===== PAGE 1 ===== ul DEAS — ON [IBERTY August 2000 Vol. 50, No. 8 FEATURES () 8 In Praise of Athletes’ High Salaries by William L. Anderson ( 12 A (Revisionist) Walk in the Park by Andrew P. Morriss 16 The Declaration of Independence: It’s Greek to Me by Jim Peron 19 The Butter Monopoly? by Raymond J. Keating ( 23 Mandatory Student Fees and Freedom of Speech by George C. Leef 27 Exploiting Asthmatic Children by Ben Lieberman 31 Economists’ Misplaced Faith in an Invisible Hand by Daniel B. Klein 34 The Right of Resistance by James Bovard 39 Downsizing, 1860s-Style: Lessons from the Pony Express by Larry Schweikart 46 The Drug War’s Assault on Liberty by Lance Lamberton COLUMNS Tr William Russell 4 THOUGHTS on FREEDOM—Freedom of Association by Donald J. Boudreaux 14 IDEAS and CONSEQUENCES—Guns, Gun Laws, and Liberty by Lawrence W. Reed 21 POTOMAC PRINCIPLES— Visiting the Killing Fields by Doug Bandow 29 PERIPATETICS—It Can’t Happen Here? by Sheldon Richman 37 ECONOMIC NOTIONS—Marriages, Mistresses, and Marginalism by Dwight R. Lee 51 ECONOMICS on TRIAL—If You Build It-Privately-They Will Come by Mark Skousen 63 THE PURSUIT of HAPPINESS—OSHA at Home by Charles W. Baird DEPARTMENTS 2 Perspective-Getting It Right by Sheldon Richman 6 Private Investment Is More Risky than Social Security? It Just Ain’t So! by Andrew G. Biggs 53 Book Reviews 15 Great Austrian Economists, edited with introduction by Randall C. Holcombe, reviewed by Robert Batemarco; Free Trade Versus Protectionism: A Source Book of Essays and Readings by Johannes Overbeek, reviewed by James Rolph Edwards; In Praise of Hard Industries by Eamonn Fingleton, reviewed by George C. Leef; The Lexus and the Olive Tree: Understanding Globaliza- tion by Thomas L. Friedman, reviewed by Robert Lawson; Code and Other Laws of Cyberspace by Lawrence Lessig, reviewed by Andrew P. Morriss; Our Founders Knew This Well by Walter E. Williams, reviewed by William H. Peterson. Lesson plans for ® articles are available at www. fee.org. ===== PAGE 2 ===== ON [IBERTY PERSPECTIVE Getting It Right The Foundation for Economic Education eas on Liver ty as a place— ust An t Irvington-on-Hudson, NY 10533 So!”—to take editorialists and op-ed writers HAAN 291-7230 FAX (914) 591-8910 to task for their economic fallacies. We don’t -mait: 10 c€e.org . . FEE Home Page: http://www. fee.org have a place to praise them when Jey get it President: Donald J. Boudreaux right. Since they don’t do it often, that’s usual- ly not a problem. But on rare occasions, some- Editor: Sheldon Richman . . , . one does and it should be recognized. Managing Editor: Beth A. Hoffman . . On May 5, a member of the Washington Editor Emeritus SE . Paul L. Poirot Post's editorial page staff, Sebastian Mallaby, Book Review Editor wrote a column about trade with China. George C. Leef Beginning with the title, it was extraordinary: Editorial Assistant “Imports Are Good for You.” When was the Mary Ann Murphy . . last time you saw someone—even a free trad- Columnists . . ce. Charles W. Baird er—write that in a publication for general Doug Bandow readers? Dwight R. Lee Mallaby is worth quoting: Lawrence W. Reed Russell Roberts . . Mark Skousen The trade debate on China is about Thomas Szasz human rights, the rule of law, Taiwan, reli- Walter E. Williams gious freedom, nuclear proliferation, com- Contributing Editors munism; it is about almost anything, in Norman Barry other words, except trade principles. Even Peter J. Boettke th h h . China’ . t Clarence B. Carson ose who champion China’s accession to Thomas J. DiLorenzo the World Trade Organization would not be Burton W. Folsom, Jr. caught dead citing the idea of comparative Joseph S. Fulda advantage, or reminding Americans that Bettina Bien Greaves imports from China benefit them. Robert Higgs John Hospers Charlene Barshefsky, the U.S. trade rep- Raymond J. Keating resentative, boasts loudly about the exports . b Danie! B. Kleki that her deal will foster. But imports? She’s Ww } fendy McElroy proud that the agreement creates myriad Tibor R. Machan . Andrew P. Morriss ways to block them. Ronald Nash Edmund A. Opitz Mallaby goes on to point out that a pending ee ee trade bill for Africa and the Caribbean mocks illiam H. Peterson . CL } . . Jane S. Shaw liberalization by attaching protectionist condi- Richard H. Timberlake tions. The Caribbean countries may not export Lawrence H. White clothes to the United States duty-free unless Ideas on Liberty (formerly The Freeman: Ideas on Liberty) is the month- they are made from American cloth. The ly publication of The Foundation for Economic Education, Inc., Irvington- . : : on-Hudson, NY 10533. FEE, established in 1946 by Leonard E. Read, is a Africans are obliged to prevent their apparel non-political, educational champion of private property, the free market, exports from growing too quickly, whatever and limited government. FEE is classified as a 26 USC 501(c)(3) tax- « exempt organization. ; that means. Mallaby notes that “the case for Copyright © 2000 by The Foundation for Economic Education. Per- . mission is granted to reprint any article in this issue, except “The Drug imports has been neglected for so long that War's Assault on Liberty,” provided credit is given and two copies of the 4 - reprinted material ar% Sout to PEE. most people have forgotten it. And yet, Mal _ The costs of Foundation projects and services are met through dona- laby reports, free trade in clothing would save tions, which are invited in any amount. Donors of $30.00 or more receive eye ; a subscription to Ideas on Liberty. For delivery outside the United States: families $700 a year, not to mention help $45.00 to Canada; $55.00 to all other countries. Student subscriptions are . . . - . $10.00 for the nine-month academic year; $5.00 per semester. Addition- those poor regions get richer. Curious, Sn t 1t, al copies of this issue of Ideas on Liberty are $3.00 each. Bound volumes of The Freeman are available from The Foundation for calendar years 1972 to 1998. The magazine is available in microform from 2 University Microfilms, 300 N. Zeeb Rd., Ann Arbor, MI 48106. ===== PAGE 3 ===== E_g— how those who make careers of rhetorically thing the Environmental Protection Agency is bleeding for the poor always have reasons for intent on exploiting in order to impose its blocking free trade. regulatory agenda. The trouble is, writes Ben As Mallaby concludes: Lieberman, the EPA’s case is a tissue of contra- dictions. The idea that you are hurt by foreign The economics profession applies Adam imports should be as easily dismissed as Smith’s “invisible hand” imagery to itself, the notion that you are hurt by your local assuming that society prospers as economists food store. Sure, you buy groceries from prosper. Daniel Klein has his doubts. the store, and the store never reciprocates Is resistance to political authority ever jus- by buying anything from you. But that tified? America’s intellectual ancestors thought doesn’t mean you would be helped if the so, though they are out of fashion in more store were hit with a large tax—which is ways than one. James Bovard looks at a con- what tariffs amount to. troversial subject. Despite the news media’s take, corporate Hear, hear! “downsizing” is not a permanent catastrophe . x for people who lose their jobs. It never was— not even when it happened to the Pony Any society that pays athletes more than it Express. Larry Schweikart tells the tale. pays teachers has something wrong with it. Can a society conduct a war against drug How many times have you heard that one? users and remain free? Lance Lamberton shows Would you believe that the exact opposite is why in myriad ways the answer must be no. true? William Anderson makes the case. Our columnists have come up with an A pleasant walk through a park shouldnt assortment of provocations: Donald Boudreaux be disturbed by government propaganda. ponders freedom of association. Lawrence Alas, Andrew Morriss’s was, and he wasn’ta Reed cuts through the fog on gun control. bit happy about it. Doug Bandow describes his visit to Cambo- The revolutionary ideas that fueled the dia. Dwight Lee adds a caveat to his discus- founding of the American republic were not sion of marginal value. Mark Skousen con- of recent vintage. Indeed, as Jim Peron shows, templates private production of public goods. they dated back thousands of years. Charles Baird envisions OSHA at home. And News flash: Government steps in to save Andrew Biggs tells those who think stock- consumers from the coming diabolical butter market fluctuations upset the case for getting monopoly. Unfortunately, as Raymond Keat- rid of Social Security, “It Just Ain’t So!” ing explains, this is no spoof. Books on great Austrian economists, the State universities recently got the go-ahead free-trade debate, globalization, the service from the U.S. Supreme Court to charge students economy, the Internet, and the observations of mandatory fees that finance campus political Walter Williams get the attention of this groups. Bad ruling, writes George Leef. month’s reviewers. Childhood asthma is on the increase, some- —SHELDON RICHMAN ===== PAGE 4 ===== Thoughts on Freedorm by Donald J. Boudreaux Freedom of Association magine being awakened one morning by a No doubt the details of your own conversa- loud knocking on your door. You stumble tion with such an officious neighbor would downstairs and find your neighbor standing differ from the fictional conversation above. before you with a friendly smile across his But surely the substance would convey the face and a frightening rifle across his shoul- same message. You wouldn’t tolerate some- der. Behind him you see your yard surround- one else exercising the authority to screen the ed by a newly built barbed-wire fence. people you associate with. “Hi!” he says. “You're gonna Jove me! I've Or would you? If you support restrictions on decided to protect you from undesirable visi- immigration you do tolerate such an exercise tors. You can come and go as you please, but of authority by others to screen the people with don’t worry: I'll screen your visitors for you.” whom you associate on your own property. You can’t believe your ears. “This is a Make no mistake: while immigration restric- bizarre dream,” you think to yourself. You rub tions are couched in rhetoric suggesting that your eyes only to find your neighbor, his gun, they limit only the freedom of foreigners, such and his fence still before you. restrictions limit your ability, as an American, “What are you talking about?!” You're too to choose the people with whom you associate. flummoxed to think clearly. Suppose, for example, that you wish to hire “Look, neighbor,” comes the reply. “You someone to mow your lawn. Several Ameri- and your family are decent folks who want to cans offer their services to you. You might associate only with other decent folks, right? find one of these offers attractive. But not Well, I have an uncanny ability to distinguish everyone who wants to offer his or her ser- desirable people from undesirables. I'm doing vices to you can do so. Many people who you the favor of ensuring that only desirable might otherwise offer to mow your lawn are people are permitted onto your property.” excluded from the United States by armed Gaining your senses, you answer carefully: guards standing ready to shoot them if they “Listen, I don’t know what kind of mind- try to get into this country—and to shoot you altering substance you're on, but take your- if you insist on continuing to associate with self, your gun, and your fence from here persons deemed by the state to be unfit to immediately. I’m quite capable on my own to associate with you. determine whom I do and do not associate Those who oppose freedom of association with. 1 don’t need or appreciate you pre- might respond by making light of commercial screening for me the people whom I allow relationships. “Surely,” they might retort, onto my property. So scram, you buffoon! “government prescreening of workers and And mind your own business.” others with whom Americans might have commercial relationships doesn’t offend an Donald Boudreaux is president of FEE. ideal so lofty as freedom of association.” ===== PAGE 5 ===== Such a retort is devious. For example, it is superficially valid to First, immigration restrictions reduce the question the merits of open immigration freedom of each American to choose not only given our governments current generosity those with whom he deals commercially, but with welfare handouts. The argument is that also those with whom he interacts in more we shouldn’t permit so many immigrants into personal ways. For example, an American America because they are likely to swell the who wants to live in the United States with his welfare rolls. foreign wife must first navigate a labyrinth But why focus on immigration? The prob- of time-consuming bureaucracy before secur- lem is our own welfare state. Abolish it. ing Washington’s permission for the wife to A common response to this call to abolish remain in this country. More generally, any- the welfare state is that such a call is politi- one kept out of the United States by immigra- cally naive. As desirable as ridding ourselves tion restrictions never becomes part of the of the welfare state might be, politically we’re pool of people from which an American may stuck with it. choose his colleagues, friends, and intimates. Perhaps. But if so, it surely is no argument Second, freedom to associate with people for restricting immigration. A less drastic fix commercially is as fundamental as is freedom than restricting immigration is available to to associate in more intimate ways. Indeed, deal with this problem: open up immigration the vast bulk of our associations aren’t with to any foreigner who agrees never to receive loved ones and close friends but with people government welfare payments based on low whom we encounter only fleetingly. The wait- income. ress who brings my lunch, the technician who More fundamentally, the very reason upgrades my computer, the physician who offered for why it’s naive to believe that the cares for my son, the jeweler who repairs my welfare state will be abolished is a compelling watch, the cabbie who drives me home. . .. I reason to support open immigration. The wel- regularly associate with these and countless fare state is entrenched because it has created other people. its own politically powerful clientele. That’s These associations are peaceful and mutually one of the grave dangers of government pro- beneficial. Our lives are enriched when oppor- grams: they self-perpetuate despite being tunities to associate with all people of our socially harmful. choosing are unrestricted. By obstructing our Immigration restrictions are the same. ability to associate freely, immigration restric- Powerful interest groups (such as labor tions make our lives less rich and fulfilling. unions and the Immigration and Naturaliza- What opportunities do immigration restric- tion Service’s employees) benefit from the tions deny us? No doubt, we all are denied perpetuation and expansion of immigration opportunities not only to strike better com- restrictions. If ever the opportunity arises to mercial deals, but also opportunities to asso- loosen these restrictions, it should be grasped ciate with people who would otherwise quickly and firmly. become dear friends or loving intimates. It’s dangerous to use the existence of one As with all who excuse government coer- abuse of government power to justify another cion, proponents of immigration restrictions abuse of government power. Never give gov- prophesy any number of ill-effects growing ernment additional power as a means of from open immigration. Most of these objec- reducing its power. To do so is to travel along tions—for example, that immigration makes the road to serfdom—and, in the case of workers as a group worse off—are unfound- immigration restrictions, to cede to the state ed. But the few objections that have some the frightful power to select those with whom superficial merit turn out to have just that— we may associate. No free people ought ever merit that is only superficial. do such a thing. ===== PAGE 6 ===== IDEAS ON [IBERTY August 2000 Private Investment Is More unless taxes are increased or other spending is Risky than Social Security? cut. But let’s assume that the extra money needed to cover Social Security’s long-term unfunded liability—all $20 trillion of it (in . 9 2000 dollars)—is donated by a generous It Just Ain t Sol benefactor and that full benefits can be paid ° without increasing taxes a penny. Now let’s assume that the same worker invested the retirement portion of his payroll he week ending April 14 witnessed a 6 taxes (10.6 percent of wages up to $76,200) in percent drop in the Dow Jones Industrials stocks and earned the same returns that the Index, while the NASDAQ fell a precipitous market has produced since 1802: 7 percent 26 percent. The markets are sure to bounce annually in real terms. If he worked 45 years, back, but could the lasting victim be the he would retire with $838,000 in his account. movement to privatize Social Security? Oppo- Assuming he remained fully invested in the nents of privatization, which would let work- Dow index until retirement, a drop of 5,000 ers invest in personal retirement accounts points would cut his account balance in half. holding stocks and bonds, hope so. They were In addition, let’s suppose that workers do not filled with glee at the recent market volatility. have the option to wait out a market downturn William Raspberry, columnist for the Wash- or to withdraw funds from their account over ington Post, typified this view, saying that the time. They are required to annuitize their per- “wild fluctuation of stock prices should have sonal accounts on the day they retire, whether cooled the ardor of those free-enterprisers who the market is a bull or a bear. want to privatize Social Security.” Raspberry Despite all this, even if the market dropped acknowledges that, over time, the stock market by 5000 points, cutting his savings in half, the always trends upward. “But suppose the mar- worker’s account balance would still be ket dropped 500 points (or that your portfolio enough to purchase a joint-and-survivor lost a comparable amount of its value) and annuity paying over $2,700 monthly, almost stayed down—not forever, of course, but for, two-and-a-half times what Social Security say, half a year after your retirement. You would pay. In fact, it would take a market might find yourself longing for the good old crash of over 80 percent—substantially days when your Social Security payment was greater than that of October 1929 —for a per- guaranteed by the government.” sonal retirement account to pay less than what Okay, let’s suppose the market did drop S00 Social Security promises (but cannot pay). points. In fact, lets assume that the Dow dropped 5,000 points, half its current value, on the very day a worker retired. How would a worker, currently 40 years old and earning Moreover, this example assumes that the $25,000 annually, fare under personal retire- market returns only the historical average ment accounts as compared to Social Security? before its crash. History shows that most large When he retires, that worker can expect to market declines are preceded by equally large receive Social Security benefits worth approx- market advances. In this case, the account bal- imately $1,100 per month in today’s money, ance would likely be even higher. assuming full benefits can be paid. Of course, In addition, we also assume that the worker after 2015, when benefits owed exceed payroll remains 100 percent invested in equities until taxes collected, full benefits cannot be paid the day he retires. Had he practiced life-cycle Historical Average ===== PAGE 7 ===== 7 investing, in which he would move to less Even after hearing all this, some may still volatile investments such as corporate or gov- prefer not to invest in stocks. Guess what? To ernment bonds as he neared retirement, his beat Social Security, they don’t even have to. exposure to a sudden market decline would be The bipartisan 1994-1996 Advisory Council greatly diminished. on Social Security estimated that even if Critics of Social Security privatization are Social Security could pay full benefits forever correct that the stock market is volatile over without raising taxes, a typical 27-year-old the short term. In their best single year stocks single worker would receive an annual return gained 66 percent in value, while losing 40 of just 1.7 percent. Even investing only in percent in their worst. But investing for retire- ultra-safe inflation-indexed Treasury bonds, ment is about the long term. Over 30 years, currently paying 3.9 percent annually, would stocks’ best average annual return was 10.6 double that worker’s retirement income. Plus, percent in real terms, while their worst per- workers would have a true legal guarantee of formance was a 2.6 percent annual profit. In repayment, which Social Security does not other words, if you held a balanced portfolio provide. Investing in higher-yielding stocks of stocks over 30 years you never lost money. and corporate bonds, ordinary workers could The same cannot be said for “safe” govern- save enough to leave large inheritances to ment bonds, which lost money in the post-war their heirs. period as inflation ate away at their value. Nor No one except day traders likes market can it be said for Social Security, which in the volatility. But it would take a pretty large mar- future will pay many workers a negative rate of ket drop, larger even than the crash preceding return. As Wharton School professor Jeremy the Great Depression, to make Social Securi- Siegel has shown, despite their daily ups and ty a better deal than personal retirement downs, over long holding periods stocks actu- accounts. J ally have smaller variations in returns (are less —ANDREW G. BIGGS “risky”) than corporate or government bonds. Cato Institute Next Month's Ideas on Liberly: Our September issue features | 4 “The Colonial Origins of American Liberty, “Economists Against the FDA,” "A Light Goes Out in New Zealand,” and much, much more. Don’t miss it! ===== PAGE 8 ===== IDE AS @ Economics ON JBERTY August 2000 In Praise of Athletes’ High Salaries by William L. Anderson hile teaching in public schools many important. Thus the state should force the years ago, I found that almost all teach- right values on us. ers believed they were underpaid and under- Even while more and more Americans appreciated. Things probably have not attend professional athletic events, the ath- changed. My colleagues expressed their senti- letes and their sports are under greater ments by hanging a newspaper editorial on a attack. Furthermore, the off-field behavior of bulletin board in the teachers’ lounge that many athletes—including the commission of condemned the high salaries of professional serious crimes in some well-publicized athletes. cases—allegedly demonstrates that we “Americans do not value education,” the should not be paying great sums of money to editorial opined, citing as proof the fact that people who are not proper role models for “a mediocre halfback in the NFL’ was paid our children. more than three times the average teacher’s Some of the details of the editorial are true. salary. The statement had its desired effect, In fact, the gap between the average salaries judging from my colleagues’ responses to the for teachers and professional athletes in the disgruntled editorial writer. last two decades has grown considerably. Yet, The message was clear: Americans have incredible as it may sound to the average per- their priorities wrong. If they truly valued son, this is a positive sign. Far from being an education more than professional sports, indication that people are worse off, the teachers would be paid more than profession- explosive growth in the salaries of profession- al athletes. People recoil at the high salaries al athletes, as well as the overall surge of pro- players receive, salaries that seem to be out of fessional sports, demonstrates that individu- kilter with what the rest of us earn. In an als—including teachers—have become more extreme example, Michael Jordan was paid prosperous. $36 million to play his last season with the Such a statement flies in the face of con- Chicago Bulls of the National Basketball ventional understanding. After all, macroeco- Association. Even most medical doctors fail nomic statistics like the consumer price index to earn such a sum during their entire working allegedly tell us that real incomes have fallen lives. That athletes are much better paid is for the past three decades. Not only is it diffi- prima facie evidence that people in this coun- cult to argue against such numbers, but for try have no appreciation for what is really those of us who believe in limited govern- ment, there is also a dark satisfaction gained William Anderson is an assistant professor of eco- by showing that living standards are down as nomics at North Greenville College in Tigerville, ~gOvernment intervention in the economy has South Carolina. increased. ===== PAGE 9 ===== 9 The Power of Economic Analysis = We next apply this example to one’s income. Assume that Joe is a teacher and is paid once a month. His first payments go to those things that are most essential to his well-being: rent (or house payment) and food, along with other bills that must be paid imme- diately. In other words, Joe applies his income in an ordinal fashion, going from his highest valued to his lowest valued priorities. It is only after those things that are essential to him receive payment that he can apply his leftover income to less important things like entertainment, eating out, and the like. The vast majority of people will spend their incomes as Joe does. This brings us to spending on education versus spending on professional sports. If the editorial writer is correct, the majority of Americans not only rank spending on tickets for professional sports events ahead of spend- ing on education for themselves and their children, but also likely will spend more dol- lars on athletics than education. Even without resorting to a bevy of statis- tics, one can surmise that the conditions required to make the editorialist’s statement true simply do not exist. Take public educa- tion, for example. The budgets of most state governments devote more than 50 percent of their funding to education. If one includes the The praxeological tools of economic analy- sis,” however, are much more powerful than numbers created by the U.S. Department of Labor, and while we would like to be arguing that the expansion of the state in recent years has meant an absolute decline in living stan- dards, perhaps there is another case to be made. We should be telling the world that free-market capitalism has succeeded despite the ubiquitous intrusions of government. To understand how the increases in the salaries of professional athletes demonstrate that all of us are better off, we turn to an old issue: the diamond-water paradox. In The Wealth of Nations, Adam Smith asked why a diamond could fetch much more money in the marketplace than could water, despite the fact that water was much more necessary for human existence. The solution to the paradox came from the “marginalists” of the mid and late nineteenth century, including Carl Menger of Austria, William Stanley Jevons of England, and Jules Dupuit of France. Value, they astutely pointed out, is determined by the usefulness of the marginal available unit of the item in ques- tion, or marginal utility. An individual imputes value to a particular unit of water, not to the overall characteristics of water itself. added expenditures for private education, the Because water is plentiful and diamonds bers become enormous. arc scarce relative to water, 1n normal Cases 4 According to the 1999 Statistical Abstracts unit of water will not be valued as highly asa rp United States, total expenditures in diamond. However, if someone were wander- 1995 on private and public education at all ing in the desert, dying of thirst, he might |oyels was $532.4 billion. In contrast, Ameri- very well be willing to trade a beautifully cut 5g spent $57.2 billion on movies (including diamond for a canteen full of water! video rentals) and $13.1 billion on commer- cial sports (including horseracing). Diminishing Utility What's more, Americans on average spent approximately 10.7 percent of their 1995 income on education. This was not a radical departure: the share of income spent on education in 1980 was 10.1 percent. Comparing education payments to expen- ditures on other things, one finds that people Take a desert traveler who stumbles on an oasis. He pulls a bucket of water from a well and drinks to quench his thirst. After he has drunk to his fill, he uses the next bucket of water to fill his canteens, while the bucket after that goes to watering his pack animals. spent more only on food ($690.5 billion), Each successive bucket is applied to lower housing ($688.2 billion), and medical care valued uses. ($766.2 billion). *Ludwig von Mises’s term for the science of human action is Listing education spending has two draw- praxeology. backs. First, since utility is ordinal and not ===== PAGE 10 ===== 10 IDEAS ON LIBERTY ¢ AUGUST 2000 cardinal, the numbers themselves do not mea- sure utility; at best, they are a representation (or proxy). Second, most education expendi- People who can qualify to be tures come from taxes, which are not volun- teachers are relatively more tary payments. However, since the critics whom we are answering have insinuated abundant than athletes who that Americans do not pay enough taxes for can withstand the rigors of education in proportion to what they pay to professional sports. Further- see athletes, it is appropriate to list tax pay- ments along with voluntary payments for more, the professional private education. athlete operates in an arena Therefore, one cannot conclude from these in which he (or she, as numbers that Americans rank professional , . sports above educa- women’s professional sports tion. However, are increasing) can entertain how dogs one large numbers of people at square the . of fact that one time. For example, it is many pro- estimated that more than a fessional billion people worldwide see athletes make huge the Super Bowl. The best salaries while most lecturers may speak before a few hundred listeners, and most teachers teach 25 students or so at a time. Each year more than 40,000 people receive Ph.D.’s in the United States, while perhaps 40 rookies may make it into the NBA. teachers make about $40,000 a year? For example, in 1995 the average salary for a major league baseball player was $1.1 mil- lion, while the average pay for a player in the National Basketball Association was $1.9 million. The average salary for a National Football League player that year was “only” $714,000. To most observers, the difference between the salaries for professional athletes and teachers seems to reflect mistaken priorities. However, to an economist this disparity is explained by the law of diminishing marginal utility. ===== PAGE 11 ===== IN PRAISE OF ATHLETES’ HIGH SALARIES 11 More Teachers than Athletes ing salary at that time. However, even accounting for inflation, Ruth’s salary today People who can qualify to be teachers are would hardly place him near the top of the relatively more abundant than athletes who baseball payroll. Even as recently as 1985, the can withstand the rigors of professional average salary for a player in the NBA was sports. Furthermore, the professional athlete just $325,000. If adjusted for inflation, that operates in an arena in which he (or she, as figure in constant dollars for 1997 would be women’s professional sports are increasing) $414,000. Yet, the average NBA salary in can entertain large numbers of people at one 1997 was $2.1 million. time. For example, it is estimated that more Unless U.S. society has undergone a sea than a billion people worldwide see the Super change in preferences in the last 15 years, the Bowl. The best lecturers may speak before a pay increase for NBA players could have few hundred listeners, and most teachers come about only because Americans had also teach 25 students or so at a time. gained in real income. Likewise, the prolifer- Each year more than 40,000 people receive ation of minor professional sports—like arena Ph.Ds in the United States, while perhaps 40 football—means that Americans have even rookies may make it into the NBA. For the more disposable income than before and can few who do make it into the pros, their afford to pay to see such sports. Otherwise, expected tenure is short, maybe a few years these teams would drown in red ink and be out on average. A teacher, on the other hand, may of business. be able to practice his profession for up to 40 Such analysis most likely will not satisfy years. Nor do most professional athletes strike those social critics who believe unless gov- it rich. The vast majority work in the obscuri- ernment guides our every thought, we will ty of minor league sports or other relatively always make bad decisions with our money. If low-paid positions, such as a golf profession- one examines the spending patterns of most al at a country club. In other words, the mul- people, however, one finds that perhaps the timillionaire athlete is the great exception, not fears that individuals have their priorities in the rule. the wrong place are unfounded. If one can get past the feelings of envy Finally, let’s apply the analogy of the canary regarding the highly paid but often publicly in the coal mine. Before the invention of tech- immature athletes, one sees that the only nical devices to detect odorless but deadly way for the escalation of high salaries to con- methane gas in deep mines, miners kept a tinue is for society as a whole to become caged canary nearby. As long as the bird was wealthier. As noted, individuals generally put alive, gas was not present. However, if the spending for sports events far down on their bird died, it was a signal to the miners to get list of priorities. out immediately. That being the case, it is obvious that Likewise, we find that professional sports greater sums of money are poured into pro- acts as a bellwether to our overall well- fessional sports because people have increas- being. Highly paid athletes and the prolifer- ing amounts of income left over after paying ation of professional teams are a signal for their highest values. The pattern of sports that we are all better off. If those salaries salaries bears this out. begin to fall or large numbers of teams go Babe Ruth made his highly publicized bankrupt, however, beware: harder times are $80,000 a year in the late 1920s, an astound- ahead for all. OJ ===== PAGE 12 ===== IDE AS @ Environment ON [IBERTY A (Revisionist) Walk in the Park by Andrew P. Morriss was recently in Missoula, Montana, and trail marker on the “Garden City Islands,” had a chance to take a walk on a hike and several tiny scraps of land in the river, began bike trail along the Clark Fork River. Despite by explaining not the natural significance of having worked on my taxes shortly before the islands but that the islands were “estab- leaving for Missoula, I was in a good mood— lished as a wildlife education area in 1995 by the air was crisp, there was a light dusting of the City of Missoula and the Five Valleys snow on the mountains surrounding the city, Land Trust.” and the sun was coming through the clouds, Indeed, all the trail markers I read (and I giving the place the wonderful glow that think I read them all) presented a peculiar Montana always seems to have. Maybe it was view of Montana’s history. Every one empha- lack of oxygen from being at a higher eleva- sized and aggrandized the role of government. tion than I live at, but I was even thinking that The only place private entities or individuals the park was a good example of something got much attention was when they donated local governments did reasonably well. Then land for the park or built things one could stopped to read a trailside marker. see from the trail. Even then they usually The first marker I encountered described played second fiddle—the “Built Environment” the scenery but did so while devoting more plaque, for example, did mention buildings than a third of its words to the role of govern- built by individuals and businesses, but the ment in preserving the view. The second theme was the buildings’ designation as marker wasn’t much better. Entitled “The “National Historic Landmarks.” River,” it began by noting that “The clear waters of the Clark Fork suffered massive degradation after white settlement began in Western Montana” and went on to explain This 1s all the more surprising because how “[a]fter environmental awareness Montana has such an incredible history of pri- emerged in the late 1960s, laws were passed vate enterprise. The state was first settled by to protect water quality.” Three-quarters of the pioneers motivated by a desire for gold. Thou- text on this one, nominally about the river sands poured in during the 1860s to gold rush itself, was actually about the government and towns like Last Chance Gulch (now the state how it supposedly stopped pollution. Even the capital, Helena), Virginia City, and Bannack. Entrepreneurs among them, like Conrad Contributing editor Andrew Morriss teaches eco- Ect, buil forings by setting up businesses nomics and law at Case Western University, Cleve- to sell the miners food and other supplies. land, and is a senior associate at the Political Econ- When the gold ran out, huge copper deposits omy Research Center in Bozeman, Montana. were found, bringing with them the vast 12 A History of Private Enterprise ===== PAGE 13 ===== 13 empires of the “copper kings,” men like Mar- cus Daly, who carved entire new towns out of hillsides. Kept in territorial status for over 30 years by Washington politics, government just wasn’t that important to nineteenth-century Montanans’ daily lives. Yet none of the rich history of early entrepreneurship merited a mention on the trailside plaques. It may not be surprising that I encountered this sort of thing in Missoula. The town is a tiny socialist enclave in the west—Ilocal elec- tions are contested not by the Republicans and Democrats but by the Democrats and the “New Party,” one of the few successful chap- ters of the most recent attempt to build a new nationwide socialist party. Last fall’s election featured a razor-thin victory against a pro- posed ordinance requiring employers doing business with the government to pay an $8 an hour “living wage.” Even for Montana, a state where a local newspaper once ran a headline “Montana Branded Land of Kooks,” Missoula is odd. But it is not just Missoula. History, even of Missing in Missoula: There’s no tribute to early Montana the compressed variety used on roadside and entrepreneurship along the trail, no mention of people trailside plaques, is far too important to be left like Marcus Daly (1841-1900), who developed the . . Anaconda Copper Mines. to governments. Historical markers and the like can shape our view of the world by telling us what’s important. They may be the only his- Missoula) statement: “Please respect private tory many people read. The “new” history that property.” I'm sure the granola-crunching sprung up in the 1960s and emphasized the crowd that runs Missoula just meant that hik- stories of individuals other than generals and ers and bikers should stay off people’s lawns, presidents may be largely a muddle of politi- but the phrasing sent a broader message. cally correct stories of oppressed peoples, but My other reason for being optimistic? The it got one thing right—there’s a heck of a lot most prominent signs along the trail were the more to American history than government. stern warnings that the leash law was strictly Still, even my encounter with the trailside enforced and carried $25 fines for violators. I plaques couldn’t ruin my mood for long. After saw at least 25 dogs—running, chasing sticks all, I was in Montana and walking along a into the river, walking, and playing catch with beautiful river on a glorious day. Two other their owners. I didn’t see a single leash. Gov- features of the trail helped me out of the dark ernments can rewrite history, but even in an mood induced by the “history” plaques. First, essentially socialist enclave like Missoula, the trailside maps—far more prominent fea- when they get between people and their tures than the history plaques and much more dogs, theyre powerless. There’s still hope for likely to be read—featured a startling (for liberty! [ ===== PAGE 14 ===== Ideas and Consequences by Lawrence W. Reed IDEAS ON [IBERTY August 2000 Guns, Gun Laws, and Liberty he heart of virtually every citizen of Proliferation of Laws America went out to the family of little Kayla Rolland after a classmate took her life Nationwide, according to John R. Lott, Jr, with a .32 caliber revolver on February 29 in there are more than 20,000 gun-control laws Mt. Morris, Michigan. As with the Columbine that regulate everything from who can own High School shootings in Colorado last year, 8uns and how they can be bought to where a we all feel pained and distraught about such PErson can possess or use them. “The biggest senseless violence, and we wonder what has Problem with gun-control laws,” writes Lott, gone wrong and what can be done to prevent “is that those who are intent on harming oth- any recurrences. In the wake of these IS and especially those who plan to commit tragedies, legislators in every state are taking suicide, are the least likely to obey them.”! up the issue of gun control. The two students who committed the The challenge is to express appropriate Columbine murders broke at least 17 state grief and concern about these things without 2nd federal weapons-control laws. The stu- allowing hyped emotions, rhetorical window- dent who shot Kayla Rolland apparently got dressing, or futile “quick fixes” to rule the the revolver he used from the bedroom of a day. Political jockeying to prove who is most fugitive being sought on drug charges. The outraged by violence must not overwhelm boy’s uncle was arrested on an outstanding facts, logic, and experience. felony warrant for concealing stolen property. One superficial but unfortunately popular This raises a question that those who push for reaction to school shootings is summarized More gun-control laws need to answer but this way: “Guns are bad; more laws are good.” Tarely try: Can we realistically expect crimi- The facts are more complicated. Guns are not nl suspects who blithely break many laws to bad when they are not misused, not accessible Somehow obey another gun law? to people who misuse them, and used harm- Does the mere prevalence of guns in Amer- lessly in sport or recreation; they are good 1¢an society contribute to gun violence? If sta- when they thwart crime. Laws are not good tistics matter, the answer is no. A study from when they injure the rights, property, or lives the U.S. Centers for Disease Control and Pre- of the innocent; when they are ineffective or vention found that firearm-related deaths in unenforceable; or when they act as cheap the United States dropped 21 percent over the political substitutes for a problem’s real cure. five-year period from 1993 to 1997 and non- fatal firearm-related injuries fell 41 percent. Lawrence Reed is president of the Mackinac Center Including all gunshot wounds reported at for Public Policy (www.mackinac.org), a free-market ~~ ©TeTS8ENCY T00MS “whether intentional, acci- research and educational organization in Midland, dental, or self-inflicted,” the CDCP study said Michigan, and chairman of FEE's Board of Trustees. that gun-related deaths fell from 15.4 per 14 ===== PAGE 15 ===== 15 100,000 people in 1993 to about 12.1 per abiding citizens are denied the right to carry 100,000 people in 1997.2 Moreover, statistics concealed guns. Moreover, the FBI’s annual compiled by the U.S. Justice Department’s crime figures for all 3,054 counties over a National Crime Survey reveal that 88 percent recent 15-year period show that states with of all violent crimes do not involve firearms.3 the largest increases in gun ownership also Firearms ownership in America is higher had the largest drops in violent crimes.” today than at the start of the decade. An esti- Evidence is strong, based on data emerging mated 80 million people own upward of 240 in the last couple of decades, that the one million guns. What percentage of them were strategy that offers the best hope of curtailing involved in intentional or accidental deaths in crime and the misuse of guns is swift and the most recent year for which data are avail- strong punishment of violent offenders. It able? Barely one one-hundredth of one per- may seem strange to some advocates of more cent. Children under five are more likely to gun-control laws that going after the guilty drown in water buckets or die in fires that they offers more promise than going after the inno- themselves start with cigarette lighters. cent, but that’s what the facts show. While the misuse of firearms generates Finally, we must recognize that violence in publicity, the proper use of them for self- any form occurs when individuals lack defense rarely does. Americans use firearms respect for the lives and property of others. for protection more than two million times Ultimately, anti-gun laws—even the effective each year. Ninety-eight percent of the time, ones—deal more with symptoms than they do they only brandish their weapons or fire warn- with causes. We must as individuals address ing shots. However, each year gun-wielding this on the home front as we raise and nurture citizens kill between 2,000 and 3,000 crimi- our children. The values that once were the nals in self-defense, an astounding three times glue that held us together must be strength- the number killed by police.5 In a recent five- ened by home, church, school, and institu- year period, the National Self-Defense Sur- tions public and private. Parents must be vey found that the number of legal, defensive given more freedom to choose the best and gun uses was three to four times that of ille- safest schools for their children. In short, rid- gal, offensive gun uses—and that civilians ding our society of handgun violence requires using guns in self-defense save a minimum of that we recognize that guns are less the prob- 240,000 lives annually.6 lem than are certain people, certain values, Yet what about the frightening statistic that and uncertain laws. [] 13 children die every day from guns? They . . 1. John R. Lott, Jr., “Gun Laws Can Be Dangerous, Too,” Wall are not all innocent six-year-olds who would grees Journal, May 12, 1999, p. A-22. be saved by trigger locks. Eleven of the 13 are 2. “Nonfatal and Fatal Firearm-Related Injuries: United States, 1993-1997,” Morbidity and Mortality Weekly, November 19, 1999, 15 -to-19-year-olds, and most of them are U.S. Centers for Disease Control and Prevention, Washington, D.C. killed as a result of gang violence. 3. Morgan O. Reynolds and W. W. Caruth III, “Myths About Gun Control,” National Center for Policy Analysis, Dallas, Texas, December 1992. 4. John R. Lott, Jr., “More Guns, Less Crime: Understanding Concealed Weapons Crime and Gun Control Laws,” American Experiment Quarterly, Summer 1999, p. 14. : 3 : : : 5. Reynolds and Caruth, p. 10. Violent crime is 81 percent higher in states 6. Glann Otero, “Ten Myths About Gun Control.” Golden State that do not have concealed-carry laws than in Center for Policy Studies, January 6, 1999, p. 8. This report can be : : seen at http://www.claremont.org/gsp/gsp60.cfm. those that do. Robbery 15 105 percent higher 7. “More Guns = Less Crime,” Investor's Business Daily editor- and murder is 86 percent higher where law- ial, May 8, 1998, p. A-32. ===== PAGE 16 ===== DEAS ON IBERTY AuaGusT 2000 The Declaration of Independence: It’s Greek to Me by Jim Peron he stirring words of Thomas Jeffersons and liberty, with the means of acquiring and Declaration of Independence said that all possessing property.” men are endowed with certain inalienable The American Revolutionaries talked about rights. To Jefferson these rights existed before natural rights and natural laws. John Dickin- the founding of government and the function son in 1766 argued that rights “are not of government is “to secure these rights.” But annexed to us by parchments and seals.” he himself said that his ringing words did not Instead, “They are born with us; exist with us; express a new idea: “This was the object of and cannot be taken from us by any human the Declaration of Independence. Not to find power without taking our lives. In short, they out new principles, or new arguments, never are founded on the immutable maxims of rea- before thought of, not merely to say things son and justice.”? which had never been said before; but to place Ethan Allen said that “knowledge of nature before mankind the common sense of the sub- is the revelation of God . . . acquired through ject, in terms so plain and firm as to command reason”? As Deists, some of the most promi- their assent, and to justify ourselves in the nent of the Founders believed in a divine cre- independent stand we are compelled to take. ator who withdrew from the affairs of man Neither aiming at originality of principle or after his act of creation. But the creator sentiment, nor yet copied from any particular devised an orderly universe with natural laws and previous writing, it was intended to be an that could be understood by man. Through expression of the American mind.”! reason the laws of nature could be discerned, Jefferson was correct. The Resolutions of and once natural laws were understood, natur- the Town of Boston (1772) said that all men al rights automatically followed. Historian had natural rights and “Among the Natural Paul Conkin of the University of Wisconsin, Rights of the Colonists are these. First a Right in his book Self-Evident Truths, described the to Life: Secondly to Liberty; Thirdly to Prop- deistic beliefs of men like Adams, Jefferson, erty; together with the Right to support and and Madison: defend them in the best manner they can.” The Virginia Declaration of Rights (1776) pro- God published all laws necessary for claimed that “all men . . . have certain inher- political order in nature, made them avail- ent rights . . . namely the enjoyment of life able to ordinary human understanding, and _— placed the needed sanction in the dire con- Jim Peron is the author of Exploding Population Myths (Heartland Institute). He is executive director To ha avoidance N r disobedienc . of the Institute for Liberal Values in Johannesburg, e appeal of natural rights was to divine South Africa, and can be reached at peron@ authority, the way God willed all things. global.co.za. But this appeal was not slavish; just the 16 ===== PAGE 17 ===== 17 opposite. Almost every influential political and to nothing else. Hence, taken in itself, theorist from Locke on had assumed divine there is nothing religious or theological in the benevolence or, in Franklins terms, that ‘Natural Law’ of Aquinas.’® The Protestant God wanted men to be happy and thus gave jurist Hugo Grotius defended the concept of them the means of happiness.# natural law in his De Jure Belli ac Pacis, where he said such natural-law theories This view was widely held by the classical “would have a degree of validity even if we liberals of the Enlightenment. J. Salwyn should concede that which cannot be conced- Schapiro said that these classical liberals ed without the utmost wickedness, that there “beheld a world governed beneficently by is no God.” For many, the idea of “natural” impersonal natural laws.”’S Schapiro said nat- law was used to distinguish it from “supernat- ural law was an “old idea,” but that it was ural” law. The former was the product of rea- made “the acid test of the legitimacy of the son; the latter was the result of faith. Reason existing order of government and society.” In required questioning while faith required obe- “human affairs, as in those of nature, there dience. Questioning required liberty while existed natural laws that could be discovered obedience required authority alone. by the scientific method of investigation.” The Catholic Counter-Reformation re- emphasized the Thomistic rediscovery of nat- ural law. The Jesuit Francisco Suarez was the leading publicist of the Counter-Revolution In Western society, Conkin notes, “Natural- and one of his arguments against Luther, law theories originated in Greek philosophy. according to J.G. Merquior, was that Luther Plato and Aristotle affirmed not only a formal had “dismissed natural law.” Suarez found logical order in the world but an inherent pur- Luther’s “dark view of human sinfulness” posefulness in all things. Nature stood for incompatible with the idea that a just society both the order and the purpose. Aristotle’s could be found on earth. Suarez also found a universe was one vast congeries of yearnings, natural-rights argument useful for Catholics of informed objects moving toward their own living in areas dominated by Protestantism perfection and, in a sense, trying to imitate the and argued for a “full return to the natural law objects above them in a chain of being perspective’! Suarez, however, did not see stretching to a perfect mind which pulls all these rights so much as individualistic but things toward it. Man, by his intellect, can holistic and limited by the social-moral grasp the formal truth in objects, can under- framework of society. He, like Grotius, stand the structure of the universe. More accepted that “natural law does not proceed importantly he can understand himself, grasp from God as a lawgiver, for it is not dependent his own nature, which is also to perceive his on God’ will.”!! According to Merquior, it own highest good.”” The natural law of the was Grotius who first used these natural rights Greeks and the Founders was one grasped and views “to build an individualist account of understood through the use of reason. society and that he “redefined natural law This Greek concept of natural law was later apart from theology.”’12 grafted onto Western Christian thinking by Aquinas and his fellow churchmen of the Thomas Aquinas, but it originated outside Counter-Revolution returned to older Greek theology. Conkin says, “For Aristotle, lawful- ideals of philosophy. Karl Popper, in The ness and purpose inhered in a reality that was, Open Society and Its Enemies, said that “our itself, eternal and in no sense the product of western civilization comes from the Greeks.” creative intelligence.” The Jesuit philosopher This means that the Greeks “began that great- Thomas E. Davitt noted that “If the word ‘nat- est of all revolutions . . . the transition from ural’ means anything at all, it refers to the the closed to the open society.!3 The revolu- nature of a man, and when used with ‘law’, tion of the Greeks was a revolution of ideas. ‘natural’ must refer to an ordering that is man- Barbara Ward, in her Faith and Freedom, ifested in the inclinations of a man’s nature writes that the “Greek philosophers were the Greek Origins ===== PAGE 18 ===== 18 IDEAS ON LIBERTY © AUGUST 2000 first people to think systematically about ‘the people govern and not the law’ and in these problems of knowledge—of the knower which ‘everything is determined by majority and the known—and it led them to their belief vote and not by law.’ ’19 Hayek went to great in the supremacy of reason.” !4 For the Greeks, lengths, especially in his three-volume Law, “order in man’s knowledge called for a com- Legislation, and Liberty to distinguish parable order in external reality. A rational between law and legislation. Law, in the mind could hardly make sense of an irrational Greek sense, is natural and like other facts of universe.” This meant that the external world nature is discovered, while legislation is was one which contained rational laws that merely imposed. Hayek said that all schools could be discovered by reason. This did more of natural law agree on “the existence of rules than change how man perceived “facts of which are not of the deliberate making of any nature” or science; it also changed how man lawgiver.”’20 It was to this concept that the related to man.!5 Founders appealed in their Declaration of Ward says “this sense of rationality and law Independence. They felt that the British permeated all Greek thinking” and “lies at the government had violated such natural laws basis of Greek political thought.” Prior to the and thus the laws of nature justified their Greeks, “government had been arbitrary.” revolution. These “archaic societies . . . developed from Jefferson was right. The radical ideas of the primitive religion and magic”; “government Declaration of Independence were not new. was universally despotic, a private matter for They were widely held by the best minds of king or priest, arbitrary, unpredictable.”’!6 But the Enlightenment, and before them by men “despotism was anathema to the Greeks” such as Thomas Aquinas. Indeed, the Ameri- because it “denies objective and intelligible can Revolution, based on natural rights and law. The whim of an autocrat of whatever kind natural laws, was a revolution begun thou- exposes a man to irrational and unpredictable sands of years earlier by the great Greek hazards.” “Only if government conforms to thinkers in the tiny city of Athens. OJ law . . . can the citizen be said to be free.”!” 1. Letter from Thomas Jefferson to Henry Lee, in Paul Ford, ed., The Letters of Thomas Jefferson, vol. 10. (New York: Putnam’s, Founders Well Versed 1892-1899), p.268. 2. Bernard Bailyn, The Ideological Origins of the American Rev- PE) olution (Cambridge, Mass.: Harvard University Press, 1967), p. 77. . Ward 8ays that America § Founders were 3. Ethan Allen, Reason the Only Oracle of Man (Bennington, directly influenced by this Greek view: “The vt. Hasswell & Russell, 1784), p. 30. rita : 4. Paul Conkin, Self-Evident Truths (Bloomington, Ind.: Indiana country gentlemen of Virginia were versed in University Press, 1974), p. 121. the classical tradition and derived from it their 5. J. Salwyn Schapiro, Liberalism: Its Meaning and History sense of law. Some of the leading spirits in the ~~ (Prneeion NJ: D- Van Nostrand Company, 1958), p. 17. drafting of the Declaration of Independence 7. Conkin, p. 77. : 8. Thomas E. Davitt, “St. Thomas Aquinas and Natural Law,” were keen students of the idea of natural law, in Arthur L. Harding, ed., Origins of the Natural Law Tradition (Dal- which was in part a harking back to the las: Southern Methodist University Press, 1954), p. 39. ancient tradition of the Greeks, to the idea of 9 Quoted in Murray Rothbard, The Ethics of Liberty, (Atlantic . . Highlands, N.J.: Humanities Press, 1982), p. 4. dike—eternal law—TIying at the foundation of 10. J.G. Merquior, Liberalism: Old and New (Boston: Twayne : 1g Publishers, 1991), p. 20. the universe. . L. ) 11. Quoted in A.P. d’Entreves, Natural Law (London: Hutchin- FA. Hayek, in The Constitution of Liberty, son University Library, 1951), p. 71. 12. Merquior. traces the very concept of the rule of law to 13. Karl Popper, The Open Society and Its Enemies, vol. 1 (Lon- the Greeks as well. But such should be don: George Routledge & Sons, Ltd., 1945), pp. 151, 153. 14. Barbara Ward, Faith and Freedom: A Study of Western Soci- expected. If the Greeks advocated natural law 1» (London: Hamish Hamilton, 1954). p. 38. they would also advocate the rule of such law. 15. Tbid., p. 39. This is what Aristotle meant when he said “it 19 he b a 1s more proper that the law should govern than 18. Ibid., p. 139. er » : : 19. F.A. Hayek, The Constitution of Liberty (London: Routledge any of the citizens.” Hayek said that Aristotle Kegan Paul, 1960). p. 165 “condemns the kind of government in which 20. Thid., p. 237. ===== PAGE 19 ===== IDEAS ON IBERTY August 2000 The Butter Monopoly? by Raymond J. Keating Cc» butter lovers in the greater Philadel- So what’s the problem? For one thing, the phia and New York City metropolitan Justice Department has arbitrarily decided to areas spread a little easier knowing that the narrow the relevant market. The government’s federal government is looking out for them? complaint refers to “branded butter.” Accord- Antitrust regulators are on guard against ing to these antitrust connoisseurs, there is a the tiniest of price increases that might result significant difference between “branded but- from a proposed merger in the butter industry. ter” (like Keller’s, Hotel Bar, Breakstone’s, The U.S. Department of Justice (DOJ) filed a and Land O’Lakes) and “private label butter” civil antitrust lawsuit March 31 against the (or “butter marketed under a label owned or merger of Dairy Farmers of America, Inc., controlled by the retailer”). According to the and SODIAAL North American Corporation. government, “Retail consumers of branded Dairy Farmers of America sells Breakstone’s butter consider it to be a product better than butter, while SODIAAL makes Keller's and private label butter.” Continuing, the DOJ Hotel Bar. claims that “a small but significant increase in The DOJ direly warned: “If the merger the price of branded butter will not cause a were allowed to proceed, Dairy Farmers of sufficient number of consumers of branded America, Inc., and one other supplier would butter to substitute private label butter or control almost 100 percent of branded butter other products to make such a price increase sales in these markets.” unprofitable.” As a consumer in the New York metropoli- The government’s sensitive palate also tan area, I launched my own butter investiga- breaks branded stick butter and branded tion by visiting the two supermarkets in my whipped butter into separate markets. It obvi- hometown. As it turns out, the local butter ously follows that if private label butter can- market is quite robust and competitive. King not substitute for branded butter, then mar- Kullen offered 18 different brands of butter, garine or other spreads are out of the question margarine, and spreads, while Waldbaum’ as well in the governments view. pushed the number up to 19. Checking many of the labels, there were at least nine different manufacturers. For good measure, coupons and sales abounded. So the DOJ is concerned about a possible “small but significant” price increase in cer- Consumers Won’t Switch Contributing editor Raymond Keating is chief econo- tain brands of butter in two metropolitan areas mist for the Small Business Survival Committee and a Newsday columnist. His new book, U.S. by the Num- because it believes that some consumers bers: What’s Left, Right, and Wrong with America might not switch to another brand. The com- State by State, has just been published. plaint states: “Due to local consumer prefer- 19 ===== PAGE 20 ===== 20 IDEAS ON LIBERTY ® AUGUST 2000 ences for specific brands, retailers and other America from agreeing directly or indirectly consumers would not substitute brands of but- to charge Dairy Farmers of America’s newly ter promoted and sold outside the greater created butter subsidiary, Butter LLC, dis- Philadelphia and New York metropolitan criminatory prices for cream, milk or butter.” areas, and are likely to pay higher prices as a So we have a rather ridiculous ending to a pre- result of the proposed acquisition.” The gov- posterous government antitrust action. ernment also assumes that other suppliers Antitrust laws and enforcement are plagued would not react to a price increase. In sum- by many faults. In this case and others, such mary, the government is saying that con- as the Microsoft action, the definition of the sumers are stupid and the butter market has relevant market can be manipulated far too stopped working in the Philadelphia and New easily to fit the political view of regulators. York City regions. For antitrust purposes, drawing distinctions In reality, of course, there are no looming between branded versus private-label butter, threats of monopoly or dire market power in stick versus whipped, and butter versus mar- the Philadelphia and New York butter mar- garine and other spreads is as preposterous kets. Several butter choices and close substi- from an economics standpoint as excluding tutes are available, and that will continue to be ~~ Apple computers from the PC marketplace, as the case when the merger between the Dairy the government did in the Microsoft case. Farmers of America and SODIAAL goes That antitrust law instructs government ahead. lawyers and bureaucrats to speculate on the And most critically, there are no legal bar- future of particular industries and the econo- riers to entering the butter market. That’s real- my in general is equally ridiculous. The Clay- ly all that matters. ton Act, for example, prohibits the acquisition It also needs to be remembered that gov- of stock or assets “where in any line of com- ernment lawyers and bureaucrats do not merce or in any activity affecting commerce have a clue if the price of so-called branded in any section of the country, the effect of butter will actually rise or fall due to a such acquisition may be substantially to merger; nor do they know how other market lessen competition, or to tend to create a players will react. These regulators are just monopoly.” speculating. As illustrated by the government’s butter In this case, the government’s speculation case, regulators can’t even grasp the current ended with a May 18 consent decree prohibit- status of industry and the economy, never ing coordination or the sharing of “competi- mind figuring out the future. Empowering tively sensitive information” regarding brand- antitrust enforcers to predict and effectively ed butter between Dairy Farmers of America manipulate the future of U.S. industry is (merged with SODIAAL) and its competitor grossly misguided. It’s time to get rid of the Land O’Lakes. In addition, according to the antitrust laws, rein in the government, and Justice Department’s press release, the con- leave it to consumers to decide who wins and sent decree “prohibits Dairy Farmers of who loses in the marketplace. Cd ===== PAGE 21 ===== Potomac Principles by Doug Bandow IDEAS ON [IBERTY August 2000 Visiting the Killing Fields HNOM PENH, CAMBODIA—The white mon- Yet mass murder seems more a statistic ument juts up 40 feet or so, dominating the than a tragedy. A thousand, a million. What surrounding fields and trees. From a distance do such numbers mean without individual it looks like it could commemorate most any- victims? thing—a military victory, important states- Those victims are evident at Choeung Ek, man, or historical event. But this monument is known simply as the Killing Fields. Fifteen different. It 1s filled with skulls. kilometers outside of Phnom Penh—down a On April 17, 1975, Phnom Penh fell to the country road, past shacks and homes, next to Khmer Rouge. As in Vietnam, an American- a school—are the grounds in which some backed regime—corrupt, undemocratic, lead- 20,000 people were buried. erless—collapsed in the face of determined Only 86 of 129 mass graves have been nationalistic communists. In Vietnam the result excavated. The 86 have yielded 8,985 victims, was repression and poverty. In Cambodia it whose skulls and bones are stored in the 17- was slaughter. level monument. Atop the large holes are The Khmer Rouge, led by Brother Number signs listing the number of bodies—450 in One, or Pol Pot, summarily executed leaders one about 20 feet long by ten wide, for of the old regime, emptied the cities, forced instance. “Many holes, same, same,” everyone into communes, and launched social explained my guide. engineering on a vast scale. Before being But there’s more. Stub your toe on the path ousted by a Vietnamese invasion less than in between holes and you're not likely to find four years later, the Khmer Rouge had killed stones. It is more likely the tip of a leg bone as many as two million people, an astonishing or a jaw poking through the dirt. one-quarter of the population. The Khmer Rouge didn’t just murder. They The number numbs. Hitler, Stalin, and Mao did so as painfully as possible, using axes, each murdered more people. But none man- poles, hammers, and knives. Babies were sim- aged to slaughter one-quarter of his nation’s ply swung against a tree. No one was immune population. from revolutionary “justice.” Pol Pot’s reign of terror filled the country. However, Choeung Ek was the end, not the Some regions, particularly Ratanakiri beginning. Most of those buried here started province, the home base of the Khmer Rouge, in Phnom Penh, at Tuol Sleng prison. suffered less than others. But four in ten resi- Tuol Sleng sits in an area scarcely bigger dents of Phnom Penh are thought to have died. than a football field and began life as a high URE } ... school. But in May 1976 the Khmer Rouge Doug Bandow, a nationally syndicated columnist, is a senior fellow at the Cato Institute and the author established Security Office 21, or S-21. Its and editor of several books, including Tripwire: Purpose was to expose and exterminate ene- Korea and U.S. Foreign Policy in a Changed World. mies of the regime. 21 ===== PAGE 22 ===== 22 IDEAS ON LIBERTY ® AUGUST 2000 Photos of the Living And that time was only after you confessed. As Martin Stuard-Fox and Bunheang Ung explain in their book, Murderous Revolution, enemies “were never simply arrested and shot: authorities had first to obtain confes- sions which would justify their arrest, and thus confirm the omniscience and justice of Angkar [the Communist Party] in arresting them.” If there was any justice at Tuol Sleng, it was that Khmer Rouge cadre were among the vic- tims. This revolution, like so many revolu- tions before it, consumed its own. These memorials in Phnom Penh reflect Choeung Ek brutally overwhelms through its pile of skulls. Tuol Sleng is even more powerful. It features photos of the living as well as of the dead. The Khmer Rouge were nothing if not meticulous. They kept arrest and execution records and filed confessions; they also num- bered and photographed incoming prisoners, often in profile as well as in front. It is the images of the living that haunt. Men and women. Boys and girls. Babies. The photos line the walls. Four roomfuls. Faces of people. Once alive. Now dead. . only the small tip of a pervasive system of A few look defiant, smoldering hatred evi- 1,1 der. Reports French scholar Henri dent in their eyes. Others look bewildered. [ ,card “From 17th April, the entire country Many radiate fear, eyes wide at the fate they ct become in a way one big prison.” knew to be before them. One seemed to be There were three waves of imprisonments crying, almost begging for his life. and murders. The first was directed against But most look dead. Their hearts beat, ;1m ost anyone associated with the fallen Lon blood flowed, and nerves transmitted pain, but No] regime. In general, the victims were mur- their eyes were lifeless. Empty. Their human- 4.104 outside of any formal prison. ity had been wrung out of them and casually The second bout of repression began in the tossed aside. latter part of 1975 and was directed against One picture is particularly unnerving. A the same classes of people, including profes- man sporting the number 162 sits with a gonai5 and civil servants. Many of these vic- vacant stare. He knows only too well that his; < had either been denounced by enemies or life will soon be over. prisoners, or had revealed incriminating Tuol Sleng was, first and foremost, an inter- getails of their pasts when writing their auto- rogation center. Khmer Rouge interrogation p;ooranhies for the new rulers. These arrests meant torture. And torture often meant death. gincided with establishment of a national prison network. The final round of brutality began in 1976 and, explains Locard, “swept through all The tools are all on display. The metal bed classes of the new society,” including “the frames and wooden slab to which inmates Khmer Rouge cadres and military personnel were shackled, then beaten. The metal and themselves. All categories of the revolution- wooden tubs in which people were drowned. ary society were soon engulfed in the mael- The high bar from which inmates were dan- strom of repression as the regime was getting gled. The boxes that housed the scorpions that more and more deranged and saw ‘enemies,’ were set on prisoners. The electrical wires khmang, everywhere.” Even at the informa- with which shocks were admimstered. And tion and foreign ministries in Phnom Penh. the clubs, axes, hammers, shovels, and knives But most of Cambodia’s dead, at Choeung used to punish and kill. Ek and elsewhere, were innocent—the vic- Although death was the ultimate end, the tims of totalitarian egalitarianism, in which Khmer Rouge thoughtfully strung barbed life means nothing and the collective means wire around the cellblocks to prevent prison- everything. Alas, the world is full of monu- ers from committing suicide. You would die, ments to incredible evil cloaked with the but only when the party thought the time was rhetoric of humanity. Few are more moving right. than Cambodia’s Killing Fields. CJ Tools on Display ===== PAGE 23 ===== IDEAS @P Government ON [IBERTY Mandatory Student Fees and Freedom of Speech by George C. Leef n March 22 the US. Supreme Court rebuke. The Seventh Circuit rejected Wiscon- ruled, in Southworth v. University of sin’s proposed refund mechanism for object- Wisconsin Board of Regents, that requiring ing students and trounced its argument that students to pay fees to support campus subsidizing an array of student groups was groups, a common practice at many colleges a vital part of a university’s educational and universities, is not unconstitutional. The mission. Court has spoken—but did it speak wisely? The university appealed to the U.S. Supreme Let’s consider the case and the issues it raises. Court. In a 9-0 decision, the Supreme Court Scott H. Southworth is a student at the Uni- reversed the lower courts. Justice Anthony versity of Wisconsin in Madison. A self- Kennedy’s opinion gave Wisconsin nearly all described conservative Christian, he objected that it had hoped for. to the university’s use of mandatory student First, the Court distinguished the case from fees to fund campus groups that he found union-dues cases by arguing that while speech offensive. Relying on Supreme Court prece- that is outside the ambit of the union’s core dents in union settings, where the Court has function is not “germane” to it and not a ruled that dissenters from the union’s political chargeable expense, all speech is “germane” stances cannot be compelled to pay for them to a university’s “mission” to foster “dynamic through mandatory dues and fees, Southworth discussions of philosophical, religious, scien- argued that his First Amendment right to tific, social, and political subjects.” Therefore, refrain from subsidizing the speech of others ruled the Court, if a university chooses to had been violated. Although the fee was only impose mandatory fees to “facilitate a wide $330, Southworth maintained on principle range of speech,” it may do so. that he should not be required to help finance The Court added a qualification, however. even one cent of the budget for the many sta- The university must be “viewpoint neutral” tist campus groups for which Wisconsin is with respect to the subsidies it dispenses. Jus- famous. tice Kennedy failed to explain precisely what Persuaded by Southworth’s analogy to the “viewpoint neutrality” requires, but what union dues cases, the trial court invalidated apparently he has in mind is that there cannot the university’s mandatory fee scheme. The be an unwritten rule that “only leftists need university appealed to the Seventh Circuit apply.” There will certainly be future litigation Court of Appeals and there suffered a severe over the “viewpoint neutrality” issue. Will Behemoth State U. be able to say that it is George Leef is the director of the Pope Center for ~~ ¥1SWPOINt neutral” if it gives some money to Higher Education Policy at the John Locke Founda- College Republicans, lots to a bevy of statist tion and book review editor of Ideas on Liberty. organizations, but nothing to (just to make 23 ===== PAGE 24 ===== 24 IDEAS ON LIBERTY ® AUGUST 2000 something up) the Lysander Spooner Campus neutrality in its subsidy decisions. The Court Association? Will a token conservative or says in effect: You may legitimately be forced free-market presence suffice to satisfy the to pay for the propagation of ideas you abhor Court that the university’s policy is “view- because there is some chance that money will point neutral”? By saying “yes, but . . .” to also be given to organizations you like. Does mandatory student activity fees, the Court has that make you feel better? Are you no longer opened up the federal courts to a tremendous aggrieved because “your side,” as viewed by wave of new litigation. some jurists, was not completely shut out in The part of Wisconsin’s program that the the rumble for money? Court questioned in this regard was its student No. The harm you feel is not alleviated at referendum method of funding or defunding all by the determination that the people who campus groups. Decisions to give money or controlled the purse strings were “fair” or not are usually made by the student govern- “unbiased.” Your right not to support speech ment, but those decisions can be overridden and action to which you object is not by student referendum. The Court was trou- redeemed by the fact that people who dis- bled by the possibility that putting financial agree with you are or might also be displeased support for possibly unpopular groups to over some of the funding decisions. Two majority vote would be inconsistent with its wrongs don’t make a right whether we are “viewpoint neutrality” requirement, and for talking about kids on a playground or the that reason remanded the case for further Constitution. proceedings. The Court’s notion that First Amendment rights are not infringed as long as some osten- 2 sibly “fair” procedure is involved is a novel Does Southworth Make Sense? Fc. eigen. Maybe it won't metasta- The Court acknowledges that there is a size, but if it were to, would state or federal First Amendment problem when students are attempts to suppress free speech then be compelled to subsidize “speech which some approved as long as the suppression were students find objectionable and offensive to directed at dissidents “from both sides”? The their personal beliefs.” (This is a constitution- fact that not one member of the Court wrote al matter only with tax-supported institu- to question the thesis that constitutional rights tions.) The freedom not to have to give finan- are “protected” by “viewpoint neutral” proce- cial support to speech with which one dis- dures is unsettling. agrees (which is usually more a matter of Justice Kennedy also makes much of the action than writing or speaking) has been one university’s “mission” to “foster vibrant cam- of the Court’s consistent principles since the pus debate among students.” But why do uni- famous union dissident cases beginning with versities have any such “mission”? Vibrant Abood v. Detroit Board of Education (1977). debate is something that frequently occurs on In Southworth, however, the Court takes the a college campus, an inevitable consequence relaxed view that the First Amendment rights of bringing together a large number of intelli- of students are “sufficiently protected” as gent people. Debate is a good thing. But it long as the mandatory fees are allocated in does not follow that universities have a “mis- accordance with its vague “viewpoint neutral” sion” to foster it, any more than they have a standard. mission to foster conviviality, physical fitness, The Court’s position is indefensible. or any other good thing that could come Put yourself in the shoes of Mr. South- from the human interactions on a university worth. You object to the fact that some of your campus. money is being directed to student organiza- If universities have a mission, it is to pro- tions that attempt to influence public opinion vide educational services for those who desire and policy in ways that you find repulsive. them. Some students may be interested in The Court says you must put up with it pro- vibrant debate on socioeconomic issues, but vided that the university retains a veneer of others just want to learn their accounting, ===== PAGE 25 ===== MANDATORY STUDENT FEES AND FREEDOM OF SPEECH 25 chemistry, economics, and so forth with as only solution to that problem is to separate few distractions as possible. That is what they education from the power to tax. With gov- pay for. Of course, it would be unconstitu- ernment out of the picture (and it is worth not- tional for a state university to take steps to ing that there were nongovernmental universi- suppress speech, but it does not follow that ties long before governments pushed their they have an obligation to subsidize it. way into the education business), there would "The Court’s “vibrant debate” is available, be no state action and therefore no constitu- almost instantly if desired, on university cam- tional problem. puses without the need for any subsidy from But given that we have tax-supported uni- the pockets of uninterested students. Students versities, why is it a defense for the avoidable who desire free expression and interchange of institution of mandatory student activity fees ideas can log onto the Internet, turn on aradio to say that there is an unavoidable problem or television, open a newspaper or magazine, with the employment of professors who will or personally attend any of the numerous from time to time say things that some student meetings, lectures, symposia, rallies, and such or taxpayer will find objectionable? If the that swirl around campuses. In the absence of First Amendment protects not just our free- university subsidies, campus organizations dom of speech, but also freedom from having such as Madison’s Lesbian, Gay, Bisexual and to support the speech of others, shouldn’t we Transgender Campus Center could still exist, minimize instances of the latter? Since it is but would have to subsist on funds voluntari- possible to let students opt out of a fee sys- ly given to them without forcing students like tem—exactly what Wisconsin proposed to the Scott Southworth to help finance them. Seventh Circuit—why does the Court tolerate the attack on the rights of Mr. Southworth? It Uninterested in Debate shouldn’t. And that observation leads to another: ’ . . 2 While the Court wraps the warm cloak of What's a University to Do: “speech” and “debate” around the campus Southworth is not a convincing essay in organizations favored with distributions of the constitutional law, but the Court has spoken. mandatory fee money, many of them are not If a university wants to have a mandatory fee the least bit interested in education, speech, program to subsidize student organizations on and the marketplace of ideas. If a university campus, it may do so—as long as the funds were to invite Justice Clarence Thomas to are distributed in a “viewpoint neutral” man- give a talk on the importance of federalism, ner. for example, his appearance would be protest- Just because the practice is not constitu- ed and quite possibly disrupted by some of the tionally prohibited, however, does not mean same campus organizations that the Court that a university has to do it. For several rea- says help to bring about “vibrant debate.” sons, the University of Wisconsin and other Intervention in the natural order always has tax-supported universities should abandon unintended consequences; the effort to pro- mandatory student fees as a means of subsi- mote speech and debate by scattering money dizing selected campus groups. to an assortment of organizations that have no First and foremost, as Jefferson wrote, “it is qualms about receiving funds taken by force sinful and tyrannical to compel a man to fur- 1s no exception. nish money for the propagation of ideas he The Court erected one more line of defense disbelieves in.” Whether it is compulsory sup- for its decision: that student tuition helps to port for an “established” church (the subject pay for the salaries and classes of many pro- of Jefferson’s comment) or compulsory sup- fessors who espouse ideas that some students port for a student group devoted to a political find repugnant. It is too bad that students (and or philosophical cause, compulsory funding is taxpayers) have to in any measure support the inconsistent with individual choice. Universi- propagation of ideas they don’t believe. The ties can demonstrate that they are committed ===== PAGE 26 ===== 26 IDEAS ON LIBERTY © AUGUST 2000 to the freedom of their students to make their pulsory fees given to any group is not just own choices and speak for themselves by a monetary savings for a student. It’s also a stopping the practice of mandatory activity way of saying that the university will respect fees. the student’s autonomy. That may make the Second, abandoning the mandatory fees difference between getting or not getting a program will spare the university the cost of student. litigation over its “viewpoint neutrality.” Finally, universities would do the world a There can no more be a definition of or infal- favor if they ended the mandatory fee policy lible test for “viewpoint neutrality” than there that encourages students to look to the politi- can be one for “pornography.” Any allocation cal methods of taxation and lobbying to of mandatory fees can be challenged as tend- accomplish their objectives and instead ing to favor some viewpoints over others, and required them to adopt the marketplace meth- legal challenges are likely. The Southworth ods of voluntary exchange and peaceful coop- case was in the courts for nearly four years. eration. We have quite enough of the former What a waste of money! as it is without universities teaching students Third, universities that do not resort to that the way you get things done is through mandatory fees can use that fact as a compet- the use of coercion. ittve weapon. These days, institutions of It’s too long for a bumper sticker, but uni- higher learning use almost every imaginable versity administrators would be well advised tool to persuade students to enroll at their to “Just Say No to Mandatory Fees for Stu- campuses. To know that there will be no com- dent Organizations!” Cd foundation for Economic Education fall Dinner Featuring Dr. Charles Murray Author of Losing Ground and What It Means to Be a Libertarian Sunday, October 29, 2000 Harvard Club, New York, NY Reception 6:00 P.M./Dinner 7:00 P.M. For further information, please contact Nicole Gray at FEE, 914-591-7230, ngray@fee.org. ===== PAGE 27 ===== IDEAS ON [IBERTY August 2000 Exploiting Asthmatic Children by Ben Lieberman hildhood asthma is on the rise, and the gain support for its costly new rules, and it experts are not sure why. The Environ- worked—at least until a federal court invali- mental Protection Agency blames air pollu- dated them two years later. The case is head- tion, and uses concerns about asthmatic chil- ed to the Supreme Court. dren to justify its aggressive implementation Last year, those same asthmatic children of the Clean Air Act. In contrast, a recent were said to be suffering because of sport util- National Academy of Sciences report points ity vehicles. In December, EPA enacted new to indoor, not outdoor, contaminants as the motor vehicle emissions standards, including likely cause. If the National Academy is right, far stricter ones for SUVs. During a press EPA is wasting billions on misdirected solu- conference announcing the rules, President tions to this very real problem. Clinton told a group of Washington, D.C, In 1997, EPA ran into some trouble pro- elementary-school students that “Carol moting its tough new ambient air-quality Browner has said to me, you have got to do standards for ozone and particulate matter something to reduce incidents of asthma (smog and soot). Even the agency’s own and other respiratory diseases among young Clean Air Scientific Advisory Committee children.” According to Vice President Gore, concluded that tightening the already strict EPA’s tightened emissions standards will existing standards will garner few if any addi- result in “260,000 fewer asthma attacks in tional public health benefits. With such a children, and more than 4,000 fewer prema- weak factual case for action, EPA Administra- ture deaths.” tor Carol Browner switched to emotional Just a month earlier, EPA and the Depart- arguments, claiming that the new rules would ment of Justice announced the filing of law- prevent “hundreds of thousands of cases of suits against 17 midwestern and southern elec- significantly decreased lung function in chil- tric power plants, claiming, among other dren and cases of aggravated asthma.” things, that their emissions carve a childhood EPA’s asthma-pollution connection is exag- asthma path that stretches all the way to the gerated. In fact, over the same 25-year span northeast. Attorney General Janet Reno stated that childhood asthma incidence and mortali- that “when children can’t breathe because of ty has approximately doubled, ambient con- pollution from a utility plant hundreds of miles centrations of ozone and particulate matter away, something must be done” As of May have substantially declined. Sidestepping the 2000, over 40 such coal-fired facilities have evidence, the agency misused the issue to been targeted with lawsuits or administrative actions. Ben Lieberman is a policy analyst with the Competi- It appears that EPA and its allies will play tive Enterprise Institute. the childhood asthma card again and again, as 27 ===== PAGE 28 ===== 28 IDEAS ON LIBERTY ® AUGUST 2000 long as it wins. The issue has even become a have had the unintended consequence of trap- part of the presidential race, with Sierra Club ping more pollutants indoors, including sever- television ads blaming the suffering of young al now implicated as asthma triggers. Unfor- asthmatics in Texas on Governor Bush’s tunately, the Clinton administration is step- supposedly weak enforcement of air-quality ping up its energy efficiency agenda in the standards. name of fighting global warming, seemingly oblivious to the downside of heavily insulated and less well-ventilated homes. Even EPA’s own indoor air experts concede Obviously, not all of these putative causes that “indoor levels of many pollutants may be of childhood asthma can be as significant as two to five times, and on occasion more than claimed, and it is quite possible that none of one hundred times, higher than outdoor lev- them are. Building on a growing body of evi- els,” and that “most people spend as much as dence, “Clearing the Air: Asthma and Indoor 90 percent of their time indoors.” Indeed, EPA Air Exposures,” by the National Academy’s funded the Institute of Medicine study as well Institute of Medicine, makes a compelling as others implicating indoor air pollution as a case that indoor air pollutants, such as insect health threat. Clearly, the agency is knowing- remains and molds, are the primary culprit. ly overstating the public health benefits of Though the report does not directly compare many rules targeting outdoor pollutants. the relative contributions of indoor and out- Public concerns about the increase in child- door air, it found “strong, causal evidence hood asthma are entirely justified. Indeed, it is linking common indoor substances to the hard to think of anything more important than development or worsening of asthma symp- the health of children. That’s why it is so dis- Primary Culprit toms in susceptible people.” turbing to see the issue being exploited for As for why asthma has been on the bureaucratic gain. increase, several other studies have blamed Every dollar spent fighting an overblown the federal government’s policy of promoting asthma threat is a dollar that can’t be used to tighter, more energy-efficient residences, make real progress. Keep that in mind the schools, and other buildings in response to the next time the EPA announces a new measure energy crisis of the 1970s. These efforts may to “protect” the asthmatic children. [] wast | Clichés of Politics HESS | Mark Spangler, editor Ar you tired of hearing people tell you that "We | heed government to fix this"? If so, we've got just what you need: Clichés of Politics, now in its fifth printing. Edited by Mark Spangler, this book is a powerful antidote to statist claims that more tl government is better. Clichés is also a great hw resource for students addressing policy issues in research papers or in debate. And now with our companion Web site, www.cliches.org, it’s more effective than ever! 524 pages, paperback $9.95 postpaid Please send check or money order to: FEE, 30 South Broadway, Irvington-on-Hudson, NY 10535 ===== PAGE 29 ===== Peripatetics by Sheldon Richman IDEAS ON [IBERTY August 2000 It Can’t Happen Here? he magician’s most potent power is mis- daughter of liberty: a national identification direction: by making his audience think card. that it should look over there, he’s able to get In the past six years Congress has passed away with some rather simple trickery over legislation at the behest of the President to here. Using that mundane power, magicians build databases on individuals’ health, educa- have been able to pull off some amazing feats. tion, and employment. Those databases, So have people in government. Houdini which are to be linked to records held by the himself might envy their facility at distracting states, can easily be cross-referenced thanks their victims from the real source of their to the Social Security number every American oppression. citizen has and which every child must have Take the issue of privacy. The current occu- before his parents can claim him as a depen- pant of the White House and his heir apparent dent. Contrary to government promises, that have more than once waxed eloquent on the number has become a de facto national iden- dangers to our privacy in the electronic age tifier. The impetus for even private requests from the—private sector. In an address last for the number is the federal government’s spring, the President promised legislation to voracious appetite for information. protect us from third-party access to our Americans might have been counted on to financial and medical information. resist being hogtied and tagged, but the social Sounds good, until we understand two engineers are clever. Besides misdirection, points: they are also masters of incrementalism and obfuscation. They know that if they go slow, » We can deal with private violations of our most people, like the oft-cited frog in the privacy without the help of the federal gradually heated water, will never notice the government, and impositions. * There 1s no bigger threat to our privacy Examples of obfuscation abound. If the than the federal government itself! planners wish to compile a database of our employment histories, they can say it is neces- While the politicians keep us agitated about sary to prevent illegal immigrants from work- private companies’ compiling and distributing ing, to apprehend “deadbeat dads,” to combat information about us, it is relentlessly build- welfare fraud, and to upgrade the workforce. If ing huge networks of databases of personal- they want medical dossiers on everyone, they ized information on every man, woman, and can say they are needed to root out fraud, to child, and subtly moving America toward avert epidemics, and to advance research. If something that should sicken every son and they aspire to amass educational and psycho- logical profiles of our children, they can pro- Sheldon Richman is editor of Ideas on Liberty. claim their goals to be improvement of schools 29 ===== PAGE 30 ===== 30 IDEAS ON LIBERTY ® AUGUST 2000 and preparation of the future workforce. And What’s Going On? if they decide to require banks to report on o their customers, of course it is indispensable to ~~ Why does government want all this infor- stopping money laundering. mation about us? Some social engineers—the There's always a good reason that will shut Planners who fear that society will perish most people up—assuming they know what's {rom centrifugal stress without them—may going on at all. They usually don’t know really believe that if they are going to do because those intrusive little items are buried things for us, they need to know everything in innocent-sounding legislation. The mandate bout us. That's a good reason to spurn the to create a “unique health identifier,” the key ~8overnment’s help. to keeping tabs on each of us medically, was Another motive, in at least some cases, is buried in the Health Insurance Portability and Sheer power lust. Every dictatorship keeps Accountability Act of 1996. The provision cre- information on its subjects. It’s the key to con- ating a Directory of New Hires, an electronic trol. Political leaders who want to constrict collection of personal employment profiles, Our sphere of action know that nothing is so was packed into the Personal Responsibility useful as personal information. Paul Schwartz and Work Opportunity Reconciliation Act of has written that the “mandatory disclosure of 1996. (It dovetails nicely with the tracking and Personal information can have a destructive certification called for in the School to Work ~¢ffect on human independence. . . . Americans Opportunities Act of 1994.) The provision NO longer know how their personal informa- inaugurating the requirement that employers tion will be applied, who will gain access to check with the government before hiring any- it, and what decisions will be made with it. one was included in the Illegal Immigration 1he resulting uncertainty increases pressure Reform and Immigrant Responsibility Act of for conformity. Individuals whose personal 1996. (Thanks to Representative Ron Paul and data are shared, processed and stored by a others, a law essentially forcing the states to mysterious, incalculable bureaucracy will be adopt a federally designed driver's license/ID more likely to act as the government wishes card was repealed.) them to behave. You see the pattern.! Many members of Whatever the reason, these intrusions Congress often don’t know those things are diminish our freedom and steal our dignity. buried in legislation. How can busy private NO worthwhile objective (medical research, individuals know? Charlotte Twight describes Prevention of fraud, and so on) requires that the methods of obfuscation as manipulation the government force us, our employers, doc- of “political transaction costs,” that is, making tOTS, teachers, and bankers to divulge person- it tougher for people to know what the gov- al information; compile the data in a central ernment is doing and to protest effectively Computer; and share it with others without our even if they find out. By these methods, gov- consent. We should have had enough experi- ernment has imposed some rather subversive ©N¢€ with modern despotism to know what programs, including Social Security and evils can come from the very sort of activities Medicare. Government's facility at conceal- the U.S. government now engages in. What ing its activities is yet another reason to shed Makes anyone so confident that those outrages the romance with democracy. against liberty can’t happen here? 0 (Here § an irony: Government also raises 1. For details see Charlotte Twight, “Watching You: Systematic political transaction costs by tying something Federal Surveillance of Ordinary Americans,” The Independent people don’t like to something they do like; Review, Spring 1399, pp. 165-200; and Claire Wolfe, A Number, ; : : ) ’ ot me,” The Freeman: Ideas on Liberty, Ma , Pp. creation of Medicare was tied to an increase 298-303. ’ ’ P in Social Security benefits. When Microsoft 2. Quoted in Twight, p. 166. tied a browser to Windows it was prosecuted for breaking the law. You decide which kind of tying is more harmful.) ===== PAGE 31 ===== IDEAS ON [IBERTY Economists’ Misplaced Faith in an Invisible Hand by Daniel B. Klein I academia most economists practice tech- are wiser about economic policy than the nical crafts. Academic incentives strongly average voter. The public needs their help. favor such crafts, and economists pursue aca- And in being relevant, economists would bet- demic rewards, perhaps with a faith in the ter learn economic judgment and become yet applicability of “the invisible hand” to their wiser. own “industry.” But the crafts are mostly irrel- vant or policy issues and contribute little to Who Makes Public Policy? The invisible hand works well when sup- In fields such as medicine and chemistry ply—of, say, shoes—caters to customers who important new decisions are made by trained purchase with their own money product for experts. Even when an active patient makes their own use. Competing suppliers prosper his own medical decisions, he first obtains by best serving demanders. In academia, how- knowledge about his particular condition and ever, the demand for academic product comes becomes a narrow sort of expert. Unlike an from journal editors, referees, and university individual making his own medical decisions, departments. The demand is the expression of however, we decide public policy collectively. other suppliers. It is as though shoe deman- In political economy important decisions are ders were only other shoe makers, who made not by trained experts, but by govern- demand shoes not for how well they wear but ment officials and voters—the Everyman for aesthetic niceties fancied by the guild. (which of course includes every woman). Academic economists tend to favor peers Politicians must worry about meeting the whose crafts exalt their own handiwork. Inthe approval of voters, the Everyman, not econo- social sciences and humanities, demand and mists. Because the Everyman neither expects supply are highly interlocking, circular, and his vote to make the difference in an election self-legitimating. The “industry” is more of a nor anticipates bearing the many hard-to-see craft circle or club. And the club subsists on drawbacks, he has little incentive to know bet- tax and tuition dollars. The grounds for faith ter about public issues. He often decides rash- in an invisible hand are rather slight. ly, ignorantly, and incompetently. Society would gain a great deal if econo- Not knowing better, the Everyman needs mists became more relevant. Most economists saving from himself. He shoots himself in the foot by building rail transit or government Contributing editor Daniel Klein is associate profes- housing, monopolizing letter delivery, subsi- sor of economics at Santa Clara University. He is editor of What Do Economists Contribute?, recently dizing agriculture, restricting imports or phar- published by New York University Press and the Cato maceuticals, imposing price controls, and Institute. imposing licensing restrictions. Foolishness 31 ===== PAGE 32 ===== 32 IDEAS ON LIBERTY e AuGusT 2000 may be avoided by economic enlightenment. mathematical functions called “consumers,” Well-intentioned policies have drawbacks that “producers,” and so on. As in solving a puz- economists can skillfully illuminate. zle, the model builder finds the “equilibrium,” Building rail transit or government housing which is treated as the conclusion of the story. means creating public-sector operations that Of the many particulars of human practices serve society poorly and that no one owns or and institutions, only one or two can be mod- takes a long-term interest in. Government eled at a time. Going by the code word “theo- investment also means the displacing of other, ry,” model building often makes no serious probably more useful investment. Imposing reference to real world happenings. Dubious a minimum-wage law means stripping work of this kind appears in Econometrica unskilled workers of their chief means of and The Journal of Economic Theory. Theory competing against higher-skilled workers and of what? one wonders. machines. Restricting pharmaceuticals in the The other official genre is statistical signif- name of safety means denying patients drugs icance—an important test of many hypothe- they need and discouraging drug development ses, but one that is rarely placed into a broad- and innovation. Imposing occupational er body of argument on a policy issue. If the licensing means restricting the supply of ser- economist does try to make an argument vices, raising the price, and preventing poor about the real world, the fancy statistics are people from entering the occupation and get- usually not the persuasive part of the argu- ting a foothold on the economic ladder. Were ment. As Ronald Coase, Herbert Stein, economists to better engage the Everyman Lawrence Summers, and Deirdre McCloskey and point out such drawbacks, economists have pointed out, simpler forms of evidence would reduce the not-worth-knowing-better and reasoning are much more believable and problem. carry the oomph of economic persuasiveness. The Everyman is somewhat like the drunk But the simpler forms don’t qualify as impres- looking for his lost keys under a lamppost sive performance. because the light is better there. Assisting the So to gain prestige economists perform for Everyman would require only basic economic each other rather than enlighten society at ideas. Most economists could provide the large. If an economist writes policy studies or analysis needed. In doing so, however, they nonacademic articles, his colleagues may dis- might not show themselves to be exceptional- parage such work by calling it “advocacy,” ly smart or clever. In fact, the cleverest econ- “popularization,” and “nonscience.” In acade- omists at MIT or Harvard might explain basic mia, participating in public discourse often principles no better than young graduate stu- counts against you. dents at George Mason University. The econ- omists, though knowing where the keys are, py, you Have Faith in Academia? give little assistance. Not only does society suffer from missed Theory of What? economic instruction, but by removing him- self from public discourse the academic econ- Academic economists crave academic rank omist also misses opportunities to better learn and prestige, which translate into nice tenured how policy and markets really work. Focusing positions, easy grant money, and influence exclusively on technical schemes, economists over graduate students and the profession. As have blinded themselves to certain broad real- in most walks of life, material benefits go ities that do not fit in. In real life, market con- hand in hand with ego benefits. ditions are highly particular and in flux. The academic world needs standards for Knowledge of moment-by-moment particu- ranking economists and their research. In eco- lars resides only in decentralized form among nomics two official genres have evolved and myriad individuals, each of whom interprets now dominate. One is model building. The the situation differently. Model building and model builder writes down a toy economy of statistical significance can scarcely appreciate ===== PAGE 33 ===== ECONOMISTS’ MISPLACED FAITH IN AN INVISIBLE HAND 33 the implications of a world with divided, dis- “industry” to sustain such an invisible-hand jointed knowledge, because only by assuming faith. Meanwhile, many complacent club uniformity, stasis, and common knowledge economists are ready to dismiss the research does the system of equations become work- esteemed in sociology, political science, or able. By shutting themselves off from the real women’s studies. But the structure of all the economy, economists have lost touch with the social science “industries” is basically simi- basic economic insights of Adam Smith, FA. lar, so why would the invisible hand apply to Hayek, and Coase. They are in fact worse economics but not to the other social sci- economists for having preoccupied them- ences? Economists ought to think harder selves with the meretricious standards of aca- about the economics of economics. demic rank. | The failings of universities were discussed Let’s Debate the Issue! ong ago by Adam Smith. He said education- al institutions subsisting on endowments or A scholarly community depends on stan- state funding tend to lose enthusiasm for the dards for good research, and those needs are basic instructional needs of the people. Uni- relatively well met by equilibrium model versity faculty become a self-evaluating building and statistical significance. Those body. They indulge one another’s neglect of genres have their proper place, and a degree basic teaching and occupy themselves with of scholasticism is inevitable and indeed elegant yet arid learning. Furthermore, their desirable. But there is too much. To foster avoidance of “the current opinions of the research and teaching that is less paradigmat- world” (that is, the policy opinions of the ic and more relevant to policy, economists Everyman) shields their own beliefs from should relax certain scholastic norms. challenge. Smith’s discussion of universities As Thomas Mayer argues, in good policy- suggests that in scholastic communities irrel- relevant work the chains of argument are usu- evance and bad judgment go together—a ally made up of links even the strongest of result today more amply demonstrated, in my which are not very fancy. Economists might opinion, in the more leftist (and hence, willy- shift their standards of evaluation to the entire nilly, more statist) disciplines of the academy. chain of policy argument, not just its strongest The average economist today is wiser about links. In doing so, they could reduce the public policy than the average voter, but that Everyman’s cost of learning the basics and wisdom would be still greater by his engag- improve public decisions. ing in more give-and-take on concrete policy Policy-relevant work is bound to involve issues. greater exercise of judgment. Like scotch, Club economists complacently affirm status- judgment is heady stuff. But one may learn to quo academic institutions. The implicit pre- imbibe more responsibly and to tolerate better sumption is that doing well academically is the passions of other imbibers. Economists doing good for society—the invisible-hand tend to see consensus as the hallmark of sci- result. Some prominent free-market econo- ence, but in a science like political economy, mists, such as George Stigler and Sherwin where the true practitioner is the Everyman, Rosen, have even made the presumption perhaps equal standing should be given to explicit.* But neither they nor any other econ- dialogue. Economists should make their sem- omist has actually done the economics of his inar rooms and professional journals more ——— hospitable to policy debate and outspoken- Estos (Chicnsor Unversity of Chivas bese 158, on 34 65. Ness. They should increase their esteem for and Memoirs of an Unregulated Economist (New York: Basic basic policy work, and decrease their esteem Books, 1988), p. 85, 179; and Sherwin Rosen, “Austrian and Neo- for the two modes of academic performance classical Economics: Any Gains From Trade?” Journal of Eco- ) nomic Perspectives, Fall 1997, pp. 139-52; see p. 151. currently dominant. OJ ===== PAGE 34 ===== IDEAS ON IBERTY AuaGusT 2000 The Right of Resistance by James Bovard MM politicians talk as if citizens were obliged both to revere and obey their government. But there are few things more dangerous than swallowing the notion that government is entitled to boundless obedi- ence from the people under its power. Throughout history, governments have occa- sionally overstepped the bounds of their legit- imate power. What should be done when gov- ernment betrays its promises? John Locke’s work Two Treatises of Government was written in the 1680s, when Englishmen were chafing under the growing tyranny of the Stuart kings. Locke wrote, “That subjects, or foreigners attempting by force on the properties of any people, may be resisted with force, is agreed on all hands. But that magistrates doing the same thing, may be resisted, hath of late been denied: as if those who had the greatest privileges and advan- tages by the law, had thereby a power to break those laws, by which alone they were set in a better place than their brethren.” Locke showed how the power of a ruler must not be placed on a higher moral plateau than that of any other potential criminal: “Should a Robber break into my House, and with a Dagger at my Throat, make me seal Deeds to convey my Estate to him, would this give him any title? Just such a title by his Sword, has an unjust Conqueror, who force some into Submission. The injury and the James Bovard is the author of Freedom in Chains: The Rise of the State and the Demise of the Citizen (St. Martin's Press). 34 Crime is equal, whether committed by the wearer of a Crown, or some petty villain. The title of the offender, and the number of his Followers make no difference in the Offence, unless it be to aggravate it.” No concept of sovereignty can justify extending government power beyond the bounds of political right. It is absurd to expect governments to descend into barbarism grad- ually, step by step—as if there were a train schedule to political hell and people could get off at any stop along the way. People forget how quickly the forms of political power can turn civilized behavior into unrestrained pil- lage and mass violence. Most people strolling the streets of German towns in the late 1920s would never have suspected that, within a few years, the government would launch a policy of genocide. Similarly, someone visiting Moscow in 1913 or Phnom Penh in 1969 would likely not have seen the barbarity just around the bend. Politicians rarely give for- mal warnings of how they intend to abuse the power they acquire. Once ideas and principles consecrating unlimited power are accepted, it is only a mat- ter of time until that power is used in ways that shock those who acquiesced to its expan- sion. As Senator John Taylor observed in 1821, “Tyranny in form is the first step towards tyranny in substance.” Mere Parlor Talk Discussions of political right are mere par- lor talk unless citizens have a right to resist a ===== PAGE 35 ===== THE RIGHT OF RESISTANCE 35 tyranny. The New Hampshire Bill of Rights, cessful assassinations became pretexts to written in 1784, declared: “The doctrine of redouble oppression. The first necessity for nonresistance against arbitrary power, and peaceful reform is for people to realize how oppression, 1s absurd, slavish, and destructive much power they have to bring government to of the good and happiness of mankind.” Yet its knees. At the height of the Vietnam War much of the political and academic establish- protests, fewer than 5 percent of the American ment shudders at even considering the right to public were actively protesting the war, yet resist.” those protests psychologically paralyzed the Any discussion about the right of resistance Johnson administration and played a role in must begin by recognizing the extent to which the Nixon administration’s paranoia of dissent government is already the aggressor. As Locke that led to Watergate. wrote, “There is only one thing which gathers Intelligent, targeted, decisive protests can people for sedition, and that is oppression.” puncture the sense of legitimacy that cossets History is replete with tyrannical govern- both Leviathan’s commanders and employees. ments that deserved to be destroyed by their And once the government’s aura of legitimacy victims. At what point can we say that a gov- is shattered, the “transaction costs” of tyranny ernment has placed itself in a state of war skyrocket. Each person who understands his with the citizenry? By what standard or mea- rights and liberties is another barrier against sure can people know when they have a right the wrongful expansion of government power. to forcibly resist illegitimate power? In As sixteenth-century French philosopher Bosnia, in Rwanda, or in other areas where Etienne de la Boétie observed, “It is the mass murders have recently occurred, the cit- inhabitants themselves who permit, or, rather, izen obviously may use as much deadly force bring about their own subjection, since by as necessary to prevent himself and his fami- ceasing to submit they would put an end to ly from being slaughtered by rampaging gov- their servitude.” ernment forces or by murderous private mobs In the final analysis, the government’s sov- acting with government sanction. And in the ereignty is limited by the character strength of United States, blacks clearly had a right to its subjects. If the citizens have self-respect peacefully resist segregationist laws in the and courage—and the means to defend their 1950s and 1960s and had a right to violently rights—government abuses will be curbed. resist attacks on them by sheriffs and private Historian Thomas Babington Macaulay, writ- citizens. ing in 1832, asserted that the English in the Unfortunately, there is no lucid standard by 1500s were “beyond all doubt, a free people. which a citizen can know precisely when he They had not, indeed, the outward show of must cease obeying. And, regrettably, much of freedom; but they had the reality. They had the political establishment, like the Anglican not a good constitution—but they had that Church in the 1680s, will preach the duty of . . . which, without any constitution, keeps passive resistance all the way to the entrance rulers in awe—force, and the spirit to use it.” of the political slaughterhouse. There may come a time when peaceful resistance becomes futile. As Locke wrote, “Men can never be secure from tyranny, if there be no means to escape it, till they are Nonviolent action is, in most cases, a far perfectly under it.” In the same way that any more effective means to curb power than is citizen has a right to defend himself against a violent resistance. Killing an oppressive mugger or a murderer, so citizens in general politician usually only generates more sympa- have a right to defend themselves against vio- thy and sanctity for the engine of coercion lent political predators. that he commanded. Many attempted or suc- As Joyce Lee Malcolm showed in her 1994 book, To Keep and Bear Arms: The Origins of ~ *See James Bovard, “Paranoia about Paranoia in American Poli- 7" Anglo-American Right, the . Second tics,” The Freeman: Ideas on Liberty, August 1999, pp. 27-30. Amendment was based on recognition that Effective Nonviolent Action ===== PAGE 36 ===== 36 IDEAS ON LIBERTY ® AUGUST 2000 people had the right to possess the means to The 1995 bombing of the Oklahoma City resist government tyranny. Discussions on federal building was inexcusable, and the federal gun control measures often focus on people who carried out the bombing deserve whether specific guns serve “sporting purpos- death sentences. Citizens have as little right es.” However, if the Founding Fathers had to kill innocent government agents as govern- added a clause to the Second Amendment ment agents have to kill peaceful private specifying that people will be “permitted to citizens. own guns for hunting rabbits,” the Constitu- If statists fear popular resistance, perhaps tion would have been overwhelmingly reject- government should violate fewer rights. The ed because Americans would have been alert- militia movement in this country became ed to how far politicians intended to stretch highly active only after the federal killings at their power. Ruby Ridge, Idaho, and Waco, Texas. The fact The citizens right to resist government is that no federal officials have been held legal- directly proportionate to the amount of force ly responsible for the deaths made many peo- government uses against the citizen. If the ple presume, not surprisingly, that the govern- government generally respects the rights of ment is out of control and a dire threat to their the citizen, then the citizen should give the rights and safety. government the benefit of the doubt when it Government does not have rights in itself, occasionally errs or exceeds its legitimate but only possesses such powers as are neces- power. When abuses do occur, citizens are sary to safeguard and uphold the rights of the obliged to seek every peaceful remedy before citizens. The more power that sovereignty forcibly resisting. supposedly confers on government, the more the doctrine of sovereignty defeats the entire purpose for which government was created. When politicians stretch their power beyond Regardless of whether Americans consider reasonable bounds, it is they, not the citizens the federal government illegitimate, attacks resisting political oppression, who destroy the that kill innocent people are never justified. legitimacy of the state. Il Respecting the Innocent Assurance and Trust in a Great Society by Professor Dan Klein An intriguing look at the ways markets promote and reward relationships built upon trust. This collection of four essays provides vigorous counterarguments to those who claim that government alone is capable of policing against fraud and unfair dealing. ON SALE NOW FOR $7.95, postpaid ===== PAGE 37 ===== Economic Notions by Dwight R. Lee IDEAS ON [IBERTY August 2000 Marriages, Mistresses, and Marginalism J) iunguishing between marginal and total ing firsthand experience. Also, nothing impor- values is crucial to understanding many tant would be altered if I reversed the sexes’ human activities and decisions. Almost all the roles. decisions we make are made at the margin, but After a few years of marriage a husband there are exceptions. We are sometimes faced has had lots of experience with his wife. He with decisions that force us to compare the has seen her almost every day, most of their total value of one option to the marginal value time together being spent in rather routine of another. These decisions can be far more activities. He knows her habits, so most of her agonizing than decisions made entirely at the behavior is predictable and not very exciting margin, which require sacrificing a little bit of or even particularly interesting. He spends one thing to have a little bit more of another. ~~ hours with her and never says a word to her or Consider love and marriage, a topic not notices her presence, even if the football commonly thought to be one that economics game is less interesting than the beer com- has much to say about. But decisions that lead mercials. And she experiences him in much to love, marriage, and sometimes divorce the same way, so her responses to him typi- always involve choices between competing cally lack enthusiasm, which reinforces his alternatives, and therefore involve costs and own lack of enthusiasm. In other words, benefits. These costs and benefits are person- before long the husband doesn’t find his wife al and subjective, but so are all costs and ben- very valuable at the margin. efits. And if people consider the relevant costs In contrast, the woman he meets at work or and benefits when making relatively trivial on a business trip seems far more interesting. decisions, say on whether to acquire or dis- He has not known her long, and likely doesn’t card a pair of socks, then surely we should see her often, so she is less predictable and expect them to consider the costs and benefits more exciting than his wife. Also, he likely of vital decisions such as getting married or sees her in more interesting situations than in divorced. a messy kitchen with screaming kids. And if his interest in her is reciprocated, it will prob- Wives and Mistresses ably be with far more eagerness than he has experienced at home in a long time. If she My wife reads these columns, so I want t0 becomes his mistress, with occasional emphasize that economic analysis allows one Jjajsons in romantic settings, he can find him- to acquire insights into activities without hav- self exhilarated at the thought of the next Dwight Lee is Ramsey Professor at the Terry College encounter. [1 ess is far more valuable to of Business, University of Georgia, and an adjunct im than 18 wile at the margin fellow at the Center for the Study of American Busi- The passion of the love affair causes the ness at Washington University in St. Louis. husband to think about leaving his wife for his 37 ===== PAGE 38 ===== 38 IDEAS ON LIBERTY ® AUGUST 2000 mistress. But leaving his wife involves a dif- there is an old saying that “we hurt the ones ferent calculus from comparing the value of a we love the most,” and marriages (especially little more time with his wife with that of a lit- strong marriages) are often good examples of tle more time with his mistress. A divorce is this. not a decision made at the margin but one that We often do things to aggravate and hurt forces the husband to confront competing those we love that we would never consider total values. Here the advantage can easily doing to casual acquaintances. The distinction shift to the wife. Her marginal value may be between total and marginal value is important small, but her total value can be very large. here. Those we love (who provide us with a lot The husband's relationship with his children, of total value) are generally those who love us his parents, and many of his friends; his (we provide them a lot of total value), so we standing in the community; his sense of per- can impose some marginal costs on them with manence and place; and his financial hurtful comments and behavior without elim- prospects are all inextricably connected with inating all the total value they receive from us. his wife and marriage. Plus there is the gen- If we did the same thing to casual acquain- uine fondness he likely has for his wife and tances at work, for example, our total value to their shared memories and experiences. them would quickly become negative and we The wife is like water and the mistress like would find ourselves isolated or worse. Of diamonds. Given a marginal choice between course, even with loved ones, there are limits the two, the husband readily sacrifices a little to how much pain they will take from you, but time with the wife for a little more with the the stronger the marriage the more latitude mistress. But when the choice is between the there is. In a weak marriage there will not be total value of the wife and the total value of much pain, at least for long, since there is lit- the mistress, the wife wins. tle total benefit sacrificed by divorce. Obviously the analogy of the wife as water To reinforce the point, consider how much and the mistress as diamonds is not perfect. aggravating behavior parents will endure Men do leave their wives. A marriage can fail from their children. There is probably no love because the wife (remember, the sexes can be stronger than that which parents have for their reversed) ceases to provide value both at the children. And children often take advantage margin and in total. But the important distinc- of this love by behaving in ways that inflict tion between total value and marginal value tremendous pain on their parents. explains why so many men who are genuine- I am not recommending that you take ly enthralled by their mistresses give them up advantage of the love people have for you by rather than sacrifice unexciting marriages. behaving badly. Far from it. Neither am I arguing that economics gives a complete Hurting Those We Love explanation of the behavior observed in mar- riages and families. That behavior is influ- the Most enced by many factors best considered by As this discussion indicates, there can be a those trained in other fields. But unless you lot of pain in a marriage, even a strong mar- distinguish between total and marginal effects riage. Obviously in many strong marriages of behavior, you will leave unopened an there is little pain, and certainly this is what important window of understanding on mar- most of us would consider the ideal. But riage and families. [] ===== PAGE 39 ===== IDEAS ON [IBERTY AugusT 2000 Downsizing, 1860s-Style: Lessons from the Pony Express by Larry Schweikart N: image in the 1990s captured the appar- attempt to remain competitive. A figure of 43 ent weaknesses of the capitalist system million lost jobs since 1979 was reported more than that of mid-level managers “down- widely, but the most popular single villain, sized” out of their jobs. Here were successful AT&T, received some of the most critical executives with well-paying jobs and solid press when it announced that it would elimi- retirement prospects suddenly told that they nate between 36,000 and 40,000 positions in had no place in the company and that they had an effort to stay afloat. Newsweek, though, to go. probably won the sleazy journalism award by Corporations, cognizant that the news portraying several CEOs on its cover with the would be portrayed negatively (jobs lost and title, “Corporate Killers.” lives ruined rather than new jobs created and Part of the enthusiasm for the news customers served), attempted to “spin” the accounts involved the “victims”—in this case, reports by creating such terms as “downsiz- employees whose productivity no longer ing” and, more insultingly, “right-sizing.” As matched their cost—because the pink-slipped the companies expected, newspapers reported were overwhelmingly mid-level managers and each new announcement of corporate cut- white-collar executives who had (seemingly) backs with almost gleeful tones, to the point been spared the severe retrenchments during of running news about the layoffs in headlines the 1970s and 1980s in the steel, auto, and with the most dramatic language. The New electronics industries. At that time, the blue- York Times, for example, in March 1996 ran a collar workforce had taken it on the chin, and seven-part series called “The Downsizing of the media had dutifully covered those devel- America,” in which it called laid-off employ- opments with appropriately somber and glum ees “casualties” of “the battlefields of busi- commentaries. After all (the newsroom rea- ness.”! Companies did not merely release soning went), the blue-collar guys actually individuals—often with generous terms or worked for a living and thus were deserving of mutually agreed-on severance packages; sympathy. But the corporate types? Served instead they “chopped” or “slashed” their ’em right. Now they knew how the line work- workforces, throwing people “onto the street.” ers felt. One headline trumpeted that Sears “kills” cat- alog sales, and jobs were routinely described . as being “cut,” with the phrase “drastic cuts” Belated Compassion used frequently to describe a company’s By the second and third wave of white- collar layoffs, however, even the media started Larry Schweikart teaches history at the University of tO show compassion, relating tales of bread- Dayton. winners turned out on a moment’s notice and 39 ===== PAGE 40 ===== 40 IDEAS ON LIBERTY ® AUGUST 2000 of fathers unable to care for their children. The has been fired or nearly fired; few workers are Times, for example, opened its series with the so diligent and successful in every undertak- story of Steven Holyhausen, who went from a ing as to be immune from a pink slip. Actor $52,000-a-year banker to a $12,000 position Sylvester Stallone, discussing with talk show as a tourist information officer. host Charlie Rose his pre-Rocky employment Certainly at no point did much discussion in a number of positions, observed that he about the actual economics of the equation didn’t provide value for consumers in any pro- arise. Seldom did a story begin: “Today, fession other than acting. In writing a book on AT&T announced that it would no longer pay entrepreneurship in American history, I was 9,000 mid-level managers three times the struck by how many successful businessmen average American’s income for doing a job and women had been fired, or had failed—not less efficiently than the Japanese or the Ger- once, but often repeatedly—to the point that mans.” Nor did most stories mention that in they were written off for dead, only to make the 16 years that the nation lost 43 million their most important contributions to society. jobs, industry created 70 million new jobs; or (These sections I have called “Tales from the that since 1982 the number of Americans Crypt.”) Well-known American businessmen, working increased by 32 percent; or that the from P. T. Barnum to C. W. Post, from Henry competitors of AT&T all added more than Ford to Famous Amos, all experienced bank- 185,000 new positions since 1978.2 Although ruptcy, some more than once. Being fired or reporters portrayed the Steven Holyhausens broke, it turns out, was not only common, it as typical, seldom, if ever, were reporters able often provided the critical stimulus people to follow any sizeable sample of workers for needed to achieve greatness. any substantial length of time after they were fired to determine what happened to them after their downsizing. After all, they had other stories to write. Had they done so, the Since the concern with unemployed work- Times reporters might have found that the real ers and their ability to find new jobs has not evidence painted a much different picture interested many scholars until the post-World from the one they sketched. War II era, the follow-up records on early Early reports, especially from Silicon Val- businesses are somewhat murky. Neverthe- ley, suggested that the unemployed did not less, some rather clear case studies exist to stay that way for long and that most found suggest that it is not just a lucky few who sur- work within a year at comparable, if not bet- vive downsizing, but the large majority, and ter, salaries. The 11 semiconductor companies that many quickly exceed their previous levels that formed the Sematech chip consortium of income and standard of living. One such had 17,000 open positions that they could not case study is of the Pony Express. Created in fill in 1996, while T. J. Rodgers, the CEO of January 1860, the Pony Express was the Cypress Semiconductor, found that when he brainchild of William Russell, who had taken tried to hire those laid off from AT&T, yet advantage of the Postmaster General’s dissat- another competitor, Cirrus Logic, had beaten isfaction with the existing mail service to him to the punch. But the media, having organize a company based on the traditions of drained one sympathy well dry, already had the Mongol riders in China. He envisioned moved on to other topics, leaving the public horsemen covering a 1,966-mile trail from St. with the notion that “once fired, always fired,” Joseph, Missouri, to Sacramento, California, ignoring a study by Princeton economist establishing small outposts along the way Henry Farber, who found that the percentage where riders could change horses and get of people holding their jobs for ten years or food and water. more had not changed between 1973 and Prior to 1860, mail from the east coast to 1993.3 California, more than 2,000 miles from the The truly astounding fact, though, is that nearest major city, had to go by packet steam- almost every worker at one point or another er to the isthmus of Panama, from which it The Pony Express ===== PAGE 41 ===== DOWNSIZING, 1860S-STYLE: LESSONS FROM THE PONY EXPRESS 41 was transported overland, then again loaded deliveries going, broadening the pack trains to on a steamer for San Francisco. The journey, include heavy wagons protected by armed while several thousand miles shorter than the escorts, which, in turn, drove up prices. In six-month trip around Cape Horn, still took 1859, mail trains were still expensive and more than six weeks under good conditions slow, burdened with an escort that slowed and could take months if it encountered bad them down. weather or disruptions in Panama. Overland Other communications mediums were not routes to California existed, to be sure, but the yet mature. The telegraph, designed by two principal routes from Missouri—the Ore- Samuel F. B. Morse in the 1830s, did not gon Trial and the Santa Fe Trail—both had impress anyone enough to obtain strong capi- severe drawbacks, including terrain and Indi- tal backing until 1843, when Morse and ans. Making decent speed on the journey led Charles Jackson built a short telegraph line. to a number of extraordinary projects, includ- At that point, perhaps the best thing that could ing a joint effort in the 1850s by the U.S. have happened to the telegraph did: the gov- Navy and Army to import dromedary camels ernment backed out. Morse and his partners, to cross the deserts of the southwest with clueless as to how to market the new technol- mail. The camels proved ill-adapted to the ogy they owned, sold licenses to the telegraph harsh, rocky soil of the American west, and machinery to private competitors (including they tended to frighten mules and horses. Henry Wells in Buffalo). In 1855 Hiram Sib- Eventually, two mail routes to California ley, who held most of the patents in the west, developed. The Butterfield (or Ox-Bow) Route merged his company with that of Ezra Cornell ran from St. Louis through Arkansas, Texas, to form the Western Union Telegraph Compa- New Mexico, and Arizona, where it split into ny and continued expanding the telegraph two trails heading to Los Angeles or San lines westward. Francisco. Naturally, that route had the sup- Until the telegraph linked the coasts, howev- port of the slave states. John Butterfield er, the delays associated with the packet liners received the contract for the southern route, and the slow pace of overland travel meant that which he serviced by constructing a small any urgent message to or from California could fleet of stagecoaches that carried eight to 14 not be delivered, well . . . urgently. Demand people and a large mail trunk. But the fastest rose further when silver and gold were discov- stagecoach could make the round trip in 50 ered in Colorado in 1859, causing a boom in days, give or take “turnaround time.” Even in the overland freight business. Several indepen- the best of conditions, the trip was dangerous, dent companies competed for that lucrative with Kiowa, Comanche, and Apache threaten- market, but none more effectively than the firm ing every coach. of Majors, Russell, & Company, a Leaven- A second route, the so-called Central worth and Atchison outfitting business. That Route, ran much further north (and thus was company, and its subsequent incarnation as strongly supported by the free-soil groups) Russell, Majors, and Waddell, handled thou- and was shorter, but also was closed for sev- sands of tons of goods shipped to the west, eral months of the year because of snow. The employing over 6,000 men to handle the more original concept in 1851 was to have mule than 75,000 oxen in the company’s stables. pack trains carrying mailbags leave Sacra- William Russell had a diverse background, mento for Salt Lake City. There they were to moving from Vermont to Missouri as a teen. meet up with a second company that had car- In Lexington, Missouri, he started a small ried the mail from Salt Lake City to Indepen- shop that specialized in items needed for the dence, Missouri. The first mail runs from fur trade and over time he graduated to engag- Sacramento, however, met with disaster rang- ing in real-estate transactions. During the ing from Indian attacks to freezing to death. Mexican War, he shipped military supplies to Nevertheless, Major George Chorpenning, Santa Fe, becoming so wealthy through those who had received the Sacramento-Salt Lake contracts that he could start his own insurance mail contract, almost single-handedly kept the company and open a college for women. ===== PAGE 42 ===== 42 IDEAS ON LIBERTY ® AUGUST 2000 In 1851, he joined a freighting firm in which bought the bankrupt J. M. Hockaday & Com- he made the acquaintance of future business pany in 1859. The new company name, sub- partners Alexander Majors and William B. mitted to the Kansas Territorial Legislature, Waddell. was the Central Overland California & Pike’s Although he apparently never went across Peak Express Company. In Russell’s mind, the the Great Plains himself, Russell was a natur- business had one immediate objective: prove al promoter who immediately perceived it was superior to Butterfield’s stages. “I was opportunities. It made him the perfect partner compelled,” he later wrote, “to build a world- for Majors, who had worked oxen and super- wide reputation, even at considerable vised bull-whackers all his life. Majors had expense. lived on the trail, riding the routes personally Defeating the Butterfield stagecoach line cach year to inspect the conditions of the would require achieving faster mail delivery animals and men. A staunch Presbyterian than the Central Route coaches and wagons (Russell was a practicing Baptist), Majors yet had attained. Ironically, few people want demanded of his employees that they sign a to credit Russell with the idea for the Pony pledge promising not to use profanity, get Express that he founded. Yet Secretary of War drunk, gamble, or treat animals badly. That John B. Floyd recalled that Russell mentioned pledge soon gained Majors a reputation for the idea of having relays of single fast riders integrity that brought him business no adver- carry mail as early as 1858. At any rate, in tising could produce. He provided balance to 1859 Russell and John Scudder had corre- the bureaucratic genius of Russell, who, after sponded regarding a plan to carry mail from organizing the operations, went east to repre- Sacramento to St. Joseph, Missouri, in 12 sent the company in the major urban areas. days. Perhaps more significant, Russell com- mitted to running a mail express from St. Joseph to Sacramento before he had guaran- tees that he would not be competing with Russell and Majors benefited from the tal- Chorpenning, whose contract remained in ents of yet a third partner, William B. Wad- force until May 1860. dell, a Virginian who had moved several times Actual organization of the Express was before settling in Lexington. Waddell also had complicated by the interlocking activities of been a merchant tailoring his business to set- the various Russell, Majors, and Waddell tlers moving to the plains, and like Russell he companies. In January 1860, the founders eventually founded an insurance company as created the Central Overland California & a spinoff of his freight firm. In January 1855 Pike’s Peak Express Company for the specific Waddell merged with Majors and Russell, purpose of competing with the Butterfield forming a substantial freight operation. A nat- Overland Mail Company. Three months later, ural division of labor ensued: while Russell the owners had signed a contract to establish operated best in the high-brow, polished envi- a headquarters in St. Joseph, and to start a line rons of the eastern seaboard and Majors of stagecoaches running from that city to belonged in the saddle heading west, Waddell Denver on a weekly basis. They also worked well in the middle, handling the local announced their intention to run a “Pony finances and the office work in Missouri and Express” from Wathena, Kansas, to Sacra- Kansas. mento, California, as soon as the railroad It was Russell who remained the visionary lines reached Wathena. St. Joseph citizens of the group. He saw the potential for gave the company several lots in town and competing with Butterfield over the Central furnished a building for the Express, in Route, using mule-driven coaches traveling essence paving the way for the Central Over- from Leavenworth through Denver, then on to land California & Pike’s Peak Express Com- Salt Lake City and California. But Russell pany to engage in railway express. Technical- really had his eye on the mail contract, which ly, however, the freight firm of Russell, he acquired with his partners when they Majors, and Waddell financed the Pony Division of Labor ===== PAGE 43 ===== DOWNSIZING, 1860s-STYLE: LESSONS FROM THE PONY EXPRESS 43 Express, establishing stations, purchasing brains. Each of the superintendents knew the supplies, and acquiring horses and riders. territory well—some having worked for rail- Attracting capable horsemen who were roads or stage companies—and 119 separate willing to risk death daily might have seemed stations were established over the 1,966-mile daunting, but the Pony Express published ads route. (At the time, that represented one of the that almost dared riders to join: “Wanted— longest overland roads in the world and was young, skinny, wiry fellows, not over 18. clearly surpassed only by Butterfield’s south- Must be expert riders, willing to risk death ern route.) Superintendents had only 65 days daily. Orphans preferred. Wages $25 a week.” to hire riders, purchase horses and supplies, Riders were expected to cover a route between and stock their stations. While that constituted two stations, resting every 75 to 100 miles at a challenge for some, many found that they a “home station,” then start back. The round could “piggyback” Pony Express outposts on trip required a rider to change his horse six to existing stage or railroad facilities. A single eight times. As suggested by the schedule for station’s region, such as that running from the first run, a rider was expected to make Fort Carson City, Nevada, to Sacramento, could Kearny, Nebraska, in 34 hours; and the mail employ 20 men as riders or packers, require would reach San Francisco after a total riding over 200 horses and mules, and use hundreds time of 240 hours. No excuse was tolerated, of saddles and blankets. The Express pur- and the company motto was “The Mail Must chased 500 of the best horses in the west for Go Through.” the actual delivery runs, with each horse cost- Consequently, the company had to choose ing between $150 and $200. A horse had to its riders well, as they constituted the average just over 12 miles per hour on the lifeblood of the operation. Division supervi- road, which posed a challenge for even the sors actually selected the riders for their finest horses in the country, but relay stations regions. Obviously, horsemanship was essen- ensured that horses were well rested between tial, and a slight build was preferred. Younger their runs. Those purchasing the horses put a riders received the nod over older ones, while premium on speed, because out-riding Indians Majors and Russell insisted that the boys have offered a much better chance of survival than good moral character. Each received a Bible out-fighting them. after signing Majors’s required oath. Almost Each outfitted horse bore a special Pony all hailed from Missouri, Kansas, or Nebraska Express saddle with a mail pouch called a and had lived on the plains their entire lives. mochila, which resembled a large blanket A few had even driven stagecoaches. The with two large covered pouches on each side. Utah regions predominantly drew Mormon The mochila had holes for the saddle horn and riders, who had a special advantage of being cantle; it was slipped over the saddle and held associated with Brigham Young’s congenial in place by the rider: a station master could treatment of his Utah, Ute, and Shoshone sweep it off and throw it on a new mount in a neighbors for many years. For risking their matter of seconds. Indeed, the process of lives and suffering from saddle sores, the rid- switching horses and pulling the mochila off ers received $50 a ‘month, plus room and as the rider swung his leg over the tired board—a high salary for the period. Russell mount, then hopped onto the fresh horse himself only took home $150 a month, and a became so intricate that most riders never division supervisor, $90. Initially, riders car- touched the ground; and toward the end of the ried rifles and a small horn to announce their Express’s days, a mochila could make the run coming at each station, but they soon aban- from St. Joseph to Sacramento and never doned the rifles (as either redundant or incon- cease moving. venient, as well as heavy) and the horns as unnecessary. A station manager could hear the First Rider approaching horses and riders. If the riders were the blood of the system, On April 3, 1860, a brief celebration was the five division superintendents were the held in St. Joseph, and at least ten riders, ===== PAGE 44 ===== 44 IDEAS ON LIBERTY ® AUGUST 2000 1861, the company had “held the spotlight of public interest and acclaim,” having made 300 runs each way and covered a total of 616,000 miles carrying almost 35,000 pieces of mail. But suddenly telegraph wires linked the coasts and the Express was made obsolete instantaneously. Although the transcontinen- tal railroad wouldn’t provide a way to deliver physical pieces of correspondence rapidly for nearly another decade, the telegraph essentially killed the Pony Express. Dozens of riders awoke to find themselves out of work, unneeded as mail carriers. Yet the total num- ber of jobs in the economy created by the new delivery systems grew exponentially, as work- ers had to place poles, string wire, run the telegraph offices, lay track, design and build telegraphs and locomotives, and serve as engineers and conductors on trains. The Pony Express represented a classic example of a business made obsolete by tech- nology. The losses in a single line of work— nominated to take the first mail pouch out, Pony Express riders—represented a 100 per- met to learn that Johnson William Richardson cent downsizing. But were they helpless vic- would be the first Pony Express rider. He tims turned out by a greedy corporation? chafed at the delays caused by the speeches Hardly. Raymond and Mary Settle have traced and celebrations, having already been indoc- the history of most of the Pony Express riders trinated with the notion that “The Mail Must in their masterful group biography, Saddles Go Through.” At 7:15 in the morning, and Spurs. The Settles discovered that the rid- Richardson took to the saddle, and the Pony ers’ stories are inspiring as much for what Express started its operations. Meanwhile, they accomplished after they were laid off later that day, James Randall initiated the from their riding exploits. Don Rising, for western end of the Express, leaving San Fran- example, carried dispatches at the battlefield cisco with a mail pouch. His journey was for the Union Army in the Civil War, gaining much different from Richardson’s, for his first promotions to assistant wagon master. He act was to ride to the waterfront to take the eventually moved to New Mexico, where he mail to the steamer Antelope, which delivered started a mercantile and hotel business. Harry it to Sacramento. There another rider in true Roff became an insurance salesman who Pony Express fashion hustled off for Pla- received promotion after promotion to cerville, which he made in four hours—ahead become the Pacific manager of the Home of schedule. East of Salt Lake City, eastbound Insurance Company. William Page, Elijah and westbound riders crossed on Sunday, Maxfield, “Happy Tom” Ranahan, Robert April 8, 1860, technically confirming Rus- “Pony Bob” Haslam, and many others stayed sell’s vision of a mail route covered by swift in the general occupation of driving stages or horsemen. On April 13, church bells and scouting; others (including John Frye, who, cheering crowds met . . . Johnson William along with Johnson Richardson, was one of Richardson, who made his return run to St. the first to ride the circuit) found work on Joseph with the 85 letters sent ten days earli- ranches and in rodeos and circuses; still oth- er from San Francisco. After that, it was all ers, such as Martin Hogan, found themselves routine. in demand by the railroads. Of the numerous When the final riders crossed in October riders that the Settles had information about, William Hepburn Russell (1812-1872) ===== PAGE 45 ===== DOWNSIZING, 1860s-STYLE: LESSONS FROM THE PONY EXPRESS 45 all found employment at levels above that pro- coach on its iron springs, the plain fact was vided by the Pony Express—with one excep- that dull and steady also meant reliability, tion, a hermit who retreated to a wilderness lower cost, and higher efficiency. location. In short, the death of the Pony Certainly a difference of perceptions sepa- Express did not make a pauper out of anyone, rated the “downsized” workers of the 1800s and the downsizing that occurred only reflect- and the 1990s; reporters, viewing events from ed the lower costs of faster transmission of a late twentieth-century prism, might assume information in other ways. that someone who loses a job will become a Meanwhile, gigantic new businesses, member of a permanent “underclass,” though employing far larger numbers of people, arose the evidence does not generally support such to take their place. Western Union, the most an argument. A more plausible criticism—but successful of the new telegraph companies, one that also stems somewhat from a misper- emerged from the Civil War as a colossus— ception—is that Americans have come to the largest nonrailroad corporation in Ameri- expect a single lifetime career. In fact, studies ca, with a $40 million capitalization. It con- have shown that many, if not most, American trolled virtually all the telegraphy in the workers have several careers during their nation, but also engaged in the production of lives, and more important, the majority of electrical equipment and had scores of electri- younger workers fully expect such to be the cians and mechanics working in its labs. As case. History provides voices for those who for physical freight, Wells Fargo stepped into choose to listen. Based on the experience of the void with its famous stagecoach lines. The the Pony Express, they are the voices of suc- new rivals to the Pony Express had it beat, cess and triumph. [J either in terms of speed (Western Union) or as was the mage of a lone, daring Pony 2. James K. Glassman, “Far From Doomsday,” Washington Post, Exp ress rider desperately lashing his horse to ors work is discussed in “Is America’s Economy Really deliver the mail on time compared to the dull- Failing?” The 4merican Enterprise, July/August 1996, pp. 26-31. ness of the relentless click of the telegraph or 4. Quoted in Raymond W. Settle and Mary Settle, Saddles and . Spurs: The Poney Express Saga (Lincoln, Neb,: University of the steady, almost painful bounce of the stage- Nebraska Press, 1955), p. 32. Inspired? Shocked? Delighted? Alarmed? Let us know. We will print the most interesting and provocative letters we receive regarding articles in Ideas on Liberty and the issues they raise. Brevi- ty is encouraged; longer letters may be edited because of space limi- tations. Address your letters to: Ideas on Liberty, FEE, 30 S. Broad- way, Irvington-on-Hudson, New York 10533; e-mail: iol@fee.org; fax 914-591-8910. ===== PAGE 46 ===== IDEAS ON [IBERTY The Drug War’s Assault on Liberty by Lance Lamberton | I determining the proper boundaries of drugs. Underlying the idea that government, government action consistent with a free and not the individual, has the right to deter- society, it is instructive to explore whether mine what one may or may not ingest is the drug prohibition is an appropriate response to assumption that government, and not the indi- actions that are clearly self-destructive to vidual, has ultimate authority over, and own- some. Following from concern over the harm- ership of, life itself. Taken to its logical con- ful effects of drugs, the prevailing view is that clusion, this principle leads to slavery. government has a responsibility to protect its This does not mean government has no right citizens from that harm through prohibition. to restrict and prohibit harmful behavior. But it Yet that position runs directly counter to the must do so only to enhance and protect free- foundation and maintenance of a free society. dom of action. The old axiom that “my free- Indeed, in today’s context, drug prohibition dom to swing my arms ends where your nose represents one of the single greatest threats to begins” applies here. The essential point is that our liberties. the individual has the right to do whatever he Foremost to understanding the threat prohi- wants with his own life, since he has a proper- bition poses to liberty is a proper understand- ty in that life, provided that he does not inter- ing of rights. According to the Declaration of fere with the same freedom of another. Independence, we are endowed “with certain With drug prohibition, the government inalienable Rights, that among these are Life, attempts to coerce citizens into abstaining from Liberty, and the Pursuit of Happiness.” The something it deems harmful. This, in essence, underlying assumption is that one’s life is is criminal behavior elevated to the status of one’s own. Thus the choices a person makes law because it involves the initiation of force, with his own life properly belong to him. or threat of force, against a class of citizens This principle is not hard to embrace. The (illicit drug users) who are engaged in volun- idea that the individual owns his own life is tary, non-coercive behavior. Moreover, the pol- accepted almost implicitly, especially in coun- icy is doomed to failure as witnessed by the tries with a tradition of free thought and insti- daily news reports on the governments drug tutions, such as the United States. Yet it is a war, which clearly show that the government principle readily abandoned when it comes to will never be able to stop individuals from tak- - ing drugs short of imposing an Orwellian /984 Lance Lamberton is a communications professional |evel of surveillance on its citizens. And judg- who was the deputy director of the White House Nahili f : Office of Policy Information in the Reagan adminis- Ing from the ready al ability . drugs in tration. Special thanks to Jerry Epstein of the Drug prison, even that 1s unlikely to work. Policy Foundation of Texas for his assistance in The bottom line is that “criminal” action researching this article. Copyright 2000. implies a victim, where force, or the threat of 46 ===== PAGE 47 ===== 47 it, is imposed on another. However, what the intrude with reckless abandon on other rights individual freely does to himself—such as to enforce its objectives. Protection from taking drugs—does not constitute the imposi- unreasonable search and seizure, as guaran- tion of force, and is therefore not a crime. On teed by the Fourth Amendment to the Consti- the contrary, it is the prosecution of the drug tution, is a prime target for the drug warriors. war that is the crime. Calls for universal drug testing are beginning to surface, regardless of any concern for . . . probable cause. Former New York Mayor Ed Some Pragmatic Considerations Koch and others have even called for shoot- The devastating impact of the drug war on ing down planes merely suspected of carry- society, along with its inevitable failure, is a ing drugs. consequence of its protagonists’ failure to rec- Tragically, the war on drugs, allegedly ognize a salient fact of human nature—name- being prosecuted to protect human life, ly, there will always be some individuals has instead claimed many innocent lives. strongly driven to take drugs because they Take, for example, those caught in the cross- provide pleasure or block pain, and no legal fire between warring gangs of drug dealers sanctions, no matter how severe, will prevent fighting over turf, or trigger-happy drug- that. Furthermore, the more draconian the enforcement agents who raid the wrong drug enforcement the more draconian the homes and accidentally kill residents defend- consequences by every measure imaginable, ing their families against violent assault. from diminished civil liberty to increased vio- Additional fatalities in the drug war include lent crime. deaths attributed to drug overdoses or poi- Criminal activity normally involves no soned drugs owing to the adulteration and more than a small fraction of any given popu- unknown potency of drugs traded on the illic- lation. Yet when laws are dramatically at vari- it market. The war on drugs has also become ance with the legitimate exercise of freedom, a significant factor in the spread of AIDS; wide-scale disobedience is often the result. almost 7,000 intravenous drug users a year Such was the case with alcohol prohibition, have died of AIDS from sharing needles.! conscription during the War Between the Despite this tragic loss of life, prohibition- States and the Vietnam War, civil disobedi- ists claim that legalization will result in a dra- ence during America’s civil rights movement, matic increase in use, thereby dwarfing the and general disregard for the national 55-mph number of fatalities directly attributable to speed limit. prohibition. However, considering that 80 Prohibition also fails to acknowledge the percent of deaths from ingestion of heroin and power of markets. By making a desired sub- cocaine is caused by their adulteration on the stance illegal, prohibition increases profitabil- black market, leaving 20 percent who die as ity by making the substance scarcer and more a result of factors that would exist after legal- risky to handle. In the pursuit of self-interest, ization, it would require a 400 percent and in light of the enormous profits earned increase in use to equal the current death toll. from the illicit drug trade, there will always be This is unlikely; at the end of alcohol prohibi- a plentiful supply of risk-takers willing to run tion, estimates of increased consumption have the gamut of government interdiction efforts ranged from zero to 250 percent.? to meet the demand for drugs. Ironically, the On the contrary, it could be argued that scarcer drugs become because of prohibition, consumption of hard drugs such as heroin and the more profitable they become for dealers cocaine would actually decline with legaliza- and the greater the incentive to sell them. tion, especially among vulnerable youth in the Thus it is profit, and the pleasure derived inner cities. This is because tens of thousands from taking drugs, that thwarts the increas- of hard-core users would no longer be push- ingly militant calls for an “all out” drug war. ing drugs to non-users in order to make Not surprisingly, when government attempts money to support their own habits, a common to deny basic individual sovereignty, it must and well-known practice throughout the drug ===== PAGE 48 ===== 48 IDEAS ON LIBERTY ® AUGUST 2000 culture. When we look at how alcohol is mar- Denial of Individual keted and distributed, we can see how legal- ‘LT: ization will put the neighborhood “pusher” Responsibility out of business. Inherent in the prohibitionist position is the In addition to the death toll coming from failure to recognize individual responsibility prohibition, the costs related to drug enforce- and autonomy as operating principles for an ment are staggering. Since President Reagan efficacious life. While taking drugs involves launched his much-heralded “war” in the the freedom to engage in what may be self- early 1980s, the United States has spent near- destructive behavior, it also, and more impor- ly $300 billion to stem the flow, with indirect tantly, involves the principle of allowing for costs put at $67 billion annually as govern- life-enhancing activity. The freedom to fail is ment continues to beef up the budgets of law also the freedom to succeed, and vice versa. enforcement agencies and the military to Ultimately, only the individual can determine prosecute the drug war.4 what is in his best interest. While that is not a The courts are so overwhelmed with drug fail-safe mechanism, the alternative is tyran- cases that the administration of justice is ny. Drug prohibitionists embrace that alterna- being hampered to an intolerable degree. For tive by presuming to know what is best for example, in 1998 more than 400,000 Ameni- others, and in the pursuit of their vision of the cans serving prison terms (one in four impris- good life they are willing to impose that oned) were doing so for drug offenses, up vision on others by force. from 50,000, or one in ten, in 1980.5 To counter the argument for individual Prohibition also has the unfortunate conse- responsibility, prohibitionists claim that drugs quence of corrupting law enforcement agents necessarily hurt others and society at large. lured by the easy availability of huge sums of Discounting the preponderance of evidence tax-free income in return for their coopera- that prohibition imposes a much greater cost tion in the drug trade. According to reporters on society than legalization ever could, the Jack Nelson and Ronald J. Ostrow, “Law fact remains that even for those who use drugs enforcement corruption, sparked mostly by in a life-threatening way, it is their lives that illegal drugs, has become so rampant that the they threaten. Society, and even loved ones, number of federal, state and local officials do not have a property right in the life of the in federal prisons has multiplied five times drug abuser. To assume otherwise is collec- in four years, from 107 in 1994 to 548 in tivism, pure and simple. 1998.6 If prohibitionists were interested in consis- On the civil liberties front, the drug war has tency, their line of reasoning would take them led to the property of non-drug users being down a path I doubt many of them would want confiscated without due process. In opera- to follow. Would they propose banning tobac- tions labeled “zero-tolerance,” leased boats co or alcohol consumption because of poten- are searched (sometimes without satisfying tially harmful effects? How about high cho- the legal standard of probable cause) and then lesterol foods? With heart disease being the seized from their owners when even minute single greatest killer of Americans today, are quantities of drugs are found onboard. prohibitionists prepared to follow their own Indeed, fully 80 percent of total asset seizures logic and ban bacon and eggs? And what related to the drug war occur without a crimi- about high-risk occupations and activities nal charge being filed.” such as stunt-car driving, hang gliding, and Another casualty in the war on drugs is motorcycling? legitimate scientific research with drugs such Assuming you could successfully ban such as LSD and MDMA. In addition, marijuana activities and substances, what would be the has been almost universally prohibited for use implications for the role that risk-taking plays as a treatment for glaucoma, which leads to in enhancing the enjoyment of life? While blindness, and for ameliorating the severe most people avoid risk in the realm of health side effects of chemotherapy. or physical activity, others are drawn to it ===== PAGE 49 ===== THE DRUG WAR’S ASSAULT ON LIBERTY 49 because it enriches their lives. The very for sensationalized TV specials and movies. essence of individuality implies that different This in turn creates the popular illusion that it people have different requirements in achiev- is the drugs themselves that cause the vio- ing happiness. lence and crimes associated with them, rather Drug prohibitionists, however, will claim than their prohibition. Yet we have only to that illicit drugs can never have any other look back to the era of alcohol prohibition to effect than to debilitate and destroy. Yet even identify the real source of drug-related vio- among the most dangerous drugs, “addiction” lence. In the ten years following the end of is far from guaranteed. Dosage has everything * alcohol prohibition, the murder rate from to do with a drug’s potentially harmful affects, assault by firearms went down from a prohibi- and if doses are low enough, and taken infre- tion high of 16 per 100,000 of population in quently enough, no long-term or short-termill 1933 to less than nine per 100,000 by 1943.8 effects will result. America’s drug war is also a manifestation Besides, the critical point, which cannot be of the historical pendulum swinging toward emphasized enough, is that ownership of social conservatism. Operating in cycles that one’s life entitles one to do with it what one run on the order of 20 years, America is react- chooses, even if that choice leads to self- ing to the social excesses of the 1960s. Sexu- destruction. al mores have become more restrictive, drink- ing is less socially acceptable, and smokers’ The Roots of War rights have become severely circumscribed. Indeed, the current trend—popular among In light of the futility in waging the war on both conservatives and “liberals” —is to place drugs, what leads the government to pursue it under cultural and political assault activities and most Americans to support it? Part of the that give pleasure and hold the potential for answer lies in the coercive nature of govern- harm. The “safety at any cost” approach ment itself. If war, as Randolph Bourne stat- toward regulating consumer choices, champi- ed, is “the health of the state,” then the Amer- oned by environmental and consumer ican government is on a very healthy diet. activists such as Ralph Nader, is but one vari- Since government is predicated on the use ant of the kind of government paternalism of force, it oft-times sees its reason for being now in vogue. in exercising it. If this power is used to protect America’s puritanical heritage, while dra- rights, it is a benevolent force. But the temp- matically at variance with its heritage of polit- tation to abuse that power is sometimes irre- ical liberty, has endured as well as it has sistible. While the line between using govern- owing to the lure of messianic perfectionism. ment force in retaliation against initiators and Few countries in the West are as “blessed” as being the initiator itself is a clear one, it is a the United States with the number and inten- line easily crossed. sity of moral crusaders determined to use There is also a need on the part of govern- government to impose their moral values on ment to fight an enemy, take on a menace, and others by force. be the paternalistic guardian of the people. This puritanical impulse is enjoying a Indeed, if officeholders do not have the com- major resurgence in the United States. Histor- modity of fear and the specter of menace to ically, America has been a magnet for cultur- incite people to rally around them for support, al extremes, ranging from the free love com- they risk, in a democracy, repudiation at the munes of the sixties to the abstinent Shaker polls from bored and fickle voters, and in a communities of the early nineteenth century. dictatorship, the violent overthrow of the gov- In the history of the Western world, no other ernment. country embarked on the bizarre path of alco- Hollywood and the media have certainly hol prohibition, despite alcohol’s deep histor- done their parts in feeding the current frenzy. ical, cultural, and economic roots. Grisly news reports on the drug war and its The U.S. Constitution and Bill of Rights victims boost ratings and provide ample grist have held America’s crusading impulse in ===== PAGE 50 ===== 50 IDEAS ON LIBERTY ® AUGUST 2000 check. Nevertheless, it persists, ebbing and wave of progressive reform that began at the flowing as circumstance and public opinion end of the nineteenth century eventually dictate. burned itself out, to be replaced by the rela- Another factor fueling the drug war is an tive social liberalism of the roaring twenties. undeniable increase in drug use, a trend that The strident anti-communism of the started in the sixties. Yet can the increase in McCarthy era in the fifties gave way to the any way correlate with the hysteria that has New Left that engulfed America’s universities overtaken America in the decades that fol- in the sixties. lowed? Indeed, deaths attributed to drug use But the real undoing of the drug war will be are but a small percentage of deaths related to the eventual realization that government can- alcohol and tobacco. And despite hyperbolic not alter human nature and that society is no claims by politicians and the media over the longer willing to pay the price required, in threat that drugs pose to our society and cul- money, social disruption, and reduced liberty, ture, the economy continues to grow, life to prosecute this war. In the past decade espe- expectancies continue to increase, technolog- cially, many prominent voices have been ical advances continue unabated, and Ameri- raised against prohibition, and no doubt many cans in all walks of life continue to build lives others will join them in the near future. More- of meaning and value, both for themselves over, prohibitionists are finding themselves and their families. compelled to respond in public to the growing The most tragic consequences related to call for legalization to an extent that would drug use persist in America’s inner cities. Yet have been unheard of ten years ago. here it is government paternalism that is the Yet until the current level of support for culprit, leading people without hope into lives prohibition burns itself out, vigilance and the of drug dependency. As the debilitating courage to speak out are required if we are to effects of welfare dependency strangle moti- avoid the permanent establishment of new vation and opportunity, the seductive lure of forms of government intrusion into our per- drug profits or the temporary relief that drugs sonal lives. That is the real threat facing us bring provides a market for drugs that other- today. OJ wise would not exist. 1. Centers for Disease Control and Prevention, HIV/AIDS Sur- veillance Report, 1997. W 7 W 7 9 2. James Ostrowski, “Thinking About Drug Legalization,” Cato here Do € Go from Here * Institute Policy Analysis, No. 121, May 25, 1989. Lo. ] . . 3. David V. Kyvig, Repealing National Prohibition (Chicago: Predicting the future is always a risky busi- University of Chicago Press, 1979), pp. 24, 112-13, 131, 186. ness, but when it comes to determining what is * orn ae the Rio Grande,” The Economist, November path Americans will choose concerning drug 5. Jacob Sullum, “Prison Conversion,” Reason, August/Septem- : ] _ ber 1999; http://www.reason.com/9908/fe.js.prison.html. policy, both history and a proper understand 6. Jack Nelson and Ronald J. Ostrow, “Illegal Drug Scene Spurs ing of human nature give us some guideposts. Rise in Police Corruption,” Los Angeles Times, June 13, 1998. : 7. DEA data reported by A. Schieder and M. Flaherty, Pittsburgh Peop le eventually tire of moral crusades. Press, reprinted in the San Francisco Examiner, August 25, 1991, No matter how lofty or seemingly righteous, p. 1. : ’ 8. U.S. Bureau of the Census, Historical Statistics of the United there comes a time when people S energy and States, Colonial Times to 1970, part 1 (Washington, D.C., 1975), direction must go elsewhere. For example, the p. 441. ===== PAGE 51 ===== Economics on Trial by Mark Skousen IDEAS ON [IBERTY AuaGusT 2000 If You Build It—Privately —They Will Come “Government provides certain indispensable public services without which community life would be unthinkable and which by their nature cannot appropriately be left to private enterprise.” —PAUL A. SAMUELSON f you take a course in public finance, you enues. According to Coase, such a financing will invariably encounter the “public system has never been tried in Britain: “the goods” argument for government: Some ser- service [at Trinity House] continued to be vices simply can’t be produced sufficiently by financed by tolls levied on ships.” the private sector, such as schools, courts, What’s even more amazing, Coase wrote prisons, roads, welfare, and lighthouses. his trailblazing article in 1974, but Samuelson The lighthouse example has been highlight- continued to use the lighthouse as an ideal ed as a classic public good in Paul Samuel- public good only the government could sup- son’s famous textbook since 1964. “Its beam ply. After I publicly chided Samuelson for his helps everyone in sight. A businessman could failure to acknowledge Coase’s revelation,3 not build it for a profit, since he cannot claim Samuelson finally admitted the existence of a price for each user.”’! private lighthouses “in an earlier age,” in a Really? Chicago economist Ronald H. footnote in the 16th edition of his textbook, Coase revealed that numerous lighthouses in but insisted that private lighthouses still England were built and owned by private indi- encountered a “free rider” problem.4 viduals and companies prior to the nineteenth century. They earned profits by charging tolls ] ] on ships docking at nearby ports. The Trinity Private Solutions for House was a prime example of a privately Public Services owned operation granted a charter in 1514 to operate lighthouses and charge ships a toll for their use. Samuelson went on to recommend that lighthouses be financed out of general rev- The lighthouse isn’t the only example of a public good that can be provided for by pri- vate enterprise. A privately run toll road oper- ates in southern California. Wackenhut Cor- -_ rections manages state prisons. Catholic Mark Skousen (http:/fwww.mskousen.com, mskousen schools provide a better education than public @aol.com) is an economist at Rollins College, (.hools. The Mormon church offers a better Department of Economics, Winter Park, FL 32789, a Forbes columnist, and editor of Forecasts & Strate- welfare p lan than the USD A food Stamp pro- gies. His textbook, Economic Logic, is now available gram. Habitat for Humanity builds houses for from FEE. responsible poor people. 51 ===== PAGE 52 ===== 52 IDEAS ON LIBERTY ® AUGUST 2000 And now, for the first time in 38 years, there and often leave municipalities with huge is a privately built major league baseball sta- losses.6 dium—Pacific Bell Park, new home of the A Brookings Institution study came to sim- San Francisco Giants. After Bay area voters ilar conclusions. After reviewing major sports rejected four separate ballot initiatives to raise facilities in seven cities, Roger G. Noll (Stan- government funds to replace the windy and ford) and Andrew Zimbalist (Smith College) poorly attended Candlestick Park, Peter found they were not a source of local eco- Magowan, a Safeway and Merrill Lynch heir, nomic growth and employment, and the net teamed with local investors, to buy the club subsidy exceeded the financial benefit to the and, with the help of a $155 million Chase community.’ Securities loan, built the new stadium for These empirical studies confirm a long- $345 million. The owners also got huge spon- standing sound principle of public finance: sorships from Pacific Bell, Safeway, Coca- Beneficiaries should pay for the services they Cola, and Charles Schwab. use. In my free-market textbook I call this So far the private ballpark has been a super “The Principle of Accountability,” also known success, selling a league-leading 30,000 sea- as the “benefit principle.” It’s amazing how son tickets for the 41,000-seat stadium. The often politicians violate this basic concept. team’s 81 home games are nearly sold out. For example, John Henry, a commodities Other team owners, whose stadiums are heav- trader worth $300 million and owner of the ily subsidized, were skeptical, but a dozen Marlins baseball team, is pushing through the team owners have visited the new operationto Florida state legislature a bill to tax cruise- study what they’ve done. They include ship passengers to help fund a new Miami George Steinbrenner, who is considering a $1 ballpark. (Fortunately, Governor Jeb Bush just billion new Yankee stadium.’ vetoed the bill.) Please, will someone send Mr. Henry a copy of my free-market textbook, Economic Economists Attack Logic? 0 Public Financing . . . 1. Paul A. Samuelson, Economics, 6th ed. (New York: McGraw Perhaps private funding of major league Hil, 1964), p. 159. 1143 : 2. Ronald H. Coase, “The Lighthouse in Economics” in The Sp orts facilities has been influenced by two Firm, the Market, and the Law (Chicago: University of Chicago recent in-depth studies by professional econ- Press, 1988), p. 213. Coase’s article originally appeared in The Jour- : : : SE nal of Law and Economics, October 1974. omists attacking publicly subsidized Sports 3. Mark Skousen, “The Perseverance of Paul Samuelson’s Eco- arenas. In Major League Losers, Mark nomics,” Journal of Economic Perspectives, Spring 1997, p. 145. : : : : 4. Paul A. Samuelson and William D. Nordhaus, Economics, Rosentraub of Indiana University (and a big "sew york: McGraw Hill, 1998), p. 36n. sports fan) studied stadium financing in five 5. Peter Waldman, “If You Build It Without Public Cash, They’ll igs : Still Come,” Wall Street Journal, March 31, 2000, p. 1. cities and meticulously demonstrated that pro 6. Mark S. Rosentraub, Major League Losers: The Real Cost of sports produce very few jobs with little ripple Sports and Who's Paying for It (New York: Basic Books, 1997). : : : 7. Roger G. Noll and Andrew Zimbalist, Sports, Jobs, and Taxes: effects in the community, take away business The Economic Impact of Sports Teams and Stadiums (Washington, for suburban entertainment and food venues, D.C. Brookings Institution, 1997). Mark Skousen’s Economic Logic Economic Logic is a no-compromise free-market college textbook, with a hands-on approach (it begins with a profit- -and-loss income statement). Discover why this book has won praise from economics professors across the country! 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 53 ===== Austria resulting from their having once been BOOKS part of the same Hapsburg Empire. The authors of these essays are steeped in the history of economics, not just the Austri- an school. Salerno’s piece on Carl Menger, for example, provides a fine description of the strengths and weaknesses of classical eco- 15 Great Austrian Economists edited with introduction by nomics, a necessity in demonstrating what Randall C. Holcombe was so distinctive about Menger’s opus. In Ludwig von Mises Institute ® 1999 © 258 pages Menger we see all three aforementioned hall- * $15.95 marks of greatness. The path-breaking analyt- ; ical tool for which he is perhaps best known is Reviewed by Robert Batemarco subjective marginal utility. In addition, his theory of imputation and his distinction reat economists come in many varieties. between goods of higher and lower orders There are path-breakers, who forge new were to become building blocks for Austrian analytical tools; there are synthesizers, who capital theory. Furthermore, Menger con- discern principles capable of explaining dis- structed an original value and price theory parate phenomena; and there are debunkers, that not only linked consumer and producer who root out error, strangling it in its own behavior in ways classical economics never contradictions so that truth may flourish. Most was able to, but also demolished the intellec- of those designated great by their inclusion in tual foundations of the labor theory of value. 15 Great Austrian Economists did all three. I'd say that qualifies for greatness. In this volume, editor Randall Holcombe, Yet this book is not titled 15 Great Econo- professor of economics at Florida State Uni- mists, but rather I5 Great Austrian Econo- versity, has assembled 14 economists of no mists. No comprehending reader could come small stature themselves to discuss these great away from these pages without a clear picture ones. Among the most prominent contributors of what constitutes Austrian economics. The are Murray Rothbard, Israel Kirzner, Roger praxeological method, that is, the use of logi- Garrison, Joseph Salerno, and Hans-Hermann cal deduction from indisputable axioms, is Hoppe. They cover over 400 years of “Austri- shared by every economist profiled in these an” economics, from the mid-sixteenth centu- pages. Not far behind is the recognition of the ry to the closing years of the twentieth. role subjective value plays in economic activ- That early starting date demonstrates that ity. Thus the classification of Phillip Wick- the ideas today labeled “Austrian” did not steed and W. H. Hutt as Austrians can be jus- emerge from Carl Menger’s fecund mind out tified by their application of subjectivism to of nothing. Thus, the first five chapters feature cost and labor supply, respectively. pre-Mengerian writers who made use of such Interestingly, not taking subjectivism seri- quintessentially Austrian themes as subjective ously enough was a criticism cast in Eugen value, entrepreneurship, time preference, and von Bohm-Bawerk’s direction from within the the ability of markets to coordinate plans to Austrian school. This criticism notwithstand- explain economic phenomena. They include ing, Roger Garrison’s chapter makes clear that Juan de Mariana, Richard Cantillon, A.R.J. by building on Menger’s depiction of the role Turgot, J.B. Say, and Frederic Bastiat. of time in the production process to create a Mariana, a Spanish Jesuit in the scholastic theory of capital that serves as the foundation tradition, is probably the least well known. of Austrian macroeconomics Béhm-Bawerk The chapter dealing with his contributions secured his position in the pantheon of great actually covers a number of Spanish scholas- Austrian economists. tics. The reader will learn that their serving as Fittingly, with the exception of Menger, sources of ideas for Menger was no accident, Ludwig von Mises receives the most exten- given the close relations between Spain and sive treatment of all. Murray Rothbard’s essay 53 ===== PAGE 54 ===== 54 IDEAS ON LIBERTY ® AUGUST 2000 describing Mises’s achievements relates not F LL : ree Trade Versus Protectionism: only how he integrated monetary and value . theory, leading to his business cycle theory A Source Book of Essays and Readings and radical critique of socialism, but also how by Johannes Overbeek his personal integrity cost him numerous Edward Elgar ® 1999 656 pages ® $120.00 opportunities for academic positions. In addi- tion, it shows how Mises went one step fur- Reviewed by James Rolph Edwards ther than his predecessors in political econo- my, taking their “rather vague commitment to his is a book that operates on several lev- the market economy,” and hammering it into els and succeeds, to a greater or lesser “a logical, consistent, and uncompromising degree, on all of them. Centrally, it is a histo- adherence to laissez-faire.” ry of economic thought in the form of extracts Mises left us not only a formidable system and short essays by the prominent advocates of economic analysis, but also a number of tal- of free trade and protectionism, extending ented students who built on that system. Two from mercantilist times to the present. Thus of them, Rothbard and F. A. Hayek, earned the reader is treated to a roughly chronologi- places among the 15 great Austrians of this cal and fairly complete view of the develop- volume. Both made contributions within Aus- ment of economic thought and understanding trian economics itself: Hayek in business cycle of international trade and finance over more theory, the role of knowledge, and competition than two centuries, as well as the vital points as a discovery procedure, and Rothbard in in the free trade/protectionist debate. welfare economics. The essays in this volume Overbeek, professor of economics at the also touch on their scholarship beyond the University of the Virgin Islands, divides the realm of economics: Rothbard’s forays into book into historical periods and for each one history, using Austrian economic theory as an presents writings by the most prominent writ- interpretive framework, and his integration of ers on both sides of the issue. He gives a short Austrian economics with libertarian theory to history of the periods regarding international develop a theory of liberty, and Hayek's influ- trade and the public debate over the issue, and ential Road to Serfdom and works on psychol- discusses how government policies were ogy, philosophy, and politics. affected. He also provides a biography of each The volume is rounded out with discus- author and a summary of his arguments. sions of Frank Fetter, Henry Hazlitt, and Wil- In his choice of material, I give Overbeek helm Ropke, whose main achievements were an A-plus. The most important writers are clarifying the valuation process for capital included, from Thomas Mun through Alexan- goods, providing a blow-by-blow refutation of der Hamilton, Friedrich List, Mussolini, John Keynes’s General Theory, and exploring the Maynard Keynes, and Robert Reich on the ethical foundations of market economies, protectionist side, and from David Hume and respectively. Adam Smith through John Stuart Mill, Lud- There is plenty in this slim volume to stim- wig von Mises, Gottfried Haberler, Melvyn ulate interest in Austrian economics and its Krauss, and Paul Krugman on the free trade greatest proponents. It belongs on every econ- side. Moreover, the extracts Overbeek has omist’s bookshelf. [J selected are all readable by anyone with even Robert Batemarco is a vice president of a marketing 2 rudimentary familiarity with economics. research firm in New York City and teaches econom- Abstruse mathematics is thankfully absent. ics at Marymount College in Tarrytown, New York. = My only criticism is that some of the readings are longer than necessary to make the author’s argument, while others seem too short. In an apparent attempt to shorten the book to its still-daunting 656 pages, the writ- ings of some key economists (Henry Hazlitt and Milton Friedman chief among them) ===== PAGE 55 ===== Books 55 have been left out in favor of summaries by The biggest surprise for me was historical. Overbeek. It is common knowledge that the reaction The book’s virtue is that it clearly presents against classical liberalism that eventually the arguments of both sides on the free trade generated the totalitarian states and world debate. One cannot read both with any objec- wars of the twentieth century began in Ger- tivity without seeing that the free traders have many in the nineteenth century. But without by far the stronger arguments. Interestingly, Overbeek’s book, I would not have known that the reader observes that the brilliant break- Friedrich List, the father of German protec- throughs occurred early on and that the prin- tionism, lived in the United States and was ciples established have never been over- heavily influenced by American protectionists thrown. Particularly crucial are Ricardos such as Alexander Hamilton and Daniel Ray- demonstration of the principle of comparative mond, by whom he became convinced that advantage and David Hume’s demonstration protectionism had been vital to American eco- of how monetary flows through international nomic development. List returned to Ger- payments imbalances alter exports and many and spread that erroneous view with imports to bring equilibrium to those balances great and catastrophic effect. Hamilton has and generate a natural distribution of specie. always been my least favorite among the Those arguments destroyed the rationales of Founders, and now I see that he and his ilk the mercantilists for trade barriers. have even more to answer for than I had pre- From then on, the case for free trade evolves viously supposed. only in detail and sophistication. The point of There is far more in this book than can be production is consumption, not vice versa, and described in a short review. It is costly to be the point of trading internationally is the sure, but you definitely get what you pay for.[] Imports we can thus obtain more cheaply (lit- James Rolph Edwards is professor of economics at erally using fewer domestic resources) than if Montana State University. we produced them ourselves. Exports are sim- ply the way we pay for imports. What is more, international trade has little effect on domestic In Praise of Hard Industries employment, except to allocate labor from less efficient to more efficient uses. by Eamonn Fingleton Just as important as the compelling argu- Houghton-Mifflin ® 1999 e 273 pages ® $26.00 ments in favor of free trade, the readings also illuminate the sordid history and motives of the protectionists. They never grasp the truly anti-social nature of their project, which is Qometimes you can judge a book by its characterized by blind nationalism, chauvin- cover. The subtitle of this book reads: ism, and xenophobia. Even otherwise democ- Why manufacturing, not the information ratic and “liberal” protectionists must be economy, is the key to future prosperity. That made uneasy when they see their association tells me that the author thinks himself capable with dictators and authoritarians of every of central economic planning at the macro stripe, all of whom adhere to the same protec- level, knowing as he does what economic for- tionist doctrines they do. mula will lead to “prosperity.” Then a glance The book contained many surprises for me. at the back cover clinches it—fulsome praise I was amazed at the brilliance of Nicholas from some of America’s most notorious pro- Gerard Pierson, arguing for free trade in the tectionists, including textile magnate Roger late nineteenth century, whose work was Milliken. Judgment based on the cover: Lousy unknown to me. On the other hand, I was dis- book. But how bad? appointed to read the unwarranted conces- Fingleton, an economic journalist and for- sions made to protectionism by such eminent mer editor at Forbes (exactly what his domain free traders as F. W. Taussig, A. C. Pigou, and was at Forbes is not disclosed), begins with an Lionel Robbins. extended assault on his béte noire, “post- Reviewed by George C. Leef ===== PAGE 56 ===== 56 IDEAS ON LIBERTY ® AuGuUST 2000 industrialism.” By that he means the idea that The hand-wringing continues with the our economy has advanced beyond the indus- author’s worries that “we” are losing “our” trial era into a new era based on services manufacturing base. (The book, not surpris- and information rather than the production of ingly, is loaded with nationalistic language. tangible products. Fingleton is bothered by Fingleton evidently thinks it is all right to the fact (if indeed it is a fact, for the book trade with “foreigners” for raw materials, but is light on evidence) that manufacturing as Keynes said, “Let goods be homespun.”) has gone into retreat in the United States and Suppose for the sake of argument that there is being eclipsed by upstarts like software was in fact a pronounced shift away from engineering. manufacturing in the United States. Business- So what? In the spontaneous order of a men, whether Americans or those foreigners, market economy, industries rise and fall with would soon discover profitable opportunities the desires of consumers. Competition to earn to earn high profits by investing in the vacant profits drives people to commit resources manufacturing sector. Fingleton, however, where they will do the most economic good. never deigns to discuss the dynamics of the But Fingleton shows no comprehension of the marketplace, preferring to continually berate idea of spontaneous order and indeed often the “postindustrial” enthusiasts who keep heaps scorn on “laissez-faire zealots.” (In one leading us, Pied Piper-fashion, into the false of the silliest passages in the book, he grum- utopia of postindustrialism. bles that the Nobel Prize in economics has so In a book arguing that manufacturing has frequently gone to those “laissez-faire gone into decline, one would expect to read zealots” and explains that the Swedish Central something about the deleterious impact of Bank, whose members make the choice, are government policy. Fingleton, however, says “laissez-faire zealots” themselves. That’s why nothing about taxes and regulations that hit the brilliance of protectionists, socialists, and harder at manufacturing than other sectors. other meddlers is overlooked.) He sets out to (Thats probably because it’s mainly econo- prove that a “postindustrial” economy is mists of the “laissez-faire zealot” variety that undesirable. have pointed this out.) A good argument can One undesirable aspect is that, allegedly, a be made, for instance, that environmental reg- “postindustrial” economy does not provide ulations are much more damaging to manu- jobs for a wide range of people. As proof, he facturing enterprises than, say, financial ser- observes that software engineering is a field vices, or that our collectivist labor laws do only for extremely smart people. Manufactur- more harm to manufacturers than to software ing, on the other hand, provides job opportu- companies. But Fingleton doesn’t call for nities for people of all levels of aptitude. changes in or repeal of government interven- Therefore, unless we want high unemploy- tions. The government isn’t his villain. ment, we need to return to manufacturing. Guess what kind of “solutions” our author Obviously. advocates? Almost exclusively, coercive ones. That 1s typical of Fingleton’s method of (One exception—he calls for “relaxation” of propping up straw-man arguments so he can antitrust laws, but doesn’t pursue the point in knock them down throughout the book. any detail.) Fingleton wants a law that would Despite some overly enthusiastic statements allow business managers to be “punished per- by “postindustrial” theorists, no one has ever sonally for laying off workers.” He wants to suggested that we should have an economy diminish the attractiveness of careers in the that is comprised only of “postindustrial” sec- hated “postindustrial” sectors through selec- tors. It would make just as much sense to tive taxation. He wants to boost U.S. savings argue that a “classical music economy” would by imposing high tariffs on foreign goods. It be undesirable because so many people would is all dreary stuff, unenlightened by any com- be unemployed because of their lack of abili- prehension of the terrible rent-seeking possi- ty to play Bach. It’s easy to fill up pages in bilities that all this new economic interven- beating up on straw men. tion would open up. ===== PAGE 57 ===== Books 57 On second thought, maybe you really can’t tight because if your country is seen to be at judge a book by its cover. In Praise of Hard all weak on any part of it, you might get a visit Industries turned out to be far worse than I from “The Electronic Herd.” That’s you and had guessed. [J me trading everything from T-bills to Russian George Leef is the director of the Pope Center for bonds. When the herd gets spooked—when Higher Education Policy at the John Locke Founda- We worry about Russian inflation for exam- tion and book review editor of 1deas on Liberty. ple—the herd can create a major crisis overnight. Friedman is one of the few journal- ists to actually understand the nature of the The Lexus and the Olive Tree: fsian/Russian Gumency crisis. Sure, Deople Understanding Globalization ike Malaysia’s Prime Minister Dr. Mahathir Mohamad can blame it on George Soros or by Thomas L. Friedman the Jews, but the real enemy was TIAA- Farrar, Straus and Giroux ® 1999 ® 394 pages CREF, e*trade.com, and Merrill Lynch. * $27.50 The Electronic Herd can be unfair, even wrong, but to fight it is useless. You either embrace the Herd, and the discipline it man- dates, or you'd better get off the range. In this, homas Friedman has written a very sur- Friedman is less an advocate for globalization prising book. Surprising not in what he than the deliverer of the bad (or good depend- has written, but in that Thomas Friedman ing on your perspective) news. His major wrote it. Friedman is the foreign affairs point is that globalization is here to stay columnist for the New York Times, and is prob- whether you like it or not. ably known to readers of Ideas on Liberty as a Friedman loves his metaphors, though they moderately “liberal” establishment journalist. sometimes get on one’s nerves. One of the He is certainly not known as a defender of more effective chapters is “DOSCapital 6.0.” economic liberty. Yet this book presents a Friedman describes countries as computers. compelling story about the prospects for Communist countries were running on a real- global economic liberty. ly bad operating system, DOSCapital 0.0 The interesting title is chosen as a metaphor while others have advanced to DOSCapital for the choice Friedman says today’s societies 1.0 up to 6.0. The more free market your face. They can pursue fancy cars like the country, the more advanced your operating Lexus by moving toward free trade, sound system. It is interesting to compare his list of accounting, transparency, property rights, and countries with one of the economic-freedom the rule of law. Or they can continue to fight indexes now available. Perhaps Taiwan is too over olive trees through tribalism, national- high and Thailand too low on his scale, but ism, and isolation. As metaphors go, it’s not a basically he got it right. Reviewed by Robert Lawson bad one. Each choice offers benefits and pit- In another interesting chapter, Friedman falls, but if you value freedom and prosperity, notes that “No two countries that both have your society had better go for the Lexus. McDonald’s have fought a war against each Friedman sees globalization as the One Big other since each got its McDonalds.” This Idea of the post-Cold War era. But joining the was true when he wrote it, but unfortunately global village is not easy; it requires a nation is not true since the United States attacked to put on what Friedman calls the “Golden Serbia. (Interestingly, the McDonald’s in Bel- Straightjacket.” Thats private property, low grade ran strong pro-Serb promotions during inflation, shrinking government, free trade, the attacks.) But the larger point is that glob- deregulation, currency convertibility, reduced alization is likely to lead to more peace—a corruption, open markets, private pensions, point free-market advocates have made for and so on. In short, a libertarian dream. decades. Once you join the global world, you had But Friedman does have some problems better wrap the Golden Straightjacket pretty with his analysis. In a series of chapters he ===== PAGE 58 ===== 58 IDEAS ON LIBERTY ® AUGUST 2000 goes through some of the pitfalls associated son) and because of the insights into the Inter- with globalization. Some are real; some are net that Lessig offers. The book is flawed imagined. For example, Friedman worries because Lessig makes some fundamental mis- that globalization will increase income takes about markets and because he does not inequality. But as a rule, developed countries understand, and so misuses, the concept of have more equal income “distributions” than spontaneous order. less developed countries. First, the good stuff: this is an exceptional- Friedman also worries that freer markets ly readable book, filled with insightful obser- and prosperity will lead to greater environ- vations. (There are also some minor annoy- mental problems. There is a grain of truth to ances, like the constant use of quotation this fear. Developing countries often make marks around words for no apparent reason.) short-term sacrifices of environmental quality The book conveys the essentials of the techni- to achieve economic growth. Nineteenth- cal areas necessary to its argument in a way century American cities were filthy messes. that most readers can grasp. Lessig illustrates But over time development will lead to the many of his points with interesting anecdotes. willingness and ability to pay for a cleaner He is a skilled writer and thoughtful analyst of environment. To his credit, he grudgingly rec- the Internet. He might not be “a James Madi- ognizes this and argues that corporations, not son of our time,” as the jacket copy touts corrupt bureaucrats, are the more likely saviors (quoting Stewart Brand), but he has certainly of the environment not corrupt bureaucrats. written a book that anyone concerned with the As Friedman finishes the book, he offers Internet will want to read. Indeed, since words of caution about the inevitable back- Lessig is such an important figure in the lash against globalization. Indeed, as Virginia application of the law to the Internet, we are Postrel argues in her book, The Future and Its lucky he has written so well—his ideas would Enemies, we do have conflicting visions be important even if they were badly written. before us. One is the dynamist world embod- Much of Lessig’s analysis is right. The ied in Friedman’s Lexus and the other is the architecture of computer programs does stasist view of his olive tree. Several thousand determine the cost of regulating the conduct World Trade Organization protesters in Seat- that occurs using those programs, and the tle were a testament to the power of the olive transmission of information is more suscepti- tree. But the good news is that the dynamist ble to government control than many early view is winning and it is not easy to see how Net enthusiasts believed. We ought to worry we can turn back. about these things more than we do, and with Robert Lawson is professor of economics at Capital any luck, Lessig’s book will prompt a large University and co-author (with James Gwartney) of number of people to do so. Economic Freedom of the World 2000. However, the author fails to understand the nature of markets and spontaneous orders. Nowhere is this more evident than in Lessig’s repeated and incorrect use of the phrase “invisible hand.” He claims that the “invisible by Lawrence Lessig hand” will produce an Internet built around Basic Books ® 1999 ¢ 297 pages ® $30.00 technology that enables identification of users. Why? Because corporations demand it, he says. Corporate power will allegedly lead to corporate control and must be balanced by awrence Lessig has written an important government power. For example, Lessig con- but deeply flawed book on the future of cludes his discussion of privacy by lamenting the Internet. The book is important because of that “Individuals may want cyberspace to pro- who Lessig is (Harvard law professor, cele- tect their privacy, but what would push cyber- brated member of the “digiterati,” and adviser space to build in the necessary architecture? to U.S. District Judge Thomas Penfield Jack- Not the market. The power of commerce is Code and Other Laws of Cyberspace Reviewed by Andrew P. Morriss ===== PAGE 59 ===== Books 59 not behind any such change. Here, the invisi- of us, on the other hand, can be worth quite a ble hand would really be invisible.” bit. When entrepreneurs spot opportunities to Lessig just doesn’t get it. Markets don’t gather and sell information, a new market is work by an invisible hand of corporate control born. In a free market system, the price entre- guiding production and consumption deci- preneurs pay for individual pieces is irrele- sions. As Adam Smith observed, the out- vant, so long as people freely agreed to accept comes from markets make it appear as if the the payments. markets were guided by an invisible hand. The Like many in academia, and on the left miracle is that there is stuff I want at a price] more generally, Lessig is profoundly suspi- can afford at the grocery store down the cious of markets. He is willing to concede their street. That’s amazing—it’s something the ability to produce goods and services, but he immense staff of planners in the Soviet Union doesn’t trust the judgments of individuals never managed, even using the visible hand of about what goods and services to buy. Con- state control. sumers certainly don’t seem to be buying near- Markets work because they are a means of ly as much privacy as Lessig thinks they aggregating local knowledge at very low cost. should, for example. But if individuals make Markets tell me what I need to know about the systematic mistakes, mistakes that can be opportunity cost of using resources and about understood by Lessig, then we don’t really the tastes and preferences of those I deal with need markets to coordinate activities—we need in the market (how much they will pay for Lessig! Perhaps that’s why Judge Jackson what I am selling, for example.) The reason wanted his counsel in the Microsoft antitrust markets work is not that corporations decide case. Unfortunately for “Third Way” statists what we will buy (remember “new Coke”?). like Lessig, people around the world have And it is not because powerful people want been rejecting planners’ advice across the them to. Markets work because entrepreneurs board. spot opportunities to get rich. Despite its insights into the world of In Lessig’s markets, however, there are no computer code and the Internet, the book entrepreneurs. No one enters the market for falls short of its ambitious goals. It does computer code or for goods and services to so because the author prefers state control offer consumers privacy and books at a dis- to the spontaneous order of the free market. count. No one enters the market for anony- Nonetheless, the book is important and mous communications. No one sets up a Web should be read by those concerned with site based in the Cayman Islands to process preserving liberty both in and out of cyber- anonymous financial transactions. Consider- space. Ol ing the record of entrepreneurs IN TCAPME 4, drew Morriss, a contributing editor of 1deas on rewards from the Internet, his claim is aston- Liberty, is associate dean for academic affairs at ishingly erroneous. Case Western Reserve University School of Law in Consumers have gone AWOL in Lessig’s Cleveland. world as well. In Lessig’s markets, consumers either have been bought off with corporate ] loyalty programs or lack “real” choices. They Our Founders Knew This Well are easily bribed to reveal information about by Walter E. Williams themselves and against their interests by fre- Hoover Press ® 1999 ® 278 pages quent flyer programs and the like. Consumers © $18.95 paperback surrender vital information either without . — realizing it or for a pittance. According to Reviewed by William H. Peterson Lessig, they need protection from the greedy corporations seeking information. tatist “liberals,” take cover. Your sacred What Lessig fails to see is that information cows are fair game in this hard-hitting about most of us as individuals is not worth work by a witty, insightful, and even radical very much. Information about a whole bunch hunter of wrongheaded conventional wisdom ===== PAGE 60 ===== 60 IDEAS ON LIBERTY ® AUGUST 2000 somehow mesmerizing the mainline media, who, though seduced, toast what they per- clergy, Congress, academe, and other purvey- ceive to be “free money,” free lunches, free ors of mulish political correctness. schools, free highways, and so on—as they Did I say Congress? Well, hear the author, view Uncle Sam as Santa Claus. Do the recip- professor of economics at George Mason ients of federal largess care that their goodies University and nationally syndicated colum- are ill-gotten? Of course not. nist—some of whose recent columns make up While many of his selections deal with gov- this work—on the vexing subject of unconsti- ernment and that classic oxymoron, political tutional activity by Congress: “Today, little science, Williams also applies his economic that Congress does is authorized by our Con- scalpel to such matters as race and sex dis- stitution. Even a casual observer would con- crimination, health and the environment, clude that Congress has exceeded its authori- lower and higher education, and various inter- ty by a wide margin.” national issues. Walter Williams notes that what Congress Take race discrimination. Though he him- may do is bounded by the Constitution, self came out of a Philadelphia public housing in particular by Article I, Section 8, project, Williams holds that most of the social which details the purposes for which Con- pathology that characterizes the black com- gress 1s permitted to tax and spend money. munity today has little to do with discrimina- Yet despite the fact that the oath of office tion. When he was young, black neighbor- taken by each member of Congress specifies hoods were safer, had greater family stability, upholding that Constitution, some two-thirds more labor force participation, more upward of the budget is expended on education, mobility, and a lot less illegitimacy. Now, housing, farm and corporate subsidies, after generations of federal programs, those Social Security, and various other domestic neighborhoods are known for fraudulent edu- and foreign welfare programs that lack con- cation, rampant crime, family breakdown, stitutional sanction. high illegitimacy—factors surely transcend- Those outlays not only lack constitutional ing rank race “discrimination.” authority, says Williams, they run into overt Or consider sex discrimination. Williams interventionism—improper intrusion into pri- wonders about the notion of physical equali- vate or nonfederal matters. And virtually all ty between the sexes. He questions the wis- of them incur the law of unintended conse- dom of women serving as firefighters, police quences, making matters worse. officers, or military combatants, all under Congress and the Supreme Court take reduced performance standards, all in places refuge in the “general welfare” clause of Arti- where physical strength, aggressiveness, and cle I. But Williams cites James Madison, the other male characteristics are important. He acknowledged architect of the Constitution, cites the findings that at Parris Island 45 per- as saying: “I cannot undertake to lay my fin- cent of female Marines couldn’t heave a hand ger on that article in the Constitution which grenade far enough to avoid blowing them- granted a right to Congress of expending, on selves up and that U.S. Navy Lieutenant Kara objects of benevolence, the money of their Hultgreen, killed in trying to land her F-14 constituents. . . . With respect to the words on an aircraft carrier at sea, had been given ‘general welfare,” 1 have always regarded “preferential” flight training standards. Such them as qualified by the detail of powers con- double standards not only hurt morale but nected with them. To take them in a literal and are, says Williams, “life-threatening.” Point unlimited sense would be a metamorphosis of made. the Constitution into a character which there Another point made is that America’s pro- is a host of proofs was not contemplated by its hibitionists wage a War on Tobacco using offi- creators.” cial propaganda to dupe the nation into Nevertheless, unconstitutional laws and accepting more and more control over what outlays go on. Why? Williams blames Con- ought to be free choices of a free people. gress; but he also faults the American people Tobacco firms are hence hit by outrageous ===== PAGE 61 ===== Books 61 tort liabilities that boomerang against, among do, towards every other, all that justice others, the smokers themselves, most of requires him to do; as, for example, that he whom are in low-income brackets and have to shall pay his debts, that he shall return bor- pay for those liabilities with steeper prices for rowed or stolen property to its owner, and that cigarettes. he shall make reparation for any injury he Curiously, cigarette packages clearly carry may have done to the person or property of a warning from the Surgeon General that another.” Not bad. smoking is dangerous to health. So Williams All in all, this book adds up to a healthy asks, in blaming tobacco firms, whatever hap- dose of uncommon common sense. a pened to personal responsibility as a value in Dr. Peterson, adjunct scholar at the Heritage Foun- menca’ ne provi cs an ap quo on on gition in Washington, is Distinguished Lundy Pro- personal responsibility from philosopher- fessor Emeritus of Business Philosophy at Campbell lawyer Lysander Spooner: “Each man shall University in North Carolina. The Market Economy: A Reader edited by James L. Doti & Dwight R. Lee THE i MARKET Looking for a great way to teach economics, ECONOMY: or learn it yourself? James L. Doti and Dwight R. Lee This outstanding anthology is an invaluable source book for students of free-market economics as well as for proponents of limited government. Professors Doti and Lee have assembled a stellar list of authors—Adam Smith, Frederic Bastiat, David Ricardo (among the classical economists); Ronald Coase, Milton Friedman, James Buchanan, F.A. Hayek, Ludwig von Mises, and George Stigler (among the modern greats); in addition to Ayn Rand, Henry David Thoreau, Charles Murray, and others— to explain eight key issues: the invisible hand; markets and individual freedom; government regulation; the proper role of government; international trade; scarcity and social cooperation; income distribution; and imperfect markets. What a joy to find—in a single book—Hayek’s classic essay “The Use of Knowledge in Society”; Friedman and Stigler's wonderful work on rent control, “Roofs or Ceilings?”; Ayn Rand's essay on “The Nature of Government”; and Adam Smith's pivotal analysis of the division of labor. For anyone homeschooling children or anyone interested in deepening his or her knowledge of the relationship between economics and personal freedom, this book is not only essential, it's a real treasure. 362 pages, paperback FEE special! $10.95 postpaid ===== 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. 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Baird IDEAS ON [IBERTY August 2000 OSHA at Home bout 16 million employees do some work political gain, Peter Hoekstra, the head of the at home for their employers, and that House subcommittee responsible for over- number is growing rapidly. Increasingly sight of OSHA, scheduled a hearing to publi- sophisticated computers, software, faxes, and cize this extraordinary blunder. modems have made telecommuting a realistic On February 25 the head of OSHA issued a and desirable option for many employers and directive that explicitly exempts “home their workers. offices,” but not “other home-based work- Late last year Richard Fairfax, the Occupa- sites,” from inspections. Lest you think this is tional Safety and Health Administration’s a victory for privacy, remember that bureau- director of compliance, issued an advisory crats always seek to expand their empires and letter stating that employers are just as this is merely an agency directive. OSHA responsible for the safety and health of bureaucrats are unlikely to discard two years employees who work in their homes as they of work merely because the public doesn’t are for employees who work on company agree with them. In their minds they are premises. OSHA personnel had been working anointed to lead, not follow, the public. Any on this letter for two years. If implemented, agency directive can be modified, interpreted, the advisory could mean that such employees and reinterpreted to fit the moment. would be subject to unannounced OSHA The directive states, “Employers are inspections of such things as lighting levels, responsible in home worksites for hazards doorway dimensions, bathroom facilities, caused by materials, equipment, or work storage of household chemicals, and of processes which the employer provides or whether desks, chairs, and other equipment requires to be used in an employee’s home.” were conducive to employee safety. Inasmuch as OSHA is currently promulgating We have been lulled into accepting many an ergonomics rule ostensibly to protect governmental intrusions into our privacy, workers against “work-related musculoskele- such as governments annual inspection of our tal disorders” such as carpal tunnel syndrome, incomes, but it seems we aren’t yet ready to it isn’t hard to imagine that OSHA could soon be coerced into opening our homes to OSHA. classify computers as hazardous equipment. To the chagrin of Mr. Fairfax, his letter caused Since computers are central to telecommut- a maelstrom of protest. On January 4 Secre- ing, the “home office” inspection exclusion tary of Labor Alexis Herman forced OSHA to would inevitably break down. retreat for now. Seeing an opportunity for Senator Robert Wagner, author of the National Labor Relations Act (NLRA), Charles Baird is a professor of economics and the coined the phrase camel 5 nose under the director of the Smith Center for Private Enterprise tent” to characterize his strategy of expanding Studies at California State University at Hayward. government regulation little by little until 63 ===== PAGE 64 ===== 64 IDEAS ON LIBERTY ® AUGUST 2000 conditions were right to finish the job. Inspec- changes in the occupational distribution of tion of “other home-based worksites” is workers. Nor does it matter to them now that OSHA's camel’s nose. If people are seduced OSHA has had no measurable effect on that into accepting this idea, inspections of all continued decline. To unions OSHA is not home worksites will soon follow. If Represen- about worker safety and health. It is about tative Hoekstra is serious about keeping preventing union-free workplaces from gain- OSHA out of homes, he should pursue legis- ing any competitive advantages over union- lation that keeps OSHA out of all home work- impaired ones. sites. At the behest of labor unions President Employers have an interest in making work Clinton would veto the bill, but he isn’t going processes and environments safer and health- to occupy the White House much longer. ier for workers. First, employers with good Besides, it would be refreshing to see Con- records pay lower workers’ compensation pre- gress take a principled stand on something as miums than those with poor records. Second, basic as privacy at home. employees are willing to work for less in safe and healthy work environments than in unsafe The Unions’ Stake and unhealthy ones. In 1993 total workers’ compensation premiums amounted to $55 bil- Union officials are delighted at the prospect lion and wage premiums received by workers of OSHA inspections of home worksites in risky jobs amounted to $200 billion. because they oppose most telecommuting. Employers are eager to minimize these expen- This episode has created a cloud of uncertain- ditures while still getting their work done. ty concerning employer liability for work- Unionized firms are typically impaired in related injuries and health problems at home. their ability to discover and implement In response, fewer employers will permit improvements in work processes and environ- telecommuting and many of those who ments. It is an unfair labor practice for an already do will do less of it. employer unilaterally to implement such Telecommuting 1s anathema to unions for changes. All work conditions and processes at least two reasons. First, at-home workers are stipulated in formal contracts. Experimen- are difficult to organize. NLRA makes it tation is impossible without the consent of almost impossible for workers to avoid union union officials, who rarely give it, especially organizers on employers’ premises, but work- when any workers may feel threatened by ers are still free to exclude union organizers changes in the status quo. from their homes. Second, telecommuting is Command-and-control regulation stifles an example of mutually beneficial arrange- entrepreneurial discovery of better ways to do ments between individual workers and things. Unions count on OSHA to impose employers. Unions depend on the myth that workplace regulations on union-free firms labor and capital are natural class enemies. If that will make it as difficult for them to inno- more and more workers come to recognize vate as it is for union-impaired firms to inno- that mutually beneficial deals can be worked vate. If it weren’t for OSHA, it is likely that at out without unions, they may come to doubt least some union-free firms would have better that unions are necessary at all. worker safety and health records than they do. Labor unions were principal proponents of Without OSHA, the uninterrupted decline in the original Occupational Safety and Health workplace fatalities since 1937 may have Act in 1970. They argued that workers needed accelerated after 1970. government protection from workplace fatali- In short, far from allowing OSHA to extend ties and injuries because greedy capitalists its reach into private homes, Congress ought would otherwise sacrifice the well-being of to abolish the agency. Its official annual bud- workers on the altar of profits. It didn’t matter get is now $348 million, and it imposes bil- to them then that workplace fatalities had lions more in compliance costs throughout the been steadily declining since 1937 because of economy. In return it confers zero or negative improvements in safety technology and general benefits. Ul