===== PAGE 1 ===== " IDEAS ON [IBERTY February 2000 Vol. 50, No. 2 FEATURES ¥ 8 Lessons from the Chicago Fire by Daniel T. Oliver 13 Orissa’s Man-Made Tragedy by Barun S. Mitra 17 Entrepreneurial Discovery and the Law of Supply and Demand by Israel M. Kirzner 20 Government as Slave Owner by James Bovard 25 Plunder Gets a Boost by Timothy Sandefur 29 Mere “Isolationism”: The Foreign Policy of the Old Right by Joseph R. Stromberg “KODAK COS 33 The Internet: Parental Guidance Preferred by Keith Wade BROWNIE =vaf iw 38 Why Medicine Is Slowly Dying in America by Michael J. Hurd CaM ERASZLR = ! 41 Saving Money by Taking Lives by Melvyn Krauss 42 A Mad Scramble at 30,000 Feet by Edward J. Lopez 45 Heart over Mind: The Death of JFK, Jr. by Eric Nolte COLUMNS 4 THOUGHTS on FREEDOM—C Cleaned by Capitalism by Donald J. Boudreaux P15 IDEAS and CONSEQUENCES—A Camera Reaches 100 by Lawrence W. Reed 23 POTOMAC PRINCIPLES—What Ain’t Broke: The Renewed Call for Conscription by Doug Bandow 27 PERIPATETICS—Hands Off by Sheldon Richman P36 ECONOMIC NOTIONS—Spreading the Work to Create More Jobs by Dwight R. Lee 48 ECONOMICS on TRIAL—A Much-Deserved Triumph in Supply-Side Economics by Mark Skousen 65 THE PURSUIT of HAPPINESS—Unions and Antitrust: Governmental Hypocrisy by Charles W. Baird DEPARTMENTS 2 Perspective—No Dog in that Fight by Sheldon Richman 6 Hurricanes Are Creative Destruction? It Just Ain’t So! by Thomas J. DiLorenzo 50 Capital Letters 54 Book Reviews Domestic Tranquility: A Brief Against Feminism by F. Carolyn Graglia, reviewed by Candace - Allen; Shattered Lives: Portraits From America’s Drug War by Mikki Norris, Chris Conrad, and Virginia Resner, reviewed by Paul Armentano; Teachers Evaluating Teachers: Peer Review and the New Unionism by Myron Lieberman, reviewed by Matthew J. Brouillette; Experiment in Liberty by William Moore Gray III, reviewed by Burton Folsom; Regulation, the Constitution, and the Econo- my: The Regulatory Road to Serfdom by James Rolph Edwards, reviewed by M. Royce Van Tas- sell; Hoodwinking the Nation by Julian Simon, reviewed by George C. Leef. Lesson plans for ¥ articles are available at www. fee.org. ===== PAGE 2 ===== IDEAS eruE—— No Dog in that Fight The Foundation for Economic Education S saus Ing as i was 0 sce the Wor Irvington-on-Hudson, NY 10533 Trade Organization meeting reduced to Phone (914) 591-7230 FAX (914) 591-8910 dithering, no meticulous free trader could E-mail: iol@fee.org FEE Home Page: http://www .fee.org President: Donald J. Boudreaux Editor: Sheldon Richman Managing Editor: Beth A. Hoffman Editor Emeritus have taken sides in the confrontation last fall involving the WTO bureaucrats, the street mob, and the jackbooted Seattle police. There were no “Free Traders Against the WTO” signs in sight. The free trade move- Paul L. Poirot ment, such as it is, has missed the boat. The Book Review Editor time to stake out a principled position was George C. Leef several years ago, when the WTO was first Editorial Assistant created. For most people now, pro-free trade a Ann EER and anti-WTO does not compute. Yet that is Columnists of . . Charles W. Baird the position most consonant with liberty and Doug Bandow property. Dwight R. Lee When the most prominent free traders Lawrence W. Reed endorsed creation of a bureaucracy that Russell Roberts Mark Skousen Thomas Szasz promised to support their abstract principles, they ignored lessons of political economy they Walter Williams routinely apply to most other areas of public Contributing Editors policy. Public Choice teaches that bureaucrats Peter J. Boettke face systemic incentives adverse to liberty. Clarence B. Carson Applied to the case at hand, Public Choice Thomas J. DiLorenzo . . B would foresee that an international bureaucra- urton W. Folsom, Jr. . eT Joseph S. Fulda cy purportedly directed at diminishing gov- Bettina Bien Greaves ernment power over trade would sooner or Robert Higgs later do the opposite. Too many free traders John Hospers seem to believe that WTO bureaucrats and Raymond J. Keating : their political sponsors breathlessly await the Daniel B. Klein next policy paper demonstrating that opening Wendy McElroy Tibor R. Machan our market is good for us. Andrew P. Morriss Predictably, the trade managers are con- Ronald Nash cerned with things other than liberty and Edmund A. Opitz sound economics. The WTO is busy becom- ee = eorson ing the TWO—the Third Way Organization, June 8. Shaw an imperialistic National Labor Relations Richard H. Timberlake Board, Food and Drug Administration, and Lawrence H. White Environmental Protection Agency rolled into Ideas on Liberty (formerly The Freeman: Ideas on Liberty) is the monthly one. This, incidentally, 18 what most of the publication of The Foundation for Economic Education, Inc., Irvington-on- 1 Hudson, NY 10533. FEE, established in 1946 by Leonard E. Read, is a nonpo- street mob wanted. (It 1s not what the people litical, educational champion of private property, the free market, and limited of the developing world want.) government. FEE is classified as a 26 USC 501(c)(3) tax-exempt organization. . . Copyright © 2000 by The Foundation for Economic Education. Permis- Historically, the phrase free trade was not sion is granted to reprint any article in this issue except “Orissa’s Man-Made Tragedy” and “Saving Money by Taking Lives,” provided credit is given followed by the word b ut. That popular slo- and two copies of the reprinted material are sent to FEE. “7 ’ ; The costs of Foundation projects and services are met through donations, gan I'm for free trade, but I'm for Je air which are invited in any amount. Donors of $30.00 or more receive a sub- trade”—would have been doubletalk to Cob- scription to Jdeas on Liberty. For delivery outside the United States: $45.00 . . to Canada; $55.00 to all other countries. Student subscriptions are $10.00 for den, Bright, and Bastiat, who understood that the nine-month academic year; $5.00 per semester. Additional copies of this issue of Ideas on Liberty are $3.00 each. government power denatures free trade, the Bound volumes of The Freeman are available from The Foundation for cal- endar years 1972 to 1999. The magazine is available in microform from Uni- versity Microfilms, 300 N. Zeeb Rd., Ann Arbor, Ml 48106. 2 Cover art: Detail, "Memories of the Chicago Fire, 1912" by Julia Lemos. Courtesy Chicago Historical Society. ===== PAGE 3 ===== concomitant of a foreign policy of noninter- If the Internet can be dangerous to children, vention. Let’s hope that the American free- what’s the best way to protect them? The trade movement rediscovers its roots and reflexive answer is “the government.” Wrong, resumes its quest for the unconditional elimi- says Keith Wade. nation of all U.S. trade barriers. Every time you turn around, the state con- trols another part of medical care. Few people see the danger. But Michael Hurd warns that No news report about a hurricane, tornado, Americans are making a pact with the devil. or earthquake in the United States is today To see that pact in action, one need only complete unless it includes details of the look to The Netherlands, where the govern- response of the Federal Emergency Manage- ment health system has the power of life and ment Administration. It’s hard to believe that death. Melvyn Krauss’ family experience is was not always so. Daniel Oliver reminds us illustrative. * ¥ 3k that one of the great disasters in American Passengers’ frantic rush for overhead- history brought virtually no government bin space can make flying in a commercial response whatever. airliner a nerve-wracking experience. It need When it comes to disasters nature seems not be. Edward Lopez applies the principles particularly unkind to the poor nations of the of markets to the handling of carry-on world. As Barun Mitra shows, this is neither luggage. vendetta nor coincidence. When John F. Kennedy, Jr.’s private plane If supply and demand don’t converge as a fell into the sea, nearly everyone wanted to result of every market participant’s having know how it could have happened and what perfect knowledge, as textbook economics government could have done to prevent it. often holds, how does it happen? Israel Kirz- Eric Nolte devotes his experience as a pilot ner salvages the law of supply and demand in and flight instructor to bringing sense to the a distinctly Austrian manner. incident. In their never-ending effort to subordinate Here’s what has caught the fancy of our . the individual to the state, Progressive intel- columnists: Donald Boudreaux laments the lectuals concoct caustic solutions designed to lack of historical perspective. Lawrence Reed dissolve all notions of natural rights. James celebrates the birthday of a culture-shaping Bovard distills the latest sample and finds the consumer product. Doug Bandow implores, usual snake oil. “Not another draft!” Dwight Lee says spread- Forget the rule of law. If special interests ing the work is not the same as spreading the fear competition from Wal-Mart and other wealth. Mark Skousen discusses Nobel-prize consumer blessings, there’s little to stop them winner Robert Mundell. Charles Baird sees from getting an edict from the legislature to hypocrisy in how unions are treated by the thwart the new retailers. Timothy Sandefur law. And Thomas Dil.orenzo, reading in a describes the recent case in California. prominent newspaper that hurricanes bring Hidden in the controversy over foreign prosperity, protests, “It Just Ain’t So!” affairs—“isolationism” versus “internation- Our reviewers deliver verdicts on books alism”—is an important matter that few about feminism, the drug war, teachers judg- want to discuss: whether America is a ing teachers, American history, regulation, republic or an empire. Joseph Stromberg and the allure of bad news. notes that only a short while ago a group of —SHELDON RICHMAN prominent men and women saw the issue for what it really. is. ===== PAGE 4 ===== sa. Thoughts on Freedom by Donald J. Boudreaux Cleaned by Capitalism | isd spoke in Toronto to students at a tery that distressed and killed people all public-policy seminar sponsored by the over the world. Fraser Institute. The seminar opened with Fras- er’s Laura Jones reviewing the many sound rea- Indeed so. sons why environmental alarmism is inappro- The fact that people today wring their priate. Ms. Jones offered superb analysis and hands with concern over the likes of global boatloads of relevant facts. Her case that the warming and species loss is itself a marvelous environment is not teetering on the edge of dis- testament to the cleanliness of industrial soci- aster was unassailable—or so I thought. ety. People dying of smallpox or dysentery During both the question-and-answer period have far more pressing worries than what’s and the group discussions that followed, the happening to the trend in the earth’s tempera- students vigorously assailed Ms. Jones’s case ture. Truly, we today are lucky to be able to against command-and-control environmental worry about the things that we worry about. regulation. These assaults all sprang either from mistaken notions about environmental Our Polluted Past facts or from a lack of historical perspective. As I listened to student after student lament I decided to work that last line into my own the horrible filthiness of modern industrial talk later in the day. I knew that declaring that society, my mind turned—as it often does—to our modern world is vastly cleaner than was the late Julian Simon. I remembered a point the pre-industrial world would be met with he made in the introduction to his encyclope- astonishment, or even hostility, by the stu- dic 1995 book, The State of Humanity: almost dents. Such a claim contradicts all that they all of the pollutants that have been most dan- are taught. So I quickly assembled irrefutable gerous to humanity throughout history are facts to back my claim. Here’s my partial list today either totally eliminated or dramatically of the myriad, mundane ways that modern reduced. Here are Simon’s wise words: society is unquestionably cleaner than pre- industrial society. When considering the state of the environ- « As Simon pointed out, smallpox, dysen- ment, we should think first of the terrible tery, and malaria—once common threats to pollutants that were banished in the past humankind—are today totally conquered in century or so—the typhoid that polluted the industrial world. (Smallpox is no longer a such rivers as the Hudson, smallpox that threat even in the poorest parts of the world.) humanity finally pursued to the ends of the Antibiotics regularly protect us from many earth and just about eradicated, the dysen- infections that routinely killed our ancestors. » Before refrigeration, people ran enor- Donald Boudreaux is president of FEE. mous risks of ingesting deadly bacteria when- ===== PAGE 5 ===== ever they ate meat or dairy products. Refrig- they rotted from alternations of wet and eration has dramatically reduced the “bacteria dry, and harbored a menagerie of mice, pollution” that constantly haunted our pre- rats, hornets, wasps, spiders, and birds; and twentieth-century forebears. above all they caught fire. Yet even in Lon- » We wear clean clothes; our ancestors wore don they prevailed. foul clothes. Pre-industrial humans had no washers, dryers, or sanitary laundry deter- One consequence is described by French his- gent. Clothes were worn day after day without torian Fernand Braudel: “Fleas, lice and bugs being washed. And when they were washed, conquered London as well as Paris, rich inte- the detergent was often made of urine. riors as well as poor.” (See Braudel’s The * Our bodies today are much cleaner. Sani- Structures of Everyday Life.) tary soap is dirt cheap (so to speak), as is clean * Our streets are clean. Here, again, is water from household taps. The result is that, Braudel, commenting on Parisian streets in unlike our ancestors, we moderns bathe fre- the late-eighteenth century: “And chamber quently. Not only was soap a luxury until just pots, as always, continued to be emptied out a few generations ago, but because nearly all of windows; the streets were sewers.” Modern of our pre-industrial ancestors could afford sewage disposal has disposed of this dis- nothing larger than minuscule cottages, there gusting pollution. And that very symbol of were no bathrooms (and certainly no running twentieth-century capitalism—the automo- water). Baths, when taken, were taken in near- bile—has further cleaned our streets by rid- by streams, rivers, or ponds—often the same ding us of the constant presence of horse dung bodies of water used by the farm animals. For- and of the swarms of flies it attracted. get about shampoo, clean towels, toothpaste, + Consider, finally, a very recent victorious mouthwash, and toilet tissue. battle against pollution: toilets and urinals * The interiors of our homes are immacu- that automatically flush. Until a few years late compared to the squalid interiors of ago, every public toilet and urinal had to be almost all pre-industrial dwellings. These flushed manually. Not so today. As automatic dwellings’ floors were typically just dirt— flushers replace manual flushers, we no longer which made the farm animals feel right at must pollute our hands by touching filthy home when they wintered in the house with flush knobs. humans. Of course, there was no indoor These are just some examples of the count- plumbing. Nor were there household disinfec- less ways that our ordinary lives are less pol- tants, save sunlight. Unfortunately, because luted than were the ordinary lives of our pre-industrial window panes were too expen- ancestors. The danger is that people—like the sive for ordinary families—and because students I met in Toronto—wrongly believe screens are an invention of the industrial that the world is dirtier and less healthy today age—sunlight and fresh air could be let into than in the past. And they blame capitalism. these cottages only by letting in insects too. While some environmental problems still Also, bizarre as it sounds to us today, the roofs exist, they aren’t dire—and they are nowhere of these dwellings were polluted with all man- near as great as were the problems with filth ner of filthy or dangerous things. Here’s the that regularly harassed our grandparents and description by historians Frances and Joseph great-grandparents. Gies, in Life in a Medieval Village, of the roofs It is tragic that demagoguery fueled by mis- of pre-industrial cottages: information leads people today to blame the free market for all real and imaginary envi- Roofs were thatched, as from ancient ronmental problems. In fact, the free market times, with straw, broom or heather, or in is the greatest cleanser and disinfectant of the marsh country reeds or rushes. . . . environment—the most successful pollution Thatched roofs had formidable drawbacks; fighter—that the world has ever known. [] ===== PAGE 6 ===== IDEAS ON [IBERTY FeBruARY 2000 Hurricanes Are Creative May Leave Robust Economy in its Wake,” Destruction? Journal reporter Tristan Mabry wrote that Hurricane Floyd, which devastated parts of . 9 the eastern United States, “won’t likely damp It ust Ain t Sol economic growth and may actually have | . churned up some extra economic activity.” Mabry quotes Marilyn Schaja, chief econo- y employer, Loyola College, is a Jesuit mist at Donaldson, Lufkin and Jenrette Secu- institution and, as such, encourages its rities Corporation in New York City as saying students to participate in myriad community- that the storm “may actually give the econo- service programs. In teaching introductory my a boost.” economics, I propose on the first day of class Ian Shepherdson of High Frequency Eco- a marriage of economic education and com- nomics, Inc., told the Journal that the hurri- munity service. I offer to give students alu- cane actually accelerated GDP growth by 0.5 minum baseball bats with which they will percent, or about $30 billion. “That could add walk through the streets of Baltimore bashing fuel to the nation’s already revved-up econo- in the windows of every car that they come my,” stated the economically clueless Mabry. across. The purpose of this rampage, I inform U.S. Labor Department economist Richard the students, is to stimulate employment and Rosen chimed in, “We’re sensitive to the reduce poverty in the inner city. weather.” The students are always quick to recognize Continuing with the weather theme, Mabry that many jobs would, in fact, be created: auto further stated that “like meteorologists, econ- repair, glass manufacturing, street sweeping, omists are quickly trying to focus their fore- garbage removal, and so on. But once they are casts to reflect changing conditions.” In other introduced to the first principle of econom- words, as Austrian economists have long con- ics—opportunity cost—they realize that to tended, economic “forecasting” is largely a think of vandalism as an economic stimulant fraud. When forecasts are off base (which is a farce. they almost always are), they are simply Sure, such vandalism may “create” certain revised, after the fact, ostensibly to “reflect jobs, but only by forcing people to spend changing conditions.” money on auto repair that would have other- All this talk of Hurricane Floyd as an eco- wise been spent (or invested) elsewhere. The nomic stimulant is, of course, absolute non- jobs that are “created” are visible, whereas the sense. If what these commentators say is true, ones that never materialize are invisible; but we should be celebrating the occurrence of they are a very real part of the opportunity natural disasters, vandalism, and even war, cost of using those resources. Government and investing our life savings in places like statistics do not measure the jobs, economic Serbia, East Timor, and Iraq. (One wonders activity, and products that never materialize. ~~ how much of Mabry’s own portfolio is invest- ed in Timorese bonds.) The American Civil War should have made the southern states— vast parts of which were looted and burned to It is disheartening that a publication as dis- the ground—the economic dynamo of the late tinguished as the Wall Street Journal would nineteenth century, with Charleston and fail to understand this most elementary of Savannah overwhelming New York City and economic lessons. But it has. In a September Chicago as the nation’s centers of commerce 17, 1999, news article titled “Hurricane Floyd and finance. A Principle Missed ===== PAGE 7 ===== 7 Property destruction always makes people basic concept in economics. As Ludwig von worse off than they were before, but because Mises wrote in Human Action, the state is per- of their ignorance of economics, Wall Street petually at “war” with economics and econo- and government bean counters fall for what mists, for economic education exposes the Henry Hazlitt, building on a Frederic Bastiat fraud involved in the something-for-nothing fable, called the “broken-window fallacy” promises of politicians. “The paramount role Once one understands the concept of opportu- that economic ideas play in the determination nity cost, which is rooted in the reality of per- of civic affairs,” Mises wrote, “explains why vasive economic scarcity, then one does not governments, political parties, and pressure fall for other fallacious notions either, such as groups are intent upon restricting the freedom a government-spending “multiplier effect,” of economic thought.” because one recognizes the destructiveness of A variant of the broken-window fallacy is the taxation that is necessary to finance the government “disaster relief.” The billions of government’s spending. taxpayer dollars spent in recent decades have Nor could one be so foolish as to believe subsequently created a massive moral hazard, that government “jobs” programs could possi- which has made natural disasters much more bly create jobs on net. The only thing that economically harmful than they would other- such programs can do is to create government wise have been. According to The Weather make-work jobs by destroying more produc- Channel, there have actually been fewer east- tive private-sector jobs. No matter how such coast hurricanes in the past 20 years than the jobs programs are financed—through direct historical average, but the damage from them taxation, borrowing, or inflationary monetary is much higher because coastal property is expansion—they must divert resources from much more developed. An important reason the private to the governmental sectors. In so why so much development has taken place in doing, they destroy private-sector jobs that the paths of hurricanes is that the government had been created as a means of serving con- subsidizes it with “disaster relief,” money for sumers in order to generate patronage jobs rebuilding, and federal flood insurance. This whose main purpose is to allow politicians to creates an even bigger role for government buy votes and advance their careers with tax- in future disasters. payers’ money. Every government program The more involved the government ever proposed was advanced with the help of becomes in “responding” to natural disasters, the fallacious notion that it will somehow the worse will be the economic destruction “create jobs”—in addition to enlightening the caused by them. When economically illiterate unenlightened, healing the ill and the lame, journalists tell us that hurricanes and govern- saving the environment, etc., etc. ment create prosperity, we should answer resoundingly, “It Just Ain’t So!” —THoMAS J. DILORENZO Department of Economics It is no accident that so many supposedly Loyola College in Maryland educated people are ignorant of the most Pervasive Ignorance ===== PAGE 8 ===== IDEAS @ History ON [IBERTY FEBRUARY 2000 Lessons from the Chicago Fire by Daniel T. Oliver magine hearing on the news that one of victims fell largely to one charity, the Chica- America’s largest cities had just been virtu- go Relief and Aid Society. How it responded ally destroyed by a manmade or natural disas- is a very interesting story. ter. What steps would have to be taken to deal with the calamity? How would the survivors . be fed, clothed, and sheltered? After their The Fire basic needs were met, how would they be Two physical conditions set the stage for helped to find work, rebuild their homes, and the Chicago Fire. First, the summer of 1871 return to their everyday lives? Would the gov- had been exceptionally dry. Second, of the ernment have to provide most of the relief city’s 60,000 barns, stables, warehouses, supplies and money for rebuilding? Or could homes, stores, and other buildings, an esti- victims turn to charitable organizations and mated two-thirds were built entirely of wood. the generosity of their fellow Americans? Many also contained combustible materials In 1871, one-third of the city of Chicago— such as firewood, lumber, hay, grain, coal, and including the entire downtown and surround- oil. In addition, there were wooden fences, ing neighborhoods—burned to the ground. sidewalks, bridges, and 55 miles of streets While it may seem startling to Americans paved with pine blocks. As one author relates, today, the government did almost nothing in “The entire city, to exaggerate only slightly, response. But within two years, Chicago’s was a huge potential bonfire waiting to be burned district had been almost completely lit.” rebuilt through private initiative. On the evening of October 8, a fire began Besides calling into question the need for on the city’s south side in a barn owned by major government assistance following disas- Patrick and Catherine O’Leary. The well- ters, the aftermath of the Chicago Fire offers known but dubious tale is that Mrs. O’Leary a case study in how to help the needy. One- was milking a cow, which kicked over a third of the city’s 300,000 residents lost their lantern. While the fire no doubt started in the homes and were in immediate need of basic O’Leary barn, it was more likely the result of necessities. Many also lost their places of spontaneous combustion of hay or a careless- employment. The task of meeting life-or- ly tossed cigar. In any case, it quickly grew death needs and of finding employment for into a huge wall of flame that was propelled northward by strong winds. The fire burned associate at the Washington, D.C.-based Capital for nearly 24 hours, cutting a path four miles Research Center (www.capitalresearch.org) and a long and three-quarters of a mile wide [freelance writer. A version of this article appeared in through what is today the Loop and the area the Center's newsletter, Alternatives in Philanthropy. surrounding the Magnificent Mile. Nearly Daniel Oliver (doliver@smart.net) is a research ===== PAGE 9 ===== everything in its path was consumed. Wrote an observer as the flames were finally extin- guished by long-overdue rain, “The fire here last night and to-day has destroyed almost all that was very valuable in this city. There is not a business house, bank, or hotel left. Most of the best part of the city is gone.”2 At least 200 Chicagoans lost their lives, and the city suf- fered $200 million in property damage— about a third of its valuation. Government’s Limited Role The role of the government immediately following the fire was largely limited to keep- ing order. Martial law was not officially declared, but it was imposed de facto, enforced by army troops, the police, and spe- cially enlisted volunteers. Mayor Roswell B. Mason also issued executive orders that established the price of bread, banned smok- X . . oy was one of the members of the board of the Chicago ing, limited saloon hours, and prohibited Relief and Aid Society. wagon drivers from charging more than their usual rate. Mason appointed Lieutenant- Aid Society was a “charity organization soci- General Philip Sheridan, the Civil War hero, ety,” a type of charity common in the latter to command the Division of the Missouri in half of the nineteenth and early twentieth cen- patrolling the streets, guarding relief supplies, turies. It was part of a broader charity organi- and enforcing curfews. Four companies zation movement that arose in response to of infantry were also stationed just outside growing concerns that indiscriminate charity the city for several months. But after only fostered dependency and undermined self- two weeks, Mason discharged Sheridan’s reliance. As charity expert James L. Payne troops on the grounds that they were no explains, “Reformers saw that the needy longer needed. could make a permanent living by going from Mason also asked the Chicago Relief and house to house and from charity group to Aid Society, the city’s largest charity, to direct charity group, telling tales of woe. To stop this the relief effort. Other charities, such as the practice, they formed central clearinghouses German Relief Society, played a small role in in each city to which they referred each case providing relief, but the Chicago Relief and of neediness; from there, each case was Aid Society took charge of the vast majority assigned to a particular church group or of funds and supplies that began to arrive friendly visitor.” from around the country. On October 13, the Charity organization societies practiced mayor issued a proclamation reading, “I have what they called “scientific charity.” They dis- deemed it best for the interest of the city to tributed application forms to those seeking turn over to the Chicago Relief and Aid Soci- aid, required references who could verify an ety all contributions for the suffering people applicant’s neediness, and kept detailed of this city. This Society is an incorporated records on all who received help. One key and old established organization, having pos- feature was their use of family histories and sessed for many years the entire confidence of interviews with neighbors and relatives to our community, and is familiar with the work determine if applicants were “worthy” of aid. to be done.” By 1912, there were charity organization Founded in 1857, the Chicago Relief and societies in 154 American cities. ===== PAGE 10 ===== 10 IDEAS ON LIBERTY ® FEBRUARY 2000 The Chicago Relief and Aid Society’s port [that is, work], and relieve [victims] from immediate task was to feed the hungry and the necessity of any further application for shelter the homeless before the onset of win- assistance.” ter. It divided the city into several districts and On October 24, two weeks after the fire, opened relief supply offices and depots con- Gibbs issued a circular to all Society person- nected by telegraph. It also separated its work nel. After pointing out that work was available into several divisions, including contribu- to nearly everyone, including boys, it stated: tions, distributions, employment, health, “Give no aid to any families who are capable reception and correspondence (to receive of earning their own support, if fully out-of-town visitors and answer letters employed (except it be to supply some need- and telegraphs), shelter, special relief (dis- ed articles of clothing, bedding, or furniture cussed below), and transportation. A commit- which their earnings will not enable them to tee of prominent Chicagoans oversaw each procure, and at the same time meet their ordi- division.4 nary expenses of food and fuel.)” Neither was On October 16, a week after the fire, the aid to be extended to anyone “possessed of Society opened a temporary headquarters in property, either personal or real, from which the heart of the burned district. Documents they might, by reasonable exertions, procure show that the Society was acutely concerned the means to supply their wants, nor to those that some recipients might try to take advan- who have friends able to help them.” The cir- tage of “the generous aid pouring in.” An cular insisted that “Our aid must be held early relief plan issued by Society president sacred for the aged, infirm, widows and Henry W. King called on “all persons engaged orphans, and to supply to families those actu- in [relief] work to stop hasty distributions, al necessaries of life, which, with the best and give applications as much examination as exertions on their part, they are unable to pro- possible.” O. C. Gibbs, general superintendent cure by their labor.” Sternly it concluded: of Distribution of Supplies, issued an October “Any failure on the part of any employee of 24 circular that read, “In all cases of appli- the Society to conform to the instructions cants moving into your district from another, given above will be regarded as sufficient you will before giving relief, ascertain, by cause for his instant dismissal.” inquiry at the office of the district from which An October 27 notice from Gibbs is also they came, if they had been aided in that dis- worth quoting: trict, and to what extent.” Another early notice by Society chairman E. C. Larned instructed, There are several thousand men and boys “All applications should be made in writing, working this week whose families we are and should state specifically the place of resi- feeding, who will be paid for their work on dence before and since the fire, the nature and Saturday night, sufficient to meet all the extent of the losses suffered, and the particu- wants of the family for food next week. Be lar articles or form of aid desired. . . . Relief sure that every such family is known in by payment of money is only extended in a your District, and reported at the office, so few exceptional cases.” that no more supplies be given to it. Our supplies are going at a fearful rate. If any men, boys or women are not working, apply St. Paul’s Rule: If any man among The Society saw its most important task as you will not work, neither let him eat. arranging work for victims of the fire so that they would not become accustomed to chari- ty. There was obviously ample work to do, including clearing away rubble and collecting The Societys Special Relief Committee salvageable bricks and other building materi- provided materials to help those in trades als. The Society’s Employment Bureau sought return to work. It helped to outfit dentists’ and “at the earliest possible period, to obtain sup- doctors’ offices, stock dry-goods stores, and The Primary Task More Inducements to Work ===== PAGE 11 ===== LESSONS FROM THE CHICAGO FIRE 11 pay the first month’ rent for new business ety’s meticulous record-keeping and careful establishments. It also assisted bookbinders, investigation of applicants helped it to detect carpenters, locksmiths, masons, shoemakers, fraud. Documents relate one story about a tailors, and tinners. Almost a quarter of the woman named Kate Moran who applied to the Committee’s funds—$140,000—was used to Shelter Committee for materials to build a buy 5,300 sewing machines for destitute house. A reference named John Kenedy [sic] sewing women. Sewing machine companies supplied a letter saying that Moran had per- offered a discount on new machines, and mission to build on his lot and that she was “a applicants themselves paid part of the cost Destitute and Severer Suffer[er] By the Late when possible. The Society also opened its Disastrous Fire and has A Large Family & own clothing factory, employing 100 women, yong [sic] children None of them Able to to replace garments lost in the fire. Help them Selfs.” On investigation, a Society The Committee also sought to discreetly visitor found that Moran already owned a help well-to-do victims of the fire who would home and that the application was “a perfect be hesitant to seek help. As one letter from a fraud. Has been living here 5 years. A hard father to his son related, “Do not say anything drinking woman. Never lost a cent. Owns about it to Dyer, but we hear that his sister house here & has been drunk nearly all the Mrs. Loving has actually been to the ‘Relief’ time. Would give her nothing.” for clothing. However, a good many other ladies as respectable as she have done the Lessons same thing. I fear that in some cases, respectable people have gone for aid who The story of the Chicago Fire relief effort ought to wait a little while for their friends to raises at least three points worth pondering. come forward; but some folks seem to give First, it calls into question how we help the way to despair almost immediately.” needy today, both through welfare and chari- The Society also gave 30,000 people mate- ty. Although many victims of the fire lost their rials to build temporary one-room shanties possessions and means of livelihood and were and supplied materials for another 5,000 larg- reduced to paupers, relief workers were er shelter houses. It erected barracks at five extremely wary about providing them with locations in the burned district to house 1,000 material goods. Instead, they helped victims poor, homeless families and also administered find work so that they would not become 64,000 smallpox vaccinations. dependent on charity. That model can be con- The Society received some criticism for its trasted with what appears to be a fairly com- arguably bureaucratic way of administering mon mindset among charity workers today: aid, which appears to have delayed assistance that “helping” means “giving” people things. in some cases and resulted in a failure to help As one example, a spokeswomen at a food some truly needy people. But most observers charity recently remarked that no one at her judged its work as outstanding. Frederick Law agency had stopped to count the number of Olmsted wrote in The Nation, “In the midst of people coming through the door because the most pressing demands of their private “we’re just trying to get the food out the affairs, men of great good sense and well door.”6 But if a charity fails to collect even the informed have taken time to devise and bring most basic information on those it serves, others into a comprehensive and sufficient how can it know if it is encouraging self- organization, acting under well-guarded law.” reliance or dependency? How can it tell if it is The Society’s work is particularly impressive serving the genuinely needy or only those considering that it had to expand quickly from who take advantage of others’ generosity? an organization that had served 7,000 annual- Second, the Chicago fire relief effort chal- ly before the fire to one that helped 157,000— lenges those who contend that private charity about half the population of Chicago—during is insufficient to cope with disasters and that the year and a half it provided fire relief. strong government action is necessary. Even Moreover, there is no doubt that the Soci- before the fire was fully extinguished, the cit- ===== PAGE 12 ===== 12 IDEAS ON LIBERTY ® FEBRUARY 2000 izens of Cincinnati held a rally that raised ernors must formally request aid from the $160,000 for fire victims. Citizens in dozens president. FEMA has even reimbursed cities of other cities around the country did like- for the cost of ordinary winter snow removal.’ wise. In New York City, wagons went through Finally, we should question whether tax- the streets to collect clothing. Money raised payer-funded disaster relief discourages for the relief effort totaled $4.8 million, Americans from voluntarily contributing to including nearly $1 million from 29 foreign relief efforts. After all, if our taxes increasing- countries. Much more was donated in goods ly cover the cost of disasters, why make a vol- such as clothing and food. This pattern of untary contribution? Fortunately, the United generosity has been typical of all major disas- States still has many private relief organiza- ters in U.S. history. tions, and Americans continue to respond By contrast, the Federal Emergency Man- generously to disasters. In 1997, the Ameri- agement Agency (FEMA), established by the can Red Cross, America’s largest disaster Carter administration in 1979, and other fed- relief organization and fourth largest nonprof- eral agencies now cover an estimated one- it organization, received only 4 percent of its third of the cost of recovery from a typical $1.9-billion revenue from the government. It disaster. Federal and state agencies have responds to hurricanes, floods, earthquakes, increasingly supplanted the role of private tornadoes, hazardous materials spills, trans- insurance and relief organizations by provid- portation accidents, explosions, and other nat- ing cash grants and low-interest loans to ural and man-made disasters, including house homeowners, renters, and businesses affected and apartment fires. In the last five years, it by every conceivable type of disaster or hard- has responded to an average of 64,800 disas- ship: severe storms, tornadoes, snow, ice, ters and tragedies annually, mostly house flooding, ground saturation, and mudslides. fires, and all relief is provided free of charge. Government assistance 1s available to cover But if government agencies such as FEMA home repairs, temporary housing, employ- continue to expand their role, will future gen- ment income lost as a result of a disaster, erations of Americans feel any obligation to medical, dental, and crisis-counseling bills, voluntarily help victims of disasters? OJ and many other disaster-related expenses. ‘hh LR 1. Robert Cromie, A Short History of Chicago (San Francisco: Moreover, FEMA exhibits the expansionist |. “OFC a5 81 tendencies typical of other government agen- 2. W. W. Belknap, secretary of war, to Philip H. Sheridan, s : : lieutenant-general, U.S. Army; Chicago Historical Society, cies. It has increasingly exaggerated www .chicagohs.org/fire. All subsequent quotes that are not end- the number of major disasters during its 20- noted are taken from this source. : : : fo 3. James L. Payne, Overcoming Welfare: Expecting More from year history. In 1983 it declared 20 maj or dis the Poor and from Ourselves (New York: Basic Books, 1998), p. 48. asters. By 1996, the number had risen to 75, See also Marvin Olasky, The Tragedy of American Compassion : : : ‘oh. (Washington, D.C.: Regnery, 1992). and it has remained roughly three times high 4. On the Society’s board sat merchant Marshall Field, sleeping- er than during FEMA’s early years. (While the car manufacturer George Pullman (who served as treasurer), and president officially declares disasters, the Bilis Chosbroush Ciicagn Hissorienl Society decision is based largely on advice given by 6. Fran Griffith, Food Bank of Delaware, quoted in “Feeding a FEMA and other federal and state agencies ) Growing Need,” Chronicle of Philanthropy, August 7, 1997, p. 27. . . g : 7. James Bovard, “The FEMA Snow Job,” Cato Institute op-ed, White House assistants have reportedly called February 19, 1997; J. Taylor Buckley, “Aid and Insurance Help, But : : the Victims Pay a Lot,” USA Today, September 6, 1996; and Barbara governors to prod them Into making requests J. Saffir, “FEMA Sets Criteria for Disaster Relief,” Washington for federal disaster aid; under federal law gov- Times, April 2, 1999. ===== PAGE 13 ===== IDEAS ON [IBERTY Fesruary 2000 Orissa’s Man-Made Tragedy by Barun S. Mitra No DeLHI—Twelve days after a super also misuse the power concentrated in the cyclone hit the state of Orissa, India is hands of the bureaucracy. still grappling with the enormity of the The events leading up to the Orissa cyclone tragedy. Over 10,000 people are feared dead, clearly show this. While the storm was a nat- and millions of hectares of cropland dam- ural calamity, the tragedy itself was the handi- aged. Meanwhile, in Vietnam a massive flood work of man. Economic development can has been causing more misery. Reading these substantially lower the danger of living close headlines of massive casualties, it seems nat- to nature. In India, this lack of development is ural to ask the question: Does nature discrim- the result of 50 years of state control over the inate against poorer people and countries? economy. Orissa is rich in natural resources, The answer is no, but theres a reason it but its people are among the poorest in the seems that way. Even a cursory analysis of world. Central and state government policies various natural disasters, whether floods, have ensured that much of these resources are earthquakes or hurricanes, shows that eco- underutilized. As a result, there is little fund- nomically developed countries are better able ing available to cope with calamities like the to withstand these same calamities and so suf- cyclone. fer fewer casualties (although the dollar value of property damage is higher, as one would = vp trolled Communications expect). This is in sharp contrast to the fate of people in developing countries, where the The major reason is that there was inade- cost in terms of human life is enormous. quate warning. The problem is partly the Indi- The obvious explanation—that citizens of an government's tight control over all kinds of developed countries have greater resources to communications, from telecoms to broadcast- protect themselves—is correct as far as it ing. As a result, the infrastructure is totally goes, but the problem goes deeper than that. inadequate, and before the cyclone hit little Governments of many developing countries warning was given to people to take precau- make fundamental mistakes in protecting and tions. Instead of a wide range of media, from bettering the lives of their citizens. They pur- local radio and television to telephone, contin- sue statist policies that hamper economic uously informing the people of the impending development and perpetuate poverty, and they disaster, for many the storm came as a surprise. Many coastal fishermen ventured out to sea to Barun Mitra is founder of Liberty Institute, an inde- turn pendent think tank in New Delhi, India. Reprinted by face the fol brunt of the storm ’ ne tore t i permission of The Asian Wall Street Journal, Novem- 1S 1s un orgivab © Since or over wo ber 10, 1999. Copyright 1999, Dow Jones & days meteorologists in India and around the Company, Inc. All rights reserved worldwide. world were tracking the storm and warning 13 ===== PAGE 14 ===== 14 IDEAS ON LIBERTY ® FEBRUARY 2000 about its impact. But nothing was done to uti- more effectively, motivated not so much out lize even this basic information. It is not of charity but by self-interest. By taking over enough to lay the blame at the door of the the insurance sector, the state has deprived the bureaucracy for their callousness and indiffer- people of one of the most effective instru- ence. It is not enough to blame the politicians ments, and left them open to face the forces of who now swarm the disaster area trying to nature without any protection. score political points. Indians talk of encouraging information If we Indians are really moved to action by technology, telecommunications, and broad- this massive human tragedy, we must recon- casting. But in practice the government stifles sider the institutional arrangements and the new technological advances in cable TV, DTH incentive structures of the present system and broadcasting, and cellular and satellite tele- compare them with possible alternatives. For phony that may help improve the condition of instance, a private and widespread network of our own people by providing them access to communication channels would have ensured information. With just 15 million telephones not only better flow of information before the and 50 million televisions, and less than one storm, but also greatly increased the chances million personal computers, it’s clear the of some of these channels surviving the storm country will never enter the information age if and therefore readily assess the damage and this sector is left under state control. direct relief measures immediately. In many parts of the world, weather fore- casting is an attractive business proposition. Linked with the insurance sector, it is the The tragedy of Orissa is the latest manifes- most efficient tool for dissemination of such tation of the ills affecting our institutions. We information to rural communities and fisher- need rapid and massive reforms—political, folks. In a competitive marketplace, there economic, judicial and administrative—to would be a premium on the quality of such have any chance of breaking free of poverty. information. And the incentive structure Rather than looking up to the state for doling would be such that it would make business out relief, we must squarely hold it responsi- sense to provide advance information about ble for creating the environment that made such an event, to ensure that adequate precau- people so helpless in the face of such natural tions are taken to minimize the loss, and to fury. We must get the state out of the people’s institute relief and rebuilding process at the hair, and let the enterprising spirits of the peo- earliest. ple a free rein, and allow them to harness the None of these exists today. In the present potential of the marketplace, especially in political and administrative environment, the information and insurance. only incentive is to extract political mileage Richer is safer—economically and environ- out of human tragedy. It is no coincidence that mentally. The richer the people, the greater we make a huge fuss about allowing 26 per- their ability to choose, and the wider the range cent foreign equity in insurance, while barely of choices in the marketplace. The people in 5 percent of the population is under any kind developing countries pay with their life when of cover, and neglect the interests of one bil- government takes on the responsibility of lion people to protect the 250,000 public- deciding for them. This is the lesson that we sector insurance employees. Insurance and must draw from the tragedy of Orissa. It may self-help organizations are one of the best not be possible to avoid natural calamities, but tools capable of dealing with such events it is possible to minimize the losses. [] Latest Manifestation ===== PAGE 15 ===== Ideas and Consequences by Lawrence W. Reed ¥ History, Invention A Camera Reaches 100 his month marks a centennial anniversary the 1870s, when Eastman was in his twenties that deserves to be noted. It was 100 and picture-taking wasn’t much older, what years ago, in February 1900, that George would become the passion of his life started Eastman first introduced the Kodak Brownie out as a hobby. In 1871 at the age of 17, he box camera. The price tag was one dollar; film bought almost a hundred dollars’ worth of sold for 15 cents a roll. Eastman was about to photographic equipment and hired a photog- do for cameras what Steven Jobs would do for rapher to instruct him in the art. He read computers almost eight decades later. For the everything he could find on the subject and first time, taking pictures was within the reach with a backpack and a wheelbarrow, he of almost every American family. hauled his equipment everywhere he wanted Whether you’re a camera buff or not, you to capture an image. probably have seen and perhaps have even Cameras in the 1870s were as big as used a Brownie. Nowadays, they show up at microwave ovens. The tools of the profession- rummage sales and antique shows, but I can al photographer’s trade—including a bulky, remember when they were still widely used in unreliable camera, a tripod, and various liquid my childhood days during the 1950s. They chemicals—were more than a single man were simple to operate and took great pictures. could carry, “a pack-horse load,” as Eastman The Brownie not only ushered in the era of described it. He resolved to downsize, simpli- modern photography; it was also a genuine fy, and reduce the cost of the “burden” of tak- cultural phenomenon in America. Millions ing pictures. were sold. Thousands of American youngsters Though he lived his entire life in the area signed up as members of The Brownie Cam- where he was born—upstate New York— era Club and entered Kodak photo contests. Eastman traveled widely. He once visited Men and women who went on to become Michigans Mackinac Island, where he set up famous photographers got their start with his camera equipment to take photos of the Eastman’s little invention. natural bridge, a stone landmark. A crowd of gawking tourists gathered, assuming East- man would take their pictures and offer the photos for sale. When he informed them he The man who gave us the Brownie camera was making pictures for his own purposes was no stranger to photography in 1900. In and not for sale, a disappointed tourist chewed him out: “Then why did you let us Lawrence Reed is president of the Mackinac Center Stand in the hot sus for 2 full halthour whils : reed Jor Public Policy (www.mackinac.org), a free-market you fooled around with your contraptions: research and educational organization in Midland, YOU ought to wear a sign saying that you are Michigan, and chairman of FEE’s Board of Trustees. an amateur!” 15 Student of Photography ===== PAGE 16 ===== 16 IDEAS ON LIBERTY ® FEBRUARY 2000 Eastman experimented endlessly and dis- worked feverishly to cut costs and improve covered new techniques and processes for quality. The result was a camera that would producing better film and lighter, less expen- reach people, in Eastman’s words, “the same sive cameras. A self-taught chemist, he ended way the bicycle has reached them”—the the era of sloppy, wet-plate photography by Kodak Brownie. It took the world by storm. inventing a process that used dry chemicals, The first run of 5,000 cameras flew off the though not without many disappointments. shelves and orders piled up at an amazing pace His Eastman Dry Plate Company almost went that exceeded the most optimistic projections. bankrupt in the 1880s, in spite of his hard Even corner drugstores were selling them. work and sleepless nights. But in America’s A new term was coined during a 1905 trial golden age of invention, when taxes were low to describe the millions of people caught up in and rewards for persistence were often great, the craze: “Kodak freaks.” In her biography of this genius who had dropped out of school at George Eastman, Elizabeth Bayer quotes the the age of 13 went on to build an extraordi- court transcript, which read, “Wherever they narily successful business. go, and whomever they see, and whatever place they have come to, they have got to have Praise from the Pros a Kodak along for the purpose of getting pic- tures.” In 1904, reports Bayer, when the Dalai Professional photographers praised the pio- Lama fled from his Tibetan palace, he took his neering work .of Eastman. They called his Brownie with him. prints and negatives “the best dry plate work Eastman inspired great loyalty among his on the market.” Journals and newspapers employees, in large measure because of what began publishing articles about his inven- biographer Bayer notes were “his countless tions. In 1929, when Eastman met Thomas acts of kindness, his enlightened personnel Edison for the first time, each of the elderly policies, and his tireless working habits.” He men revealed they had purchased a product was an American original—a self-made man made by the other as early as the 1880s. “Pret- whose dreams and commitment have made ty good film,” Edison told Eastman. the everyday lives of generations of people By 1888, Eastman had simplified the cam- happier by allowing moments of-those lives to era into a small, easily held box measuring be captured on film. three and three-quarter inches high, three and The estimated 70 billion pictures Ameri- a quarter inches wide, and six and a half inch- cans alone will take this year are the direct es long. He needed a name for it, a catchy descendants of the Kodak Brownie, the first trademark that could be easily pronounced mass-produced camera in history. Its creator and spelled. “K” was his favorite letter was a superb businessman as well as a talent- because, he said, it was “a strong, incisive sort ed inventor, and became one of America’s of letter.” After toying with various combina- wealthiest citizens. He gave away more than tions of letters, he hit on one that rang some $100 million to universities and charities sort of internal bell in his mind, “Kodak.” But before his death in 1932. the first Kodak camera, priced at $25 when it If, as the saying goes, one picture is worth debuted in 1888, was still unaffordable for a thousand words, then the story of George most Americans. Eastman and the Kodak Brownie is worth 70 Eastman and his team of expert craftsmen trillion words. [J] ===== PAGE 17 ===== IDEAS ON [IBERTY Entrepreneurial Discovery and the Law of Supply and Demand by Israel M. Kirzner ast month we promised to explain how the act of decision, such decision-making Austrian economics presents its under- consists essentially of the solution to a math- standing of the law of supply and demand by ematical maximization exercise; the outcome invoking the entrepreneurial character of is predetermined: it 1s implicit in the given dynamically competitive markets. The key context within which the decision is to be element in this Austrian understanding is the made. appreciation that individual buying and sell- For Misesian human action, on the other ing decisions are examples of what Ludwig hand, the action is, most importantly, seen as von Mises called human action. For Mises, including the determination of both what the each human being is, in a very important available alternatives are and what ranking of sense, an entrepreneur. (See Ludwig von relative desirability is to be adopted. Deter- Mises, Human Action, 3rd edition, 1966, p. mining these elements inevitably exposes the 252.) And it is the entrepreneurial element in agent to the uncertainties of an open-ended those decisions that is responsible, in the Aus- future (in a sense absent in the context of the trian view, for that crucially important ten- standard “economizing decision”): action is dency toward market-clearing that (for Austri- the present choice between future alternatives ans as well as for non-Austrians) constitutes that must, in the face of the foggy uncertainty the heart of the law of supply and demand. of the future, now be identified in the very act of choice. It is this aspect of human action The Meanin g of Human Action that renders it, for Mises, essentially entrepre- neurial. Mathematical expertise in solving The Misesian notion of human action is maximization problems is of very limited significantly richer than the mainstream- help in choosing among courses of action economics notion of the economizing deci- when the very alternatives must be “created,” sion. An economizing decision is seen as the as it were, by the agent’s entrepreneurial selection of the most desirable option out of imagination and creativity, by his daring and an array of given alternatives with a given boldness. ranking of what is more desirable and less desirable. Since both the alternatives available The Entrepren eurial Role and the ranking are already identified prior to For Austrian economics the entrepreneurial Israel Kirzner is a professor of economics at New yo) is despite—or more accurately, precisely York University and author of The Meaning of Mar- b fit Ivtical “fuzzi % ket Process. This is the second in a series of articles ~©0°C3uS€ OI—IIS —analytica UzzZIncss, laying out some foundational elements of modern Tesponsible for the systematic character of Austrian economics. market processes (“fuzzy” since no economist 17 ===== PAGE 18 ===== 18 IDEAS ON LIBERTY ® FEBRUARY 2000 can “model” the creative imagination of the potential consumers wish to consume it, on entrepreneur acting under open-ended uncer- the other hand) and thus to ensure that the tainty). Going beyond the context of the quantities which are simultaneously worth- entrepreneurial elements in each individual while for producers to produce and for con- human action, Austrian economics focuses on sumers to buy will in fact tend to be pro- the role of the businessman-entrepreneur duced, offered for sale, and purchased. in the dynamic market process. The success- If, for example, current production of this ful businessman-entrepreneur “sees” what commodity is “too low,” this means that other market participants have not yet seen; opportunities exist for additional units to be the entrepreneur sees opportunities to buy at produced at an outlay below the highest price one price and to sell at a higher price. To potential consumers would be prepared to see such opportunities will typically call for pay; it is “worthwhile” to produce these addi- (a) superior imagination and vision (since the tional units. Entrepreneurial producers will perceived opportunity to sell at the higher tend to discover and act on such opportuni- price is likely to exist only in the future) and ties. If, on the other hand, current production (b) creativity (since such a profit opportunity is “too high,” this means that the production is likely to take the form of selling what one outlay for at least some units exceeds the buys in an innovatively different form, and/or highest price potential consumers are pre- different place, than was relevant at the time pared to pay for them; these units were pro- of purchase). duced as a result of entrepreneurial error. It is because Mises saw each human being Entrepreneurial producers will tend to discov- as, to some extent, an entrepreneur that he er these (marginal) losses and cut back on understood the powerful tendencies that exist production. in free markets for profit opportunities to be The entrepreneurial forces acting on the sensed and exploited (and thus eliminated) by market for any one commodity are thus con- profit-oriented entrepreneurial market partici- tinually pushing that market toward the market- pants. In a dynamically changing world, new clearing point—that is, to where (a) the quan- profit opportunities are continually emerging, tity produced is such that (only) all units and their emergence continually generates the “worth producing” are indeed produced, and incentives toward their discovery and exploita- (b) the market price for this commodity is just tion. It 1s this ceaseless re-creation and discov- high enough to make it, as a practical matter, ery of entrepreneurial opportunities that make worthwhile for producers to produce this up the market process we observe in the world quantity, and is just low enough to make it around us. worthwhile for consumers to buy it. Clearly, these forces would, were all other dynamic changes in market conditions to be The Law of Supply and suspended, tend to achieve exactly those out- Demand Reconsidered comes identified, in more conventional main- stream formulations of the law of supply and For Austrians, the law of supply and demand, by the intersection of the supply demand is simply an insight into one particu- curve and the demand curve. It is for this rea- lar (but central) element in this more compre- son that we have described Austrian econom- hensive, dynamic, entrepreneur-driven market ics as basically in agreement with mainstream process. For any particular commodity, the economics in its emphasis on the centrality of market forces acting on the prices at which it the law of supply and demand. It is worth- will be bought and sold (and thus the market while, however, briefly to ponder the sense in forces acting on the decisions made to pro- which the Austrian version of the “law” duce and to buy it) tend to identify and exploit avoids reliance on any presumption of univer- the opportunities (structured by the technolo- sal perfect market knowledge (a presumption gy and the economics of its production on the that, as seen in the preceding article, pervades one hand, and by the urgency with which much standard economics). ===== PAGE 19 ===== ENTREPRENEURIAL DISCOVERY AND THE LAW OF SUPPLY AND DEMAND 19 The Role of Ignorance and ticipants, learning more accurate assessments Learning in the Entrepreneurial of the attitudes of other market participants, Market P tend toward the market-clearing price-quantity arket Frocess combination. As Austrian economist F. A. Hayek empha- Two concluding observations are in place at sized, the market process we have been this point. First, we should emphasize, once describing in entrepreneurial terms can also again, that this “law” is simply an element in usefully be understood in terms of learning. the more general dynamic, entrepreneurial The process through which the market tends market process that is continually at work not to generate the “right” quantity of a commod- only (as in the narrowly defined law of supply ity, and the “right” price for it, can be seen as and demand) within a particular industry, but a series of steps during which market partici- also between industries. It is this that renders pants gradually tend to discover the gaps or understanding of the law so important for the errors in the information on which they had broader and deeper understanding of the role previously been basing their erroneous pro- of free markets generally in achieving social- duction and/or buying decisions. Buyers who ly effective economic outcomes. had overestimated the willingness of produc- Second, we should emphasize the extent to ers to produce and sell the commodity had which the law of supply and demand is being been “incorrectly” refusing to offer higher continually buffeted and interrupted—and prices (that they would indeed have been pre- continually re-asserted and re-created~—in the pared to pay), those who had underestimated real world of dynamic change. (The circum- that willingness were “incorrectly” offering stance that these dynamic changes typically higher prices than were in fact needed to take the form of forces acting on a particular inspire sellers to produce. Sellers who had commodity market from other commodity overestimated the willingness of buyers to markets reinforces the observation made in buy were “incorrectly” asking higher prices the preceding paragraph.) (and were producing more units of the com- Next month we will again explore the modity than it was “really worthwhile” to pro- dynamic entrepreneurial free-market process duce), and so on. The market process is one in with particular concern for the nature of which, driven by the entrepreneurial sense for and role for competition in this process, and grasping at pure profit opportunities (and for for the implications in regard to antitrust avoiding entrepreneurial losses), market par- policy. [ The apple icon # identifies articles that are appropriate for teaching students sever- al major subjects—including economics, history, government, philosophy, and current issues. We also provide sample lesson plans for these articles on our Web site www.fee.org and in written form. Professors, teachers, and homeschooling parents need only to visit our Web site or request written lesson plans to take advantage of this unique service. ===== PAGE 20 ===== IDEAS ON [IBERTY FEBRUARY 2000 Government as Slave Owner by James Bovard he Declaration of Independence pro- public not private goods.” Thus, it is com- claimed that “all men . . . are endowed pletely up to the current government what by their Creator with certain inalienable rights—if any—today’s citizens will have. rights.” This assertion captured the idealism The American Revolution was fought in and the principles of this nation’s Founding large part because colonists believed the Fathers. British government was violating their pre- Unfortunately, the notion of the citizens existing rights. However, Holmes and Sun- inviolable right to liberty is vanishing from stein reveal that “rights are rooted in the most the American political landscape. Attorney shifting of all political soils, that of the annu- General Janet Reno, in a 1995 speech vindi- al budgetary process, a process thick with ad cating federal actions at Waco, informed a hoc political compromises.” All rights are group of federal law enforcement officers: mysteriously created somewhere in the con- “You are part of a government that has given gressional appropriation process—some- its people more freedom . . . than any other where between the first draft of a legislative government in the history of the world.” Con- bill on an intern’s laptop and the notes a lob- temporary politicians and political scientists byist slips to a congressman while wheeling have greatly improved on Thomas Jefferson. and dealing on the final version. Progressive thinking about government is Holmes and Sunstein spare no effort to exemplified in a new book titled The Cost of stomp out any notion of inviolable rights. Rights: Why Liberty Depends on Taxation They say, “It is more realistic and more pro- (Norton, 1999), by Princeton University pro- ductive to define rights as . . . selective invest- fessor Stephen Holmes and University of ments of scarce collective resources, made to Chicago law professor Cass Sunstein. achieve common aims and to resolve what are Holmes and Sunstein perform dazzling generally perceived to be urgent common intellectual gymnastics that leave common problems.” The authors also define rights as sense in the dust. They begin by asserting ‘“welfare-enhancing investments, extracted by that “the individual rights of Americans, society for society’s purposes” and assert that including the right to private property, are “all legal rights are, or aspire to be, welfare generally funded by taxes, not by fees. This rights.” all-important funding formula signals that, Thus when the Founding Fathers pro- under American law, individual rights are claimed in the Bill of Rights that “Congress shall make no law . . . abridging the freedom James Bovard is the author of Freedom in Chains: of speech, or of the press” it was no different The Rise of the State & the Demise of the Citizen {TOM contemporary congressmen’s voting for (St. Martin's Press, 1999). food stamps. 20 ===== PAGE 21 ===== 21 Freedom through and automatically fills up government coffers . with rights fodder. Intervention “A tax deduction is a form of public sub- Holmes and Sunstein work overtime to sidy,” write Holmes and Sunstein. But to attribute every freedom to government inter- believe this is to assume that politicians vention, asserting that “Religious liberty is are entitled to 100 percent of everyone’s certainly no more costless than other legal income. If politicians set the tax rate at rights. American citizens are more or less free 99 percent, and allow people a tax deduc- to worship or not, as they wish, but their free- tion for food and clothing, then everyone’s dom in this respect makes a claim upon the budget supposedly becomes a government public fisc, even when it is not subsidized out handout. of public budgets (through, for example, The so-called tax burden is an illusion police and fire protection of churches and because whatever title anyone has to own other religious institutions).” If a single drop something came originally from government. of government money could conceivably be In an earlier book, Sunstein stressed that “a involved in some activity, the entire activity system of private property is a construct of becomes the equivalent of a government the state” and “governmental rules are impli- handout. And regardless of how much in taxes cated in, indeed constitute, the distribution of a person pays, if he receives any benefit at all wealth and entitlement in the first instance.” from any government activity, he becomes the Thus government can presumably revoke the moral equivalent of a public-housing resident rights to any property without violating the who never worked a day in his life. rights of the purported owner. This presumes In perhaps the book’s most creative pas- that government is the equivalent of some sage, Holmes and Sunstein reveal that “Our pagan Earth Mother from whom all things freedom from government interference is no come—and who thus has a right to take all less budget-dependent than our entitlement to things back. public assistance. Both freedoms must be The only way to justify treating tax burdens interpreted. Both are implemented by public as morally irrelevant is to assume that govern- officials who, drawing on the public purse, ment owns all the labor of all the citizens in have a good deal of discretion in construing society. Taxes are not an imposition but mere- and protecting them.” The fact that you can ly government reclaiming its rightful proper- see the words on this page clearly is only ty. But did the government bequeath the sweat because some police supervisor deterred a of the brow of the carpenter who built a house traffic cop from whacking you in the head that he sold, or the muscle by which a laborer with his billy club this morning. The Bill of dug a ditch, or the idea that the software Rights was created as a bulwark to defend cit- writer used to revolutionize computer use izens against government. Yet because gov- around the world, or the courage of a busi- ernment lawyers must occasionally interpret nessman who staked his life savings on a new its clauses (usually to subvert plain meaning), product that made life easier for millions? An any citizen not boar hogged by government edifice of freedom cannot be built on a foun- officials miraculously becomes a government dation of slave ethics. dependent. Holmes and Sunstein argue in effect that Holmes and Sunstein reveal that “rights because politicians help set the rules for eco- depend in practice on the going rate of taxa- nomic markets, they somehow become enti- tion.” Thus the higher the tax rates, the more tled to what anyone produces. This makes as rights people have. Unless citizens live under much sense as saying that federal patent the heel of the tax collector, they cannot hope clerks deserve all the rewards for new inven- to have any freedom. The Internal Revenue tions, since they approve and register new Service is never mentioned in the book. patents, or that a bank security guard is enti- Instead, taxation is portrayed practically as an tled to carry home armfuls of money from the abstraction, as something that just happens vaults he guards. ===== PAGE 22 ===== 22 IDEAS ON LIBERTY ® FEBRUARY 2000 Citizens at Fault protect the remainder of their income and their other rights? If rights are the result of the Every failure of government is somehow government budget, then the rights must orig- the citizens’ fault. Sunstein notes that “The inate with the person who produced the Fourth Amendment right [against unreason- money, not with the government agents who able government searches and seizures] can- seized it. The adulation of government turns not be absolute unless the public is willing to into a tautology: in the final realm, govern- ‘invest the enormous amounts necessary to ment is the source of all rights merely because ensure that it is seldom violated in practice. it has the power to fleece and subjugate its The fact that the Fourth Amendment is violat- citizens. ed so regularly shows that the public is not Portraying all rights as dispensations of willing to make that investment.” Thus the government is a scam to convey absolute only reason that police routinely carry out power to government officials. Since rights unconstitutional searches is that taxes are not are solely the creation of government, any high enough. limitation on government power supposedly The one part of the Bill of Rights that becomes a threat to rights. Holmes and Sunstein strictly avoid mention- Americans endorsed the creation of the fed- ing is the Second Amendment, which guaran- eral government over 200 years ago so that it tees citizens the right to keep and bear arms. could fulfill a handful of narrowly prescribed The Founding Fathers saw widespread private functions. Government was intended to be a gun ownership as a necessary check against hired clerk, not a divine master. Each person the threat of tyranny. Even Harvard law pro- has a natural right not to be made a govern- fessor and “progressive” icon Laurence Tribe ment pawn, a right to sovereignty over his recently admitted that “It becomes impossible own body, his own life, and his own peaceful to deny that some right to bear arms is among actions. As Etienne de la Boéttie, a sixteenth- the rights of American citizens.” Presumably century French thinker, observed, “It is fruit- the authors believe that people must pay taxes less to argue whether or not liberty is natural, so that government can confiscate everyone’s since none can be held in slavery without guns. being wronged.” Holmes and Sunstein see government as Americans must choose between “govern- the alpha and omega of all rights, all liberties, ment-issue liberty” and “self-reliant liberty.” all existence: they cannot conceive of any- The choice is between a concept of freedom thing happening that was not first ordained by based on government handouts and a concept politicians and inflicted by bureaucrats. They of freedom based on restraint of government, declare that “To take the cost of rights into between a liberty in which people are perpetu- account is therefore to think something like a ally treated as children needing to be government procurement officer, asking how restrained and a liberty in which they are to allocate limited resources intelligently allowed to experiment, take chances, and pay while keeping a wide array of public goods in for their own bloody noses. It is a choice mind.” Neither Sunstein nor Holmes has spent between a freedom in which each person can time around the General Services Administra- make his own mistakes or a freedom in which tion headquarters, where real procurement each person becomes another statistic in the officers waste billions every day. governments mistakes. The choice between The authors never attempt to explain where the two freedoms comes down to a question of or how government got all the rights. Suppos- whether people will benefit more from being edly, government officials have them because left alone to build their own lives or from government spends the money to protect somebody’s confiscating much of their build- them. But the money government spends was ing material and imposing the structure he first earned by private citizens. How can citi- thinks best. A good definition of liberty must zens acquire rights only by government’s tak- provide a barricade that 10,000 enforcement ing away much of their paychecks in order to agents can’t breach. J ===== PAGE 23 ===== Potomac Principles by Doug Bandow What Ain’t Broke: The Renewed Call aa for Conscription ave he draft has been dead for more than a allies are secure. Together with its allies, quarter century. Despite a rocky start, the America accounts for roughly 80 percent of All-Volunteer Force (AVF) now provides the globe’s military outlays. Allied states like America with the highest quality military in France are abandoning conscription. its history and the finest armed services in the Still, advocates of conscription point, world. Yet recruiting and retention problems among other things, to poor recruiting results. have begun to appear. As a result, there are In 1999 every service aside from the Marines an increasing number of calls for a return to had a difficult time. Moreover, the services conscription. are losing pilots and other selected skill The draft was bad policy during the Cold grades, such as computer technicians. Critics War. It would constitute amazing foolishness also lament the expense of recruiting new today. Renewed conscription would simulta- soldiers. neously reduce the quality of new servicemen Yet the military’s problem is not inadequate and increase the cost of raising a military. A recruits, but inadequate quality recruits. draft would also sacrifice the very constitu- Major General Evan Gaddis, commanding tional liberties that the military is charged to general of the Army, reports that of roughly defend. nine million males between the ages of 17 and Congress adopted the first peacetime draft 21, “only 14 percent are the high quality, fully in 1940, when war was raging in Europe. qualified and available prospects all military Conscription persisted—with but a brief 15- services want to recruit.” The Pentagon could month hiatus—until 1973. solve its recruiting problems tomorrow if it Now, however, a growing chorus on behalf simply lowered its standards modestly to those of conscription is being heard. of a conscript military. That would leave the AVF with a far higher quality force than dur- . . ing the draft era. Observes Gordon Sullivan, Memo to Washington: former Army chief of staff and current presi- We’re at Peace dent of the Association of the United States That Washington is even discussing a return Army: “Military commanders prefer high- to a draft is bizarre. The United States is at quality volunteers to mixed-quality draftees.” peace. Washington stands astride the globe as he AVF attracts superior personnel for two a colossus—its enemies are pathetic and its Important reasons. First, the services can reject people who haven’t graduated from Doug Bandow, a nationally syndicated columnist, is high school and so-called Category IVs and a senior fellow at the Cato Institute and the author Vs—people who score well below average on and editor of several books, including Tripwire: the Armed Forces Qualification Test. More- Korea and U.S. Foreign Policy in a Changed World. over, a volunteer military draws people who 23 ===== PAGE 24 ===== 24 IDEAS ON LIBERTY ® FEBRUARY 2000 want to be there, creating a dramatically dif- ica’s new commitments: Bosnia, East Timor, ferent and more positive dynamic compared Haiti, Kosovo, Macedonia, Somalia, and who to a conscript army. knows where else in the future. However, even Career retention has long been a Pentagon if there is some merit to what Johns Hopkins concern. However, conscription brings in University professor Michael Mandelbaum untrained first-termers, not experienced has derisively called “foreign policy as social pilots. And draftees, who don’t want to be in work,” there is no justification for forcing uniform, re-enlist in far lower numbers than young Americans to suit up to patrol a new volunteers. colonial empire. Such conflicts are not worth the bones of a single healthy American rifle- . man. Coercion Not Cheaper The only other argument with any reso- Nor is coercion cheaper than voluntarism. nance is that conscription would enforce the There would be some savings in recruiting moral duties of citizenship. Of course, we all costs, but even radical pay cuts would save lit- do have important moral obligations. But tle, since first-term volunteers earn the least in those duties are owed to others in society, not the military. Moreover, any such savings to the state. And they are owed by everyone, would be offset by increased costs elsewhere, not just 18-year-old males (and possibly such as more generous re-enlistment pay and females). It is all too convenient for well-paid bonuses to build and retain a career force. On professionals beyond draft age to sit in the top of that would be the costs of classification, comfort of their offices and pontificate about induction, and enforcement. the duty of young people to serve everyone In fact, the Reagan administrations Mili- else. tary Manpower Task Force concluded in 1982 A volunteer military places the defense that a return to the draft would actually hike burden on everyone. Through it society calls costs by about $1 billion annually. A draft upon patriotic youth to join the military, while would also generate significant avoidance sending the bill to old and young alike. At the activities, economic dislocations, and other same time, it withholds from government the social costs. extraordinary (and dangerous) power to order The alleged unrepresentativeness of the citizens to fight and die. This is the proper volunteer force rankles some. But conscrip- way for a republic dedicated to the protection tion would fail to deliver a more representa- of individual liberty to defend itself. tive force. The notion that the military 1s dom- Still, there is no gainsaying that the AVF inated by unqualified minorities and lower- suffers some problems with recruiting and class whites is a ridiculous myth. Compared retention. What to do? Most important, Wash- to the conscript force, the AVF has a few more ington should return to a foreign policy African-Americans, high-school graduates, appropriate to a republic rather than an above-average students, and members of the empire. Adjusting America’s foreign policy middle class, and a few less college gradu- would reduce pressure on the armed forces. ates, Hispanics, and members of the under- With a smaller force less frequently deployed, class and upper-class. It is quintessentially the Pentagon would need fewer first-termers middle America. and careerists, NCOs, and officers. Both Despite the endless, and endlessly fero- recruiting and retention problems would dis- cious, arguments over representativeness, the appear. most important point may be how little con- It is important never to forget that the mili- scription would affect the composition of tary is a means to an end, not the end. The today’s force. Since few draftees re-up, con- purpose of America’s armed forces is to scription would primarily change the compo- defend a free society built on respect for and sition of the transient pool of new recruits. protection of individual liberty. That is ulti- Are there any other reasons to conscript mately the most important reason to reject today? One argument is to fulfill all of Amer- conscription. ===== PAGE 25 ===== IDEAS ON [IBERTY FesruARY 2000 Plunder Gets a Boost by Timothy Sandefur recent legislative battle in California jobs and good business. I fear the loss of good demonstrates once again the dangers of jobs, traffic jams, small businesses closing economic ignorance and what Frederic Basti- down and our local government paying for at called “legalized plunder.” Assembly Bill health benefits that these megacenters refuse 84, fortunately vetoed by Governor Gray to offer their employees.” Davis, would have “prohibit[ed] a public There has been a lot of press given recently agency from authorizing a project or develop- to people’s fear that America’s traditional ment that includes a retail store exceeding small towns, with their quaint drugstores and 100,000 square feet with over 15,000 square newsstands, are being swallowed up by greedy feet to be devoted to the sale of nontaxable corporate giants and chain stores. At the same merchandise.” This legislation purported to time, many of these critics complain about “protect” communities that are supposedly what they call “urban sprawl,” which in fact wrecked by larger stores like Costco and Wal- merely means the growth of small towns and Mart that have started competing with super- more opportunities for small-scale entrepre- markets. neurs to open their own quaint stores. The bill was passed secretly, over the It should come as no surprise that the course of three days, without public hearings, smaller stores would complain and lobby the and with just barely enough time for the news government to get involved. As Frederic Bas- to cause a public outcry. But even aside from tiat wrote in The Law, man can live by his these shady techniques—and the fact that the own labor, but “It is also true that man may text of the bill wasn’t even listed on the Web live and satisfy his wants by seizing and con- pages of its own sponsors—the bill was a suming the products of the labor of others. great example of an old political phenome- ... [I]t follows that men will resort to plunder non: demagogues thriving on ignorance. whenever plunder is easier than work.” Many Californians favored the bill, even if they disliked the secrecy. One letter to the edi- . tor in the Los Angeles Daily News tells the Boycotting Wal-Mart story: “I’m all for free enterprise,” the writer Last year, when Wal-Mart announced plans said, “and some argue that these retailers will to try its hand at grocery sales, the United benefit our communities. 1 strongly disagree. Food and Commercial Workers Union Our communities are built around small busi- (UFCW) and the AFL-CIO immediately nesses and local markets that support good protested, marching at non-union Wal-Mart’s headquarters in Arkansas and signing “good Timothy Sandefur is a law student at Chapman Uni- neighbor cards” pledging not to buy groceries versity in Orange, California. at Wal-Mart. AFL-CIO president John 25 ===== PAGE 26 ===== 26 IDEAS ON LIBERTY ® FEBRUARY 2000 Sweeney even promised to ask that no union- passed ordinance in Clark County, Nevada, negotiated health plans use Wal-Mart phar- would “restrict any retailer with more than macies. UFCW president Doug Dority said, 110,000 square feet of space from using more “Wal-Mart has the money with over $3 billion than 2 percent of that space for the display in profits. But we have the people. We have and sales of groceries.” In the October 6, the power in our pockets and pocketbooks to 1999, Las Vegas Review Journal, the UFCW stop Wal-Mart from destroying good jobs. We locals president, Roberta West, argued that if are going to mobilize that power to protect our Las Vegas permitted larger grocery stores, neighborhoods and our communities.” “we will all pay the price through increased Protect them from what? Low prices? traffic, neighborhood blight, and elimination Neighborhoods, it seems, have far more to of the diversity we have come to expect in our fear from economic ignorance than from Wal- retail stores.” Mart or Costco. The National Council on Why would the president of a farm and Economic Education’s recent study demon- commercial workers union be concerned with strated how common that ignorance is. “On heavy traffic? How would a large grocery average,’ the study announced, “adults get a store cause “neighborhood blight”? What, grade of 57 percent for their knowledge of indeed, is “neighborhood blight”? Of course, basic economics,” and high schoolers get 48 the UFCW isn’t concerned with anything of percent. One out of four adults does not know the sort, but with “protecting jobs” from Wal- that an increase in price tends to result in a Mart’s competition. decrease in quantity demanded. The Clark County measure points up the The connection is clear. The notion that truth of another statement by Bastiat. “When large grocery stores are bad for communities [people] can, they wish to live and prosper at is a self-serving misrepresentation by union the expense of others. This is no rash accusa- leaders, designed to manipulate the economi- tion. Nor does it come from a gloomy and cally ignorant. And the saddest aspect of this uncharitable spirit. . . . Thus it is easy to ignorance is that the economic principles understand how law, instead of checking involved, like so much of economic theory, are injustice, becomes the invincible weapon of simple—so simple that economists often have injustice. It is easy to understand why the law to use big words to make them sound complex. is used by the legislator to destroy, in varying In this case, the economic principle involved is degrees among the rest of the people, their simply, “people work to get things.” personal independence by slavery, their liber- ty by oppression, and their property by plun- der. This is done for the benefit of the person who makes the law, and in proportion to the Fortunately, Governor Davis vetoed the bill. power that he holds.” Ol But the fight continues elsewhere. A recently Battle Continues ===== PAGE 27 ===== Peripatetics by Sheldon Richman Hands Off A Microsoft study from November 1997 reveals that the company could have charged $49 for an upgrade to Windows 98—there is no reason to believe that the $49 price would have been unprofitable—but the study identifies $89 as the revenue-maximizing price. Microsoft thus opted for the higher price. hus wrote U.S. District Judge Thomas (such as hand-held models) don’t use the Intel Penfield Jackson in November, illustrat- microprocessor. A significant number of per- ing, in his view, Microsoft’s monopoly power. sonal computers—15 percent—are shipped Because of its “monopoly” position, Microsoft without any operating system at all. When all can charge “monopoly prices.” this is taken into account, Reynolds calculates That view underlies the government’s entire that Microsofts Windows was on no more case. The alleged monopoly enables Microsoft than 70 percent of the PCs delivered last year. to force adverse terms on other companies and That’s a hefty share, but a monopoly? harm rivals by, for instance, bundling its Web browser with Windows and giving it away. This view is rife with fallacies. First, by what definition is Microsoft a Another problem for the judge’s monopoly monopoly? The government says the com- theory is the ever-present potential competi- pany has 85 to 90 percent of the market for tion. The marketplace is never static (unless personal-computer operating systems. That the government makes it that way). Entrepre- leaves a not insignificant 10 to 15 percent for neurs and venture capitalists are always look- competitors. ing for high returns. Potential competition can But this gives the government too much soon become actual. No firm is safe. A com- credit. Market share depends on how the mar- placent, inefficient lone seller garnering high ket is defined. Alan Reynolds has shown that returns is begging for competition. As D.T. the government narrowly defines the market Armentano has pointed out, the most effective to further its case. The antitrust lawyers barrier to entry is low returns. excluded everything except single-user, Intel- The idea of potential competition makes a based, desktop personal computers. That con- mockery of analyses that assay competition veniently leaves out Apple’s Macintoshes (10 by counting firms or computing market percent of the market in late 1998), Sun shares. The late Yale Brozen documented that Microsystems’ units, and all networked com- concentration in an industry is perfectly con- puters. They and a host of other computers sistent with consumer welfare—which con- firms the power of potential competition. Believers in antitrust law don’t understand Sheldon Richman is editor of Ideas on Liberty. this. Vice President Al Gore, for example, told 27 Potential Competition ===== PAGE 28 ===== 28 IDEAS ON LIBERTY ® FEBRUARY 2000 a group of Microsoft employees that “compe- computers running Windows. That forecast is tition can be stifled . . . by private action on not outlandish, considering the new devices the part of companies that want to unfairly use coming to market. As Richard Doherty, an market dominance in one sector to stifle inno- industry consultant, says, “Windows, which vation in another sector.” The problem with had been a shoo-in, now has competition.” that view is that Microsoft had to innovate to win market share from its Web-browser rival Netscape. Early versions of Internet Explorer left reviewers cold. The product gained The view that Microsoft is a secure and ground only after a third version impressed abusive monopoly persists. Stanford Univer- the PC press and then Web surfers. Moreover, sity economist Robert Hall says a copy of Microsoft keeps updating Windows. Improv- Windows 98 might have cost $10 less had ing Internet Explorer and integrating it into Microsoft not exploited its monopoly. Windows was innovation. By the way, What is a monopoly price? It is defined by Netscape continues to improve its products. reference to “competitive price” and is mean- Its acquisition by America Online, the leading ingless if that concept can be shown to be Internet service provider, only strengthened it. empty. The late Murray Rothbard, in path- Where's the stifling of innovation? breaking work more than 35 years ago, blew No doubt there are would-be innovators both concepts to smithereens. Assuming who chose not to take on the efficient industry that a seller sets his price at the revenue- leader. The same thing can be said of any maximizing level, above which sales would industry. Efficiency is a “barrier to entry,” but fall (because demand is elastic), Rothbard it is a legitimate one. If we are doing a proper asked if that is a competitive or a monopoly accounting, we must point out that the large price. In Man, Economy, and State he replied: base of Windows users creates economies of “[T]here is no way of knowing. Contrary to scale for anyone who wants to produce appli- the assumptions of the theory, there is no cations for Windows-based computers. ‘competitive price’ which is clearly estab- Consumers benefit from a standard operat- lished somewhere, and which we may com- ing system. It spares them confusion and pare [any given price] with.” spawns a large array of software. But that Even if the seller restricts production to would seem to pose a dilemma: How can raise the price, we still cannot say that it has we have a standard without stagnation? The achieved a monopoly price. “[T]here is no cri- free market solves that problem by striking terion that will determine whether or not he is the best balance between stability and moving from a price below the alleged com- dynamism. petitive price or moving above this price.” The belief that Microsoft has a secure place Wrapping up his discussion, Rothbard even in the operating-system market is ludi- wrote: “If a concept has no possible ground- crous. Rival Linux is spreading, and several ing in reality, then it is an empty and illusory, manufacturers sell computers Linux-ready. and not a meaningful, concept. . . . The con- Investors have been eager to put money down cept of monopoly price as distinguished from on this Microsoft rival. People in the industry competitive price is therefore untenable. We may say that Microsoft has a lock on its posi- can speak only of the free-market price.” tion, but they don’t act that way. The head of The upshot is that Microsoft is not a Sun Microsystems, Scott McNealy, com- monopoly in any meaningful sense. It’s a plains to Congress that Microsoft “operates group of people with property rights who deal beyond the constraints of market discipline.” with consenting customers. It can’t thwart Meanwhile, he forecasts that in a few years competitors except by being better in the eyes more than half of the appliances used to get of those customers. on to the Internet will be something other than The government should leave it alone. [] “Monopoly Price” ===== PAGE 29 ===== IDEAS ON [IBERTY Fesruary 2000 Mere “Isolationism”: The Foreign Policy of the Old Right by Joseph R. Stromberg Ox of the “lost causes” to which libertar- take on board the transformation of the Right 1ans are attached—and one of the most until 1964, when they had to denounce Barry important—is that of the “isolationist” Old Goldwater as an inhumane, trigger-happy fel- Right. As used by the late Murray Rothbard, low who wanted to immolate poor flower- among others, the term “Old Right” refers to picking little girls in nuclear Armageddon, a loose coalition opposed to the New Deal in unlike Ole LBJ, who would never, never get both its domestic and foreign aspects. While us into a wider war anywhere. But at least not following a strict party line, Old Rightists they finally noticed the existence of the New largely spoke from the ground of classical lib- Right. As Carl Oglesby pointed out (speaking eralism and classical republicanism. This of Vietnam), the Goldwaterite New Right earned them epithets like “conservative” and “accepts the political description [of the war] “reactionary” since those two outlooks were and therefore wants the war to be more fierce- rooted in actual American life. Having some- ly waged”—a point that applies to the entire thing to conserve made them “conserva- Cold War. For the Goldwaterites, far more tives”—a terrible thing from the standpoint of active policies were necessary to “win” that the Party of Progress. This was a label that great cosmic struggle than those undertaken many on the Old Right rejected, arguing with by the inept Liberals. a certain dogged futility that they were the real American “liberals.”! The Old Right was effectively dead by 1955 with the death, electoral defeat, or The problem was in the premises, and this retirement of many of its prominent figures. brings me back to the Old Right’s distinctive More important, the Right was undergoing an take on foreign policies. It was hard to stam- ideological makeover as new spokesmen pede the Old Right into futile crusades involv- (hereafter called the “New Right”) rushed ing Total Good vs. Total Evil. As critics of our headlong into interventionism and overseas intervention in World War I, they were aware empire under Cold War slogans and policies of the costs of grand ideological crusades and largely invented by Establishment Liberals.2 of war itself. This—rather than some unex- In an interesting case of cultural lag, the plained fondness for foreign governments American press continued to refer to the known for big parades and funny salutes— “conservatives” or whatever as “isolationists” accounts for their participation in the Ameri- well into the later 1950s. They didn’t fully ca First movement.4 Actually, the Liberals “explained” it on the view that everyone to Joseph Stromberg is a part-time college lecturer in their Right has bad motives (fascists! Nazis!), history. whereas those to their Left—the Stalinists 29 Problematic Premises ===== PAGE 30 ===== 30 IDEAS ON LIBERTY ® FEBRUARY 2000 come to mind—are basically good but in too Veteran anti-New Deal writer John T. Flynn, much of a hurry. (I think we can reject this a central Old Right figure, wrote in 1955: construct.) For some Old Rightists the aver- sion to intervention and world-saviorhood By means of war and the post-war mess, continued into the early Cold War period. our government has managed to keep an These so-called “isolationists” (to use the evil prosperity going, based on continuous term foisted on them by their interventionist confiscatory taxes, endless borrowing, fan- enemies) worried about the risk of war, the tastic adventures abroad, a crooked pre- costs of war, and the domestic consequences tense of war on the Soviet which we saved of imperial policy. They well understood Ran- with our military aid and perpetuated with dolph Bourne’s statement that “war is the our Treasury, and which we now nurse as health of the state.” Permanent mobilization an enemy—not because we fear her clum- in time of peace—the essence of the Cold sy system in a military sense—but because War—fostered many undesirable policies. we need her. We need her as the enemy this Conscription was especially evil. Senator corrupt system requires to keep the taxes Robert Taft of Ohio called it “essentially and the borrowing and spending going.’ totalitarian” and added, “it 1s the most extreme test of our whole philosophy. . . . We Such biting criticism was banished from shall have fought to abolish totalitarianism in the Right, or New Right, by the mid-fifties, the world, only to set it up in the United and complainers like Morley and Flynn were States.” When the Truman administration increasingly isolated. The Old Right detested brought in legislation for peacetime conscrip- Soviet communism. Its power, where it tion, or UMT (universal military training), existed, made them uneasy. But they refused Representative Howard Buffett of Nebraska to turn a blind eye to the dangers of American argued that Selective Service “would prove to empire, American bureaucratization, and the world that Hitler was right—that the threat American militarism. Sustained intervention- of communism externally justifies militarism ism, under the Cold War banner as under any and regimentation at home.” It rested on “the other one, deeply threatened America’s histor- totalitarian concept that the state owns the ically unique culture of liberty. individual.” Representative Lawrence Smith Perhaps no one on the Old Right made the of Wisconsin complained that there would be point as well as the industrialist Ernest Weir in “no escape” from “economic controls, man- a speech in early 1951: power controls, and the regimentation that goes with dictatorial power.” As it is we hear too little from our leader- Felix Morley, president of Haverford Col- ship that is positive and constructive. We are lege, wrote in 1955 that centralization must told that we must prepare to endure 5 - 10 - accompany our increasingly imperial foreign 20 years of tension . . . of expanding gov- policy. Our institutions, “rather than our ernment and government costs . . . of widen- . imperial policy . . . will be modified.” Con- ing government controls . . . of high taxes gress was becoming a mere rubber-stamp for .. . of military service for our youth . . . of a agencies working in pitch-black secrecy like garrison state economy. Think what this will the CIA and AEC (Atomic Energy Commis- mean. It will mean that by the end of 20 sion). In 1957, Morley wrote in Modern Age years—if it does end then—we will have that America had reached a point where “we had two whole generations of Americans have a vested interest in preparation for war.” who have never had the opportunity to know Defense spending was a major prop of full the real America. They will have no experi- employment and we were dangerously addict- ence with the real individual independence ed to it. Behind the screen of secrecy which that made this country great but on the con- the Cold War made possible, we were “losing trary they will accept as an accustomed the substance of self-government” to a rising thing, the detailed control over their private “self-perpetuating managerial elite.” lives by a powerful central government.8 ===== PAGE 31 ===== MERE “ISOLATIONISM”: THE FOREIGN PoLICY OF THE OLD RIGHT 31 During the High Cold War such initiatives many turn-of-the-century social reformers were as likely to come from the Right as from could never praise war and imperialism too the Left. A perfect illustration is a collection much. (Teddy Roosevelt is just one who of “conservative” essays on federalism pub- comes to mind.) lished in 1961. A majority of the contributors The Old Right was well aware of the philo- belittled decentralization and the Tenth sophical unity of the two spheres of interven- Amendment and called for endless, hyperthy- tion. Senator Taft made the point well: roidal federal efforts—federal aid to educa- tion, road building, desegregation, and so on, There are a good many Americans who in the name of “national strength” necessary talk about an American century in which to win the Cold War. One contributor even America will dominate the world. . . . If we demanded a federal building code so that confine our activities to the field of moral everyone would have a bomb shelter when the leadership we shall be successful if our Russkies nuked us! Poor Russell Kirk and philosophy is sound and appeals to the James Jackson Kilpatrick made little headway people of the world. The trouble with those defending “territorial democracy” and states’ who advocate this policy is that they really rights in that crowd.’ do not confine themselves to moral leader- After 40-some years of the Cold War and ship. They are inspired by the same kind of with no real “dismantling” of its structures— New Deal planned-control ideas abroad as including our old pal, NATO—in sight despite recent Administrations have desired to the collapse of the official enemy, it may be enforce at home. In their hearts they want time to have another look at the Old Right’s to force on these foreign people through critique of the Cold War and intervention. the use of American money and even, per- haps, arms, the policies which moral lead- Who Th ey Were ership is able to advance only through the sound strength of its principles.!2 The Old Right was made up mainly of right-wing Republicans who wished to avert This pretty much sums up the Truman Doc- the institutional and economic costs of war trine, the Nixon Doctrine, the Bush Doctrine, and empire. As such, they are not seen as wor- and—God save the mark—the Clinton Doc- thy predecessors by the anti-war Left and trine. (Yes, he, too, cobbles together ‘“doc- their insights have been abandoned by most of trines,” when he’s not otherwise occupied.) 1 their Republican successors. Yet they saw that leave out a couple of presidents because I'm making the authoritarian fixtures of war into not sure they actually had “doctrines” as such. permanent “peacetime” policies was the high Certainly they all had policies of the same road to the garrison state. At the same time, sort. JFK genuinely wanted to move us for- the extension of U.S. “interests” all over the ward, at home and abroad, but with more world was turning the Old Republic into an excitement, drama, vigor, and counter- Empire. insurgency than that dull fellow Eisenhower Arthur Ekirch, Bruce Porter, and Robert bothered with. This worked out very well, Higgs, among others, have noted the inner especially in Southeast Asia. His heir, Lyndon unity between social intervention at home and Johnson, illustrates the point perfectly: one of military intervention overseas.!®© That great his great brainstorms was to try bribing North humanitarian and classical liberal Herbert Vietnam to give up the war by offering them a Spencer wrote that “a society’s internal and sort of Mekong Valley Authority modeled on external policies are so bound together, that TVA! The Clinton Doctrine seems to involve there cannot be an essential improvement of exporting all the American new class’s delu- the one without an essential improvement of sions about welfare rights and civil rights, the other.”!! One might add that a worsening bombing those who don’t conform quickly of one runs right along with a worsening of enough, and then setting up big civil engineer- the other. Thus it was hardly accidental that so ing projects to rebuild the cities of those who ===== PAGE 32 ===== 32 IDEAS ON LIBERTY ¢ FEBRUARY 2000 submit. Finally—and like Dave Barry, I am mobilization, civil society in America remains not making this up—FDR’s political fixer and stronger, more independent-minded and more factotum Harry Hopkins opined in 1941 that antistatist than in virtually any country of Hitler could only be defeated by “the New Europe or Asia.” Being more antistatist than Deal universally extended and applied.”!3 the heroic masses of Natovia may, however, In 1991, columnist Charles Krauthammer not be quite enough. The enhanced state wrote that renewed “isolationism” on both which grew up under cover of endless foreign sides of the political spectrum posed a grave “emergencies” may, Porter admits, have threat to proper (interventionist) U.S. foreign “crossed the welfare threshold . . . the point at policy. The threat came from right-wing isola- which the state transcends its military origins tionists (Midwestern boneheads who refuse to and acquires a new raison d’état as the pilot learn French?) and former “peaceniks” trau- of the economy and provider of social wel- matized by Vietnam. At that time, Krautham- fare. Military basis or not, the American state mer had a long wish list of anticipated will not go gentle into that good night.”!5 [] “threats” and interventions: “North Korea, Libya, Pakistan, Iran, South Africa”’14 I was L See Murray N. Rothbard, “Confessions of a Right Wing Lib- all set to watch the JFK Flexible Response te a he Comrie Sommer 1554, mm. 230.31, Legions rain death down on the heathen and Also see Justin Raimondo, Reclaiming the American Right: The Lost . . Legacy of the Conservative Movement (Burlingame, Calif.: Center then make up for it by hanging drywall, set- for Libertarian Studies, 1993). . or . Studies on the Left, vol. 11, no. 1 (1962). on interest-group liberalism and electoral 3. Carl Oglesby, “Vietnamese Crucible: An Essay on the Mean- ’ ment and Change (London: The Macmillan Company, 1967), pp. Deal, meet Dr. Win-the-Perpetual-War.) After 36-37. all. John Kennedy bogged us down in Viet- 4. On the smears against the AFC, see Michele Flynn Stenehjem, ’ An American First: John T. Flynn and the America First Committee nam and founded the Green Berets and the (New Rochelle, N.Y.: Arlington House, 1976), esp. Chapter 7, Peace Corps. Having it both ways never had it “Anti-Semitism and Profascism in the AFC: Fact and Fiction.” 5. Robert A. Taft, “Compulsory Military Training in Peace SO good. Time,” Vital Speeches of the Day, July 1, 1945, p. 557; Howard Buf- Since 1991, we have found out that some of fett, Congressional Record, June 15, 1948, pp. 8362-63; Lawrence . . . . Smith, ibid., June 17, 1948, p. 8707. the peaceniks do enjoy bombing foreigners, 6. Felix Morley, “Conservatism and Foreign Policy: Either the and Krauthammer himself discovered an Constitution or the Policy Must Give Way,” Vital Speeches, January 15, 1955, pp. 974-79, and “American Republic or American intervention he didn’t like, and for this he Empire,” Modern Age, Summer 1957, pp. 20-32. should be commended. In any case renewed 7. John T. Flynn, The Decline of the American Republic (New wr A ) > York: Devin-Adair, 1955), p. 161. isolationism” anywhere—Left or Right— 8. Emest T. Weir, “Good Government and a World at Peace,” tev ame 1 methin cheer Vital Speeches, June 15, 1951, p. 732. and by whatever n ¢ 15 somet g to ee 9. Robert A. Goldwin, ed., 4 Nation of States: Essays on the about. Even so, the task is even more daunting american Federal System (Chicago: Rand McNally, 1963). 3 : : 10. See Arthur A. Ekirch, Jr., The Decline of American Liberal- than Ernest Weir predicted, since three, rather ism (New York: Atheneum, 1969 [1955]), especially Chapter 11, than two, generations have grown up under “The Progressives as Nationalists”; Bruce D. Porter, War and the : 3 : Rise of the State: The Military Foundations of Modern Politics (New the . Impression that all the inroads made York: Free Press, 1994); and Robert Higgs, Crisis and Leviathan against liberty and property in that time Span (New York: Oxford University Press, 1987). “ » : aki 11. Herbert Spencer, The Man versus the State, ed. Donald nor : are « 0 mal and even, ma) oking sort of MacRae (Baltimore: Penguin Books, 1969), p. 189. way, constitutional. 12. Robert A. Taft, 4 Foreign Policy for Americans (Garden 41 : : City, N.Y.: Doubleday & Company, 1951), pp. 17-18. Political scientist Bruce Porter suggests 13. Harry Hopkins quoted in John Charmley, Churchill's Grand that there is some basis for hope. He writes tliance (New York: Harcourt Brace & Co., 1995), p. 20. “ 2 14. Charles Krauthammer, “The Lonely Superpower,” The New that “[a]t the end of the Cold War, despite Republic, Iuly 29, 1991. pp. 33.27, nearly fifty years of full or partial national 15. Porter, pp. 293-94. ===== PAGE 33 ===== IDEAS ON [IBERTY The Internet: Parental Guidance Preferred by Keith Wade t is probably helpful—given how venturing the beer and wine aisle at the local grocery into the areas of “obscene” and “inappro- store, for that matter). While issues and view- priate” can often lead to name-calling and points vary, most of us accept that at least misunderstanding—to make a point very some things should be the exclusive purview clear immediately. I do not intend to argue of adults. The Internet has provided children that obscene or otherwise inappropriate mate- whose parents do not supervise their activities rials should exist, that the Internet shouldbe a with access to a goodly number of these vehicle for delivering them, or that children things. should have access to them. Given recent unfortunate incidents, there is Rather, my point is that the only proper, a redoubled interest in keeping children from effective, and realistic force that can keep inappropriate materials; the government children from inappropriate materials is the seems more than willing to help. There is, combination of parents and private industry. however, simply no need for the government Although a commonly deployed strategy, leg- to assist parents in this way. There already islation is simply wrong and ineffective. exist—in addition to the obvious “no brainer” (Indeed, the FBI's 4 Parents Guide to Inter- solution of supervising one’s children—ample net Safety advises parents to “Utilize parental economic incentives, free or low-priced tools, controls provided by your service provider filtered Web access, private-industry utilities, and/or blocking software” and “Monitor your and not-for-profit service groups to exclude child’s access to all types of live electronic children from “offensive” online material. communications [chat rooms, instant mes- sages, Internet Relay Chat, etc.], and monitor The Communications your child’s e-mail.”’) As will be discussed, we can agree on a proper mechanism for restrict- Decency Act ing children’s access while allowing each Perhaps one of the most blatant offenses household to decide for itself which materials against freedom of speech in this country in it deems “inappropriate.” the past several decades is the Communica- There are few among us who believe that tions Decency Act of 1995. While the act was children should have unrestricted access to declared unconstitutional, the idea of censor- the Internet (or television, movies, books, or ing the Internet is one that will not die. The act would have made it a crime for any- Keith Wade is the director of finance and MIS at one ! 0 use “any Interactive computer service Cypress Gardens in Florida and an adjunct instruc- to display in a manner available to a person tor of business and information technology at Web- under 18 years of age, any comment, request ster University. suggestion, proposal, image, or other commu- 33 ===== PAGE 34 ===== 34 IDEAS ON LIBERTY ® FEBRUARY 2000 nication that, in context, depicts or describes, “simulated sexual activity.” Parental values in terms patently offensive as measured by simply vary too widely to let any one group contemporary community standards, sexual decide what is appropriate for children. or excretory activities or organs, regardless of whether the user of such service placed the Enter the Free Market call or initiated the communication. On the surface, many people find no prob- Fortunately, we need not rely on legislation lem with this. Children do not have the same to keep children from sites they ought not see. rights as adults, and few would argue that they The free market offers numerous solutions. should have them. There are clear-cut reasons Many magazines (the ones behind the for keeping certain materials away from chil- counter at the bookstore) have been ruled dren until their judgment, values, and sensi- legal but are deemed inappropriate for chil- bilities have matured. But legislation such as dren. What stops children from picking up the this denies access not only to children but also phone, calling the toll-free number, and get- to adults who presumably have every right to ting a subscription (after all, magazines do not decide for themselves what offends them. require proof of age)? Money. Even if parents “Available to a person under 18 years of don’t monitor the incoming mail (probably age” is an exceedingly broad and terribly sub- for the same reason they don’t monitor their jective term. Does this mean, for example, children’s computer usage), children are not “available to persons under 18 whose parents known for their discretionary income or do a good job of supervising them” or “avail- access to checks and credit cards. able to persons under 18 who are fraudulently Few folks operate commercial Web sites misrepresenting themselves (perhaps to assist out of the goodness of their hearts. Setting up law-enforcement officers entrap someone)”’? and running a site costs money. While there Considering that an Internet service provider may be people who put “offensive material” or Web site operator cannot look at driver’s on the Web just for the sake of doing it, most licenses, the only way to outlaw access by have products to sell. There’s no economic youth is to outlaw “inappropriate” sites entire- incentive to let kids into the site. ly. Much as we might like to do that, the Con- One incentive to keep kids out is the money stitution is fairly clear in prohibiting censor- that age-verification companies will pay site ship of communication we do not like, even operators to do it. Several companies pay for something as laudable as protecting the Webmasters a commission for each patron nation’s children. referred for age verification. The patron pays Perhaps as big a problem as the unconstitu- for an access number after proving he’s of tionality of outlawing “offensive” Internet age, then uses it at restricted sites. material is the definition of “offensive.” This Adult Check, for instance, advertises that it is an area in which one size simply does not fit provides Webmasters with protection and profits. all. While children may have to bow to the The company has developed “a complete sys- idol of secular humanism in public schools, tem of adult verification, identification number parents still have the right to instill whatever assignment and a lucrative income earning values they wish at home. Most parents make opportunity for Webmasters” (www.adultcheck. an effort to shield their children from bad com). Tens of thousands of Webmasters have influences during the impressionable years. installed this gatekeeping solution, and numer- These bad influences, however, vary from ous verification competitors (each with screens parent to parent. One person’s “family values” full of information about the potential profit for is another’s “hateful speech.” One family’s Webmasters) have popped up. “intolerance” is another family’s “fundamen- tal beliefs.” I recently received a self-diagno- sis book from my HMO that I would never let a child see; one company’s “educational mate- Many companies have entered the market rials” are my family’s “full frontal nudity” and to provide “family friendly” Web surfing. Family-Friendly Filters ===== PAGE 35 ===== THE INTERNET: PARENTAL GUIDANCE PREFERRED 35 MayberryUSA markets itself as a child-safe terms of content type. You can screen and Internet service provider (ISP). It offers “a block anything such as Pornography, bomb- filtering system designed to give our neti- making formulas, hate literature . . . or what- zens the best in Internet protection. We ever else concerns you. If you can define it, check the entire Internet daily, and update our Net Nanny can block it!” (www.netnanny. filter. MayberryUSA wishes to provide its com). Another product, CYBERsitter, members with the best the web can offer and “includes databases in numerous categories of to protect its citizens from the dangers of web sites you might want to restrict access to” pornography, hate groups, criminal skills, ille- (www.cybersitter.com). gal drugs, and other offensive material” (www.mbusa.net). Realizing that “offensive” means different things to different people, MayberryUSA lets There’s yet another kind of protection for users help define what is accessible to them- children in cyberspace. Much as they did on selves and their children: “anytime you find the urban streets, the Guardian Angels, an offensive site, YOU can help protect our through their CyberAngels branch, help police community. Click the green Sheriff sign on enforce existing laws regarding child pornog- our sign post or the Badge at the top of any of raphy and child abuse in cyberspace. “We're our main pages and make your report. We will your cyber-neighborhood watch,” the organi- take immediate action to filter that site from zation literature says. “We find and report ille- the MayberryUSA community.” gal material online, educate families about America Online also permits users to online safety and how to enjoy cyberspace restrict access to AOL areas, Web sites, chat together, work with schools and libraries, and rooms, and instant messaging through its share basic Internet tips and help resources” “parental control” feature. (www.cyberangels.com). CyberAngels also Perhaps the most important thing about monitors the Web and furnishes its list of family-friendly Web sites and surfing is that 8,000 offending sites to filter-software com- they are voluntary (and therefore have a keen panies and family-friendly ISPs. interest in staying closely aligned with their Further, the group provides a babysitting customers). If someone does not want or need service: “Our [volunteer] CyberMoms do restrictions, or thinks his provider is letting in what moms do best . . . keep their and your too much indecency, or thinks it’s gone over- kids safe online. Specially trained to spot board in its restrictions, he can change child predators online, they volunteer to providers. moderate kids’ chats and watch children in For the parents who would prefer not to rely cyber-playgrounds for online services and on Webmasters and Internet service providers websites.” to prevent access to children, there are many We currently have many laws against the software alternatives. The newest versions of exploitation of children. While society is Microsoft Internet Explorer and Netscape undoubtedly served when those who prey on Navigator include filtering capabilities that children are caught, tried, convicted, and allow parents to decide what can be accessed. locked up, the damage to the children has In the latest edition of Internet Explorer one already been done by the time offenders are can choose from five different categories of apprehended. The virtue of private-sector violence, from “no violence” to “wanton and methods to keep children away from inappro- gratuitous violence.” Sex, nudity, and obscen- priate materials and computer users is that ity screens have similar continuums. they prevent such harm. While most legislation aims strictly at One of the great truths in life is that families pornography, the commercial tools give par- and private industry can generally do things ents control over much more. The maker of better and more efficiently than government. Net Nanny says the product “isn’t limited in This is no less true in cyberspace. [J] Online Guardian Angels ===== PAGE 36 ===== Economic Notions by Dwight R. Lee ¥ Economics Spreading the Work to Create More Jobs | Ps month I emphasized that job creation making more valuable use of workers, they is not a sensible objective for economic communicate that fact to consumers through policy. The purpose of economic activity is lower prices. This motivates consumers to buy not to do work for its own sake. What’s the more of the industry’s product and motivates point of creating jobs to produce goods or ser- the industry to hire more workers. Again, vices that consumers don’t want as much as workers cooperate with consumers by moving other things that could have been produced? into those jobs where they produce what con- Yet there is a widespread view that having sumers are most eager to have. government create more jobs is the best way When government tries to create jobs it to promote economic progress. Wrong. Rely- always interferes with market cooperation ing on government to create jobs invariably between workers and consumers. So even retards economic progress. when jobs are created, people are directed Productive jobs are created when people into jobs in which they are producing less have the freedom to communicate and value for consumers than they could be pro- cooperate through markets. Consumers com- ducing. Government attempts to create municate the value they place on different domestic jobs by restricting imports is an jobs by how much they are willing to pay for example of undermining the market coopera- products. Anytime a firm employs workers to tion that creates the most productive jobs. By produce a more valuable good than workers preventing people from buying products from are producing at other firms, consumer pur- the most efficient producers, import restric- chases tell that firm: “We will make it prof- tions prevent the cooperation that guides itable for you to expand output by offering workers into those jobs in which they have a higher wages and bidding workers away from comparative advantage; that is, where they less valuable jobs.” Workers end up cooperat- produce the most wealth. Unfortunately, there ing with consumers by moving into the pro- are many other examples of how government duction of more desirable products until all job creation destroys wealth by distorting gains from such a move are exhausted. market interaction between consumers and Similarly, firms communicate how much it workers. Consider one way that government costs to produce different products (including attempts to expand employment. the cost of hiring workers) by how little they are willing to charge for those products. . When firms can lower production costs by Spreading the Work _— France is currently attempting to reduce its Dwight Lee is Ramsey Professor at the Terry College hioh ) J te b p e it illegal of Business, University of Georgia, and an adjunct 1gh unemployment rate by making 1 1liega fellow at the Center for the Study of American Busi- for any employee to work for more than an ness at Washington University in St. Louis. average 35 hours a week. That policy would 36 ===== PAGE 37 ===== 37 make sense only if there existed a fixed explained is that when market prices are free amount of work and it was being done by to respond to changing production costs and fewer than the available workers; in that case, consumer preferences, then the decisions of more workers could be hired only if the suppliers and consumers are coordinated and amount of work done by each were limited. If there is no need to worry about unemploy- this is true in France, then it has pulled off an ment caused by gluts of unwanted goods. amazing feat. The French must have all the goods and services they want, with work and toil being the only scarce things remaining. But if work rather than desirable goods is Trying to reduce unemployment with gov- what the French lack, there is a better way of ernment restrictions on the number of hours taking care of the problem than restricting the that people are allowed to work is like trying hours of work. They could simply destroy a to sober up with more drinking. Such restric- percentage of everything produced. This tions add to existing government policies would create more jobs for people to replace (such as minimum-wage laws, regulations on the destroyed output, plus additional jobs to dismissal, and mandated benefits) that are do the destroying. already reducing cooperation between con- Unfortunately, neither the French nor any- sumers and workers. Also, enforcing these one else has overcome the problem of scarci- restrictions employs workers, who could be ty. If more of the things people value are pro- responding to consumer desires, to make sure duced, people will be anxious to consume that other workers don’t respond to those them as long as market communication is desires. For example, the French government undistorted by government restrictions. Imag- hires “work police” to enforce the work ine a technological breakthrough that allows restrictions. They do such useful things as one person to produce everything currently note how long cars are parked outside busi- being produced in a country. Does anyone nesses. This snooping is not merely a total believe that the country would be worse off or waste of time. It is worse than that, having led that everyone but the one person would be to the detection of renegade executives who unable to find work? Of course not. The coun- have committed the crime of working the try would become incredibly wealthy as mil- extra hours required to negotiate complex lions of workers were freed up to produce deals that, if culminated, would lead to more additional products that consumers had been productive jobs. doing without. And in the absence of market The more distortions governments impose distortions, the extra output would be con- on market communication and cooperation, sumed since it would result from consumers’ the more problems they create—problems communicating their desire and willingness to they can use to justify more distortions. It is purchase it. as if you are on your boat and a government Interestingly, it was the nineteenth-century official comes aboard, announces he is there French economist Jean-Baptiste Say who to help, and drills a hole in the bottom. But explained why expanding output should be no don’t worry. As your boat takes on water and problem. Say’s explanation is often distorted starts to sink, the official reassures you that he as meaning that “supply creates its own is going to drill some more holes so the water demand,” which has become known as Say’s can run out. Law. But this is a straw man. Neither Say nor Government’s attempt to create jobs is any other sensible economist believes that the almost always the economic equivalent of production of any particular product, or bun- drilling holes in the bottom of a boat. The dle of products, will create the demand for it. problem is that the costs are greater than Producing something that no one wants will we realize and commonly disguised as bene- not create a demand for it. What Say fits. HW Drilling More Holes ===== PAGE 38 ===== IDEAS ON [IBERTY FesruARY 2000 Why Medicine Is Slowly Dying in America by Michael J. Hurd he American Medical Association recent- out why. Elderly patients no longer had to ly voted to form a national union for worry about costs. Doctors felt no competi- physicians. It’s official. Doctors are now tive pressure to keep rates reasonable to stay unionized—just like public school teachers, in business. Guess what happened? Demand postal workers, and truck drivers. for health care skyrocketed. So too did cost. In one sense, unionizing is a good step for doctors. Everybody asserts their health-care “rights” today except for physicians. We hear The Law of Mandates about patient rights and HMO rights and gov- The extent to which the government man- ernment rights. We never hear about the doc- dates a product or service as free is the extent tors’ rights. It’s time doctors stood up for them- to which demand for it will rise. If the gov- selves too—for their patients’ sake as well as ernment suddenly legislated that all cars were their own. If they don’t, the quality of medical free, then everybody would clamor to have care will deteriorate (as we already see hap- three or four cars, rather than one or two. Peo- pening), and we’ll all suffer the consequences. ple who normally would be content not own- Why didn’t doctors need unions in the past ing a car at all—perhaps because they lived in while they do today? Turn back the clock to a city or relied on a close friend—would the 1960s when Medicare became law. want a car because, what the heck, the Medicare, for all practical purposes, social- government’s paying for most or all of it ized medicine for the elderly. At first, it anyway. And people who used to be content seemed like a good deal for everybody. The with Chevrolets would want BMWs and best health care imaginable—all for free! Who Mercedes-Benzes. could argue with the goodies? Excellent re- With demand for Medicare shooting ever imbursement rates for physicians. High-quality upward, the government had to do something. care for elderly patients—with little or no cost. If not, we would all soon be paying 85 percent Low payroll tax rates—at least initially. of our incéme in payroll taxes just to cover Then reality set in, slowly, as it usually Medicare. In a strange sort of way, govern- does. By the 1980s, it was clear that medical ment and HMO bureaucrats have saved us costs were skyrocketing. It’s not hard to figure from this fate. They started to make the cost- —_——— cutting decisions that we, as individual Michael Hurd (www.drhurd.com) is a psychologist patients in the medical marketplace, right- in private practice in the Washington, D.C., area. He is the author of Effective Therapy (Dunhill, 1997) SUSI refused to face. When costs began to and Grow Up, America! (forthcoming). Dr. Hurd is skyrocket, voters in effect told their politi- the president of Living Resources, Inc., and publish- ~ cians, “For heaven’s sake, do something. 1 er of “The Living Resources Newsletter.” don’t care what. Just something.” 38 ===== PAGE 39 ===== 39 And “do something” they did: in the form of and other managed-care programs. In 1993 ever-increasing controls. Somebody has to do the government tried to force everybody into it. If patients and doctors are not going to con- managed care by decree. The infamous trol costs—and it is most certainly not in their Clinton plan sought to equalize the medioc- interest to do so under a free-lunch, socialized rity. The plan failed to pass, but for the most program like Medicare—then clearly the gov- part medical care today is managed care. ernment will have to do it for them. Government-inspired managed-care compa- Ironically, as legislation has sought to nies are running the show, much more than remove capitalism from the medical sector, doctors and patients are. Instead of socialized medicine has become more concerned with medicine, we have fascist (superficially pri- money than ever before. Prior to Medicare vate) medicine. and government regulations, you did not hear In formerly communist countries, and in horror stories of patients who were turned socialist democracies such as Canada, France, away from life-preserving surgery or medica- and Great Britain, citizens are used to things tion because bean-counting bureaucrats were being this way. They don’t even have HMOs. trying to save money. Now such tales are Instead, monolithic government agencies, commonplace. similar to our Department of Health and Yes, the sanctimonious Great Society “lib- Human Services, control medicine. It’s called erals” of the 1960s were successful at remov- “single-payer” insurance, which will become ing the “stench” of business from medicine. the next big push in the United States if peo- And look what they gave us in its place. The ple like Ted Kennedy and Hillary Clinton kindly family doctor has been replaced by the have their way. cool, terse HMO physician—whose primary Most Europeans and Canadians have no incentive is to see as many patients as possi- concept of genuine medical excellence ble, as rarely as possible. because they’ve never experienced private Medicine is slowly evolving into a war of medicine. Americans are different. We prefer all against all. Doctors find patients increas- to have more control over our lives than peo- ingly demanding and greedy in their use of ple do in other nations. We used to have pri- medical services they do not have to pay for. vate medicine here, and to a limited degree we Patients find doctors increasingly arrogant still do. We liked—and still like—the results and uncaring because, after all, the doctors of private medicine, which include dignity don’t really answer to them. Thanks to gov- and respect for both doctor and patient. ernment regulations, doctors now answer to Yet most of us have accepted a lethal con- the third party who pays their bills and tells tradiction. We have endorsed the idea that them how to do treatment. No wonder theres trading value for value—in the form of dol- a call for a “patient bill of rights” as well as a lars—is somehow tasteless or wrong in the union for doctors. medical arena. So we call on government to Has the elimination of freedom and capital- handle the dirty economic business for us. ism really been good for patient and doctor? Observe the results. Has our four-decade experiment with social- In a sense, medical care is less valued by ized medicine been a success? No, most today’s patient, because it’s cheap and looked would reply. Yet these same people cling to on as a “right.” Such a mentality is a breeding Medicare and government regulation with the ground for mediocrity. Look at how the public tenacity of a child clinging to his teddy bear. school system has evolved into mediocrity (and even violence). Kids have a right to “free” education, run by the government and union- ized teachers—but how much of a value is it? In the 1990s government controls slowly The same is starting to happen in health spread from Medicare to what remained of care. We're in the earlier stages of the same the “private” sector. Non-elderly patients kind of breakdown currently becoming more were, for the most part, shoved into HMOs obvious in the public school system. How Spreading Control ===== PAGE 40 ===== 40 IDEAS ON LIBERTY ¢ FEBRUARY 2000 long before some crazy patient shows up in a street and charge less. In a free market, where doctor’s office with a gun, frustrated by the rates are not uniformly imposed by the Health lack of service his $5 copayment is buying Care Financing Administration or some HMO him? (Indeed, indignant that he has to pay the board of directors, Dr. Smith will have every $5 at all.) It happened to public education. incentive to do so. Why will it be any different with public med- The new government policy must be: “Take icine? Consider Medicare. responsibility for your own health care—and People cling to Medicare just as they do to we’ll lift the legal and tax burdens off your the public schools. They seem to think its shoulders immediately” Young and middle- some kind of mystical oracle that can make aged people must be put on notice that something out of nothing—when in fact (as Medicare’s days are numbered, and they must even its government overseers admit) it’s a fis- start saving and investing on their own. cally bankrupt actuarial disaster that destroys If you don’t want all this added responsibil- the rights and responsibilities of doctors and ity, then just leave things the way they are patients. now. Don’t pressure your representatives to Watching pressure-group representatives privatize health care. The government will shriek on the evening news that “Our just keep taking more and more control, Medicare must be preserved!” is like watch- which means: taking more and more control ing grown, educated adults cry, “The tree that over your bodies and your lives. grows money must not be cut down! How Then in another few years everything will dare anybody think of cutting it down!” It’s probably be run by the state or federal Depart- absolute madness. ment of Health and Human Services. (They Today, most doctors and patients clamor for will call this “streamlining.”) You’ll have increased rights without increased responsi- lengthy waits for surgery, just like they have bility. Yet if they are going to support govern- in Britain and Canada. Doctors will already ment programs like Medicare and the many be unionized, making them more defensive, state and federal regulations that increasingly arrogant, and adversarial than ever. Lawsuits grant a “right” to this or that form of medical will increase, driving medical costs still high- care on demand (or, at most, for a small er. Medicine, for everyone except the highest copayment), they have to live with the conse- government officials, will work like the post quences of such legislation. office—only the stakes are much higher than The consequences include losing control the delivery of your mail! The waits will prob- over who your doctor will be and over med- ably be longer too. ical decisions that affect you. Neither doctors Today, most Americans righteously expect nor patients like those consequences, but they the best health care in the world. Government continue to push for more government regula- and intellectual elites have convinced them tions and mandates anyway. that they have a right to it on demand, whether If you want less government control they want to pay for it or not. But sooner or (including indirect government control, such later reality always asserts itself. He who as HMOs and managed care), you need to picks up the tab eventually runs the show— support privatization of the medical care sys- indeed, has to run the show. Patients and doc- tem. This will require all patients to shop tors are getting what they voted for and more carefully and rationally for services, the demanded. In the end, the politicians are sim- same way they now shop carefully for cars, ply following the voters’ orders. computers, and groceries. At the dawn of the 21st century we enjoy a Privatization will also require doctors and window of opportunity. A strong economy insurance companies, competing in the mar- makes ending government programs such as ketplace, to keep costs reasonable in order to Medicare more feasible than ever. It may be meet the demands of the patient-consumers. our last chance to privatize medicine without If Dr. Jones charges too much for foot even more painful results. We had better move surgery, Dr. Smith can open a clinic across the quickly. [1] ===== PAGE 41 ===== Saving Money by Taking Lives Two weeks ago, my 91-year-old mother-in-law died in a nursing home in Amsterdam. But although she had been suffering for nine months from a paral- ysis that prevented her from speaking and eventually from swallowing her food, she did not die a natural death from lack of nourishment. She died because the doctors decided that her time had come. Even though she had never given any indication of wanting to die, the med- ical authorities at the Amstelhof home refused to perform a simple surgical procedure to put a nourishment tube in her stomach in order to prolong her life. They even refused to give her water intravenously. Without the benefit of widely available modern medical care, my mother-in-law expired within five days. Because she was unable to speak, the doctors at the government- financed nursing home made that decision for her. While her case was not one of euthanasia, it clearly was a product of the “culture of euthanasia” that now abounds in Holland. Once the taboo against terminating patients dissolves, it is a short step to ending patients’ lives “for their own good” with neither the patient’s nor the family’s consent. The point, we were told, was to save her from further pain and misery. But until the day when she could no longer swallow, she had shown a voracious appetite and a zest for life. The real motive for the Amstelhof doctors’ deadly actions, of course, was economic. Caring for old people is a significant burden on the public finances of the welfare state. Moreover, to extend life in fragile old people can be very costly. The medical authorities at the nursing home never informed us about the options for prolonging my mother-in-law’s life because it was in neither their personal interest nor their country’s economic interest to do so. A well- informed patient is an expensive one. In the U.S., my dog got better treatment than this. The week before my mother-in-law died in Holland, my 13-year-old Irish setter was stricken with kidney disease and refused to eat. The vet said the dog would die without nourishment and that the only way we might extend her life was to place a tube in her stomach or esophagus. When | winced, the vet convinced me the pro- cedure was simple and effective. We went ahead with the operation. Free-market opponents might say the vet pushed the tube solution only to make a handsome fee on the operation. But if this is the case, it’s a blessing. The vet’s economic incentives encouraged her to let me know what my options were. With that knowledge, | was free to decide. In Holland the poten- tial for profit gouging has been removed from the health-care system. As a result, the Dutch medical community cannot make money extending life; they can only lose it. Sadly, both my dog and my mother-in-law died within a week. But my dog died despite the doctors; my mother-in-law died because of them. —MELVYN KRAUSS Senior fellow, Hoover Institution Reprinted with permission of The Wall Street Journal, November 16, 1999. © 1999 Dow Jones & Company. All rights reserved. 41 ===== PAGE 42 ===== IDEAS ON [IBERTY FEBRUARY 2000 A Mad Scramble at 30,000 Feet by Edward J. Lopez irlines have been taking it on the chin promises an efficient solution to this problem lately. Travelers are busier, delays are that will suit everyone involved. likelier and longer, airports are bursting at the First the problem. Most people do not like seams, and FAA complaints have doubled. to check their bags because it adds time and Last summer Andy Rooney stood up for all the risk that the airline will misdirect, dam- travelers on his 60 Minutes commentary when age, or lose the luggage. Airlines figured this he raged at the airlines, “we’re sick and tired out long ago and recognized that without and we’re not going to take it anymore!” The some restrictions, most passengers would try airlines aren’t sitting on their tail fins, either. to carry on all their bags. This would be a On June 29, 1999, the industry announced its problem (not enough space) as well as a safe- Air Traveler’s Bill of Rights, with gems such ty hazard. In response, airlines began to limit as declaring the passenger’s right to access the the amount of luggage passengers may carry court system. Then in August 1999, American onto the plane—typically two pieces of a cer- Airlines and United Airlines publicly apolo- tain size. These restrictions are meant not only gized to passengers for severe delays at busy to ensure passenger safety, but also to create airports. an equal amount of carry-on space for all pas- This is a difficult situation for the airlines sengers. because passengers are partly responsible for Anyone who has taken a flight recently delays. Excess carry-on baggage, in particu- knows the system doesn’t work. Airplanes lar, costs the airlines a lot of time and money. have two areas for you to place carry-on bag- In December 1998, United installed baggage gage: the small space beneath the seat in front templates at X-ray machines to prevent pas- of you and in the overhead bins. Most passen- sengers from carrying on bags larger than 14 gers prefer to put their bags overhead so they inches long or 9 inches tall. American Air- can have more legroom. People who get on lines did the same thing a year later. Their the plane first tend to stow both bags up there. thinking is that less time will be wasted Soon the bins fill up and people who board the scrambling for overhead bin space, which will plane later cannot find overhead space. Pas- get passengers to their seats sooner and help sengers become frustrated as they scurry up eliminate delayed departures. Sounds good in and down the aisle looking for an open bin. theory. But will it work? Flight attendants get flustered and often have A healthy dose of economic analysis to gate-check extra bags. As a result, the departure is usually late by a few minutes, and Edward Lopez is an assistant professor of economics if it isn’t, it’s because the airline has factored www.econ.unt.edu/elopez). no one is happy. 42 ===== PAGE 43 ===== 43 People Differ own “tragedy of the commons.” A better sys- tem would allocate the space first to those Airlines need to recognize that people are willing to pay more than others to reduce their not all the same. When you spend time at the waiting time and risk and to increase their baggage carousel, youre giving up some legroom. other use of that time. You could be in the air- You might complain that this system port lounge having a drink, or looking for the wouldn’t be fair. It would treat people differ- friend who is picking you up, or making your ently. But that’s the point! This type of effi- way home in the comfort of your own car. cient solution differs from the airlines’ current Every traveler values that time differently. equitable solution. For example, you might Similarly, people may evaluate the risk of think that the problem could be solved by checking their bags differently. Some infre- simply enforcing current restrictions on quent flyers might be uptight about turning carry-on bags. But airlines are already doing their valuables over to blue-collar baggage that. Or you might suggest that airlines allow handlers with reputations born of Samsonite only one carry-on bag. This would certainly commercials. Others might not give too much get rid of the overuse problem, but now there thought to it because they’ve checked bags a would be an underuse problem. I recently hundred times and never had any problems. received a satirical e-mail about New York It is an obvious point: people value time City’s Central Park, another example of the and risk differently. But that point can help us tragedy of the commons. This e-mail reported to understand the problem and to find a solu- that the NYC park authority planned on tion. In other words, when no one is happy, releasing a small pack of wolves into the park economics can help. to cut down on the overuse problem. It’s a This problem has long been understood as funny idea in a dark sort of way, and it’s thor- the “tragedy of the commons.”* Whenever a oughly equitable unless you factor in slow valuable resource is commonly owned, every runners. But it wouldn’t bring about an effi- individual “owner” tends to use more than his cient outcome. It’s like telling people they “fair share” because, while enjoying the ben- can’t carry any bags on board an airplane. efits, he does not absorb the full cost of doing s0. When most people act this way, the result There’s No Market is a general overuse of the resource and an overall unhappy ending for everyone The way airlines currently allocate bin involved. Similar tragedies occur everyday: space, while not as deadly as a pack of congestion on interstate highways, overhunt- wolves, is still wasteful. Why is this so? First, ing of elephants in Africa, overfishing in the passengers don’t have property rights over north Pacific. Because of airline policy, over- their own bin space (as they do their own head bins, too, have become a tragedy of the seats, their own peanuts, and their own com- commons. But there are workable and well- plimentary magazine). So there is no way for known solutions to commons problems. someone who boards the plane late to guaran- Reconsidering the airlines’ situation in this tee himself some bin space, even if he values framework should help us figure out what it highly. At the same time, there is no way for would be the best way to make travelers and someone who does not value the bin space airline personnel happier. highly to be compensated for giving up the The current system is so inefficient because space. We're missing a market for overhead airlines allocate overhead bin space on a first- bin space. To solve the inefficiency, we need come, first-served basis. Doing this creates its to somehow think of a way for passengers to I trade for overhead space according to the *Garrett Hardin, “The Tragedy of the Commons,” Science, 1968, pp. 1243-48 (http:/iwww.cs.colostate.edu/~heckendofragedy hemi) value they place on it, which really means For a useful and current treatment of the issue, focusing on insti- value of their time and comfort and their per- tional remedies to commons problems, see John A. Baden, Douglas : . : S. Noonan, and William D. Ruckelshaus, eds., Managing the Com- CE1ved Tisk of checking bags. mons (Bloomington, Ind. Indiana University Press, 1988). What would this market look like? The ===== PAGE 44 ===== 44 IDEAS ON LIBERTY © FEBRUARY 2000 first thing is to create property rights. Each don’t want to pay the extra, you would say no. passenger, or each seat, would have a given Soon enough, the airlines will balance out all amount of bin space—say, enough for one the yeses and nos and reach a market-clearing standard carry-on bag. This way, people who price, just like all other markets when they are want to carry two bags with them will have allowed to work. Those who value the space to place one under the seat. But going only highly will get it, and those who do not will this far merely achieves an equitable solu- not—an efficient outcome. tion, not an efficient one. If we give passen- You might object that this is just better for gers not only property rights over their bin the airlines because they'd get to charge an space but also the ability to trade with other even higher ticket price. Good objection, but I passengers for that space, the situation don’t think that will happen. Airlines already would greatly improve. Passengers who charge for overhead bin space, whether you didn’t mind checking their bags could “sell” use it or not! A small portion of every ticket their bin space to others. And those who price goes to offset the cost of creating that wanted to carry more luggage on board space. In the system I've described, airlines could do so, as long as they compensated the would compensate those who do not use bins owners of the extra space. with a lower price. Likewise, they would This sounds good in theory, but what about charge those who do use bin space even more the practical side? We can’t exactly expect than now. Also, since a market for bin space people to run up and down the aisles shouting will make flights faster and more efficient, out their supply and demand prices for over- costs should fall (even if by a small amount). head bins. Talk about wasting time! But there In effect, airlines would drop the base price 1s no reason to resort to that kind of solution. and then add to it if a passenger wants over- . Instead, let’s capitalize on the airlines’ existing head space. computerized information system to settle The economic way of thinking is capable of this. Airlines would sell bin space as an add-on solving interesting problems and improving to the ticket: “Would you like overhead space people’s lives—even if just a little bit, as in with that?” If you're in a hurry, or you're car- the case of overhead bin space. If you add up rying something really valuable or breakable, all the little ways economic thinking can your answer would very likely be yes. And you improve how societies organize their interac- would pay a little extra for your ticket to tions, it would be quite an improvement ensure some space. On the other hand, if you indeed. O Mark Skousen’s Economic Logic “Economic Logic is a first-rate and exciting introduction to economics. It’s clear and accessible, uncommon among today’s textbooks.” —DoN BOUDREAUX The first volume of Mark Skousen’s breakthrough college text- book, Economic Logic, is available from FEE. This “micro” text covers supply and demand, monopoly vs. competition, entrepre- neurship, wages, capital and interest, and the financial markets. Economic Logic is a no-compromise free-market college text- book, with a hands-on approach (it begins with a profit-and-loss income statement). Special price: $21.95, plus $4.00 shipping and handling. Send your check to FEE, 30 S. Broadway, Irvington-on-Hudson, NY 10533, or call 800-452-3518 with your credit card order. ===== PAGE 45 ===== IDEAS ON [IBERTY Heart over Mind: The Death of JFK, Jr. by Eric Nolte Boose I am an airline captain for a major Young Kennedy’s pitiful death illustrates carrier, | was deluged by friends with some of the issues that arise from the question questions from the moment John F. Kennedy, of government regulation and the hugely vex- Jr.’s airplane disappeared last July. ing and misunderstood question of the major “Why on earth was he allowed to take off political tension of our age: the questions of into weather he wasn’t trained to handle? Why the political primacy of the individual versus didn’t the government do something? Why the state, and the very purpose of government. wasn’t he stopped? How could anybody with As you read on, ask what sense you can his lack of experience be given permission to make of the moral philosophy and political take off on such a night? How can we make policy that are invoked by those who in the sure this won’t happen again? Why can’t the wake of young Kennedy's crash are now call- FAA create and enforce laws that are strong ing for more government regulation. Also enough to stop this kind of thing?” consider a life metaphor that was suggested to When the waves closed over the watery me by my career as a commercial pilot. graves of Kennedy, his wife, and sister-in-law, calls began to arise for greater regulation of . D) private pilots. But there were already plenty Why Did Kennedy Crash? of regulations on the books to cover every In the last few minutes before Kennedy’s facet of Kennedy's last flight. As I asked my little single-engine airplane went into the friends, how would the government restrain heavy seas off Martha’s Vineyard, its radar anybody from getting in their cars and driving track showed all the evidence of a mind wob- off a cliff? How does one regulate common bling in the tortured confusion called vertigo. sense? And more to the point, what are the This confusion steered Kennedy down a hor- hazards of granting government the power to rifying spiral to his death on that hot and hazy attempt such regulation of horse sense? night in July. If you've ever felt the searing We live in an era when most people assume pain of belly-flopping off a diving board, you that every new problem is properly open to might rightly suspect that hitting the water at solution by government regulators. Implicit is high speed is an impact not much different the belief that the regulators have enough from colliding with a granite cliff. power, information, and wisdom to meet any The kind of bafflement and panic that killed new challenge. Kennedy arises in a mind as it struggles with Eric Nolte is an airline pilot, a writer, and a clas- the contradictory signals of its Inner ear and sically trained pianist and composer of contempo- Its rational faculty. Reason and emotion are at rary concert music. E-mail him at ericnolte@ War. The inner ear evolved over millennia to compuserve.com. measure one’s movement in relation to the 45 ===== PAGE 46 ===== 46 IDEAS ON LIBERTY ® FEBRUARY 2000 fixed sensation of gravity. Gravity always acts mere experience, which we can discover as a vector pointing straight down to the cen- through some mystical process of feeling. ter of the earth. The inner ear is equipped with Such notions of knowledge are widely held in tubes of liquid that shift in response to any our culture to this day. Moreover, there are movement while the mind compares these legions of people who hold reason itself to be signals against this fixed sensation of gravity. a coarse and unsophisticated faculty that does This balancing apparatus signals the pilots not grasp reality so much as it invents an idio- mind and says, “You are strapped into a seat syncratic fantasy, peculiar to each individual, that is now as level as if you were sitting conditioned by the irresistible forces of race, squarely at your kitchen table.” gender, and class, stemming from the accident By contrast, at the same moment he was of a person’s birth. Millions of people reject feeling perfectly right-side-up, the aircraft reason as a proper tool for making sense of instruments, when correctly interpreted, con- the important problems of life. veyed the message, “Your wings are tilted I find it ironic that a seasoned aviator like steeply to the right of level, the nose of this Saint-Exupery would hold this mystical prod- airplane is pointing way down, and your air- ding of the heart as a proper guide to knowl- speed is already howling past the red line.” edge. Let’s consider what this would mean in The airplane’s flight path creates forces that the cockpit of an airplane and then look befuddle one’s awareness of earth’s gravity. To again at the known facts surrounding John judge by the sensations in the seat of your Kennedy’s crash. pants, you literally can’t tell up from down, left I was a flight instructor for many years. My from right. You are as helpless to move out of students were mostly beginners and private the airplane’s acceleration field as you would pilots seeking an instrument rating, so I know be if you were pinned to the side of a spinning something about teaching a neophyte how to circus centrifuge when the floor drops away. pilot an airplane in bad weather, solely by ref- And here is the crux of the matter: the erence to the flight instruments. pilot’s emotions drowned out the flight instru- It’s not so hard to keep an airplane straight ments’ story about banking and diving at high and level when you first fly into “the soup.” speed, and screamed out, “No way! It can’t You can fly along happily enough without any be! I’m actually flying straight and level! I view of the world outside the cockpit by using know it! I feel it’s true!” the various gyroscopically stabilized instru- ments. The whole array of instruments pro- What Is Essential to vide accurate indications of the airplane’ Seein g Rightly? pitch, roll, and yaw—the measures of motion around the three axes of flight. Antoine de Saint-Exupery was a famous The tricky part of flying on instruments is French pilot of the golden age of aviation and what happens after inevitable moments of dis- a renowned author. “It is only with the heart traction. You're flying along happily when the that one can see rightly, for what is essential is air-traffic controller tells you to switch radio invisible to the eye,” says the fox to his epony- frequencies so you can talk to another con- mous little prince, in Saint-Exupery’s most troller before you fly out of radio reception famous book. range. You reach down to fiddle with the I take Saint-Exupery’s sentiment about the knobs, and when you look back up at your six heart’s efficacy to mean that emotion is the basic flight instruments, from which you proper tool for grasping what is essential extract and integrate all the information you about life. We feel what is right. We know need to keep the airplane right-side-up, you life’s truths through the prodding of our heart. think, “Hey, what’s going on here?” You did- This notion has ancient roots that go back at n’t feel the airplane bank, and you feel a sud- least as far as Plato’s formulation of “anam- den moment’s confusion when you see a neses.” Anamnesis is the doctrine that our frighteningly different picture from what you knowledge is rooted in a perfect realm beyond expected to see. ===== PAGE 47 ===== HEART OVER MIND: THE DEATH OF JFK, JR. 47 So the real skill of instrument flying con- I take this relationship between instruments sists of the ability to regain control of the air- and mind as a metaphor for the wider ques- plane when it inevitably veers off in alarming tion of the relationship between reality, broad- directions. Instructors call this lifesaving skill ly understood, the human faculty of reason, “recovery from unusual attitudes,” and the and the senses and emotions that also inform mindful instructor always gives even begin- the mind. Reality is not relative, as the cultur- ners big doses of it. al relativists would have you believe when Recovering from unusual attitudes consists they tell you that your mind creates your real- of one essential belief: your feelings cannot ity. Reality is “out there” (notwithstanding be trusted as the final authority on what the introspection, which is merely thinking about airplane 1s doing. Your mind is boss. The one’s experience). The uniquely human prob- instruments are your window on reality, and lem is how to grasp it correctly. you desperately need to understand the data For the pilot, the mind must rule. they provide. The only power that can grasp Feelings, according to cognitive psycholo- and integrate this evidence correctly is reason, gy, are automatic, somatic manifestations of which evaluates experience by logic. our underlying beliefs. (See the work of But what happens when an instrument Aaron T. Beck, Martin E. P. Seligman, Albert fails? The truth exists in a context, not as a Ellis, and especially Nathaniel Branden.) For commandment carved in stone from some example, on the instrument panel the artificial authority. If, for example, the artificial hori- horizon shows a picture of an upside-down zon indicates that you're flying with the nose airplane. If you think you should be flying well above the horizon, and at the same time along straight and level, this sight will arouse the airspeed indicator reveals a high speed fear and confusion. If you are doing aerobat- with the engine at idle, and the altimeter and ics, rolling the airplane through 360 degrees vertical-speed indicators reveal a dive, then of bank, this sight will arouse joy and a sense the artificial horizon is clearly broken. Reali- of control. These beliefs operate as the source ty is contextually absolute. The pilot’s task, no of our emotions whether they are conscious or less than everyone else’s, is to grasp reality, not, whether examined in the light of reason not to invent it, and we do this by applying or merely breathed in and acted on without a reason to the evidence of our experience. thought. Our feelings, indulged without examina- Cheatin g R eality tion, will kill us. Feelings, intuition, and emo- tions are inputs that should be fully heard, but Some years ago, a visitor freshly back from they must never govern our behavior. For the halls of Congress reported a rash of lapel those of us whose goal is happiness, it is only buttons proclaiming that “Reality is nego- with the mind that we can see rightly, for what tiable!” I don’t doubt that in the world of Con- is essential is invisible to the heart. gress, where creative accounting and decep- In the mud-wrestling contest between the tion are fine arts honed to a bright shimmer, rational faculty and the feelings flooding the “reality” may appear to be as malleable under mind, the fully trained pilot learns to trust rea- the legislators’ hands as clay in the sculptor’s. son and to fight any contradictory emotional But to a pilot asking whether he can get away and sensory signals with all the power of his with cheating the reality of poor or rusty skills love of life, because it is only the power of in the face of overwhelming weather condi- reason that will save him from destruction. tions, reality should be as evidently threaten- Following your heart will kill you, as it ing as if one were contemplating a leap off the killed young Kennedy, and thousands of other Empire State Building, and wondering if flap- pilots over the years who have failed to recov- ping one’s arms could allow a gentle touch- er from a graveyard spiral. CJ down on 34th Street. ===== PAGE 48 ===== Economics on Trial by Mark Skousen IDEAS ON JIBERTY A Much-Deserved Triumph in Supply-Side Economics “After occupying center stage during the 1980s, the supply-side approach to economics disappeared when Ronald Reagan left office.” —PAUL SAMUELSON! | Bl Robert Mundell won the Nobel Prize Nobel Prize in economics. According to Jude in 1999, supply-side economics had been Wanniski, Mundell, 67, is the theoretical a school without honor among professional founder of the Laffer Curve In the early economists. Established textbook writers such 1970s he told Wanniski, “The level of U.S. as Paul Samuelson (MIT), Greg Mankiw taxes has become a drag on economic growth (Harvard), and Alan Blinder (Princeton) fre- in the United States. The national economy is quently condemned the supply-side idea that being choked by taxes—asphyxiated.”s marginal tax cuts increase labor productivity, Mundell offered a creative solution to or that tax cuts stimulate the economy suffi- stagflation (inflationary recession) of the ciently to increase government revenues. 1970s: impose a tight-money, high-interest The Laffer Curve—the theory that when rate policy to curb inflation and strengthen the taxes are too high, reducing them would actu- dollar, and slash marginal tax rates to fight ally raise tax revenue—is dismissed. “When recession. Mundell’s prescription was adopted Reagan cut taxes after he was elected, the by Reagan and Fed chairman Paul Volcker in result was less revenue, not more,” reports the early 1980s. “There’s been no downside to Mankiw in his popular textbook.2 Never mind tax cuts,” he told reporters recently. that tax revenues actually rose significantly Yet, oddly enough, Mundell isn’t accorded every year of the Reagan administration; the much attention compared to supply-siders Laf- perception is that supply-side economics has fer, Paul Craig Roberts, and Martin Anderson. been discredited. Arthur Laffer isn’t even list- In their histories of Reaganomics, Roberts and ed in the 1999 edition of Who's Who in Eco- Anderson mention Mundell only once. nomics, although the Laffer Curve is fre- Two major studies of supply-side econom- quently discussed in college textbooks.3 ics in 1982 don’t cite his works at all. Now that is all about to change with Colum- Nevertheless, Mundell has accomplished a bia University economist Robert A. Mundell’s great deal worth lauding. In fact, he is consid- -— ered the most professional scholar of the Mark Skousen (http://www.mskousen.com; mskousen gupply-siders. @aol.com) is an economist at Rollins College, Robert Mundell has had an amazing pro- Department of Economics, Winter Park, FL 32789, a . } . Forbes columnist, and editor of Forecasts & Strate- fessional career. A Canadian by birth, he has gies. His textbook, Economic Logic, is now available attended, taught, or worked at over a dozen from FEE. universities and organizations, including MIT, 48 ===== PAGE 49 ===== 49 University of Washington, Chicago, Stanford, in November 1999. According to Mundell, Johns Hopkins, the Brookings Institution, gold plays an essential role as a hedge against Graduate Institute of International Studies in a return of inflation. He predicted that the Geneva, Remnin University of China (Bei- price of gold could skyrocket in the next jing), and the IMF. Before going to Columbia decade, to as high as $6,000 an ounce, if G7 in 1974, he was a professor at the University central banks continue to expand the money of Chicago and editor of The Journal of Polit- supply at 6 percent a year. “I do not think this ical Economy. Thus the Chicago school can an outlandish figure. Gold is a good invest- once again claim a Nobel, although Mundell ment for central bankers.” He did not foresee differs markedly from the monetarist school. central banks selling any more gold. “Gold will stay at center stage in the world’s central banking system,” he said. In awarding Mundell the prize, the Bank of Famed monetarist Milton Friedman says, “I Sweden recognized him as the chief intellec- have never believed that fiscal policy, given tual proponent of the euro, the new currency monetary policy, is an important influence on of the European Community. He considers the the ups and downs of the economy.”? Supply- euro a super-currency of continental dimen- siders strongly disagree. Cutting marginal tax sions that will challenge the dollar as the rates and slowing government spending can dominant currency. The benefits of a single reduce the deficit, lower interest rates, currency include lower transaction costs, and stimulate long-term economic growth. greater monetary stability, and a common Mundell counters, “Monetary policy cannot monetary policy. Mundell advocates an open be the engine of higher noninflationary global economy, expanded foreign trade, and Monetary vs. Fiscal Policy growth. But fiscal policy—both levers of it— fewer national currencies. Ultimately, he envi- can be. . . . The U.S. tax-and-spend system sions a universal currency backed by gold as reduces potential growth because it penalizes the ideal world monetary system. Under a success and rewards failure.” strict gold standard, “real liquidity balances Mundell favors spending on education, are generated during recessions and con- research and development, and infrastructure strained during inflations.”® rather than government welfare programs. He Mundell is an optimist as we enter a new advocates reducing top marginal income tax century. He’s bullish on the global stock mar- rates, slashing the capital gains tax, and cut- kets, the gold standard, globalization, and ting the corporate income tax. Such policies downsized government. He’s my kind of would sharply raise saving rates and econom- economist. Ol ic growth—"“an increase in the rate of saving by 3% of income (GDP) say from 10% of 1. Paul Samuelson and William D. Nordhaus, Economics, 16th bl . 7 ed. (Boston: Irwin/McGraw-Hill, 1998), p. 640. income to 15%, would increase the rate of 2. N. Gregory Mankiw, Principles of Economics (Fort Worth, : 0s 0 Tex. Harcourt/Dryden Press, 1998), p. 166. [economic] growth by 50 %, 1.€., from 2.5% to 3. Mark Blaug, compiler of Who's Who in Economics (Northamp- 3.75%.78 ton, Mass. Edward Elgar, 1999), determines the top 1,000 names in the book based on frequency of citation in scholarly journals. Among the famous economists missing the cut are Arthur Laffer, Paul Craig Roberts, and Murray N. Rothbard. Mundell as Gold Bug 4. Jude Wanniski, The Way the World Works, rev. and updated . (New York: Simon and Schuster, 1983), p. x. Supply-siders also take a different approach 5. Wanniski, “It’s Time to Cut Taxes,” Wall Street Journal, : December 11, 1974. to monetary p olicy. They go beyond the 6. Paul Craig Roberts, The Supply-Side Revolution (Cambridge, monetarist policy of controlling the growth of Mass.: Harvard University Press, 1984) and Martin Anderson, Revo- : : lution (Stanford, Calif.: Hoover Institution Press, 1990). the money supply. Unlike the monetarists, 7. Milton Friedman, “Supply-Side Policies: Where Do We Go supply-siders like Mundell resolutely favor from Here?” Supply-Side Economics in the 1980s Conference Pro- : : fd : ceedings (Federal Reserve Bank of Atlanta, 1982), p. 53. Increasing the Tole of gold i In international 8. Robert A. Mundell, “A Progrowth Fiscal System,” The Rising monetary affairs. “Gold provides a stabilizing Tide, ed. Jerry J. Jasinowski (New York: Wiley, 1998), pp. 198, . : . 203-204. effect in a world of entirely flexible curren 9. Mundell, The New International Monetary System (New York: cies,” he told a group of reporters in New York Columbia University Press, 1977), p. 242. ===== PAGE 50 ===== 50 alism,” a hoary legacy of the days of human CAPITAL hs LETTERS: Nom There I joined Bolick in criticizing “con- ¢ servatives” who view the states as a bulwark against federal power, but who have no con- cern about what the states themselves do to “States’ Rights” and diminish the freedom of their citizens. Exam- ples given are Robert Bork and Edwin Meese Fr eedom III, who champion the Tenth Amendment and dismiss the Ninth. For libertarians, of which I am generally To the Editor: one, the important goal is not to preserve invi- Gene Healy represents a disturbing trend ate some magical balance of countervailing among some libertarians to nostalgically governmental powers, but to protect and recall the good old days when states were epjarge liberty. “States’ rights” in our time has bastions of freedom. Those days never existed; meant unpunished lynchings, Jim Crow laws, and as James Madison depicts them in genjal of the right to vote, exclusion from Federalist No. 10, even at the founding they occupations, and countless burdens and were such bastions of tyranny that a stronger hymjliations inflicted on black Americans by national government was called upon to racist state governments. When libertarians restrain them. invoke a higher (federal) power to protect lib- The concept of states’ rights libertarianism erty against slavery and its lingering inci- is oxymoronic. All libertarians know that gents | think they have a strong case. The states do not have rights. States have powers. principle of “states’ rights” cuts both ways, as The purpose of our federal system is to Healy shows. The principle of liberty works restrict the powers of both national and state only to advance liberty. governments. Incidentally, states have no rights. States The Fourteenth Amendment was the prod- have powers. Only individuals have rights. uct of the most libertarian Congress in —JouN McCLAUGHRY history. Properly construed, the amendment’s Ethan Allen Institute scope is purely negative in the sense of Concord, Vermont restraining state and local violations of civil rights. Let’s see . . . John Calhoun versus Roger To the Editor: Pilon and Randy Barnett? Not exactly a tough There he goes again. Last August, in a long choice for libertarians. article in the pages of Liberty, Gene Healy — CLINT BoLick went after my views on the Fourteenth Litigation Director Amendment. My detailed, 7,000-word Institute for Justice response appears in the February 2000 issue. Washington, D.C. Then in the December 1999 issue of The Freeman: Ideas on Liberty, Healy took on Clint Bolick, John McClaughry, Randy Bar- To the Editor: nett, and me—on the same subject, but with The complete version of the quotation frag- more attention to history than to theory. My ment attributed to me by Gene Healy (from response here will be brief. my favorable review of Clint Bolick’s Healy wants to resurrect “states’ rights” as Grassroots Tyranny in Reason, October 1993) a brake on federal power. Properly under- is this: “Most of those who pass for ‘conserv- stood, so do I. But in arguing against federal atives’ are proponents of ‘states’ rights feder- tyranny, he all but ignores state and local ===== PAGE 51 ===== 51 tyranny, which the Fourteenth Amendment, legal rights. No one—no libertarian, at his principal target, was designed to address. least—who speaks of a violation of “states’ Thus, he says that “libertarian centralists view rights” thereby seeks to ascribe natural rights the federal government as an indispensable to an artificial, noncognizant entity like a partner in the struggle to protect individual state. rights.” Yes, we do, but that doesn’t make us When a libertarian decentralist calls a fed- “centralists” in any serious sense of that eral action a violation of “states’ rights,” he word—because the Fourteenth Amendment, means that the federal government has trans- properly understood, affords only limited gressed its enumerated powers and is claim- power. ing jurisdiction over an area that the Constitu- To be sure, the amendment enhanced feder- tion reserves to the states. In a similar fashion, al power by providing federal remedies for we can speak of NATO’s lawless assertion of state violations of individual rights, which the jurisdiction over a civil war in Yugoslavia as a original design had failed to provide. Most violation of Yugoslav “sovereignty,” without such remedies were meant to be secured thereby conceding to Slobodan Milosevic’s through litigation in the courts. Contrary to government a god-given natural right to Healy’s contention, however, that does not kill Kosovar Albanians. I'm curious, would authorize judges to engage in “moral theoriz- Bolick and McClaughry respond to critics of ing,” although it does require them to invoke NATO’s cluster-bomb humanitarianism with the classic common law—as implied by the “states aren’t sovereign, only individuals are amendment. And section 5 of the amendment sovereign”? gives Congress, when necessary, the power Bolick suggests that the idea of states’ “to enforce” those provisions. Here again, rights has always been anathema to libertari- however, that is not a power “to comprehen- ans. Not so. Libertarian decentralists can sively redesign state and municipal codes,” as draw on a host of classical-liberal thinkers Healy claims. Rather, it is a power simply to who embraced divided sovereignty and address state violations of rights through viewed centralization in the name of liberty “appropriate legislation.” with intense skepticism. Among them: Have both courts and Congress exercised Thomas Jefferson, Lord Acton, Albert Jay their powers under the amendment faithfully? Nock, and Felix Morley. In fact, Bolick must Of course not. Whether by design or by mis- know that “states’ rights libertarianism” is not understanding, they have often abused their oxymoronic, because he is familiar with Felix powers. But that is a separate issue, to be Morley’s work. In Grassroots Tyranny, Bolick addressed on its own terms. Our liberties will repeatedly cites Morley’s classic Freedom and be better secured not by abandoning our sys- Federalism despite Morley’s embrace of tem of dual sovereignty but by getting it right. states’ rights and wholesale rejection of Four- That, precisely, is what modern libertarian teenth Amendment activism. (Morley, who legal theorists are trying to do. viewed Thad Stevens as an American Robes- —ROGER PILON pierre, would also have taken issue with Vice President, Legal Affairs Bolick’s belief that the pro-tax, high-tariff, Cato Institute corporate statists in the Radical Republican Washington, D.C. junta constituted the “most libertarian Congress in history.”) As for John Calhoun, Murray Rothbard— Gene Healy responds: who after all knew a thing or two about liber- Clint Bolick begins by trotting out the tarianism—would have been bemused by states-don’t-have-rights-states-have-powers Bolick’s notion that Calhoun was far too polit- straw man from his 1993 book Grassroots ically incorrect to be of service to libertarians. Tyranny. (John McClaughry apparently also Rothbard called Calhoun “one of America’s found the phrase irresistible and irrefutable.) most brilliant political theorists,” and quoted But here Bolick confuses natural rights and him at length in For a New Liberty. ===== PAGE 52 ===== 52 IDEAS ON LIBERTY ¢ FEBRUARY 2000 If Bolick wants his position on libertarian- In For a New Liberty he wrote of “the inher- ism and federalism to remain the party line, ent tendency of a State to break through the then when that position is challenged he limits of its written Constitution.” Rothbard ought to respond with something more than a quoted none other than John Calhoun to make few sound bites and a dismissive tone. He the point: “it is a great mistake to suppose that ought to make an argument or two. the mere insertion of provisions to restrict and To his credit, Roger Pilon has made an limit the powers of the government . . . will be extended argument on behalf of a strong sufficient to prevent the major and dominant Fourteenth Amendment, in which he grapples party from abusing its powers.” with some of the tough issues that position Pilon sees in the Fourteenth Amendment an presents. Pilon’s argument, and my response effective check on such abuses. I see it as a thereto, will appear in a forthcoming issue of source of further abuses. Collectivists in Con- Liberty magazine. gress and on the federal bench will seize on In his letter to Ideas on Liberty, Pilon the expansive construction of the amendment objects to my use of the term “libertarian cen- Pilon urges to subvert the very liberties he tralism.” I remain comfortable with character- seeks to secure. In so doing, they are unlikely izing Pilon’s position in that fashion. The to be restrained by what Pilon views as the interpretation that Pilon gives to the Four- proper understanding of the amendment. teenth and Ninth Amendments confers feder- Fragmentation of political power, even— al jurisdiction over each and every rights vio- perhaps especially—when such power is lation committed at any level of government, invoked in the service of our natural rights, is whether it be a municipal recycling program a surer guarantor of liberty than the goodwill or a local zoning ordinance. If this isn’t cen- of federal legislators and judges. I'd have tralism, the word has no meaning. thought that this was a respectable position Political power being what it is, centralism for a libertarian to take. But if, as Bolick and in the name of liberty is quite unlikely to lead McClaughry suggest, this be heresy—then to liberty. Far too much of Roger Pilon’s argu- make the most of it. [] ment for a strong Fourteenth Amendment rests on the words “properly understood.” But properly understood, the Commerce Clause, to take one example, merely eliminates inter- | We Will print the most interesting and state trade barriers—it provides no justifica- | Provocative letters we receive regarding tion for the mammoth administrative state articles in Ideas on Liberty and the issues erected in its name. Nonetheless, any anti- | they raise. Brevity is encouraged; longer federalist transported to late-twentieth centu- | letters may be edited because of space ry America would consider himself vindicat- limitations. Address your letters to: ed on seeing what centralism in the name of Ideas on Liberty, FEE, 30 S. Broadway, liberty has wrought. Irvington-on-Hudson, NY 10533; e-mail: Murray Rothbard well understood the iol@fee.org; fax: 914-591-8910. fragility of parchment barriers to state power. ===== PAGE 53 ===== Ideas on Liberty—Reaching Out to New Readers If you know of a student, friend or colleague who might appreciate a free sample issue of Ideas on Liberty, please fill out the form below and return it to us in the postpaid envelope. Make sure to include your own name—we will mention you in the covering letter we send to the potential subscriber. We appreciate your assistance in finding new friends for liberty! * Across the Sea of Commerce * How to Sink 3 Cat Fey To: FEE 30 S. Broadway / Irvington-on-Hudson, NY 10533 e-mail: iol@fee.org / fax: 914-591-8910 / phone: 914-591-7230 Please send a sample of Ideas on Liberty to: Name Address City State Zip Name Address City State Zip Name Address City State Zip Name Address City State Zip Name Address City State Zip Suggested by: ===== PAGE 54 ===== 54 and adversely affect the institutions of mar- BOOKS riage and family. She does not actively seek policy interven- tion, but suggests tax breaks for married cou- ples with children cared for at home as a legal antidote to the social outcomes sought by social feminists. But the crux of the issue Domestic Tranquility: A Brief Against Feminism by F. Carolyn Graglia should be that tax policy has unintended Spence Publishing Company ® 1998 ® 452 pages consequences, and trying to offset the bad. ® $29.95 cloth; $18.95 paperback consequences with the good usually back- - fires. Reviewed by Candace Allen Missing from the book is evidence of any awareness that licensing restrictions, heavy D omestic Tranquility is more than interest- taxation, business-entry and technology- ing reading if one sees it not as just related regulations, certification, and testing another book on feminism, but one on what it all prevent women from discovering creative means to be a woman. ways to remain home- and family-centered. Mrs. Graglia left her law practice in Wash- The vitality of any social institution depends ington in the 1950s to marry and raise a fam- on the ability to adapt to changing circum- ily. She believes that countless other women stances. Certainly, technology is offering would consider the life she chose oppressive women more time-saving opportunities and and her book answers the challenge with on-hand resources to create and run part-time tremendous feminine insight. or full-time businesses from their homes But on the subject of feminism the author without diminishing the quantity or quality of evidently hasn’t had the benefit of reading the time spent with their families. Mrs. Graglia work of individualist feminist writers Wendy would have made a better case if she were McElroy and Joan Kennedy Taylor. It’s too more conversant with the free-market critique bad. She no doubt would have avoided the tir- of interventionism. ing and stereotypical approach taken by anti- Unshackling market opportunities might feminists. But on to some good points. provide the trump cards for individuals who Mrs. Graglia discerns the totalitarian bent can use their human capital within the market of most feminists. She introduces one chapter order in ways that over time will encourage with an F.A. Hayek quotation regarding spon- the longevity of the traditional family unit. taneous order as opposed to deliberate con- Mrs. Graglia might not welcome this idea, as struction of social order. Then she argues that she views the market as something happening the very “success” of feminism has been the quite apart from family life. It’s unfortunate imposition of legislation (for example, the that she characterizes “market production” “no-fault” divorce laws) that impose perverse only as competitive and fails to grasp the incentives on wives and husbands who may underlying structure of cooperation based on otherwise have chosen a traditional family voluntary exchange. arrangement. Moreover, she apparently doesn’t value the Yes, legal mandates intended to design spe- market order as a self-organizing social insti- cific social change have contributed to the tution and seems unaware of the important demise of marriage and two-parent families. role that individualist feminists have played in She realizes that institutions, evolving over equalizing freedom of exchange for individu- time, serve to facilitate harmonious social als. The socialist feminist movement that Mrs. interaction and that they are certainly prefer- Graglia abhors is quite apart from individual- able to interventions of the state. No-fault ist feminism. divorce, federally funded daycare programs, Throughout our history, the intent of indi- tax incentives rewarding unmarried parents, vidualist feminists has been to change the and abortions for minors change incentives general rules of society to apply to men and ===== PAGE 55 ===== 55 women alike. The right to own, control, and undercover agents posing as “investors.” The dispose of property and to make contracts, buyers, whom Pogue met only once, allegedly expecting that they will be enforced, are were to use the land to build an airstrip for important examples. Individualist feminists smuggling drugs. That there were no actual seek the economic and legal freedoms that drugs involved, that Pogue was an upstanding allow any woman to become her best self. citizen with no prior drug history, and that the Mrs. Graglia attacks only collective, or airstrip was never built failed to mitigate his socialist, feminism. She does so effectively. virtual life sentence. Alas, it is not clear whether her rejection of » First-time offenders like Will Foster, sen- authoritarian feminism implies acceptance of tenced to 93 years by an Oklahoma jury for individualist feminism that seeks common cultivating marijuana for the purpose of alle- legal treatment and liberty for all human viating pain associated with rheumatoid beings. [J arthritis. Candace Allen is southwest regional coordinator for o the National Foundation for Teaching Entrepreneur- These are the seldom seen vichms of our ship (NFTE). nation’s growing drug war hysteria, unfortu- nate casualties of more than 80 years of lies, propaganda, and political posturing. Shattered Lives: Portraits From Shattered Lives pays special attention to the America’s Drug War families torn apart by drug prohibition and vy. ] . the children left behind in its wake. “I have by Mikki Norris, Chris Conrad, and four children who all live with family, but in Virginia Resner separate homes and towns,” recalls Jodie Creative Xpressions Press © 1998 © 118 pages Israel, 34, a first-time, nonviolent offender * $19.95 paperback serving 11 years on marijuana conspiracy charges. “It is so hard to explain to a child why you can’t be with them and I believe it puts a tremendous burden on their little Ithough many writers criticize the drug hearts. . . . It is not just the prisoners doing war, few, if any, more poignantly illus- time, it is our families, too. I believe it 1s just trate its human casualties than the authors of as hard on them as it is on us.” Shattered Lives: Portraits From Americas Jodie’s story, and her family’s plight, are Drug War. not unique. The authors profile dozens of Mikki Norris, Chris Conrad, and Virginia cases where the punishment is inappropriate Resner paint a human face on the thousands to the “crime.” Consider the case of David of incarcerated Americans serving out drug Ciglar. “My family is devastated,” writes sentences: Ciglar, 39. A former firefighter who saved more than 100 lives, Ciglar is now serving a » Americans like Joanne, Gary, and Steve ten-year mandatory minimum sentence for Tucker, together serving 36 years for selling marijuana cultivation. Authorities also seized legal hydroponics gardening equipment from his family’s home. “My wife live[s] every day their family-owned store. Prosecutors charged wondering if she can make it financially and and convicted them with conspiracy to manu- mentally. My kids don’t know why their Dad facture marijuana based on the offenses of a was taken away for such a long, long time.” Reviewed by Paul Armentano handful of their customers and on the Tuck- According to the Department of Justice, 1.7 ers’ refusal to allow DEA agents to install sur- million Americans subsist behind bars and veillance cameras in their store. one out of 35 Americans lives under the direct « Grandfathers like Loren Pogue, 64, serv- control of correction agencies. This inflating ing 22 years for conspiracy to import drugs prison population, one that stands six to ten and money laundering. Pogue helped a paid times higher than those of most Western government informant sell a plot of land to European nations, is largely attributable to the ===== PAGE 56 ===== 56 IDEAS ON LIBERTY e FEBRUARY 2000 war on drugs and the increasing prevalence of mandatory-minimum sentencing. Dubbed the “law of unintended consequences” by U.S. Supreme Court Justice William Rehnquist, by Myron Lieberman mandatory sentencing shifts judicial discre- Transaction Publishers ® 1998 ® 137 pages tion from judges to prosecutors. ® $19.95 paperback Mandatory-minimum laws were first intro- - . duced in the 1950s, but lawmakers eventually Reviewed by Matthew J. Brouillette repealed them because of their inflexibility. However, to appear “tough on drugs,” Con- fter decades of denial, the National Edu- gress reintroduced mandatory-minimum sen- cation Association (NEA) and the Amer- tencing in the 1980s and they are now applied ican Federation of Teachers (AFT) finally almost exclusively in drug cases. According concede that maybe their organizations have to Judge Franklin Billings, these laws deny been an impediment to K-12 education judges “the right to bring their conscience, reforms that seek to ensure classrooms are experience, discretion and sense of what is populated with only qualified and capable just to the sentencing procedure. [I]n effect, educators. Their solution? “Don’t worry; let [mandatory sentencing] makes a judge a com- us handle it.” puter, automatically imposing sentences with- NEA and AFT officials, who have in the out regard to what is right and just.” past fought ferociously to protect the jobs of Shattered Lives is based on the award- unqualified or incompetent teachers, are now winning photo exhibit “Human Rights: Atroc- proposing a “new unionism” that focuses on ities of the Drug War” All three authors teacher quality. The keystone to the unions’ served as curators and coordinators for the new reform agenda is the “peer review” exhibit, originally constructed in 1995 in con- process in which teachers continuously evalu- junction with the United Nations’ 50th ate the performance of their colleagues. In anniversary. Like its predecessor, Shattered this book Myron Lieberman, a former candi- Lives has both a literary and visual impact on date for president of the AFT, tests whether or the reader. The book’s oversized format makes not this new unionism truly represents a dif- even more compelling the portraits of those ferent direction for organizations that for forever scarred by the excesses of drug prohi- years have resisted change tooth and nail, or if Teachers Evaluating Teachers: Peer Review and the New Unionism bition. it instead offers only the appearance of If the ultimate goal of art and the written reform. word 1s to move the reader, then Shattered Peer review is a procedure culminating in Lives succeeds as have few analyses before. [[] decisions about whether to renew contracts of Paul Armentano is a senior policy analyst for The first-year teachers, to grant tenure, of © allow NORML Foundation, a Washington, D.C.-based teachers to provide assistance to struggling research and legal foundation that examines mari- tenured teachers without any implication for Juana policies. adverse action. In other words, teachers them- selves are asked to take collective responsibil- ity for improving the teaching profession. Although peer review costs schools more than traditional administrator-teacher evalua- tions, Lieberman argues that this is not neces- sarily a reason to reject it. “The question,” he writes, “is whether any additional benefits are worth the additional costs.” To answer that, Lieberman examines two peer-review pro- grams in operation in Ohio’s Toledo and Columbus school districts. Toledo began its program in 1981; Columbus implemented a ===== PAGE 57 ===== Books 57 similar plan in 1986. Both programs obliged In fact, at no time has anyone—including peer their districts to hire additional staff and review’s strongest supporters—demonstrated devote significantly more resources to their that achievement has gone up as a result of evaluation processes than previously required such programs. by traditional evaluations. Lieberman makes a strong case that peer Are the programs working? In Lieberman’s review has little potential for improving edu- words, “it is highly unlikely that peer review cation. In fact, the model peer-review pro- [is] more effective than conventional proce- grams are not demonstrably better than tradi- dures in weeding out unqualified teachers.” tional approaches to reviewing teachers. Over an 11-year period, 95 percent of first- Lieberman concludes that “Peer review illus- year teachers in Columbus were recommend- trates the point that, for certain union purpos- ed for re-employment. During this same peri- es, the belief that educational reform is taking od, 178 tenured teachers were identified as place is more important than the reality.” ineffectual and in need of assistance, but only Teachers Evaluating Teachers is must two teachers were terminated. The obvious reading for those interested in understanding question arises: Did the peer-review process how the teacher unions are attempting to actually improve the teaching of 176 teachers reshape themselves as leaders of the educa- in the district? Lieberman concludes that tion reform movement. Lieberman’s book there is no way to measure whether this has demonstrates how peer review and “new been more effective in weeding out poor unionism” are actually an effort to maintain teachers and improving those who were iden- the status quo. | . . A « tified as needing assistance. F or all we Matthew Brouillette, a former teacher, is associate know,” Lieberman says, “peer review keeps director of education policy at the Mackinac Center incompetent teachers in the classroom longer for Public Policy in Midland, Michigan. than conventional procedures did or would.” Union officials, of course, have a different perspective on peer review’s effectiveness, claiming that it is the best method by which incompetent. teachers can be removed from by William Moore Gray III the classroom. As of early 1998, however, no Sunflower University Press ® 1998 © 388 pages functioning peer-review plan had any author- ® $34.95 ity to exclude a teacher from teaching in another school district. Therefore, says Lieberman, peer review is at best a procedure to determine whether a teacher will be J periment in Liberty is an experiment by employed in one particular school district. a certified public accountant in writing a Instead, he writes, an honest evaluation of history of the United States. It is sometimes a these programs “requires recognition of the flawed experiment and often idiosyncratic in possibility that peer review may result in a organization; but this book is nonetheless lower quality of instruction” because it can more reliable than most texts now being used take excellent teachers out of the classroom, in high-school and college classrooms across where they belong, to serve instead as the country, as it places liberty rather than the “consulting teachers” who evaluate other state at the center of our history. educators. In tracing American history, Gray looks at The success of peer-review programs the impact of liberty on our political and eco- should be indicated by marked increases in nomic development. Liberty, he argues, has teacher competence, which in turn would lead been the key to American progress, with gov- to gains in student academic performance. ernment a gaudy but unproductive sideshow. But Lieberman finds no evidence that student That is a vital shift from the common scores on standardized tests have improved in approach that leads the reader to believe that school districts that have programs in place. government is the driving force. Experiment in Liberty Reviewed by Burton Folsom ===== PAGE 58 ===== 58 IDEAS ON LIBERTY ® FEBRUARY 2000 Experiment in Liberty is rather thin on the in modern American life. His refusal to take at colonial period, but ably covers the American face value the usual claims that government Revolution and economic development there- programs work and must correct for “the fail- after. On Alexander Hamilton, Gray is, I ures” of the free market sets this book apart believe, too negative. It’s true that Hamilton from the run-of-the-mill history of the United involved the federal government in activities States. beyond the scope of Article 1, Section §, of Gray properly criticizes the United States the Constitution. But he ought to be com- for its Indian policy, but his analysis is some- mended, not criticized, for helping to redeem times simplistic. The Indians often were paid the near worthless Continental bonds and for their land and sold it voluntarily. If he had thereby establish U.S. credit at home and studied the fur trade, he would have seen abroad. Gray overreacts when he concludes Indians and whites in a market economy fre- that if Hamilton “had . . . not been martyrized quently working well together. The American by falling to Aaron Burr’ bullet in a duel . .. Fur Company, under John Jacob Astor, did he would likely have disappeared quietly from more for the American Indian than did gov- the pages of history.” ernment paternalism, which led to Indian The author does a good job of tracing west- removal. ward expansion and the industrial growth of Concerned parents—who are looking for America during the nineteenth century— sensible histories of the U.S. for their high- again a result of the actions of free individu- school and college-age children—will be als operating under a system that protected pleased with this book. It’s a sad state of life, liberty, and property. On the rise of big affairs when retired accountants write better business, Gray ignores the standard historical histories of our country than do the historians, line and sagely concludes that “envy and fear but that is the case at present. Gray has served describe in a nutshell what drives the criticism up an excellent feast of information on liber- of trusts and monopolies.” ty in the United States, and its essential role in Gray is also sharply critical of the Progres- creating American health and prosperity. [] sive Era and the New Deal. He p ons out the Burton Folsom is historian in residence at the Center dangerous concentration of power in Wash- fr the American Idea in Houston and author of sev- ington that began so forcefully early this cen- eral books, including The Myth of the Robber Barons. tury and takes a dim view of the justifications advanced for subjecting people to the yoke of federal bureaucracies. Regulation, the Constitution, and However, he should have hit the problem of the Economy: The Regulatory Road the income tax harder than he did. Tax rates, to Serfdom contrary to Gray, did not remain low until 1943. During World War I, the rate on top by James Rolph Edwards incomes was hiked to 77 percent; it came University Press of America ® 1998 © 256 pages down to 24 percent in the 1920s, but shot up ® $52.00 cloth; $32.50 paperback first to 79 percent and then to 90 percent under FDR. Understanding the history of the income tax is understanding twentieth- century America, and here Gray lets the read- ames Rolph Edwards invokes a Hayekian er down. legacy in the title of his book, Regulation, Unlike many history texts, Experiment in the Constitution, and the Economy: The Reg- Liberty recognizes the deluge of problems ulatory Road to Serfdom. In light of Hayek's with the growth of government from the Great belief that freedom cannot endure unless Society era to the present. Gray frequently every generation restates and reemphasizes its quotes John Stuart Mill, F. A. Hayek, and value, this book is quite timely. The message Ludwig von Mises in advocating greater indi- is not new, but it is certainly one that needs to vidual choice and less government regulation be stressed again and again. Reviewed by M. Royce Van Tassell ===== PAGE 59 ===== Books 59 Edwards, professor of economics at Mon- He discusses how a series of obscure but tana State University-Northern, examines reg- critical Supreme Court decisions following ulation from three perspectives: historical, the Civil War, culminating in the fateful constitutional, and economic. The command- “switch in time that saved nine” in 1937, per- and-control mechanisms of the modern wel- mitted and even endorsed socialist redistribu- fare state, he observes, are not modern inno- tionist principles. To cite but one decision, in vations, but musty relics mirroring the author- the 1877 case. In Munn v. Illinois the Justices itarian, mercantilist policies of bygone stated that “Property used in a ‘public’ fash- centuries. In the social evolution from rela- ion, affecting the public at large, grants the tionships based on status to relationships public the right to control it for the public based on contract, regulatory agencies are an good.” This amounts to saying that the act of about-face. employing private assets in business automat- Furthermore, by combining legislative, ically transforms them into public property, to executive, and judicial powers, regulatory be politically regulated at will. A clearer agencies obliterate the constitutional system expression of socialist principle would be dif- of checks and balances. Even some so-called ficult to find. liberals are now starting to see the dangers in While subsequent Courts tried to narrow permitting so much power in one place. the application of this principle, none have From an economic perspective, regulation recognized that this principle knows no often cartelizes industries and stifles competi- bounds. As the Court demonstrated in the tion, thereby artificially raising prices above infamous case Wickard v. Filburn, even grain what would prevail in a competitive market. that never went, or even was supposed to go, Far from helping consumers, as widely to market can be subjected to public control. believed, regulation benefits interest groups While his assessment of regulation is accu- that know how to manipulate the political rate, Edwards has overlooked a fundamental process. issue. The Founders believed that a constitu- Summarizing the literature on regulation, tional system that depends on good behavior Edwards exposes both the inefficiency and by politicians would fail. In establishing a immorality of modern regulatory agencies system of constitutional checks and balances, like the National Labor Relations Board, the the Framers felt they had avoided that defect. Food and Drug Administration, National However, as Edwards shows, a mere change Highway Traffic Safety Administration, and of judicial opinion sufficed to upset the con- Occupational Safety and Health Administra- stitutional order. He rightly laments America’s tion. Edwards asserts that the ideologues departure from its constitutional order, but staffing these agencies “wish to exercise coer- never asks why the Framers’ system failed. If cive power over others, either because that is the defect lies not in ephemeral academic or what they enjoy or from [an] egotistical belief public opinion, but in the Constitution’s vul- that others are too stupid or immoral to be left nerability to such changes, then we must con- free.” tinue to endure burgeoning regulation and On the basis of his historical, political, and other forms of extra-constitutional controls economic analyses, Edwards explains why thé over our lives and property. nature of the federal government changed so Edwards also fails to adequately acknowl- dramatically between 1870 and 1937. He main- edge his debt to Hayek’s The Road to Serf- tains that “government growth in America has dom. Aside from the subtitle, the only refer- been related to episodic crises.” Robert Higgs ence to it is an oblique mention buried in the has made that point about the consequences of last footnote of chapter three. Those familiar both world wars. Edwards argues, however, that with Hayek’s classic will quickly recognize these changes are the outcome of more funda- the reference; however, it cannot speak to mental changes that followed the Civil War, those unfamiliar with his great work. In a conferring on the federal government greater book specifically referring to Hayek, the powers than it had ever enjoyed. author ought to have clearly articulated the ===== PAGE 60 ===== 60 IDEAS ON LIBERTY ® FEBRUARY 2000 origin and importance of the phrase “The reporters are naturally drawn to predictions of Road to Serfdom.” calamity and frequently fail to check out Finally, because of the numerous editing reports before putting dubious material before errors permeating the book, I would recom- the public. Moreover, even after a bit of scare- mend waiting for the second, and hopefully mongering has been utterly refuted, reporters cleaner, edition. [J have little interest in setting the record Royce Van Tassell is director of research with the straight. } oe . American Civil Rights Institute in Sacramento, Cali- Simon provides the “vanishing farmland fornia (www.acri.org). panic as a case study. The story began in Illi- nois in 1979, where he was teaching at the time. Farmland was supposedly being lost to Hoodwinking the Nation urbanization at an “alarming” rate. The basis . . for the assertion was a report by the Cham- by Julian Simon paign County Soil and Water Conservation Transaction Publishers ® 1999 © 140 pages ® $29.95 District that 30,000 acres of farmland had been lost between 1960 and 1978. Simon sensed the impossibility of the figure and did some checking. Agricultural acreage that had Jinan Simon was an energetic, irrepress- been shifted to other uses was far less than ible, and effective champion of freedom. claimed, and he eventually got the Illinois His untimely death in 1998 silenced a voice— Department of Agriculture to admit that the arguably the foremost voice—of reason on numbers tossed around by Champaign Coun- the subjects of population, resources, and the ty were “grossly inaccurate.” But no matter. environment. The word “irreplaceable” comes Reporters had swallowed the report whole to mind when one thinks back over his career without scrutinizing it. If there were any sto- as an opponent of faddish nonsense. ries written to correct the false impression I had occasion to speak with him only once. that our ability to produce food is in danger Back in 1997, I asked him if he would like to from greedy suburban developers, they were review a book for this magazine. He recom- buried where no one would see them. mended his wife, Rita Simon, as a better Journalists also come in for criticism reviewer for that particular volume, but we because, Simon observes, they use their “stan- then got to talking at length. What an opti- dard reportorial methods of interview and mistic, engaging, and friendly man he was. adversarial discussion of facts” when dealing His books mirrored him—brimming with life, with difficult policy issues, although these full of insight. issues call for different methods. Usually In Hoodwinking the Nation, Simon ana- reporters, when writing about population, pol- lyzes the various reasons why the crusading lution, or resource economics, employ the doomsayers who want Americans to believe same methods they use for everyday phenom- that we are running out of resources, polluting ena, such as trials or tornadoes, when what is ourselves to death, and overpopulating the needed is the scientific method. Simon writes, planet have succeeded as much as they have “Scientific discipline is necessary when the (which, to judge from public opinion polls, is chunk of the world you wish to understand considerably). This book is not a debunking presents a complex, varied, off-again-on-again of pernicious falsehoods but rather an attempt picture that includes data dispersed over time to understand why they so often spread like and geography.” Unfortunately, few journalists Reviewed by George C. Leef wildfire. know the scientific method and therefore write The news industry is the principal villain. stories when there is really no story at all. Incompetent or ideologically motivated Suppose that an “environmentalist” group, reporters are the dry kindling in the forest lets call it the Coalition to Save Our Planet through which scientific and economic disin- (CSOP), releases a “study” purporting to formation spreads fast. Bad news sells, so show that microwave ovens are disturbing the ===== PAGE 61 ===== Books 61 migratory instincts of merganser ducks and often do so because they aren’t able to filter calling for a ban on the production of out junk science. microwaves. Fuzzy-minded reporters are the Simon was optimistic that the fast-moving main targets of the study. CSOP knows that at revolution in communications would help to least some will write about it, cranking out a blunt the rapier of scientific disinformation. “dueling experts” piece that will quote first “The more competitors in the news market- the report and a spokesman for CSOP, then place, the better. The greater the number of get a response from someone from the firms, the more it will be profitable for at least microwave oven industry denying the prob- a few of them to show how others are scan- lem, and finally coming back to CSOP for a dalously misinforming the public,” he wrote. “what would you expect from those greedy This is a witty, readable, and most valuable capitalist pigs and shouldn’t we err on the side book. It’s sad that we shall have no more from of safety” clincher. Thus is the public led to the pen of Julian Simon. OJ] further believe that technology is a threat. To George Leef is director of the Pope Center for High- write anything at all about such reports is a ¢r Education Policy at the John Locke Foundation victory for the technophobes, but reporters and book review editor of Ideas on Liberty. FREEMAN (ideas On Liberty) 1999 Bound Volume he 12 issues from January through December 1999 have been gathered into a single volume—sturdily sewn with navy blue cloth cover and gold foil stamping—768 pages, fully indexed for handy reference to the latest literature of freedom. More than 100 feature articles on topics such as antitrust, education, environment, government regulation and control, health care, individual rights, labor, money, private property, and international trade. Columns by Walter E. Williams, Mark Skousen, Larry Reed, Dwight Lee, Doug Bandow, Chuck Baird, Russell Roberts, and Thomas Szasz. Reviews of more than five dozen books—and all of Don Boudreaux’s messages. $24.95 each Save! Special introductory price: $19.95, through April 30, 2000 Available February 15, 2000. ===== PAGE 62 ===== Have you heard the latest from Washington? These days it seems as if everybody is crying for the truth. But how often do you actually feel that you can believe what you hear or read? If puréed truth and strained journalism makes you want to scream, we'd like to invite you to subscribe to The Washington Times National Weekly Edition, the only nationally circulated newspaper in the country with the courage and conviction to cover the news honestly. Every week, we’ll bring you a fresh, honest, unbiased look at the people and events that shape the news in Washington D.C. and around the world. No liberal spin. No hidden agenda. Just vigorous, unapologetic journalism and clean, crisp writing. Anything less would be downright childish. Try It FREE! Call today and order 4 weeks of The Washington Times National Edition free of charge! If you like it, you’ll receive 48 more issues, for a total of 52 and pay only $59.95. If you decide not to subscribe, simply write “cancel” on your invoice and owe nothing at all! The 4 sample copies will be yours to keep! Name Address City State Zip Credit Card # Exp. Date Signature Phone Make checks payable to: The Washington Times NWE. Clip and mail with payment to: PO Box 96601, Washington, DC 20090 For lightning-fast delivery, call 1-800-363-9118 (mention express code: 2055) ===== PAGE 63 ===== The Pursuit of Happiness by Charles W. Baird Unions and Antitrust: Governmental Hypocrisy Qcton 1 of the Sherman Antitrust Act up job demarcations (specify who does what states that “every contract, combination in work) that organization would be a cartel. the form of trust or otherwise, or conspiracy, Using ordinary English, the worker cartel in restraint of trade or commerce . . . is here- (union) would be a combination in restraint of by declared to be illegal.” Notwithstanding trade, but it would not be illegal under the that the antitrust laws have been used to favor Sherman Act. particular competitors rather than the compet- The Clayton and Norris-LaGuardia Acts itive process, the Act implies that the federal give unions a statutory exemption regarding government stands for open markets. specific “anticompetitive” activities, includ- However, on top of its other failings, ing secondary boycotts, picketing, and strikes. antitrust law is a particularly egregious exam- Whenever unions undertake other activities ple of government hypocrisy because Con- that are not specifically exempted, but which gress has exempted unions. That is how the are “anticompetitive,” they, too, are declared U.S. Supreme Court interprets the Clayton exempt simply because they must be in order Act (1914) and the Norris-LaGuardia Act to make the NLRA effective. (1932). Moreover, Congress has gone further For example, in the Allen Bradley case with the National Labor Relations Act (1945) the Court ruled that collusion between (NLRA), which promotes and protects unions unions and employers that restricts competi- as combinations of workers in restraint of tion in labor markets is exempt, but collusion trade. is not exempt when it restricts competition in Economists define a cartel as an agreement other markets. Yet restrictions on competition among sellers (or buyers) of a product or in labor markets necessarily affect other mar- service to eliminate or restrict competition kets. Every collective bargaining contract is among its members. For example, if General the result of joint action of an employer and a Motors, DaimlerChrysler, and Ford attempt to union to fix wages and work rules in a labor fix prices and assign sales quotas, that organi- market, and this necessarily affects the prices zation would be a cartel and illegal under and availability of the goods and services pro- the Sherman Act. (Whether it should be is duced by that labor. The Court had to make another story.) this spurious distinction to avoid contradict- Similarly, if the employees of General ing the NLRA. Motors, DaimlerChrysler, and Ford organize to fix wages (set a standard union rate) and set Ign oring Constitutional Prin cipl e Charles Baird is a professor of economics and the A basic principle of the rule of law under director of the Smith Center for Private Enterprise the U.S. Constitution is equal treatment under Studies at California State University at Hayward. the law. The statue of Justice wears a blindfold 63 ===== PAGE 64 ===== 64 IDEAS ON LIBERTY ® FEBRUARY 2000 signifying that all courts, including the U.S. tion. The last thing we need is for bad law to Supreme Court, should apply the same rules be applied equally. to all irrespective of their identities and cir- There is only one way for a free society to cumstances. There is not supposed to be one treat business enterprises and unions equally set of rules for some and a different, contra- with respect to antitrust—apply the law to dictory set of rules for others. But when it neither. Depend on the open market process to comes to antitrust, courts routinely ignore the maintain competition. Government’s role is rule of law. merely to enforce the rules of property, con- Consider Hunt v. Crumboch (1945). A tract, and voluntary exchange. union used its closed-shop contracts (which However, doing away with antitrust regula- when forced on employers are anticompeti- tion is not enough. Government must cease tive) with shippers to drive a trucking firm out supporting combinations in restraint of trade. of business simply because the union leaders This means the NLRA must be repealed and didn’t like the owners. All the shippers with replaced with voluntary unionism. Some may whom the target firm might have done busi- dismiss this proposal as politically impossi- ness had agreements with the union that they ble. But nothing of value will ever be accom- would use only unionized truckers. The target plished if innovators only propose what seems was willing to unionize, but the union refused to be politically possible. History is replete to accept any of the target’s employees into with stories of the politically impossible the union or to supply the target with any becoming the status quo. In the 1950s the unionized drivers. Simply put, out of pure abolition of Jim Crow laws in the United malice, the union drove the target firm out of States seemed politically impossible. Until business through its legally privileged combi- the early 1990s the abolition of apartheid in nations in restraint of trade. These activities South Africa seemed politically impossible. were declared legitimate because, and only In comparison, the abolition of compulsory because, they were carried out by a labor unionism seems not much at all. union. The Court conceded that “Had a group There is an excellent real world model for of petitioner’s business competitors conspired the abolition of compulsory unionism—New and combined to suppress petitioners busi- Zealand. In 1991, the New Zealand Parlia- ness by refusing to sell goods and services to ment enacted the Employment Contracts Act, it, such a combination would have violated which eliminated most forms of compulsory the Sherman Act.” Hypocrisy replaced the unionism. Today, individual workers are free rule of law. to decide whether to represent themselves or to authorize an agent to represent them in The Remedy bargaining for wages, salaries, and other terms and conditions of employment. Unions One who understands the competitive mar- may represent only their voluntary members. ket process knows that so long as combina- There can be no forced membership or forced tions in restraint of trade are not supported by dues. Employers and workers are free to government, they are unlikely to be launched, choose whether to enter individual or collec- and if launched they will quickly collapse tive contracts. An employer may have indi- when members cheat on one another and dis- vidual contracts with some workers and col- cover ways to compete not covered by the car- lective contracts with others. All arrange- tel agreements. ments are made and carried out on the basis The remedy for governmental hypocrisy of mutual consent. Competition among alter- in antitrust is not to apply antitrust regula- native forms of labor representation is unre- tions to unions. Antitrust regulations are stricted and unregulated. The rule of law in inconsistent with the principles of a free labor relations has been re-established in society. They are not needed and they are New Zealand. We must do the same in the never used to protect the process of competi- United States. OC]