
the public interest? Indeed, the alternative must get permission from the legislature,
hypothesis, that they really are that stupid, is provincial or national, to arrest a member.
almost too horrifying to contemplate. Obvi- Such permission is rarely granted.
ously, the American judicial system is failing “We have a saying,” explains political sci-
to do its job. ence professor Yang Tai-shuenn: “If you get

Some members of the Washington, D.C., elected, you become an official. If you don’t
police force inadvertently made this point two get elected, you go to jail.” At one point 136
years ago when they blocked off streets of 175 members of the country’s provincial
around the Capitol in anticipation of the Pres- assembly and the two largest city councils had
ident’s State of the Union speech. Instead of been convicted of various offenses; another
using the standard markers, “Police Line—Do five had been indicted. An incredible 312 of
Not Cross,” they put up yellow tape embla- 858 county and city officials had been con-
zoned “Crime Scene.” Unfortunately, the cops  victed and another 112 were under indict-

failed to arrest any of the miscreants. ment. Three-fourths of the speakers and
deputy speakers of city councils had been
indicted.

Doug Bandow, a nationally syndicated columnist, is . .
a senior fellow at the Cato Institute and the author Many of them were charged with buying

and editor of several books, including Tripwire: VOtes, a tradition in Taiwan. Others were
Korea and U.S. Foreign Policy in a Changed World. indicted for allegedly rigging bids and abus-

412


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

413

ing their office in the sale of state property. board members; seven others resigned rather
Some were charged with more usual crimes. than face charges. “None of these people
Explains Mr. Yang: “Many people involved deserve to go to jail, but they screwed up,”
in the underground and mafia in Taiwan explained Mr. Humphrey. “It happened on
tend to run for public office to get away from their watch.”
punishment.” Such an approach would have wide appli-
And also to improve the efficiency of their cation at the federal level. When (not if) Con-
criminal operations. Chao Yung-mao of Chin- gress breaches the spending caps agreed to
ian University says that gaining power is “a only last year, the Justice Department should
way to upgrade their business. They need sue legislators for violating the budget provi-
political [influence] to protect them.” Rather sions. When (not if) Congress creates new
like in America, where businessmen typically spending programs after proclaiming its com-
hire politicians to protect them from their mitment to smaller, more efficient govern-
competitors. ment, taxpayers should file a class-action
Immunity for criminals is not completely lawsuit against the miscreants. When (not if)
unknown in America. To prevent politically the loudest proponents of federalism, individ-
inspired arrests, many states along with the ual liberty, and similar values violate their
federal government exempt legislators from promises and expand Washington's power,
arrest on their way to vote or while the legis- outraged citizens should force them to resign.
lature is in session. A decade ago Senator But it’s not enough to simply toss politicians
Roger Jepsen of Iowa used such a provision of out of office. Maybe Humphrey is right to
the U.S. Constitution to avoid a Virginia traf- believe that incompetent school board mem-
fic ticket; alas, his constituents were less for- bers don’t deserve to go to jail. But most con-
giving than Taiwanese voters and sent him gressmen do. Forget term limits. Let them
into early retirement. An aide to Virginia’s serve the full sentence.
lieutenant governor later claimed immunity to If this seems too harsh, then consider an
avoid a drunk driving charge. A Virginia leg- alternative. Instead of prosecuting politicians,
islator used the same tactic to win dismissal send them away with full pay. For many legis-
of a charge of indecent exposure. lators there is no higher priority. Last year
But it would be better to move in the other Turkish legislators resisted a call for new
direction. Instead of immunizing legislators, elections because they wanted to remain in
we should criminalize more of their actions. office for at least two years in order to qualify
The very same state of Virginia has a law, for generous government pensions. It would
rarely enforced, holding school board mem- have been simpler to have paid them off if
bers responsible for any overspending. In they promised never to darken Ankara’s steps
1990 the King George County Board of again.
Supervisors threatened to petition the local Public service would be an honorable occu-
circuit court to remove members of the pation if government performed the limited
local school board for malfeasance after role of creating a framework for a free society,
the school board ran a $500,000 deficit in thereby safeguarding individual liberty. But in
a $13 million budget. Three members, who today’s world, where government is simulta-
had been appointed by the supervisors, neously an obnoxious meddler and violent
resigned. thief, becoming a member of the political
Similarly, in 1996, after the Virginia Beach class almost automatically turns one into a
School Board ran a $12.1 million deficit, professional criminal.
local Commonwealth’s Attorney Robert So let’s treat politicians accordingly. Let
Humphrey called a grand jury to investigate them choose—between resignation, exile, or
the financial mess. It indicted two school jail. Then the rest of us can live in peace. [J


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

FREEMAN

tdeas On (ideas On Liberty

Climate-Change Worries in the
Eighteenth Century

by Aubrey Drewry

n the 1770s the Lunar Society of Birming- Small, science and math teacher to Thomas

ham, England, whose members were some Jefferson during a sojourn in America; Josiah
of the leading thinkers of the era, regularly Wedgwood, potter to the world and the man
gathered to discuss their concerns about glob- who made it possible for ordinary people to
al climate change. They were interested in the eat from china plates rather than out of wood-
scientific aspects of the change, but being en bowls; and Joseph Priestley, one of the
entrepreneurs as well as thinkers, they also titans of chemistry.
formulated plans to cope with it. Their basic The main tie that brought these luminaries
strategy was to stop the cooling of the earth together was a common interest in “natural
by dragging icebergs away from the Arctic philosophy” (which we today call “science”).

regions to let them melt in the tropics. However, many of them also had remarkable
That’s right: they were worried about glob- business skill and towering entrepreneurial
al cooling. energy. They were thus very much concerned

The Lunar Society of Birmingham with the application of science to industry.
(1766-1809) was an informal club of never Many of them became fellows of the Royal
more than 14 men, who met to exchange Society as a result of their scientific work, but
information on scientific experiments, discuss they were equally proud of their memberships
scientific theory, and promote their own entre- in the Society for the Promotion of the Arts,
preneurial activities. As the name indicates, which emphasized their commitment to prac-
they met on the Monday nearest the full moon tical application.
each month. Among them were several god-
fathers of the Industrial Revolution, men Small, Watt, and Boulton
whose contributions to science and technolo-
gy, as well as industry and manufacturing, The global-cooling story begins with letters
render their names still familiar: James Watt, between Small and Watt. (The letters are
developer of the steam engine, and his busi- printed in a midnineteenth-century biography
ness partner, Matthew Boulton, who was also of Watt by his son-in-law, James Muirhead.)
founder of the Birmingham Mint and a major In 1765, Small had arrived in Birmingham
manufacturer of metal products; Erasmus with a letter of introduction from Benjamin
Darwin, grandfather of Charles and a distin- Franklin. Shortly thereafter, he became fami-
guished naturalist in his own right; William ly physician to Boulton, at that time a suc-

cessful 37-year-old silversmith who was busi-
Aubrey Drevry is the R. Hugh Daniel Professor of ly realizing his great ambition: to make his
Business and Free Enterprise at Birmingham-South- Name “known all over the world as the hall-
ern College in Birmingham, Alabama. mark of excellent and artistic workmanship”

414


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

415

in metals. Small, a native of Scotland, had buck, which would allow Watt to move to
already made his mark on America by having Birmingham to continue his experiments and
taught Jefferson at the College of William and testing, and to initiate production of engines.
Mary in Virginia. Many years later, Jefferson Those negotiations dragged on for eight years
would recall that “what probably fixed the and took several strange turns, including the
destinies of my life” was that Small “made me collapse and bankruptcy of Roebuck, who
his daily companion” and “from his conversa- sold all his rights to Boulton. Thus, when Watt
tion I got my first views of the expansion of finally moved to Birmingham in 1775, it was
science & of the system of things in which we to create the firm of Boulton & Watt, one of
are placed.” High tribute indeed, from a man the greatest companies of the early Industrial
who would himself greatly affect “the system Revolution.
of things in which we are placed.” But by During the long years of negotiations,
1764, Small had tired of academic life (espe- Small was a crucial figure. He saw the enor-
cially the bickering with his faculty col- mous profit potential of Watts designs com-
leagues in Williamsburg who considered him bined with Boulton’s high-quality workshops,
an outrageous radical for lecturing in English and he hoped to invest in the new firm him-
rather than Latin!). Thus he returned to self. He thus took on the task of keeping alive
Britain and took up his medical practice in Watt's interest in moving to Birmingham. This
Birmingham. was no easy job, because Watt was not a nat-
Some months thereafter, Dr. Small enter- urally ebullient personality. Indeed, he seems
tained a visiting fellow Scot, James Watt. At to have been inclined to hypochondria, suf-
that time, Watt was eking out a living as a fered severely from headaches, and was often
poorly paid instrument maker for the Univer- despondent over his money problems and
sity of Glasgow, his income supplemented by other setbacks, including the death of his
surveying and minor engineering jobs on wife.
canals and at coal mines. Despite all that
activity, his income was not enough to cover «cy obal Co oling”
the expenses of his experiments with steam
engines. By 1765 Watt had worked out all the Small’s voluminous correspondence helped
“central ideas to be incorporated in his vari- Watt’s morale in several ways. First, Small
ous steam engines for the remainder of his constantly encouraged Watt to continue devel-
life.” (See Robert Schofield, The Lunar Soci- opment of his steam engine, regardless of
ety of Birmingham [Oxford University Press, what was happening on the financial and
1962].) But between the financial needs of his organizational side of the negotiations. Sec-
family and “the villainous bad workmanship” ond, Small gave moral support to the whole
of Scottish artisans, he had not been able to array of engineering odd jobs that Watt was
produce a successful working engine. In order compelled to undertake to stave off bankrupt-
to keep going, he had sold production and dis- cy. Third and perhaps most important, Small
tribution rights to an ironworks and mining kept up a flow of other stimulating ideas
tycoon, John Roebuck, who thus had control across the entire scientific spectrum, which
of Watt’s destiny. helped Watt to forget his troubles. The discus-
During Watt’s Birmingham visit, Small sion of global cooling was in fact initiated in
took him to visit Boulton’s metalworking an exchange of letters reviewing a canal-
shops. Watt recognized that Boulton’s plant, surveying project that Watt had undertaken
tools, and especially his workmen were just (as usual, to raise a little extra income).
what was needed to produce steam engines. Watt had been surveying in the Highlands
On a second visit a year later he met Boulton of Scotland for a canal project near Loch Oich
himself, and the two men instantly liked each in the Great Glen above Inverness, where the
other. Naturally enough, then, discussion Caledonian Canal was later built. It was an
immediately turned to the possibility of estab- area from which many were emigrating to
lishing a partnership with Boulton and Roe- America. The purpose of the proposed canal


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

416 THE FREEMAN e JULY 1998

was to connect the east coast of Scotland Small’s next words give us a glimpse of his
(where there were manufacturing shops) with views on the political institutions of his day,
its west coast, thus shortening the shipping especially monarchy, and are interesting in
time to American markets. Watt wrote to light of Jefferson’s connection with Small. “I
Small, “I had a miserable journey home, will be bold to say, that if all the gunpowder
through the wildest country I ever saw, and which has been spent by their Imperial and
the worst conducted roads . . . [IJncessant rain Royal Majesties the Emperors and Empresses
kept me for three days as wet as water could of Constantinople, Germany and Russia, the
make me. I could hardly preserve my journal- Kings of France, Spain, Britain and Prussia,
book.” within these last twenty years, had been laid

Small, on October 27, 1773, replied, “I do out upon it [his iceberg project], the powder
not wonder the people migrate from the coun- would have produced at least as much benefit
try you have described to America.” Then, in to every one of them as it has done by being
what was apparently his style of raising inter- expended on their own schemes. I have had
esting thoughts out of Watt’s gloom, he went thoughts of writing a circular letter to these
on, “Pray, have not all these mountains for- potentates, and if you give me any encourage-
merly been forests, and why does not timber ment, notwithstanding my laziness, I will still
now grow upon them, as they are not cultivat- do it, although there is but little to be made of
ed?” Contrasting those barren hills of Scot- kingly heads, I fear.”
land with the lush environment of his New Apparently, Watt did nor encourage him,
World sojourn, he continued, “Nothing but since we hear nothing further of the project
incessant cultivation can hinder any spot in for producing “perpetual summer” before
America, from latitude 50 southwards, from Small’s untimely death. He died in February
producing trees.” Latitude 50 runs through 1775, a little more than a year after this
northern Newfoundland and central Quebec. exchange of letters and a little more than a
Scotland is at a higher latitude, but Small year before his student Jefferson had some
believed that its highland hills had once sup- equally scathing things to say about a certain
ported trees and no longer did so. The hills, he European monarch.
reasoned, must have become barren and tree-
tess due to a southward spread of cold climate. The Botanic Garden

mall summarized: “I am led by this and

many other reasons to suppose, nay to believe, However, the idea survived, as we know
that the frozen space of the Globe is annually from The Botanic Garden, a book-length
increased at the rate of about the 300th part of didactic poem in several cantos by Erasmus
a degree of latitude . . . so that after a certain Darwin, another member of the Lunar Soci-
number of years all Europe, and finally the ety. Darwin began work on this, his master-
whole surface of this earth, will be frozen, as piece, in 1777 and published it in 1789 to
the Moon is now and has long been.” Quick- enormous popular success. (A 1798 American
witted and ingenious as he was, Small had a edition was produced by T. & J. Swords, Print-
scheme to deal with this horrifying prospect, ers to the Faculty of Physic of Columbia Col-
namely, a “project for producing perpetual lege, New York.) Darwin started out to sum-
summer,” which he outlined for Watt. The marize the current state of botany, but ended
central feature was to use gunpowder to blow up by having “versified all of science and
up the polar ice, thus creating icebergs, which technology too,” in the words of Robert
could be towed to the tropics. There the ice- Schofield, a leading authority on the Lunar
bergs would serve as air-conditioning units, Society. How a project for moving icebergs
rendering the tropics more temperate and hab- makes its way into a poem on botany is indi-
itable. Simultaneously, of course, the removal cated by the “advertisement” (or preface) to
of ice from the arctic would slow the souther- the London edition. The reader is told that
ly spread of the freeze that threatened to cover “the physiology of Plants is delivered” in the
all Europe and finally the whole earth. first canto, called The Economy of Vegetation,


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

The Foundation for Economic Education
Irvington-on-Hudson, New York 10533
Tel. (914) 591-7230

Fax (914) 591-8910

E-mail: freeman@fee.org

July 1998
What Is the American Constitution?

This is the essential element of all government: force, used with general consent.
—ROSE WILDER LANE, The Discovery of Freedom

at is the American constitution? can citizens. No species of economic regu-
The obvious answer is that it’s lation is off-limits to the national govern-

the document written in 1787, ment. Likewise, Washington routinely and
amended 27 times since, and the original of | without a whiff of apology exercises gov-
which is housed in the National Archives. ernmental powers clearly intended by the
Judges, politicians, the news media— framers of the Constitutional document to
indeed, all Americans—talk of that 6,000+ be reserved to each state.
word document as being the constitution. It’s true that some provisions in the Con-

This talk is mistaken. The constitution is stitutional document are respected. If
neither a document nor the collection of Congress today passed a statute outlawing
words in a document. Instead, the constitu- | publication of Cosmopolitan magazine, a
tion is the dominant ideology within us— sufficiently large number of Americans
an ideology that determines what we per- would resist this attempt by government to
mit each other to do, as well as what we control what is printed. But the fact that
permit government to do. No words on some parts of the Constitutional document
parchment, regardless of the pedigree of have some teeth doesn’t mean that the doc-
that parchment or of the men and women ument itself is “the law of the land.”
who composed those words, will ever Those instances in which the Constitu-
override the prevailing belief system of the tional document has teeth (such as the First
people who form a polity. Amendment's prohibition of government
We have at hand ready proof that the interference with the press) are those

constitution is ideology rather than words instances in which the prevailing ideology
in a document. Read the document popu- of the American people happens to corre-
larly called “the Constitution” and ask if it spond with what's written in the Constitu-
accurately describes the law of the land. tional document. But in those many
Your answer will almost certainly be no. instances when the prevailing ideology

That document clearly gives to the national | runs counter to the text of the Constitution-
government only very limited powers—for al document, the document is toothless.

example, to coin money, to operate post Again, the American Constitution is
offices, and to supply national-defense ser- nothing more or less than Americans’ pre-
vices. Today, however, Washington knows vailing ideology. And this ideology—as any
almost no restraints on how deeply its reg- ideology—comes from ideas about what is

ulatory arms reach into the lives of Ameri- proper and improper, acceptable and unac-



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

ceptable, desirable and undesirable, practi- that politicians who attempted to enforce,

cal and impractical, noble and ignoble. say, the Americans With Disabilities Act
Most Americans today have the idea would get nowhere. It’s not so much that
that Congress is perfectly justified in dele- these politicians would get voted from
gating its legislative authority to federal office; instead, ordinary people would sim-
agencies. Therefore, despite the complete ply refuse to comply with the statute.
lack of any language in the Constitutional If you doubt this, ask what would hap-
document authorizing independent agen- pen if Congress enacted legislation banning
cies, Washington is planted thick with fed- interstate travel by Americans. Can you
eral agencies exercising legislative powers. imagine Americans today respecting such
No one today suggests that these agencies an odious statute? Of course not—despite
are unconstitutional. the fact that the Constitutional document
Most Americans today have the idea does not explicitly prevent Congress from
that the national government is authorized passing such legislation. To avoid enforce-
to dictate the details—from gasoline ment of this statute we wouldn't have to
mileage to the number of airbags per vehi- wait to throw from office the bums who
cle—of how automobiles are to be manu- enacted it. Because of the prevailing Ameri-
factured. Despite the Constitutional docu- can ideology, which is hostile to such legis-
ment very clearly not giving authority over lation, this statute would be a nullity from
such matters to Washington, the national the moment the President signed it.
government exercises such authority and It follows that ideas matter enormously.
almost no one today regards this exercise Ideas, not words, are the principal ingredi-
of authority as unconstitutional. ent of the American constitution. If ideas
Most Americans today accept the idea change, so does the constitution. And the
that government should tell people what only way really to change the constitution
they can or cannot ingest. Most Americans is to change the ideas accepted by the great
accept the idea that minimum-wage legis- swath of citizens.
lation is desirable. Most Americans accept We at FEE are in the business of consti-
the idea that protecting property rights is tutional amendment—changing the ideas
less noble than protecting plant and animal | that people have about freedom, about
species. property, about politics, and about govern-
Thousands more such examples can be ment. If we succeed in restoring the idea
listed. that free people are more prosperous,
In the past, when I got furious at the gov- | peaceful, and culturally vigorous than
ernment for doing things clearly prohibited those who rely on government, we will
by the Constitutional document, I would have done nothing less than to amend the
declare “That’s unconstitutional!” American constitution in a way that
I was wrong. Those innumerable gov- secures liberty. We will also have
ernment actions that are at odds with the re-created the Constitution that James
Constitutional document as well as with Madison and other founding-era Ameri-
the principles of a free society are in fact cans intended.
constitutional. These actions are constitu- Liberty cannot be secured by asking its
tional because the constitution is the actual foe—the state—for more respect. Liberty
legal framework of our society—and the cannot be secured at ballot boxes or in
actual legal framework in America today courtrooms. Liberty must reside in the
grants to government extraordinarily vast hearts of people if it is to reign. And the
powers for intruding into the lives of only way that liberty can find its way into
peaceful people. the hearts of people is through the promul-
Again, the reason is that most Ameri- gation and circulation of the ideas of liberty.

cans today have the idea that it is desirable, In these ideas lies liberty’s only hope.
or at least not inappropriate, for govern-

ment to exercise an authority immensely

larger than was contemplated by Ameri- / ) 75 / Z
cans of the founding generation. If, instead,

today’s Americans had the idea that gov-

ernment’s only legitimate function was to Donald J. Boudreaux
keep the peace, there could be no doubt President



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

“Liberty, when it begins to take root, is a plant of rapid growth.”

—George Washington

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

The Shortest and Surest Way to Understand Economics

ECONOMICS
IN ONE LESSON

by Henry Hazlitt
Foreword by Steve Forbes

50TH ANNIVERSARY EDITION

irst published in 1946, Economics in One Lesson

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

CLIMATE-CHANGE WORRIES IN THE EIGHTEENTH CENTURY 417

including “the operation of the Elements as steadily grow and that the winds passing over
far as they may be supposed to affect the them deliver cold temperatures to points
growth of Vegetables.” Darwin organized his south. “[W]e cannot doubt that the northern
poetic lines on the various “Elements”—heat, ice is the principal source of the coldness of
rain, snow, sunshine, as well as ice—under our winters . . .,” Darwin wrote. “Hence the
various constellations of stars. When he got to increase of the ice in the polar regions, by
the “Northern constellations” in Section XI of increasing the cold of our climate, adds, at the
the first canto, he versified about “Ice islands same time, to the bulk of the Glaciers of Italy
navigated into the Tropic Seas” by legions of and Switzerland.”

nymphs: Small would no doubt have been delighted
to learn that his ideas were still being investi-
There, Nymphs! alight, array your dazzling gated, and particularly pleased that his project
powers, for correcting the problem was garnering
With sudden march alarm the torpid Hours; worldwide attention through the popularity of
On ice-built isles expand a thousand sails, Darwin’s poem. Darwin even echoed Small’s
Hinge the strong helms, and catch the lament about how the resources wasted on
frozen gales; war could have been used to cool the tropics

The winged rocks to feverish climates guide, and warm the northern reaches.
Where fainting Zephyrs pant upon the tide; The great firm of Watt & Boulton became
much too busy in the next few years making
While swarthy nations croud the sultry steam engines to pursue the “iceberg

coast, removal” project. The idea of moving icebergs
Drink the fresh breeze and hail the floating to achieve various human objectives still
Frost, comes up from time to time: to irrigate the
Nymphs! veild in mist, the melting trea- vegetable gardens of California or to provide
sures steer, more drinking water to Los Angeles. But so

And cool, with arctic snows, the tropic year. far as modifying the climate is concerned, our
preoccupations have reversed in the past two
While Darwin assigned the project to centuries: from global cooling in the late
Nymphs and Zephyrs in the poem, he shows 1700s to global warming in the late 1900s.
in his footnotes that the best minds of his era Some scientists tell us that the problem is not
were thinking about both global cooling and that the masses of ice have become too enor-
practical schemes to forestall it. In a very long mous—but that they may well be melting too
“philosophical footnote” to the above pas- fast due to the accumulations of greenhouse
sage, Darwin says that visitors to the north gas!
provided evidence that the “islands of ice” Darwin might have been surprised. [3



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

FREEMAN

ldeas On (Ideas On Liberty] rig

Should There Be a
Carbon Subsidy?

by Roy E. Cordato

he Clinton administration has committed These new taxes, which, according to some
the United States to a massive reduction estimates, could more than triple the producer
in the use of energy. That is the implication of price of coal and double the producer price of
its signing the United Nation’s Global Cli- oil and gas, are defended on grounds they will
mate Treaty in Kyoto, Japan. If the Senate allegedly generate “net benefits” for society.
approves, we will have to reduce carbon diox- Proponents say the future harms that will be
ide (CO,) emissions drastically. CO, is emit- avoided will outweigh the problems and dis-
ted naturally, of course, by everything from locations that these higher prices would
erupting volcanoes to exhaling people and cause. As the World Resource Institute states
animals. Indeed, without it there could be no in one of its studies, “the justification for a
human or plant life. The alleged problem is carbon tax is that the benefits are worth the
that, because of the burning of carbon-based costs.” This is a direct application of the eco-
fuels such as coal and oil, “too much” CO, is nomic theory of “externalities,” which sug-
being emitted. According to some, this will gests that when a production process gener-
cause excessive amounts of heat to be trapped ates harmful effects on society, a tax on that
in the earth’s atmosphere and ultimately (50to process can enhance social welfare.
100 years from now) lead to “global warm- In the case of carbon dioxide, there is a
ing.” This warming could have certain harm- complication. The costs-benefit calculus may
ful side effects, including increased flooding be turned on its head. According to many sci-
and droughts, rising sea levels, and even melt-  entists, increased levels of CO, are generating
ing of the polar icecaps. unintended benefits for society. Furthermore,
These predictions, accepted as gospel by these are tangible benefits that are occurring
the United Nations and the Clinton adminis- now, as opposed to the costs of global warm-
tration, if not by the scientific community, ing, which are highly speculative and not
have led to the signing of the Kyoto agree- expected to occur, if at all, until well into the
ment. If the U.S. Senate were to ratify this next century. As was recently reported in Sci-
treaty, massive new taxes on the use of coal ence, the journal of the American Association
and oil—*“carbon taxes”—would be required. for the Advancement of Science, “many cli-
Americans would be forced to reduce their mate experts caution that it is not at all clear
use of these fuels by about 25 percent over the yet that human activities have begun to warm
next ten years. the planet—or how bad greenhouse warming
will be.”
Roy Cordato is the Lundy Professor of Business Phi- On the other hand, CO, generally provides
losophy at Campbell University in Buies Creek, great benefits for the earth and mankind. This
North Carolina. we know with certainty. Elizabeth Cullota,

418


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

419

writing in the May 1995 issue of Science, prices, and reduced world hunger. It is impor-
points out that “CO, is more than a greenhouse tant to note that many of these benefits are
gas—it’s also an essential nutrient for vegeta- occurring here and now. They seem much less
tion, an aerial fertilizer providing the carbon speculative than the hypothesized costs asso-
that plants use to make sugars, carbohydrates, ciated with global warming. These costs will
and the other compounds they need to live.” occur only if predictions of certain computer
She concludes that “in the agricultural realm, simulation models are accurate—models that
experimental evidence suggests that higher continue to dramatically overstate the actual
CO, concentrations may be a boon, helping warming that has taken place over the last 100
many crops grow faster and yield more” years. This raises an interesting question:
According to a Duke University study cited by should the Kyoto Protocol have called for a
Cullota, as much as 10 percent of the increased worldwide expansion of the use of carbon-
crop yields over the last 100 years have come based fuels rather than a reduction?

from higher levels of atmospheric CO,.

Is a Subsidy Justified?
Better Use of Water :
According to the same economic theory

A second benefit to agriculture associated that leads many to advocate a carbon tax if
with added CO, is the increased efficiency increased CO, generates external harms, a
with which plants use water. As atmospheric carbon subsidy would be required if the exter-
CO, mounts, plants make more productive nal effects of using coal and oil are, on net,
use of any given level of rainfall. A study pub- beneficial. Thus, should the United States be
lished in the November 1997 Science points considering a carbon subsidy rather than a
out that “For the individual plant, water-use carbon tax? Of course not. But even the con-
efficiency is almost directly proportional to ventional approach would have to answer:
the level of CO,. . . . [D]oubling the CO, con- probably not. When the net effects of external
centration is almost like doubling the rainfall harms and benefits are uncertain, the econom-
as far as plant water availability is concerned. ic theory of “second best” argues that neither
. . > The study goes on to conclude that taxes nor subsidies are appropriate. The evi-
“Given that the availability of water for agri- dence implies that cautious policymakers
culture is already becoming such a problem, seeking a neutral approach should be looking
this aspect. . . of atmospheric change is a wel- for opportunities to eliminate existing taxes
come one.” on gasoline and electricity. Furthermore,

These benefits are in addition to those that restrictions on coal mining and oil drilling,
are likely to occur in the event that warming which are the equivalent of a tax, should also
actually takes place. Increased temperatures, be eliminated. In other words, a conventional,
especially those that occur overnight, will cautious “second best” approach would end
delay the first frost and prolong growing sea- all existing carbon taxes and subsidies. Since
sons, further expanding crop yields. advocates of carbon taxes have been quick to

Behold the economic implication of all invoke the economic theory of external
this: increased CO, caused by the burning of effects to justify the tax, one would hope that
fossil fuels may be generating social bene- intellectual honesty would lead them to con-
fits—more fruits and vegetables, lower food sider its full ramifications. OJ


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

Peripatetics by Sheldon Richman

Such a Deal!

| hk keep this among ourselves, but we We should be grateful to the people who
non-rich folks have a good thing going. bought those products early on. Had they not,
Even though we are of modest means, we we would not be able to afford them today.
have a huge staff of servants who perform They might not be offered at any price. And it
valuable services for us. The best part is that isn’t only entertainment and convenience
we don’t even have to pay them. products that have undergone that process.

Think back to when the VCR came out Lifesaving devices, such as the latest medical
almost two decades ago. A typical model was technologies, were also tested by our servants.
over one thousand dollars. Like most of you, I The reason I said we should keep this to
couldn’t afford that. Today they are two hun- ourselves is that those people may not know
dred dollars or less, within the reach of most they have done us such a big favor. It may
Americans—and with better features! What never occur to them that we get a free ride off

happened? their consumption. I like this state of affairs
Our servants did us a huge favor. They and don’t wish to rock the boat.
spent their own money to buy the new VCRs. This is ironic, really. They consume and we

Sure, they enjoyed the benefits, but they also benefit. Who'd have thought it could work out
suffered the headaches that the bugs in a new that way? We don’t even have to command
product often cause. In the process, they gave them to help us. They do it for themselves. Yet
the manufacturers a chance not only to work we get things that improve our lives immea-
out those bugs but also to get better at making surably and that otherwise would be out of
VCRs. Costs dropped, and competition trans- reach.

lated that into falling prices. Eventually the You might be curious about the identity of
price dropped low enough that you and I these people who serve us so well. I'll tell you
could afford VCRs. Some of us have more only on the condition that you not seek them

than one. out and express your gratitude. Remember,
The same thing happened with many other we're keeping this quiet.
products. Everyone can afford a television Our unwitting servants are the rich. Who

today. A short time ago, that was not the case. else had the money to buy a thousand-dollar
Only the richest families got TVs when they VCR for home use? They are the same kind of
first came out. Same with telephones, auto- people who bought the first ballpoint pens at
mobiles, clothes dryers and washers, stereos, over ten bucks a pop, when a dollar was worth
dishwashers, calculators, microwave ovens, something. Today pens, like pencils and
and personal computers—things we all take matches, are given away as promotions. You

for granted now. can go through life and never have to buy one
of these items. What will they be giving away
Sheldon Richman is editor of The Freeman. tomorrow?

420


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

421

Spillover Benefits Similarly, two companies have an ultimate
interest in a process in which consumers

Fortunately, our racket is safe because the freely choose whom to buy from and anyone
rich don’t test products for our sake. They buy may aspire to be in any business—even
new, expensive, flashy things for their own though one loses out in the bid for a given
pleasure. The benefits then spill over onto us, customer and maybe even go bankrupt.
regardless of their intention. That’s how so
many benefits from living in society get
passed around. Adam Smith observed that we Fundamental Concord
get our dinner not because the butcher, baker, Ludwig von Mises saw this concord
and brewer love us, but because they love among people as natural and fundamental.
themselves. It’s a good thing they do. As No one better appreciated that it is what
Smith added, “By pursuing his own interest [a makes society and prosperity possible. For
person] frequently promotes that of society him, the worst thing that could be said about
more effectually than when he really intends government intervention is that it jeopardizes

to promote it.” civil peace. In his essay “The Clash of Group
Like the rich, the rest of us also strive to Interests,” he wrote, “In a free-market society
make ourselves and the ones we love better . .. [t]here prevails full harmony of the right-

off. That’s proper. No apology is needed. But ly understood (we say today, of the long-run)
it’s good to know that there are significant interests of all individuals and groups. . . .
secondary benefits from that activity. It con- The short-run interests of a group may be
firms there is a fundamental harmony of inter- served by a privilege at the expense of other
ests in society. Classical liberals have always people. The rightly understood . . . interests
stressed that feature of life. It is so ubiquitous are certainly better served in the absence of
that most people don’t appreciate it. The sur- any privilege.”
face conflicts are more noticeable and thus get The division of labor and knowledge bene-
more attention. Two people applying for the fits us all. Competition is simply another word
same job, for example, see each other as for cooperation. It’s the result of multiple
rivals. Two firms in the same industry are ina offers to cooperate in any given endeavor. If
kind of conflict with respect to wooing con- we are free to choose with whom we will
sumers. Even consumers may now and then cooperate, there is competition. The idea that
be in direct competition for an especially cooperation and competition are opposites is
scarce product. silly. The idea that libertarians oppose cooper-
But that conflict is superficial. Deep down ation is worse than wrong. The marketplace is
there is a harmony of interests among rational the paradigm of cooperation. I'll give you
people. The job applicants have an ultimate item A if you give me item B. What's that if
mutual interest in a process in which employ- not cooperation?
ers freely choose their employees and anyone To their credit, Americans do not hate the
1s free to aspire to any job. Ayn Rand, in her rich, despite decades of anti-capitalist envy-
essay “The ‘Conflict’ of Men’s Interests,” mongering. (That was reconfirmed earlier this
wrote, “Both men [applying for the same job] year in a public opinion poll.) Now we see
should know that if they desire a job, their there’s another reason not to hate them. Not
goal is made possible only by the existence of only do they invest most of their incomes,
a business concern able to provide employ- providing new products and opportunities for
ment . . . and that their competition for the job all, but they also make us better off simply by
is to their interest, even though one of them engaging in what was once condemned as
will lose in that particular encounter.” conspicuous consumption. [J


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

ldcas On UC tdcas On Liberty

FREEMAN

The Taiwan Model

by Hugh Macaulay

b

eople at all times in the past and every- a model, one whose policies can be easily
where on earth today have wanted to duplicated? I offer the Republic of China on

enjoy economic growth and prosperity, as Taiwan, usually called Taiwan, as a shining
well as political and personal freedom. Unfor- country on a hill.!
tunately, as Milton Friedman has observed, If this description is correct, why have not
our existence has. been more often one of others beaten a path to its door, eager to learn
stagnation and poverty, considerable political and duplicate its accomplishments? Taiwan is
control, and little personal freedom. The an international pariah. It is not a member of
desire for the good life and the reality of the the United Nations or of most other interna-
bad describe conditions faced by most people tional bodies. It has formal diplomatic rela-
on the planet both then and now. Why have we tions with only 29 of the very smallest coun-
failed so miserably? tries. Its accomplishments are not recorded in

Economists have noted that free markets most of the international collections of statis-
and protected property rights allow people to tics. Its successes are ‘largely unknown and
reach these economic goals, while many unsung.
political philosophers have called for democ- We will detail first why Taiwan was unlike-
racy and limited government to produce the ly to succeed. It faced almost every conceiv-
latter aims. Considering the universal lack of able condition that has led other countries to
these sought-after conditions, the arguments explain away their failures. Next we examine
have not been persuasive, or at least have not its record of successes, levels achieved by few
persuaded those in power. countries anywhere or at any time. We then

If we seek empirical evidence of policies look at conditions that produced this out-
and plans that have led to these desired standing record, conditions ridiculed and
results, the United States springs readily to rejected by most countries. We conclude with
mind. But its success is often attributed to its lessons for other countries, both those called
natural resources, its defensive moats of two emerging and those that are fully advanced.
oceans, and a well-educated population of There is much to be learned.
immigrants. Is there not another convincing
example, a smaller country with conditions Barriers to Economic Growth
like those in many poorer nations to serve as

Countries that are described as less devel-

— tries (LD r emerging countrie
Hugh Macaulay is Alumni Professor of Economics oped coun . ( Cs), o I LC g¢ h 5
Emeritus at Clemson University. He was a visiting whose output 1s nising slowly or 1s perhaps

professor at National Taiwan University in Taipei ~~ Stagnant or even falling, seem always to have
from August 1984 to July 1985. an excuse for their sad condition. Something

422


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

423

beyond their control explains their plight. produces poverty, Taiwan should be the poor-
This unfortunate situation, which they have est nation on earth.
inherited from God, nature, or other malevo-
lent humans is offered as a reason for failure. Immigration. Closely related to population
Taiwan, however, has inherited nearly all of is immigration. Hong Kong was unable to
these problems and still succeeded. The barri- absorb fleeing Vietnamese and forcibly repa-
ers include: triated some of them. The United States com-
plains of illegal immigrants, and often of even
Colonial Status. Countries in Africa and the legal ones. England has long voiced con-
Southeast Asia, and particularly India, cite cern over immigrants from the Common-
their sad earlier fate as a colony of some other wealth. But in 1949 some two million Nation-
nation bent on exploiting their resources and alists from the mainland came to join the six
population. This massive drain has left the million residents of Taiwan, a 33 percent
former colonies prostrate and exhausted and increase in population in two years. Many res-
unable to recover and prosper. But Taiwan idents of the United States find our annual
was a Japanese colony from 1895 to 1945, immigration rate of less than 1 percent a
and the Japanese were never noted for kind- heavy burden, lowering our average wage rate
ness or beneficence to their colonies. The and reducing our per capita GDP. Taiwan took
Japanese did construct some roads, railroads, its burden of immigrants and proved them to
a few factories, and port facilities, which pro- be a great blessing.
vided a small base on which the Chinese

could later build. Other colonial powers, how- Illiteracy. An educated populace is neces-
ever, left similar assets, which were most sary for a country to prosper, and illiteracy
often wastefully used or abandoned. characterizes poor countries. But when the

Japanese left Taiwan, they left a population

Natural Resources. These help explain the they had not tried to educate. Even in 1952,
success of the United States, Australia, after the Nationalists had arrived on Taiwan,
Kuwait, South Africa, and a few other nations, 41 percent of the population was illiterate, 43
but most poor countries tell us how they were percent had completed only primary school,
deprived of these blessings. How can a nation and just 9 percent had finished high school.
grow when it has no inheritance of natural- Many other countries were cowed by such
resource wealth? Taiwan has some coal, inef- conditions; but not Taiwan. By 1994 only 6
ficient to mine, and some recently discovered percent were illiterate and 63 percent had
natural gas, but no significant oil, iron ore, or completed high school. In 1952 only 13 Tai-
minerals, and little tillable land. It is hard to wan students were doing graduate work, but
make something out of nothing. But Taiwan by 1996 there were 42,000. Compare these
has done so. results with those in any countries in Africa or

Latin America.
Overpopulation. India and China give this

as the principal reason they have remained National Defense Expenditures. Will
poor. Since Malthus, most who have written Durant observes that the natural state of
on the topic have cited the overbearing nature mankind’s existence is war. This means that
of the population problem. Taiwan is a small all nations must spend resources on national
island, less than half the area of South Caroli- defense, which diverts activities from invest-
na, with a population of about 21 million, ment and consumption. So, many countries
which makes it the second-most densely attribute their poverty to their need to defend
populated nation on earth, behind only what little they have. Even so wealthy a nation
Bangladesh. Further, 62 percent of the island as the United States has in recent decades
is mountainous, with over 60 peaks above explained its slow rate of growth as a result of
10,000 feet, so that its people live in an area large expenditures on national defense. Tai-
the size of Connecticut. If overpopulation wan, with its 21 million people, lies 150 miles


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

424 THE FREEMAN e JULY 1998

from Mainland China with its 1,250 million the United States during the same period, it
who loudly proclaim their intention to bring was 3.2 percent. The power of a compounded
Taiwan back into the fold. Taiwan’s defense rate of growth is often poorly understood,
expenditures are not published but are esti- but these figures should help put the concept
mated to run from 10 to 20 percent of GDP, in perspective. Taiwan’s real GDP grew 27-
and every physically able young man must fold; in the United States it grew less than
spend at least one year serving in the military, fourfold.
depriving the nation of his productive activity. Dozens of other countries were simultane-
We in the United States spend 3 percent today ously stagnating, or suffering a decline in
and have not spent more than 7 percent since output.
1972. Taiwan has managed to produce both Of course, some of this growth could be
guns and butter. due to an increase in population, for more
people mean more goods. When we adjust
Foreign Aid. Many nations argue they can- these figures to per capita terms, we find real
not prosper without the help of foreign aid. income grew at 6.4 percent per year in Tai-
Yasir Arafat makes this a condition for the wan, a twelvefold increase. The average per
success of his new Palestinian political unit. capita GDP for an American today is about
While Taiwan was a beneficiary of U.S. for- $30,000. If we enjoyed the growth rate of Tai-
eign aid after World War II, this aid was dis- wan, in 40 years the average American would
continued in 1968. Taiwan has prospered have $360,000. Instead, U.S. per capita
without foreign gifts. growth in real terms has been at 2 percent per
year, a twofold increase over the 40 years.
Diplomatic Ostracism. Since 1979, when And in the last 20 years to 1990, the growth
the United States recognized the People’s rate has fallen to 0.9 percent, which would
Republic of China, the Republic of China on take 75 years to double output per person.
Taiwan has been expelled from the formal Rates of growth such as those in Taiwan can
community of nations. This is a deterrent to produce miracles—hence, the common
trade, but the inventive people on Taiwan have phrase “the Taiwan Miracle.”
found ways to circumvent this barrier. It could be that this growth in output per
This is a formidable array of difficulties, person is due to workers laboring increasing-
adverse conditions, and reasons for failure. ly longer hours. We find, however, that the
Many a country has used just one of these to number of hours worked per person per
explain its poverty and stagnation. Taiwan has month in manufacturing fell from 223 in 1975
had all of them and has still amassed a record to 202 in 1990, a 9 percent decline. More
that places it at the top of all nations. One goods with less work 1s an achievement we
immediate lesson is that these explanations all seek.
are not valid reasons for failure but only weak Half of the “Misery Index,” made popular
excuses with no foundation. The excuses are by the late Senator Hubert Humphrey, is the
the emperor’s new clothes, and Taiwan is the unemployment rate. Never in the 40 years we
little boy stating, quietly, the truth about the are considering did it reach 3 percent in Tai-
impressive robes. wan. After 1954 it never reached 2 percent,
and in eight of these years it was less than 1
percent. In no year did the lowest U.S. rate fall
as low as the highest Taiwan rate. There is lit-
If citizens of a country are to enjoy a good tle misery in these figures.
standard of living, the economy of the country Many economists explain low rates of
must grow—rapidly if it starts from a low unemployment by high rates of inflation. The
base. Taiwan has done just that. From 1952 to Taiwan experience debunks this theory. Over
1992, a period from the arrival of the Nation- the 1952-t0-1992 period prices rose an aver-
alists on Taiwan to this decade, the annual age of 6.3 percent per year. This compares
growth rate in real GDP was 8.7 percent. For with a rise of only 4.4 percent in the United

Taiwan’s Accomplishments


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

THE TAIWAN MODEL 425

States. But Taiwan’s increases were concen- of those policies in its earliest days, after
trated in the early 1950s and during the two about 1957 it marched to a different drummer,
oil shocks; in one of these years prices rose 47 one beating out the cadence of free markets
percent. In 11 of the 40 years prices rose less and limited government.

than 3 percent, a level reached in the United Taxes take resources from productive indi-
States in only one year between 1968 and viduals and transfer them to government, dis-
1990. Taiwan has shown the world that stable couraging economic activity. The Republic of
prices are consistent with rapid growth. China collected only 14 percent of gross

Countries around the world have borrowed national product in taxes in 1960, while the
from others to invest and produce. The result United States was taking 25 percent. By 1990
has been little capital and much debt. Taiwan the Republic’s take had risen to 20 percent
has not borrowed but saved and amassed for- and the United States’ to nearly 40 percent.
eign reserves of roughly $100 billion. Such Although the upward trend seems universal,
wealth can assure future growth and well- Taiwan has left with its citizens more money
being. and greater incentive to produce.

The benefits of this growth have been wide- Modern nations have large welfare pro-
ly dispersed. Today 99 percent of Taiwanese grams to succor those in need. The “social
households have color televisions and refrig- safety net” commands much attention. Taiwan
erators. The figures for telephones and wash- has acted as though people can take better
ing machines are 97 and 92 percent, respec- care of themselves and their friends and rela-
tively. When the Berlin Wall fell in 1989, tives than can government. Social-welfare
fewer than 10 percent of East Germans had expenditures have been less than 1 percent of
telephones—in what was the wealthiest of the GDP. Their welfare program has consisted of
Soviet-bloc countries. rapid growth, stable prices, low unemploy-

A comparison of the Republic of China on ment, and a wide distribution of consumer
Taiwan with the People’s Republic of China goods. Results count.
makes clear what Taiwan has accomplished. Most governments promote labor unions as
In 1950 when the Nationalists had just arrived a way to help working people. Taiwan has not
on Taiwan, the per capita income on both Tai- promoted unions, and union power has been
wan and the Mainland was $50 per year. By weak. A review of the figures above show how
1992, the figure for the Mainland had risen to workers have gained more from markets than
about $500, while that for Taiwan was over from unions.
$10,000. Here were two people with similar Firms are born and they die. Each event is
cultural backgrounds and accomplishments. traumatic, and government aid is often sought
The important difference was the social and to make the process easier. Taiwan has pro-
economic systems adopted in each country. tected few of its infant industries; those it has
Could there be a clearer example of the supe- assisted have remained dependent on govern-
riority of political and economic freedoms? ment support. Dying firms have been allowed

to close. A recent study shows this policy has
promoted efficiency, growth, and a higher
Factors Promoting standard of living.
Economic Growth Early in the 1950s Taiwan undertook a
land-reform program, but it differed from

Throughout the period we have examined, those in other countries. In Taiwan the land
most economists who specialized in econom- was bought, rather than taken, from its own-
ic development argued that government ers. It was then sold, rather than given, to its
should direct the economy to overcome mar- new owners, who had worked on these farms.
ket failures, protect infant industries, promote Thus, property rights were respected, and
saving for capital investment, and direct those responsibility was promoted. These actions
investments so the greatest social good would established confidence in property rights and
be realized. Although Taiwan followed some promoted business formation.


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

426 THE FREEMAN e JULY 1998

Finally, culture is always an important fac- economic accomplishments above. The politi-
tor in the economic life of a people. The Con- cal system has moved from local elections to
fucian culture, with its emphasis on family, election of all members of the legislative yuan
education, and work, is an invaluable charac- to popular election of the president. Residents
teristic, as is shown by the four Little Tigers, of Taiwan have great freedom of religion,
where it has been prominent, and by the press, and political expression to go with their
Mainland, where it has been denigrated. rapidly growing economy.

The theory and practice of freedom are
Political Freedom, Too found in Taiwan. All other nations have only
to look, listen, and learn. If Taiwan can

Writers such as Adam Smith, F. A. Hayek, achieve these results, every nation on earth
Milton Friedman, and Julian Simon predicted should be free and prosperous. ]

that free markets and a respect for property
1. Editor’s note: Despite its virtues, Taiwan has not escaped

rights would produce a prosperous society political corruption. Doug Bandow supplies details on pages
with political freedom. We have outlined the 412-413 of this issue.

Now complete—a rich narrative account of our country’s history . . .

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

FREEMAN EMAN | ® Economics, History

ideas [1deas On Liberty Liberty

The Wild West Meets
Cyberspace

by Andrew P. Morriss

I 1848 Americans received the startling Today a new gold rush is beginning. Entre-
news that the vast territory they had just preneurs are using the Internet and other
acquired from Mexico included tremendous technological breakthroughs to create new
riches. California, previously a distant, sleepy wealth, build new business empires, and rev-
Mexican province whose economy was based olutionize communications. Just as happened
on trading cattle hides and tallow for manu- in the nineteenth century, however, politicians
factured goods, was actually brimming with are frightened by the entrepreneurial forces
gold. There it was, just lying on the ground. these opportunities unleash. One of the most
Tens of thousands of individuals from all widespread and powerful metaphors being
parts of the globe flocked to California, invoked in the debate over whether we stand
beginning almost 50 years of western mineral on the verge of a new era of unlimited
rushes. Similarly, after the Civil War, Ameri- prosperity or on the brink of societal collapse
cans discovered that the “Great American is that of the nineteenth-century American
Desert” in the central west was perfect for west. Hundreds of news stories and edito-
raising cattle. Thousands of individuals and rials compare the Internet to the “Wild
tens of millions of dollars of capital quickly West,” some to illustrate the opportunities
flowed into the region to create the range- available in cyberspace, most to warn of the
cattle industry. dangers.

Gold and cattle became important influ- In the opportunity camp is the comedian
ences in shaping modern America, creating Sinbad, who says the Internet is like the Wild
hundreds of millions of dollars of wealth, new West because it is “the only place left where
businesses (like Wells Fargo & Co.) that you can be creative without any money and
shaped the decades that followed, and revolu- compete with the big money boys. And I think
tions in transportation and communications, it bothers the boys—that the Internet puts the
exemplified by the transcontinental railroads tools in the hands of the everyday person.” In
and telegraph. During the next half century, the danger camp is Minnesota Attorney Gen-
western miners, cattlemen, and others built eral Hubert H. Humphrey III, who warns that
new institutions that challenged the existing “it’s time to let go of the romanticized image
structure of government. of the Internet as the Wild West—an electron-
- ic frontier where the law is not enforced.”
Andrew Morriss is associate professor of law and Which image of the west sticks is likely to
associate professor of economics at Case Western have profound consequences for how we
Reserve University in Cleveland, Ohio. His article on
spontaneous order in the nineteenth-century Ameri- understand cyberspace and how we treat the
can west, “Miners, Vigilantes, & Cattlemen,” is Opportunities it offers. Sinbad is right. Attor-
Jorthcoming in the Land and Water Law Review. ney General Humphrey is wrong.

427


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

428 THE FREEMAN e JULY 1998

Spontaneous Order in the West Spontaneous orders thus developed in the
absence of the state across the west. Western-

ers established property rights and dispute-
resolution mechanisms that relied on the con-
sent of the participants rather than the coer-
cive force of the state. They lived in peace and
good order without centralized executive
authorities, police, jails, or armies. Simple
tort rules sufficed for criminal law. Corrup-
tion of those appointed to resolve disputes
was rare, a striking contrast to the rampant
corruption among government judicial offi-
cials in the west.

When the gold rush, range-cattle industry,
and other economic opportunities brought
tens of thousands of new residents to the
nineteenth-century west, the new arrivals had
little choice but to create their own institu-
tions to provide law and order. The west was
far away from established centers of govern-
ment, and the small outposts of officialdom
present were usually unable to assert signifi-
cant civil authority. In gold-rush California,
for example, American military commanders
were afraid to allow their troops to leave their
forts because the lure of the mines led to ram-
pant desertion. Spontaneous Order on

Thrown back on their own resources, the the Internet
miners, cattlemen, and others quickly estab-
lished their own institutions, using contracts As it was in the west, the state is largely
to create property rights, for example. absent from the Internet today. The Internet is
Remarkably, these institutions endured far away” from government because there
despite the regular doubling of population. In  ar¢ nO centralized control mechanisms, mak-
almost all cases more recent arrivals (who Ing it impossible for any government to phys-
outnumbered the first waves of miners) ically assert control over information. As a
respected established claims, choosing to Microsoft vice president told the Wall Street
establish their own claims on unoccupied land Journal, “This is not like regulating trucking.”
rather than using force to oust earlier arrivals Thus, for example, when a local governing
with productive tracts. Even when govern- body in Britain recently attempted to squelch
ment finally arrived, the west’s size enabled an investigatory report highlighting abuses in
those who found taxes oppressive or regula- its child welfare service, web sites outside
tions annoying to easily move on. When pio- Britain quickly made the report available in its
neering Texas cattleman Charles Goodnight entirety. Not only was the information thus
encountered a tollgate across the main pass archived beyond the reach of the British
north, for example, he blazed a new trail authorities, it remained easily accessible to
around it. Similarly, when Canadian authori- anyone in Britain with access to the Internet.
ties attempted to tax gold miners in the (Governments can, of course, choose to com-
Yukon, many packed their bags and left for pletely block access to the Internet, but doing
Alaska. Indeed, despite the vast wealth pro- so would be akin to forgoing the riches Cali-
duced from gold deposits across the west, it fornia offered in 1849.)
was not until quartz mining with its deep Despite the lack of centralized control, the
shafts and expensive machinery replaced pan- Internet exhibits a remarkable degree of order.
ning for placer deposits as the dominant form Without government coercion, millions of
of mining that governments became able to users have managed to adopt standardized
“mine” the industry for significant tax rev- protocols enabling the network to function.
enue. As a result, miners managed to avoid Social norms have arisen in a wide range of
any federal regulation for eighteen years contexts, norms that are enforced by commu-
after the gold rush began. Even when the fed- nities of users rather than a centralized police
eral government finally asserted its authority force. New tools enhance such decentralized
over mineral resources in 1866, it was forced procedures. Deja News, for example, allows
to recognize the validity of the customary users to review others’ contributions across
norms and property claims established by the newsgroups, enabling individuals’ reputations
miners. to be easily verified. Certification systems


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

THE WILD WEST MEETS CYBERSPACE 429

from groups like the Electronic Frontier a mud flat to the largest city west of the Mis-
Foundation and Better Business Bureau sissippi with almost no municipal or state
enable service providers to signal their relia- government; gold-rush communities from
bility and trustworthiness. California to Alaska went from unpopulated
Even more important, traditional forms of wilderness to bustling communities of 10,000
economic regulation are rapidly becoming or more in a matter of weeks; and cattlemen
impossible in many industries. Relatively transformed much of the Great Plains into a
simple, readily available technology, for source of great wealth in a few years without
example, enabled international “call back” significant government help and often in the
services to force national telecommunications face of active government opposition.
regulators to lower the cost of international Throughout the nineteenth century, the feder-
phone calls. Indeed, the falling communica- al government was never able to keep up with
tions costs made possible by the Internet the changing technology and explosive popu-
mean that businesses from retail banking to lation growth in the west.
gambling can be effectively removed from Government's absence did not leave west-
regulators’ jurisdiction. Widely available erners impoverished economically or cultural-
means of strong encryption provide individu- ly. For most of the second half of the nine-
als with a degree of privacy previously attain- teenth century, westerners managed to live
able only by government security services. productive lives without much government,
Freedom is thus outstripping the ability of the lives that were full of opportunities for more
state to contain it, creating new spaces in than chasing cows or panning gold. The
which spontaneous orders can flourish. explosive economic growth that drew tens of
thousands from around the world to make the
ego ‘ difficult journey to the American west also
Justifying Coercion attracted entrepreneurs who saw a substantial
Spontaneous orders and freedom frighten market for cultural institutions. Westerners
governments. Those who fear the Internet’s filled the region with private libraries, opera
potential to undermine government use the houses, schools, and theaters to enrich their
metaphor of the “Wild West” to argue for cen- lives. World-renowned opera singers and
tral control. Hollywood westerns have actors toured packed houses throughout the
cemented the idea that westerners lived in a west.
constant hail of bullets loosed by hard-drink- Governments did invest in the region, of
ing desperadoes. Only when the Texas course, most notably in massive direct subsi-
Rangers, U.S. Marshals, or some other dies to railroads and others and indirect subst-
square-jawed lawmen rode into town and dies through military infrastructure. The exis-
stopped the terror could decent people rest tence of government subsidies is hardly per-
easily. Invoking such images and painting a suasive evidence of the need for subsidies,
flattering image of themselves as movie law- however. Railroads required government help
men, modern statists like Attorney General because the federal government owned most
Humphrey hope to rescue us from the dangers of the land west of the Mississippi. Unlike
of the ungoverned Internet. To do so, statists private landowners, however, the government
rely on two myths about the west and the could offer more than a right of way. Govern-
Internet: ment bonds financed the subsidies that pro-
vided an inviting target for flim-flam artists,
Myth 1: The west reached its potential only who used the promise of a rail line to bilk
when government established law and order; countless millions across the west.
the Internet needs the helping hand of gov- Today politicians like Al Gore want to
ernment, too. repeat this experience by using government
The west underwent phenomenal growth funding to build the “information superhigh-
during periods when there wasn’t any func- way.” While the initial infrastructure of the
tioning government. San Francisco grew from Internet was largely funded through govern-


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

430 THE FREEMAN e JULY 1998

ment subsidies, the government’s version of ful with your credit-card number and suspi-
the Internet was a sleepy place, much like pre- cious of terms that seem too good to be true
gold-rush California. The early Internet was prevents most fraud. Indeed, rather than a
sparsely populated, almost entirely by acade- source of fraud, the Internet is actually turn-
mics, and built around difficult-to-use pro- ing out to be a valuable tool for distributing
grams. Only when easier-to-use graphical up-to-the-minute information on fraudulent
interfaces became widely available and pri- schemes. (Try the Better Business Bureau’s
vate investment vastly expanded capacity did web site at http://www.bbb.org for some cre-
the Internet become the exciting, vibrant ative fraud-busting.)
place it is today. The norms and order present Protecting children turns out to have a sim-
on the Internet are the spontaneous result of larly simple solution: parents. Commercial
billions of interactions among hundreds of Internet service providers have already pro-
millions of users, not centralized planning. duced services aimed at children—E-mail
service that allows messages to be received
Myth 2: Like the Wild West, the Internet is only from approved addresses, for example.
full of dangerous people who prey on the Simply putting the home computer used for
helpless and weak. Internet access in a room where the screen is
In Hollywood’s version of the west, no epic readily visible to others is an effective deter-
was complete without the villain with the rent to children’s unauthorized access to sites
pencil-thin mustache preying on the innocent with inappropriate content. Moreover, as
widow and her helpless children. So too, we demand grows for ways of enhancing parents’
are warned, is the Internet full of predators: ability to control their children’s access to the
con artists await the opportunity to steal the Internet, entrepreneurs will provide more
life savings of the unwary; criminals of all effective products and services than govern-
sorts are able to communicate without the fear ment will.
of being observed because of widespread
cheap and effective cryptography; and most
ominously, pedophiles lurk online waiting to The West as a Metaphor for

seduce children. Opportunity and Freedom
Again, the reality of the western experience
differs from the myth. Many of the green- The opening of the American west created

horns and easterners fleeced in the west made unprecedented opportunities for ordinary
themselves easy marks. They bought mines people. The California gold rush alone
without testing the ore or invested in cattle offered tens of thousands of people, drawn
companies that never counted their cattle. from every corner of the globe, the chance to
Investors who had never been west of the Mis- pick gold up off the ground. Not surprisingly,
sissippi or even to America lined up in the they flocked to California and spread out
1870s, for example, to invest in western cattle across the west in search of more gold. In the
operations that “guaranteed” risk-free profits process, they turned what had been a quiet
of 20 percent and more. British investors provincial backwater into a fast-growing,
alone invested between $20 million and $45 diversified economy. While the Internet is not
million in American ranches from 1879 to quite offering gold on the ground, it is offer-
1888. These investors rarely counted the cat- ing something close. Technology companies
tle they bought, relying on “book counts” are just the better known Internet success sto-
based on sellers’ estimates of the rate of ries. On a smaller scale, opportunities
increase of the cattle turned loose to roam the abound. I buy most of my books and CDs
plains. It should come as no surprise that such from Internet stores. I gain access to things
sloppiness was eventually rewarded by mas- unavailable in my hometown and at better
sive losses. prices; the entrepreneurs who offer these ser-

People are losing money on the Internet vices get some of my money. The free market
today for similar reasons. Simply being care- has made us all better off.


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

THE WILD WEST MEETS CYBERSPACE 431

Because we can access information any- The nineteenth-century west was a place of
where around the globe, the Internet frees us almost limitless opportunity where, through
from geographic constraints on our activities. market transactions and voluntary action, tens
That means regulators lose a significant of thousands of strangers developed institu-
amount of control over our lives. We can tions that allowed them to take advantage of
obtain offshore banking services, gamble on that opportunity in communities of peace and
horseracing around the world, buy books from good order. Today we are only beginning the
a bookstore in England that charges neither Information Rush. Like a forty-niner trying to
British nor American taxes, and route around imagine modern-day San Francisco while
censorship. With a little more effort, we can looking at the mud flats and tents of his day,
structure databases to exploit regulatory dif- we cannot foresee what forms the sponta-
ferences or establish a web site on a comput- neous order now evolving in cyberspace will
er located in any number of countries, where take. What we can do is reject the use of the
we can sell services, information, or products metaphor of “Wild West” as a justification for
free from the grasp of regulators. Indeed, state intervention. Whether the demand is for
what really has government regulators sweat- law-enforcement authorities to restrict cryp-
ing is the Internets potential for tax avoid- tography or antitrust regulators to crush com-
ance. New York state, in a bid to attract Net petition, intervention will stifle freedom. If
businesses, announced last year that it won’t we are lucky, the Internet will turn out to be
tax Internet service providers. just like the American Wild West. 0

roy Rrvmens dE FP» v7.



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

Economic Notions by Dwight R. Lee

¥ Economics

Social Cooperation and
the Marketplace

he primary insights of economics come ratory problems may result from working in

from explaining how individuals pursu- cotton fields. People would have to know lit-
ing their own interests make choices that best erally millions of things that affect the con-
enable others to pursue their interests as well. sumption and production of thousands upon
This social cooperation is not inevitable. It thousands of products to know enough to
requires rules that motivate people to consid- adjust their decisions in mutually accommo-
er the concerns of others. The rules that dating ways. One might throw his hands up at
accomplish this amazing feat define the free- this point and consider that requirement
market economy. ! impossible to satisfy.

Free-market economies vary in their partic- Transmitting information is only part of
ulars owing to cultural variations. But the fun- the problem. Even if it is communicated,
damental rules can be stated in terms of pri- people would still have to be motivated to act
vate property. Property is owned privately, on it appropriately, to respond as though they
and private owners have the right, within Were as concerned with everyone else’s well-
broad limits, to use their property as they see being as they were with their own.
fit; rights to property are transferable on any But before concluding that social coopera-
mutually agreed-on terms. Before considering tion requires an information network far supe-
how these rules motivate social cooperation, rior to anything even remotely available, and a
let’s see how remarkable that achievement is.2 level of compassion seldom practiced by ordi-

nary mortals, consider that every day we ben-
Sounds Impossible efit from exactly that type of social coopera-

tion. Indeed, it is so common that most people
Full social cooperation would require that take it for granted.

every person have information about the
preferences of everyone affected by his deci-
sions and on the constantly changing condi- How Does It Happen?
tions that alter the relative scarcity of
resources. For example, everyone consider-
ing using cotton products would have to be
informed if a fad has Brazilian teenagers
increasing their desire for denim clothing, or
if the supply of cotton needed to produce
denim is reduced by poor weather in Missis-
sippi, or if new evidence suggests that respi-

What harmonizes the pursuits of billions of
individuals who have little direct information
about, or interest in, one another’s circum-
stances? The answer is found in the informa-
tion and incentives that emerge when people
pursue their objectives in accordance with the
marketplace rules of private property and vol-
untary exchange.

Dwight Lee is Ramsey Professor of Economics and When property is privately owned and
Private Enterprise at the University of Georgia. transfers are voluntary, the prices that emerge

432


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

433

from the interaction of buyers and sellers Consumers communicate to suppliers indi-
communicate a tremendous amount of infor- rectly through the prices for labor, land,
mation. The price you observe for a product machinery, semi-finished goods, and raw
reflects how much value other consumers materials (inputs). The prices textile produc-
place on an additional unit of it. If the value ers, for example, pay for inputs reflect the
that Brazilian teenagers place on denim cloth- value consumers place on other products that
ing increases, their additional purchases will could be produced with those inputs. If those
communicate this information throughout the other products become more valuable to con-
world in the form of slightly higher prices for sumers, textile producers will receive this
cotton products. Everyone who is considering information through higher prices for their
buying these products will be immediately inputs, which are bid away by the other indus-
aware of their increased value to others. tries. Textile production will be reduced, and
Prices also indicate the relative availability of some textile manufacturers may go bankrupt.
different products, and the cost of producing When a supplier reduces his output, or goes
more of them. bankrupt, it is as though he is saying, “Con-
Market prices motivate people to respond sumers are telling me that the resources I am
as if they are as concerned with the interests using are more valuable in other employ-
of others as they are with their own. Con- ments, so I will use fewer of them so others
sumers will respond to the higher prices can put them to better use.”
caused by Brazilian teenagers as if the con-
sumers are thinking, “Teenagers in Brazil tell
us they value additional cotton in denim Blaming the Market for
clothing by a little bit more than we value itin ts Success
the cotton products we use; so we will reduce
our consumption so Brazilians can increase The social cooperation that results from the
theirs.” Or in the case of evidence of health information and incentives communicated
damage to cotton workers, consumers will through the market is not perfect. But no other
respond to the higher prices as if they are economic system comes remotely close to the
thinking, “We will reduce our consumption of market in allowing people to achieve their
cotton products to reduce the number of peo- objectives in productive cooperation with
ple exposed to the risk in the cotton fields, and each other. The market is criticized mostly for
we will pay a little more to compensate those its success rather than for its failure. It is com-
willing to take that risk.” monly blamed for delivering news about
Of course, it is pnmarily self-interest that scarcity. No one likes scarcity, but it is not
motivates consumers to respond that way, caused by markets. Indeed, the wonder of
rather than concern for people they will never markets is that they call to action those in the
meet. Indeed, higher prices tell consumers best position to respond. Blaming scarcity on
nothing about why cotton products have markets makes no more sense than blaming
become more valuable. (Important informa- fires on fire alarms.
tion, of course, is also communicated through The problem of scarcity will always be with
lower prices.) Market prices are efficient pre- us. But the social cooperation that is realized
cisely because they do not overload con- only through the marketplace permits us to
sumers with irrelevant information. push the limits of scarcity back farther than is
Prices also motivate suppliers to respond to possible under any other system. J
the interests of others. Obviously, higher
prices tell suppliers that consumers want 1. Adam Smith famously discussed social cooperation in terms of
more of a product. Suppliers are strongly his “invisible hand.” See The Wealth of Nations (New York: Modern
motivated to resp ond app ropriately. But con- ry ed re Coos to reinforce the discussion in this sec-
sumers also communicate information dis- tion by reading F.A. Hayek, “The Use of Knowledge in Society,” in
agreeable to suppliers when they decide they his Individualism and Economic Order (Chicago: University of

Chicago Press, 1980 [1948]). In my opinion, this is one of the most
want less of a product. important economics articles ever written.



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

FREEMAN

tdeas On C Ldeas On Liberty

Whose Rules? Whose Law?

by Jesse Walker

he virtue of the rule of law is that it Therefore, one might conclude, the initia-
requires the government, like the rest of tive is unconstitutional. Right?
us, to follow rules. The trouble with the rule Well, yes. But that hasn’t stopped the gov-
of law is that it’s the government that ends up ernment from moving forward with it, rule of
enforcing those rules. Often as not, it ends law be damned. A few congressfolk have
up doing whatever it wants, defining its own complained, but to little effect: they have
power with little regard for the Constitution, forced the feds to defend their actions, but not
the common law, or the other institutions to produce any arguments that actually make
that are supposed to constrain it. One recent sense. Thus, the government and its lawyers
example: the American Heritage Rivers argued that the program introduces no new
Initiative. regulations and dispenses no new funds, and
President Clinton will soon designate ten therefore does not amount to new legislation
waterways as Heritage Rivers. Each will then or new spending. But Washington has already
be assigned a “river navigator,” an official spent several hundred thousand dollars pro-
who'll assist local governments in finding fed- ducing brochures, operating a website, flying
eral programs to help them “restore and revi- federal employees to meetings, and otherwise
talize their river communities.” In other preparing to put the initiative into effect. With
words, he will be a pork facilitator. (Original- time, those expenses will increase and new
ly, he was to be called a “caseworker” I costs will emerge. The biggest of those will be
believe that says something about the way this the river navigators themselves, ten men and
administration thinks.) women who will be paid anywhere from
The Constitution is explicit about who has $70,000 to $100,000 a year apiece, for at least
the power to pass laws and spend money: five years. That’s as much as $5 million right
Congress does. The President is not and there, without even taking into account what
should not be a lawmaker—the Founders will happen if more waterways are added to
feared excessive executive power, recognizing the program.
that it would draw us closer to dictatorship. That sure looks like new spending.
Yet the Heritage Rivers program was created In theory, the initiative simply diverts cash
by presidential fiat. Congress never approved from already existing programs. Therefore,
it; indeed, it never voted on it at all. The Pres- argue the Clintonites, it merely reorganizes
ident simply announced it in his State of the existing funds, and hence requires no con-
Union address last year. gressional approval. “What we are talking
about here is not the creation of a new bureau-

Jesse Walker is the Warren Brookes Fellow at the cacy or the creation of new statutory author-
Competitive Enterprise Institute. ity,” explains Representative Paul McHale.

434


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

435

“We are talking about the more efficient precisely what Roosevelt did nearly a centu-
administration and delivery of existing feder- ry ago, and with the wisdom of hindsight and
al programs.” history, we now recognize that Roosevelt
That is a shell game. The initiative is a new fortunately protected the natural resources of
program; the navigatorship is a new post. The our nation so that we of this generation
very fact that communities must compete to might be able to enjoy them.”
be designated Heritage Rivers indicates that Think about this. Behind the fashionable
this is more than a mere continuation of exist- Teddymania, McHale is baldly arguing that
ing programs. Otherwise, what new benefits the ends justify the means and that the Con-
would they be competing for? And if the plan stitution isn’t worth anything. Whither the
draws its money from existing agencies, that rule of law now? (Asked about this later, the
1s more cause for concern. When Congress congressman clarified his position. He wasn’t
funds the Environmental Protection Agency, saying that the president had the right to cir-
the Department of the Interior, the Army cumvent Congress, he explained. He was sim-
Corps of Engineers, and the rest, it is funding ply pointing out that Roosevelt did it, and
those departments. It is not authorizing the Roosevelt was right to do it, and Clinton is
President to carve from them a new bureau- right to do it now. On second thought, “clari-
cracy of his own. fied” might not be the word I’m looking for.)
At times, even the initiatives advocates The oversight hearing came and went; the
seem to recognize this. After President Clin- program stayed in place. But the resistance
ton announced the program, an array of wasn’t over yet. When one branch of the gov-
property-rights activists, western legislators, ernment oversteps its bounds, we are sup-
and concerned citizens protested it, worried posed to have a weapon of last resort: the
that it might evolve into a federal land grab. courts. And so earlier this year, Representa-
When Congress responded with an oversight tive Helen Chenoweth and three colleagues
hearing a year ago, Representative McHale filed a lawsuit to stop the program, arguing
was among those testifying for the initiative. not only that it was passed unconstitutionally
“The American Heritage Rivers Initiative,” he but that it violates the Tenth Amendment and
told his colleagues, “is in the conservation tra-  private-property rights as well.
dition of Teddy Roosevelt, Gifford Pinchot, In March, Judge Henry Kennedy dismissed
and Rachel Carson. It deserves the support the case without even considering the plain-
and the funding of Congress.” tiffs’ arguments, declaring that Chenoweth
Maybe, maybe not—but this was an over- and company simply did not have standing to
sight hearing, not a legislative debate. Con- present the suit.
gress’s support and funding were not at All this may seem unimportant. But it’s part
issue. The President had already seized that of a pattern. Look at the long list of laws
prerogative for himself, Constitution or no enacted by executive order. Look at all the
Constitution. powers executive agencies have arrogated to
Not that McHale cared much about that themselves at the expense of the judiciary as
once his colleagues brought it up. “We heard well as Congress. Look at all the military
references earlier . . . about a president tak- adventures presidents have ordered without
ing unilateral action,” he testified. “The pres- any congressional declarations of war. The
ident of the United States acting without the Heritage Rivers Initiative is another prece-
consent of Congress, and in fact deliberately dent, another blow—as the band sang, anoth-
attempting to circumvent the will of some er brick in the wall. Above all, it is another
members of Congress, took executive action reminder of how our government actually
to protect the natural resources of the United does business behind the pretty words that
States. I am not referring to Bill Clinton. I decorate the National Archive.
am referring to Teddy Roosevelt. Read his The rule of law is a great idea. But can it
autobiography. What is objected to today is withstand the rules and the lawyers? OJ


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

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Economics on Trial by Mark Skousen

THE
FREcaN

Milton Friedman,
Ex-Keynesian

“I had completely forgotten how thoroughly Keynesian I then was.”
—MILTON FRIEDMAN!

hat?! The world’s most famous free- mists were Keynesian before Keynes.
market economist a former Keynesian? In his autobiography, Friedman says he was
Yes, it’s true. One of the more remarkable “cured” of Keynesian thinking “shortly after
revelations in Milton and Rose Friedman’s the end of the war,” but doesn’t elaborate. In a
new autobiography, Two Lucky People, is Mil- recent letter, he denies ever being a thorough
ton Friedman's flirtation with Keynesian eco- Keynesian. “I was never a Keynesian in the
nomics in the early 1940s. During his stint sense of being persuaded of the virtues of
with the Treasury Department, Friedman was government intervention as opposed to free
asked to give testimony on ways to fight infla- markets.” It should also be pointed out that
tion during World War II. His reply, couched Friedman’s teachers at Chicago blamed the
in Keynesian ideology, mentioned several Great Depression on “misguided government
options: cutting government spending, raising policy.” Friedman indicates he was “hostile”
taxes, and imposing price controls. Amazing- to the Keynesian idea that the Depression was
ly, nowhere did he mention monetary policy a market phenomenon.3
or controlling the money supply, the things Despite these statements, many free-market
Friedman is famous for today. economists have long accused Friedman of
During the 1930s, Friedman had also being a quasi-Keynesian.
favored Keynesian-style deficit spending as a On December 31, 1965, Time magazine put
way out of the Great Depression. His mentor John Maynard Keynes on the cover and quot-
was not Keynes himself but Friedman’s teach- ed Friedman as saying, “We are all Keynesians
ers at the University of Chicago. Friedman now.” Later, Friedman said he was quoted out
recounts, “Keynes had nothing to offer those of context. “In one sense, we are all Keynes-
of us who had sat at the feet of [Henry] ians now; in another, no one is a Keynesian
Simons, [Lloyd W.] Mints, [Frank] Knight, any longer. We all use the Keynesian language
and [Jacob] Viner”? In short, Chicago econo- and apparatus; none of us any longer accepts
the initial Keynesian conclusions.”
Dr. Skousen (mskousen@aol.com; www.mskousen.com) In an article published in 1986, Friedman
is an economist at Rollins College, Department of Eco- glorified Keynes as a “brilliant scholar” and
nomics, Winter Park, Florida 32789, a Forbes colum- «of the great economists of all time.” He

nist, and editor of Forecasts & Strategies. He is also . «
the author of Economics on Trial (Irwin, 1993), a described The General Theory as a “great

review of the top ten textbooks in economics. He is cur-  b0OK,” although he considers his Tract on
rently working on his own textbook, Economic Logic. = Monetary Reform as his best work. More-

437


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

438 THE FREEMAN e JULY 1998

over, he declared, “I believe that Keynes’s the- unstable.” The book shows that the Fed’s inept
ory is the right kind of theory in its simplici- policies, not free enterprise, caused the Great
ty, its concentration on a few key magnitudes, Depression. Friedman’s permanent-income
its potential fruitfulness.” hypothesis modifies Keynes’s consumption
Many conservatives wonder how Milton function and undermines the case for progres-
Friedman, defender of free markets, could sive taxation. His natural-rate-of-unemploy-
speak so highly of a man considered the intel- ment doctrine denies any long-run trade-off
lectual architect of the postwar inflation and between inflation and unemployment (the
the modern welfare state. Phillips curve). In Capitalism and Freedom,
Friedman is known as the leader of the Friedman challenges the effectiveness of the
Monetarist opposition to the Keynesian revo- Keynesian multiplier and declares that the
lution. According to Friedman, monetary pol- federal budget is the “most unstable compo-
icy (manipulation of the money supply and nent of national income in the postwar peri-
interest rates) influences economic activity far od.’® And, as early as 1963, he labeled as
more than fiscal policy (taxes and government “erroneous” the Keynesian proposition that
spending). Yet it must be remembered that the free-market economy can be stuck indefi-
monetary and fiscal policies are both forms of nitely at less than full employment.®

state intervention in the economy. According- So where does that leave us? In one of the
ly, some free-market advocates see Keynes more controversial contributions to my edited
and Friedman as partners in crime. volume Dissent on Keynes, Roger Garrison of

Granted, Friedman, as opposed to the Key- Auburn University asks, “Is Milton Friedman
nesians, favors a strict limit on monetary a Keynesian?” Garrison contends he can
growth. Yet even Friedman occasionally suc- argue it either way. Indeed. Yet, in the final
cumbs to interventionist fever. Late last year verdict, I can’t help but think that Friedman,
he endorsed this remedy for Japan's sluggish as an open-minded scholar, is willing to
economy: print more money. Apparently investigate and test all theories, no matter
Friedman felt that the easy-money policy in their source, and this methodology has gradu-
effect in Japan since 1994 (recent M1 was ally led him to discard most of Keynesianism.
growing at 9.9 percent, M2 at 4.3 percent) As he himself has written, “I have been led to
was insufficient. “The surest road to a healthy reject it . . . because I believe that it has been
economic recovery,” he wrote, “is to increase contradicted by experience.”10 0
the rate of monetary growth.” What about tax . .

. . . 1. Milton and Rose Friedman, Two Lucky People (Chicago: Uni-
relief, deregulation, and open markets? Fried- erty of Chicago Press, 1998), p. 113.
man failed to list any of these options.6 2. Milton Friedman, “Comments on the Critics,” in Robert J.

. Gordon, ed., Milton Friedman's Monetary Framework (Chicago:
Undoubtedly he favors these remedies, but  (piversity of Chicago Press, 1974), p. 163. 8

the article rekindled the old accusation that 3. “Comments on Critics,” pp. 48-49.
“onl ’ iedm 4. Milton Friedman, “Why Economists Disagree,” Dollars and
only money matters” to Friedman. Deficits (New York: Prentice-Hall, 1968), p. 15.

5. Milton Friedman, “Keynes's Political Legacy,” in John Bur-
ton, ed., Keynes's General Theory: Fifty Years On (London: Institute
3 io 1 of Economic Affairs, 1986), pp. 47-48, 52.
Friedman the Anti Keynesian 6. Milton Friedman, “Rx for Japan: Back to the Future,” Wall
. . Street Journal, p. A22, December 17, 1997.
I have to admit that, like many free-market 7. With Anna J. Schwartz (Princeton, N.J.: Princeton University

economists, I am surprised by these findings Press, 1963).

. 8. Milton Friedman, Capitalism and Freedom (Chicago: Univer-
and the favorable comments Friedman has sity of Chicago Press, 1962), p. 76.
made about Keynes. I’ve always viewed the 9. Milton Friedman and David Meiselman, “The Relative Stabili-

: : ty of Monetary Velocity and the Investment Multiplier in the United
leader of the Chicago school as strongly anti States, 1897-1958,” in E. Cary Brown, et al., ed., Stabilization Poli-
Keynesian. His Monetary History of the Unit- cies (New York: Prentice-Hall, 1963), p. 167. Sec also Friedman's
tention that the capitalist system is inherently 10. “Keynes's Political Legacy,” p. 48.


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

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440

The second lecture in the book details
BOOKS another of America’s unique social institu-
tions: its patent system. Without a system for
“intellectual property,” the Founders believed,
America’s experiment with freedom would
fail. That is why providing for patents and
copyrights, Novak maintains, is among the
by Michael Novak few enumerated powers of the federal govern-
Rowman & Littlefield ® 1997 ® 177 pages ® $19.95 ment in the U.S. Constitution. And he does
students of economic history a great service
Reviewed by John Hood by uncovering Abraham Lincoln’s long-
forgotten celebration of the Founders’ wis-
he Corporation, as we know it—and we dom about patents. Before patents, Lincoln
know it from every aspect of our lives— wrote, inventors had no way of protecting
was invented; it did not come to be of itself.” their practical ideas'and thus lacked the incen-
With those words from Oscar Handlin begins tives to develop and use them. “The patent
Michael Novak’s latest work, The Fire of system changed this,” Lincoln continued.
Invention: Civil Society and the Future of the “[Patents] secured to the inventor, for a limit-
Corporation. The quotation sums up neatly the ed time, the exclusive use of his invention;
two main thrusts of Novak’s short and readable and thereby added the fuel of interest to the
book: the moral and social importance of the fire of genius, in the discovery and production
corporation, and the role that invention and of new and useful things.” The title of Novak’s
patent laws play in a free society. book is a paraphrase of this classic passage.
The Fire of Invention is based on three lec- Corporations and patents were necessary
tures Novak gave at the American Enterprise to the explosion of American know-how
Institute in Washington. The first deals with throughout the nineteenth century. Even inno-
the history and future of the corporation. vations originating elsewhere, such as the rail-
Novak points out that while the publicly held road, were implemented far more quickly in
corporation has become a worldwide phe- the fertile soil of the United States. Many
nomenon, the people of the United States are economists and historians have tossed around
primarily responsible for “inventing” it as a various explanations for this fact, but Novak
basic social institution. is onto the truth when he spotlights the role
They did so first by suggesting that they as that social institutions play in guiding human
citizens, not as merely the subjects of a sover- endeavor.
eign, could form corporations. The citizens of The last of Novak’s lectures is on corporate
Massachusetts, for example, made up a char- governance. This is an important issue, given
ter of incorporation for Harvard University in the insistence by latter-day socialists that
1636, shocking the monarchy back in Eng- “stakeholders” (outside interests affected by
land. By 1800 the United States, populated by corporate decisions) deserve representation in
only about 5 million people, had more busi- corporate governance equal to the stockhold-
ness corporations than all of Europe. ers. Some argue that stockholders don’t
The difference between America and deserve priority treatment because they are
Europe went beyond the extent of incorpora- mostly passive, with little or no interest in the
tion to the nature of civil society itself. management of the firm. The author shows
Instead of pleasing states and sovereigns, the hazards of this thinking.
would-be American incorporators would have Excellent as the book is, I wish that Novak
to please customers and stockholders. “[The had covered more ground. One dangerous
corporation] brought to civil society not only argument that critics make is that corpora-
independence from the state but also unparal- tions have duties to society. But Novak says
leled social flexibility and a zest for risk and little about this. He observes that the growth
dare,” Novak argues. of pension funds means both broader stock

The Fire of Invention: Civil Society and
the Future of the Corporation



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

441

ownership throughout society and stronger monetary policy, banking regulations, for-
pressure on behalf of shareholders to keep eign investment codes, and the like. Maps in
managers in line. It is not enough to argue, color abound.
however, that the interests of society in gener- By the lights of Heritage’s Johnson and
al and those of stockholders are converging Holmes and the Wall Street Journals Kirk-
because of the growth of stock ownership. patrick, the five unfreest countries are, in
One must challenge the basic assumption that descending order, Bosnia, Iraq, Cuba, Laos,
the limited-liability corporation is a govern- and, at the very bottom, North Korea. The five
ment intervention in the free market. freest countries of the 1998 Index list are, in
Although Novak doesn’t weigh in on all the order, Hong Kong, Singapore, Bahrain, New
issues and arguments, his book remains one Zealand, and, tied for fifth place, Switzerland
of the best introductions to the subject of the and the United States.
morality of the corporation that one can find. To be sure, some question economic free-
Its brevity is an asset, not a liability; it makes dom in light of “the Asian Contagion,” a sud-
The Fire of Invention a perfect gift for that den economic letdown that has left the vaunt-
busy corporate executive you know who ed Asian tigers looking rather emaciated and
needs to understand more clearly why what he wobbly. Nor has their look been enhanced by
does is socially beneficial and morally just. [] the International Monetary Fund’s pumping
John Hood is president of the John Locke Founda- 0 SOM€ $150 billion in bailout credits.
tion, a nonprofit think tank based in Raleigh, North But a check of the chief “beneficiaries” of
Carolina, and author of The Heroic Enterprise. the IMF bailout shows recipient countries
were themselves remiss in embracing eco-
nomic freedom. South Korea, for example,
ranked 24th in the Index, Thailand 28th, and
Indonesia 62nd. Moreover, these countries,
like the oldest tiger of them all, Japan, have

1998 Index of Economic Freedom
by Bryan T. Johnson, Kim R. Holmes,

and Melanie Kirkpatrick engaged in neomercantilism and “bubble
® 376 pages (oversized) ® $24.95 paperback reserves to inflate the value of mortgaged

assets such as factories, hotels, shopping
malls, and office buildings to bubbled heights.
(Murray Rothbard, with your call for 100 per-
I 1989-1991 the walls of Eurocommunism cent bank reserves, thou should’st be living
came tumbling down, including the most at this hour!) The “Asian Contagion” can be
dramatic one of all, the Berlin Wall. Since said to indict economic freedom by those who
then, like a fresh breeze blowing around the have but superficial understanding of these
world, the watchword for investors and others nations.
has been freedom, a growing understanding The real issue for the IMF is whether it
that economic growth swings on economic should be in the bailout business at all: would-
freedom. Unfortunately, that understanding n’t it be wiser to let perpetrators of crony cap-
has been resisted in some nations, and there is  italism and neomercantilism learn from their
even much hostility to it in our own. Witness, own errors?
for instance, the antitrust assault on Microsoft. A wealth of information is to be found in
The Index of Economic Freedom, now in these pages. Argentina, for example, is hailed
its fourth year, recognizes this vital truth for its success with an anti-inflationary cur-
and furnishes a practical reference guide on rency board. The question of Hong Kong's
the economies of 156 nations. It does so remaining as No. 1 in the Index is raised in
with a concise country-by-country analysis, view of its political reversion to China. The
with two pages per country. Each analysis Netherlands is downgraded for boosting
includes up-to-date data on taxes, tariffs, government regulation and wage and price
government intervention, black markets, controls.

Reviewed by William H. Peterson



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

442 THE FREEMAN e JULY 1998

The United States is ranked as one of the Singer begins this devastating critique with
world’s nine “free” nations. This is certainly three incontrovertible points. First, the global-
true comparatively, but is there a drawback to warming scare is completely a child of com-
pinning that label on a nation that taxes, regu- puter models—models that have never been
lates, nannies, bullies, and bothers its people verified by empirical data. Their predictions
as much as our government does? Calling the of future warming are more than doubtful.
country “free” permits antimarket ideologues Second, even if the modest warming now
to say, “We're prosperous and free because of predicted by the models is occurring, the
our many wise and compassionate govern- result is likely to be beneficial to human
ment programs.” That’s nonsense. Americans beings rather than harmful. What government
are, in many, many ways, not free and we suf- science considers to be the major culprit,
fer because of that. But, as Frederic Bastiat CO,, is as essential to plants as oxygen is to
pointed out, the suffering from economic animals. There have even been suggestions
meddling is largely unseen. that a significant part of the success of agri-

Wall Street Journal editor Robert L. Bart- culture’s “Green Revolution” can be traced to
ley writes in the foreword: “Our editorial pol- the mildly elevated levels of CO, that we cur-
icy has always championed free people and rently enjoy.
free markets. Often over the past century, Third, CO, levels are quite low relative to
these ideas have been on the defensive, and it past known levels, and they appear to have
is remarkable to witness them reemerging been mostly declining for the past 200 million
and gaining the ascendancy as a new century years. In fact, there is no known scientific def-
approaches.” I believe Bartley is right, but we inition of what might represent a “dangerous”
have a huge battle before us, even in our level of CO,. Hence, there can be no objective
“free” nation, to say nothing of the majority scientific case made for its control. Indeed,
of the world’s economies that isn’t even some analysts contend that the earth is cur-
close. [J rently starved for CO, relative to the past his-
William Peterson, an adjunct scholar with the Her- torical levels of that gas.
itage Foundation, is the Lundy Professor Emeritus of Singer offers important data that cast doubt
Business Philosophy at Campbell University in North on claims that the atmosphere has warmed
Carolina. significantly, especially since the middle of

this century. In particular, the “urban heat
island” effect inflates ground-level tempera-
Hot Talk, Cold Science: ture measurements taken near densely popu-

. ] lated places. Once this effect is taken into
Global Warming’s Unfinished Debate account, we find that the years around 1940

by S. Fred Singer were the warmest this century.

Independent Institute ® 1997 © 110 pages ® $14.95 The author also discusses the distortions of
the Intergovernmental Panel on Climate

Reviewed by Ben Bolch Change (IPCC), whose report forms the basis

for the recent Kyoto Conference. The IPCC’s
Fe Singer is a scientist with impeccable Summary for Policymakers (which is what
credentials. He was the first director of the press reads) did not faithfully represent
the U.S. Weather Satellite Service, winner of the report itself, which is filled with doubts
the US. Department of Commerce Gold about man’s influence on global climate. After
Medal Award, and a fellow of the American the report was circulated, a poll of atmospher-
Association for the Advancement of Science. ic scientists indicated that an overwhelming
Yet Singer represents quite a threat to govern- majority felt that there was no clear evidence
ment science these days in that he openly that the climate record of the past 100 years
questions the validity of one of the weakest could be attributed to human activities.
excuses for a governmental takeover of the Singer rebuts the global-warming scare
world economy—global warming. stories bandied about in the media. A major


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

BOOKS 443

one is that the seas will rise and inundate “solve” the crime problem, the educational
coastal cities. But 95 percent of the “green- problem, the transportation problem, and so
house effect” is attributable to water vapor, on. Taxpayers have been mulcted for billions
and the effects of clouds on warming or cool- in urban aid over the last three decades, and
ing have never been accounted for in the yet most urban politicians cry for more.
computer models. Because of feedback But Goldsmith doesn’t buy the accepted
effects, increased warming might lead to wisdom. On assuming the mayorship in 1992,
lower, rather than higher, sea levels. We sim- he set about to demonstrate that cities can
ply don’t know. solve their own problems through common
An increase in tropical diseases in temper- sense and reliance on the market. He built his
ate regions is also predicted. Singer argues administration around five principles:
that it is not temperature that brings these

plagues, but lack of sanitation and health * People know better than government

facilities—two things that come with eco- what is in their best interest.

nomic development. Guess what will be * Monopolies are inefficient, government

slowed down by attempts to “fix” global monopolies particularly so.

warming. * Wealth needs to be created, not distributed.
Singer’s book should be read by everyone * Government should do a few things well.

who wants to be informed about the poverty « Cities must not raise taxes or price them-

of the science that purports to support global selves out of competition with excessive

warming. OJ regulations.

Ben Bolch is Robert McCallum Distinguished Profes- . .
sor of Economics at Rhodes College and coauthor of Acceptance of these ideas necessitates a
Apocalypse Not: Science, Economics and the Envi- drastic downsizing of city (and, in fact, all)

ronment (Cato Institute, 1993). government. Early on, Goldsmith instituted
the “Yellow Pages Test,” namely, if the city
was doing something also done by companies
The Twenty-First Century City advertising in the yellow pages, it should stop.
} Applying that test, he got Indianapolis out of
by Stephen Goldsmith the printing, window-washing, and nursery
Regnery Publishing ® 1997 ® 241 pages ® $24.95 businesses (growing trees, that is—not the
kind of government nursery our national nan-
nies have in mind) among others.
But that was relatively easy. Goldsmith’s
Boe by politicians. Seldom worth read- real insight was in seeing that it would be pos-
ing and rarely even worthy of the appel- sible to make a market where none existed so
lation “book,” they are usually tedious pas- that taxpayers could reap the benefits of com-
tiches of campaign blather, clichés, flattering petition. He emphasizes repeatedly that it is
photos, and anything else designed to help not necessarily privatization but competition
enhance election prospects. Don’t waste your that enhances efficiency. Consider, for exam-
time. ple, the towing of abandoned cars. It was a
But every now and then a politician writes city monopoly. A look in the yellow pages
a book that is not a waste of time, one that found no firms doing it. Goldsmith wasn’t sat-
challenges rather than merely regurgitates isfied with merely trying to get the city
accepted wisdom. Stephen Goldsmith, the monopoly to become a bit more efficient. He
mayor of Indianapolis, has done so in The decided to throw it open to bids from anyone
Twenty-First Century City. The accepted wis- with experience in the disposing of used cars.
dom among many Americans—and especially The winning bid came from ADESA Auc-
big-city mayors—is that cities cannot survive tions, which knew very well the business of
without costly “Marshall Plans” with Wash- selling used vehicles. The results were excel-
ington or the state capitals ladling in money to lent. In the last year before competition, the

Reviewed by George C. Leef



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

444 THE FREEMAN e JULY 1998

city had towed 900 vehicles for a net loss of

$174,000. In the first two years of the ADESA

contract, the company towed over 2,300 aban- by David Gelernter

doned vehicles, sold them, and paid the city The Free Press ® 1997 ® 160 pages ® $21.00

$500,000. Competition works. . .
Harder cases: what about welfare and “pub- Reviewed by John Attarian

lic” education? Goldsmith calls for “An End

to Social Programs,” but this chapter title avid Gelernter was a busy associate pro-
doesn’t exactly convey the book’s message. fessor of computer science at Yale Uni-
Ending social programs would entail the versity, an artistic man who had entered soft-
repeal of government handouts, relying com- ware research because he wanted a trade.
pletely on voluntary efforts to assist needy Then, going through his mail on June 24,
people. Goldsmith writes, “Welfare as a 1993 he opened a book pouch from the
social program must cease to exist. In its Unabomber.
place should be transitional help, job place- Badly mangled by the mail bomb—his
ment and family rebuilding. . . . Public assis- right thumb and little finger gone, his right
tance will be the bottom rung of a ladder eye and lung badly damaged—Gelernter
toward self-sufficiency.” No doubt that would made a long, agonizing recovery; “it’s much
be better than the status quo, but why accept harder to put things back together,” he writes,
the “need” for even bottom-rung public assis- “than to smash them up.” With that truth as its
tance? Why cave in to the idea that govern- theme, Drawing Life is his recovery’s narra-
ment at any level must be responsible for pro- tive: absorbing, often moving, sometimes
viding transitional help? We shouldn’t. wryly humorous. Thus, on wearing an eye
On the subject of education, Goldsmith patch: “the elastic of the patch gives you a
also stops short of the real solution. Unfortu- headache eventually—probably that’s why
nately, mayors can neither change the state pirates are always in such a bad mood—and I
and federal laws that have so thoroughly man- don’t relish looking any stranger than strictly
gled the market for education nor drop out of necessary, so hesitantly I remove it.’

the system. But they are free to advocate the ~~ One sentiment conspicuously absent is self-
return to a free market. Goldsmith doesn’t. He pity. The media’s fascination with him as a
speaks favorably of the private Choice Trust “victim” infuriated Gelernter, and he blasts
scholarship program to help poor parents the cult of victimhood, with its “demeaning
afford the tuition at private schools (a great and discouraging” promotion of self-pity. “A
idea that ought to be pushed from coast to man wants to act, not be acted upon. Self-pity
coast), but is apparently willing to live with is a pile of bricks on your chest, and your real
“public education” (government schools, as friends help you heave it off.” Hear, hear.
Milton Friedman insisted to him) as long as it Prompted by his experience to switch
contracts out noninstructional services to con- careers to painting and writing, Gelernter also
centrate on “their core service.” Education is grasped that “a writer has a duty to say what
just no business of the government and needs is wrong about life in his country, also, to say
to be pulled out by the roots. If Mayor Gold- what is right” He uses his unique vantage
smith understands this, he didn’t say it. point as a survivor of terrorism to make dev-
Nevertheless, there is a lot of good in this astatingly apt observations on America,
book. If you live in or near a city administered whose condition mirrors his: easily wrecked,
by politicians who are in the thrall of the hard to restore. Our passivity about bombings
accepted wisdom on urban policy (almost and other outrages—and, underlying it, a loss
every one of them), I suggest buying it and of capacity for moral outrage epitomized by
then using it to do everything you can to make the condemnation for being “judgmental”—
life miserable for your mayor. LJ especially appalls him. He rightly traces our

George Leef is book review editor of The Freeman and ~ €xplosion of crime and collapse of justice to
coordinates FEE’s Freeman Society discussion clubs. ~~ our retreat from passing moral judgment and

Drawing Life: Surviving the Unabomber



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

BOOKS 445

our blinking at the reality of evil, pointing out schools dedicated to truth-telling, high stan-
that “a society too squeamish to call evil by its dards of workmanship, and affirming what’s
right name has destroyed its first, best defense good about America. As he rightly observes,
against cutthroats. Our best line of defense if we don’t defend the good in our way of life,
against crime is to hate it.” Free societies, we risk losing it. Indeed, for all his anger, Gel-
modern America demonstrates, can’t beat ernter is optimistic and affirmative: “To me no
crime by force alone. He also has hard and cause is lost,” he proclaims, adding, “Only
abundantly justified criticisms for collectivist when the basics of culture and morality are
feminism, which has been destructive of under attack do we have the privilege of see-
motherhood and the family; government ing their beauty (like stars when the city lights
schools; the collapsing respect for privacy; go dim) as clearly as we do today.”
and collectivist intellectuals. Besides being a wonderful read, a hearten-
Gelernter attributes America’s change to ing account of triumph over a life-shattering
judgment-averse intellectuals, who occupy setback, and a keen criticism of our time, Gel-
the commanding heights and have “destroyed ernter’s memoir is a salutary reminder of the
something basic in this society that has yet to crucial importance of beliefs, character, and
be repaired.” That something is our presti- soulcraft for individuals and free societies
gious colleges and universities, which now alike. Civilization requires a sound moral
produce an intellectualized ruling elite hostile sense and the courage to be “judgmental”;
to, and anxious to coercively reform, both the without them, it comes apart, and the innocent

American people and their beliefs. are prey to evildoers. Short but powerful and
While many factors have caused our trou- provocative, Drawing Life is a splendid small
bles, Gelernter has ably fingered one of them. jewel of a book. OJ

His prescription 1S a necessary step on the John Attarian is a freelance writer in Ann Arbor,
road back to national sense: reestablish insti-  Aichigan, and an adjunct scholar with the Midland,

tutions such as newspapers, magazines, and Michigan-based Mackinac Center for Public Policy.

The power of one.

“There is really nothing that can be done except by an individual.
Only individuals can learn.
Only individuals can think creatively.
Only individuals can cooperate.
Only individuals can combat statism.”
—LEONARD E. READ
founder of FEE

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The Pursuit of Happiness by Walter E. Williams

¥ Government

Social Justice

he pursuit of social justice probably ing—away from totalitarianism or toward it—
accounts for most human misery. Whats there is no question that, by tiny steps, we are
more, throughout history, one form of injus- heading toward totalitarianism and arbitrary
tice has usually been replaced by another that governmental abuse and control.
i3 far worse. Russia’s 1917 revolution Some Americans are naive enough to think
expelling the Czars and their injustices ush- that the oppression seen in other countries
ered in Lenin, Stalin, and a succession of bru- can’t happen here. But let’s not forget that the
tal dictators who murdered tens of millions in country that gave the world great men like
the name of the proletarian revolution. The Goethe, von Humboldt, Beethoven, Bach, and
injustices of Chiang Kai-shek were replaced Schiller also gave us Auschwitz, Buchenwald,
with those of Mao Zedong; Castro’ ousting and Treblinka. Also keep in mind that it was
of Batista and Ayatollah Khomeini’s toppling German-Americans who helped create the
of the Shah of Iran produced regimes far more underground railroad to assist runaway slaves,
brutal. After Africa became independent the and it was German-Americans who had the
injustices of colonial powers were replaced best reputation for getting along with the Indi-
with those of brutal dictators. ans. Let’s also not forget that pre-Nazi Ger-
The slaughter of nearly 200 million poor many provided Jews with one of the most hos-
souls, not including war deaths, during the pitable climates in Europe, so much so that
twentieth century was a direct result of the during the early 1900s, in nearly one-half of
pursuit of visions of social justice, such as all Jewish marriages, one of the spouses was
income equality, the common good, and the a German gentile.
various alternatives to the so-called evils of If social justice has any operational mean-
capitalism. As if by design, measures taken to ing at all, it is that the purpose of law is to pre-
produce what was seen as the good society vent one person from violating another per-
lowered both the common man’s human- son’s right to acquire, keep, and dispose of
rights protections and his standard of living. property in any manner so long as he doesn’t
By contrast, after the American revolution, violate another’s simultaneously held rights.
we laid the groundwork that produced the In other words, laws should be written to pre-
world’s freest people. However, for most of vent force and fraud. Laws that force one per-
the twentieth century, we have been losing son to serve the purposes of another are
ground. If you ask which way are we head- immoral. These values, expressed in our Dec-
laration of Independence as the unalienable
Walter Williams is the John M. Olin Distinguished rights to life, liberty, and the pursul t of happi-
Professor of Economics and chairman of the eco- ness, guided the framers in the writing of our

nomics department at George Mason University in Constitution and Bill of Rights. Today, our
Fairfax, Virginia. government has become increasingly destruc-

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448 THE FREEMAN e JULY 1998

tive of the ends it was created to serve. Amer- In the pursuit of social justice, personal lib-
icans have become increasingly hostile and erty has become a secondary or tertiary mat-
alien to the liberties envisioned by the ter. Consider the following as just one exam-
framers. We have disregarded the inscription ple: suppose a citizen, as an emancipated
that graces the U.S. Department of Justice: adult, sent the following affidavit to Congress:
“Where the law ends tyranny begins.” “I hereby renounce any claim to Social Secu-
rity benefits and Medicare services. If I don’t
prepare for my later years or poor health, I
shall depend on the charity of others or suffer
Most people agree that slavery is immoral. the consequences. Release me from further
But what makes it so? Slavery denies a person Social Security and Medicare ‘contributions.’”
the right to use his property (body) and the A safe bet is that Congress would greet such
fruits of his labor as he sees fit. Slavery an affidavit with contempt.
forcibly uses one person to serve the purpos-
es of another. Tragically, most Americans, The Price of Abstaining
including blacks, whose ancestors have suf-
fered from gross property-rights violations, Suppose I refused to make payments into
think it quite proper for one person to be Social Security. What would happen to me?
forced to serve the purposes of another. That’s First, a fine would be assessed. Suppose I
what income redistribution really is. That’s refused to pay the fine? I'd be threatened
also what theft and robbery are. We could call with property confiscation. Then suppose I
slavery income redistribution. Income redis- tried to protect my property from the actions
tribution, theft, and slavery are all practices in of the agents of Congress? I would surely be
which the fruits of one person’s labor are con- killed.
fiscated for the benefit of another. You say, “But Williams, you’re violating the
Article I, Section 8, of the U.S. Constitution law; people can’t go about deciding which
enumerates the functions of the federal gov- laws they will obey!” My response is that
ernment and gives it taxing authority to carry laws do not determine what is or is not moral
out these functions. For the most part these conduct. In Nazi Germany, there were laws
functions relate to national defense, federal that required the reporting of a person hiding
courts, copyrights and patents, coining a Jew. In our country, the Fugitive Slave Act
money, borrowing, and a few other activities. made assisting runaway slaves a crime. In
With even a cursory reading of the Constitu- apartheid South Africa, hiring blacks for cer-
tion, one cannot find any authority for Con- tain work was illegal. In the former East Ger-
gress to confiscate the property of one Amer- many, assisting people in their efforts to
ican and give it to another. Yet this activity escape to the West was illegal. Would any
now constitutes over two-thirds of federal decent person demand that any of these laws
expenditures that will top $1.7 trillion dollars be obeyed? Decent people must always ask:
in 1998. Expenditures that have that charac- does the law have a moral basis?
teristic include Social Security, food stamps, Liberty is not mankind’s normal state of
farm subsidies, business bailouts and subsi- affairs. Liberty is fragile. Our liberties are
dies, disaster insurance, and expenditures by under siege because most Americans are
the departments of Health and Human Ser- ignorant about our Constitution and its philo-
vices, Housing and Urban Development, sophical underpinnings. Thus, we fall easy
Agriculture, Commerce, and Education. prey to political charlatans and quacks all too
These government activities and many others ready to exploit this ignorance in their quest
have been justified in the name of promoting for power and to satisfy popular visions of
social justice. social justice. OJ

Why Is Slavery Immoral?