===== PAGE 1 ===== IDEAS ON [IBERTY November 2000 Vol. 50, No. 11 FEATURES 8 “I Support Coercion and I Vote” by Jon Sanders 10 Enemies of the Automobile by Ralph W. Clark 14 Freeing the Freeways by Leigh Jenco 18 The Economic Virtues of Federalism by Dan Alban and E. Frank Stephenson 20 The Government’s Assault on Golf by Raymond J. Keating ¥ 26 Constitutional Protection of Economic Liberty by Norman Barry 33 Psychiatry in a Communist Utopia by Miguel A. Faria, Jr. 35 Peanut Butter, Education, and Markets by Darcy Olsen 37 How the Theory of Comparative Advantage Saved My Marriage by Ted Roberts ¥ a1 The Return to a Global Economy by lan Vasquez 46 Adam Smith: Moral Philosopher by James R. Otteson COLUMNS ) THOUGHTS on FREEDOM—Two Radicalisms by Donald J. Boudreaux 16 IDEAS and CONSEQUENCES—Incentives and Disincentives: They Really Do Matter! by Lawrence W. Reed 24 POTOMAC PRINCIPLES—The Clinton Regulatory Miasma by Doug Bandow 31 THE THERAPEUTIC STATE—Cereativity and Criminality: The Two Faces of Responsibility by Thomas Szasz ¥ 39 ECONOMIC NOTIONS—Sacrificing Lives for Profits by Dwight R. Lee 53 ECONOMICS on TRIAL—The Anti-Capitalistic Mentality, Updated by Mark Skousen 63 THE PURSUIT of HAPPINESS—Shameless in California by Charles W. Baird DEPARTMENTS 2 Perspective-They Don’t Make Revolutions Like They Used To by Sheldon Richman 6 High Gasoline Prices Are Your Fault? It Just Ain’t So! by Roy E. Cordato 52 Capital Letters 55 Book Reviews Illusions of Prosperity: America’s Working Families in an Age of Economic Insecurity by Joel Blau, reviewed by Donald J. Boudreaux; Freedom From Fear: The American People in Depression and War, 1929-1945 by David Kennedy, reviewed by Burt Folsom; The Titanic Story: Hard Choices, Dangerous Decisions by Stephen Cox, reviewed by George C. Leef; Money, Greed, and Risk: Why Financial Crises and Crashes Happen by Charles R. Morris, reviewed by Larry J. Sechrest; Public Finance and Public Choice: Two Contrasting Visions of the State by James M. Buchanan and Richard A. Musgrave, reviewed by Mark Skousen; Funding Science in America: Con- gress, Universities, and the Politics of the Academic Pork Barrel by James D. Savage, reviewed by Jack Sommer. Lesson plans for [ articles are available at www fee.org. ===== PAGE 2 ===== IDEAS TE ON [BERTY PERSPECTIVE They Don’t Make Revolutions Published by Like They Used To The Foundation for Economic Education oo } Irvington-on-Hudson, NY 10533 Another national election is here and will Phone (914) 291-7230 Fax (914) 591-8910 soon be gone. When you consider the A /iwww.fee.org resources sunk into elections, it’s remarkable President: Donald J. Boudreaux how litle they accomplish. Shakespeare’s Editor: Sheldon Richman Phrase sound and fury, signifying nothing Managing Editor: Beth A. Hoffman comes to mind. i .. £ & en The latest evidence for electoral indiffer- itor Emeritus ; i Paul L. Poirot ence issues from Cato Institute analysts Book Review Editor Stephen Moore and Stephen Slivinski, who George C. Leef write that the “Republican revolution” ush- Editorial Assistant ; ; : ty ered in by the 1994 congressional elections Columnists was something less than revolutionary. Its Charles W. Baird architects promised less government, and the Doug Bandow candidates campaigned on that promise. If a Lone Se ] mandate can ever be discerned in an election WICNCce . Ree . “oe Russell Roberts (a dubious proposition at best), the 1994 elec- Mark Skousen tion seemed to be a mandate for cutting gov- Thomas Szasz ernment drastically. Contributing Editors “The 106th Congress is well on its way to i becoming the largest-spending Congress on Clarence B. Carson domestic social programs since the late 1970s Thomas J. DiLorenzo when Jimmy Carter sat in the Oval Office and Burton W. Folsom, Jr. Thomas ‘Tip’ O’Neill was Speaker of the Joseph S. Fulda PS. House,” Moore and Slivinski wrote in July. Bettina Bien Greaves “... A major reason for all the new spending Robert Higgs . } oo. Lo h John Hospers is the inability or unwillingness of Republi- Raymond J. Keating cans to eliminate virtually any government niet Bein program. Many of the more than 200 pro- endy McElroy . CL. Tibor R. Mackan grams that the Republicans pledged to elimi- Andrew P. Morriss nate in 1995 in their ‘Contract with America Ronald Nash ~ fiscal blueprint now have fatter budgets than Edmund A. Opitz they had before the changing of the guard.” James L. P. . . wi Hoe The authors point out that 95 of the biggest Jane S. Shaw programs targeted for extinction have actually Richard H. Timberlake grown by 13 percent. “Many of President Lawrence H. White Clinton’s favorite programs have received Ideas on Liberty (formerly The Freeman: Ideas on Liberty) is the month- substantial budget increases, often in €XCess ly publication of The Foundation for Economic Education, Inc., Irvington- . 2 on-Hudson, NY 10533, FEE, established in 1946 by Leonard E. Read, is a of what the president has proposed,” they non-political, educational champion of private property, the free market, : and limited government. FEE is classified as a 26 USC 501(c)(3) tax- wrote. When the GOP Congress exceeded its exempt organization. own spending caps by $187 billion, the lead- Copyright © 2000 by The Foundation for Economic Education. Per- . . mission is granted to reprint any article in this issue, provided credit is ers applied the standard remedy: they raised given and two copies of the reprinted material are sent to FEE. The costs of Foundation projects and services are met through dona- the caps. B ut they overshot them too, by $40 tions, which are invited in any amount. Donors of $30.00 or more receive billion a subscription to /deas on Liberty. For delivery outside the United States: : . . . $45.00 to Canada; $55.00 to all other countries. Student subscriptions are Among the more egregious increases high- $10.00 for the nine-month academic year; $5.00 per semester. Addition- . . . al copies of this issue of Ideas on Liberty are $3.00 each. lighted in the study: the budget for Ameri- Bound volumes of The Freeman are available from The Foundation for calendar years 1972 to 1999. The magazine is available in microform from University Microfilms, 300 N. Zeeb Rd., Ann Arbor, MI 48106. 2 ===== PAGE 3 ===== Corps increased 248 percent since 1995, economics; education teaches slavish absorp- bilingual education by 80 percent, and the tion of official doctrine; and psychiatry is education program Goals 2000 by 112 per- political discipline. Miguel Faria takes a close cent. “In the past three years, the Republican look at psychiatry in the island bastion of discretionary budgets have exceeded the Marxism, Cuba. White House requests by a total of more than Despite a multitude of diagnoses about $30 billion,” the report stated. This includes what ails the government’s school systems, it the Department of Education, which the is only rarely pointed out that what the Republican platform no longer opposes. Sup- schools lack most of all are—customers. port for term limits was also a casualty of the Darcy Olsen explains. revolution. The law of comparative advantage says do Remember that as you go to the polls—or what you do best and trade for the rest. Ted as you don’t go. Roberts found that law the surest way to ripe . x x tomatoes. Globalization is on everyone’s mind, but In this political season bumper stickers are this is not the first time the world has lived in full bloom. Jon Sanders interprets an espe- through the phenomenon. The late nineteenth cially popular genre of auto adornment. century saw increasing economic integration The automotive age is nearly a century old, and liberalism, which perished in world war. but never have the car’s enemies been more Ian Vasquez compares today with that earlier determined to impose restrictions on people’s period of freedom. transportation mode of choice. The attack on Before Adam Smith wrote The Wealth of the automobile is an attack on freedom, writes Nations, the Scottish professor of moral phi- Ralph Clark. losophy wrote a book on a different subject. Cars traverse roads, of course, which today Or was it so different? James Otteson exam- are almost all government operated. Leigh ines Smith’s other book. Jenco goes back to a time when roads were Our columnists have prepared a sumptuous the product of private enterprise. intellectual feast. Donald Boudreaux discuss- The lords in Washington brag that they are es two radicalisms. Lawrence Reed says gov- responsible for putting 100,000 policemen on ernment discourages ambition and self- the streets of America’s communities. If so, reliance. Doug Bandow assesses the regula- they have wasted a lot of resources, write Dan tory overload. Thomas Szasz discourses on Alban and Frank Stephenson. geniuses and madmen. Dwight Lee continues In ordering professional golf to let Casey his discussion of putting a price on human Martin ride a cart during tournaments, the life. Mark Skousen remembers E. F. Schu- courts have intruded not only into private mat- macher. Charles Baird champions union-free ters but also into a grand tradition. Ray Keat- professors. And Roy Cordato, hearing con- ing relates this disgraceful chapter in the sumers blamed for higher oil and gasoline annals of the Americans With Disabilities Act. prices, inveighs, “It Just Ain’t So!” Over the years economic liberty has waxed Books that have occupied this month’ and waned in the hands of the U. S. Supreme reviewers contend with the illusion of the illu- Court. Progress in one area has co-existed sion of prosperity, America through war and with retrogression in others. Norman Barry depression, the Titanic, the causes of financial leads us on the constitutional roller coaster. crashes, public finance, and subsidies to sci- In communist countries nothing is as it entific research. seems. The economy has nothing to do with —SHELDON RICHMAN ===== PAGE 4 ===== Thoughts on Freedorm by Donald J. Boudreaux Two Radicalisms s radicalism good or bad? tradeoffs that our world of scarcity necessi- The answer depends on what is meant by tates. For example, most people agree that “radicalism.” Radicalism is good when it family vacations are good things. But this fact means consistently adhering to principles. does not mean that a family should spend 52 Among my principles, for example, is that weeks of each year vacationing. Parents must adults who respect the rights of others deserve work to earn income, and children must be to live in peace according to their own lights. educated. Any family that becomes so radical I apply this principle to everyone, regardless about vacationing that they do so year-round of sex, religion, ethnicity, nationality, sexual will suffer in the long run. Such a family will preferences, or whatever other particular facts fail to make the tradeoffs necessary to lead a you care to identify about them. I make no full and happy life. Single-minded obsessions exceptions. If you therefore accuse me of are dangerous. being a radical about this principle, I proudly Consistent advocates of free markets are plead guilty. often accused by statists of being radical in Radicalism is also good when it means the undesirable way. The insinuation, of seeking to understand a phenomenon by iden- course, is that advocates of free markets are tifying its root causes. (The word “radical” is like the family that insists on vacationing derived from the Latin radix, meaning “root.”) year-round—namely, obsessed with one par- If an economist wants to understand why the ticular thing. price of milk fell, he doesn’t focus on the fact But the insinuation is faulty. Consistent that the dairy manager in the local supermar- advocates of free markets are indeed radical, ket changed the price tag on cartons of milk but only in the good way—only in the way from $2.50 to $2.00. Instead, he finds his that means that they aren’t diverted by super- answer in the principles that determine price ficial considerations—only in the way that formation—supply and demand—and asks means that they steadfastly stick to their prin- which real-world events might have caused ciples. In fact, only by urging the widest pos- either the supply of milk to rise or the demand sible role for the free market can we avoid the for milk to fall. undesirable form of radicalism. Radicalism in these two senses is the oppo- The reason is that free markets open to each site of capriciousness and superficiality. It is, person countless different ways to spend his instead, a source of decency, intelligence, and resources and time. With this wide set of wisdom. options, each of us tailors his or her choices in Radicalism is undesirable, however, when very subtle and nuanced ways. Undesirable it connotes a refusal to take account of the radicalism is thereby avoided. Here’s a mundane example of what I mean. Donald Boudreaux is president of FEE. Next time youre in a supermarket, look ===== PAGE 5 ===== around at everyone waiting in the checkout collectivists want to eliminate capitalism. lines. Because each of us has unique tastes, They display a dazzling willingness to over- knowledge, and circumstances, you’ll find look collectivism’s history; despite its long that no one else’s grocery cart contains the record of tyranny and mass slaughter, collec- same mix of items that you have in your cart. tivism enjoys the praise of collectivists for no While two six-packs of beer might be exces- reason other than that it pretends that it will sive for you, it’s just right for the man ahead eliminate self-interest. of you in line. Likewise, while a half-gallon of Why this radical obsession with motives milk is ideal for the woman beside you in line, rather than consequences? Why excuse a long you need a full gallon. Each shopper selects and undeniable pattern of gruesome conse- that particular mix of groceries that promises quences merely because those who perpetrat- to him or her—individually and uniquely— ed these horrors said that their motives were the greatest amount of satisfaction. altruistic? Are intentions so hallowed and But if we acquired our groceries through consequences so trifling that only intentions government dictate rather than through indi- matter? vidual choice, each of us would be compelled Capitalism has proven beyond any vestige to consume a mix of groceries that other peo- of doubt that it, and only it, is the engine of ple—politicians—selected for us. The result- material prosperity for all. It creates colossal ing mix for each of us would be inferior to the and widespread wealth, and does so peaceful- mix that each of us would choose individual- ly. Contrast capitalist achievement with com- ly. Each of us would be obliged to consume munism and socialism—systems designed to too-small amounts of some items and too- engineer society from top-down using coer- large amounts of other items. It’s true that cion and, as a not-so-surprising result, distin- each of us is free, within free markets, to guished chiefly by their excellence at human become single-mindedly obsessed with some- slaughter. thing. But because each of us who becomes so “No matter,” growls the collectivist. “Capi- obsessed personally bears the cost of the talists are selfish. That fact alone condemns obsession, free markets reduce to a minimum capitalism.” the amount of such obsessions—such radical- How radical in the worst way! Collectivists ism—that prevails. are willing to subject millions of people to the The undesirable form of radicalism arises poverty, tyranny, and slaughter of statism— inevitably whenever some people assume the collectivists are willing to deny everyone the authority to dictate how other people should wealth, freedom, and flourishing that capital- live. A particularly galling variety is exhibited ism brings—merely because self-interest is by those collectivists who lament that each part of the fuel that drives the capitalist engine. person in free markets generally pursues his Collectivism is surely the ugliest species of own self-interest. For this reason alone, many radicalism. ===== PAGE 6 ===== IDEAS ON [IBERTY Novemser 2000 High Gasoline Prices in the position of arguing that gasoline prices 0) are higher today because they haven’t been Are Your Fault: higher for the last 20 years. And finally, it should be noted that the fuel economy rules, . namely, the Corporate Average Fuel Economy It Ju St Ain t S 0! (CAFE) standards, do not lead to reduced fuel . consumption because greater fuel efficiency makes driving less costly and therefore encourages people to drive more. (The most ho should be blamed for the high oil distressing problem with CAFE regulations is and gasoline prices? OPEC? The oil that they lead to smaller, lighter, and therefore companies? The government? According to more dangerous cars. Studies by Robert Cran- the New York Times’s Floyd Norris, if you dall and John Graham in The Journal of Law chose any of those you would be wrong. Writ- and Economics have concluded that 14 to 27 ing on June 23, Mr. Norris places all the percent of the nation’s automobile passenger blame for the current “energy crisis,” as he deaths are due to CAFE regulations.) calls it, squarely on the shoulders of con- sumers. He answers the question “Why are Not a Normal Market? gasoline prices so high?” with a cocky, “It’s the demand, stupid.” And as one would Norris arrives at his conclusions about con- expect, his solution centers on public policies sumer responsibility for higher prices by that would rein in consumption. Since con- arguing that “the oil market is nothing like a sumers are obviously too stupid to know how normal market.” In a “normal market” higher much energy consumption is right for their prices and increased profits would typically needs, the government must step in and use attract new producers, which would bring enlightened force to reduce demand and bring prices down. But according to Norris, this is prices down. In Norris’s view, “The real mis- not how the oil market works. He points out take in Washington came in the years after the that non-OPEC countries, like the United last oil crisis, when oil prices were weak and States, which would be expected to increase consumers lost interest in energy conserva- production cannot do so because they are tion. Higher gas taxes and less loophole laden already at full capacity. Since the crisis we fuel-economy rules would have helped avert face cannot be addressed on the supply side, it the current situation.” must be solved through government policies It should be pointed out, first of all, that so aimed at controlling consumption. It is long as oil is a scarce resource with a positive demand and demand alone that drives oil and price, consumers will never “lose interest in gasoline prices. This is what government pol- conservation,” that is, their desire to econo- icy needs to focus on. mize the resource. Of course, the extent to Norris is correct on two points. The oil which we conserve oil, gasoline, or any market is not like a “normal market,” and the resource will always be subject to what we U.S. oil industry is not in a position to must give up in the process of “conserving.” respond to the higher prices with increased What Norris is really saying is that consumers output. But Norris completely misses the rea- have refused to economize consistent with the sons for this. First, where a normal market tradeoffs he thinks they should be making. features profit-seeking private-sector firms Moreover, in a bizarre twist of logic his competing with one another, the oil market is lament about higher gasoline taxes puts him dominated by a number of state-run monopo- ===== PAGE 7 ===== 7 lies, with both political and economic goals, economies in Asia. But all that proves is that that do not compete with one another but market forces work. When demand is lower rather operate as a cartel. This includes Mex- than expected, prices fall (duh!!). How does ico, whose state-run oil industry has gone Norris explain the declining prices of the 16 along with OPEC’s output restrictions. years before 1998 or the declining oil prices Second, the private-sector U.S. oil industry of the last 100 years, all in the face of increas- is at capacity, but not because there is no more ing demand? Let me give him a hint. It’s the oil left to exploit. The U.S. government, in supply, stupid. response to a politically influential environ- While Norris compares our current oil mental movement, refuses to allow explo- problems to the energy crisis of the 1970s, he ration in Alaska’s Arctic National Wildlife seems to have learned nothing from that peri- Refuge (ANWAR) and off many coastal od. That decade’s energy policy was focused areas, and has effectively taken tens of bil- entirely on demand management. From odd- lions of barrels off the market. The Energy even gas rationing and regional allocation Departments Energy Information Agency schemes to CAFE regulations, interference estimates that the ANWAR’s coastal plain with consumer sovereignty did nothing to end alone contains as much as 20 billion barrels of the energy problems the country was facing. recoverable oil. What really “thrills” OPEC is The solution was found not in demand man- not, in Norris’s words, our “loophole filled” agement but in the elimination of price con- CAFE standards that allow American con- trols and the massive supply-side response sumers to drive “gas guzzling” SUVs, but our that deregulation engendered. The real prob- government’s restrictions on OPEC’s compe- lem with demand management, though, is not tition. The oil-producing countries’ most its lack of theoretical or empirical justification important ally is the U.S. environmental but its moral implications. Demand manage- movement and its access to power in the Clin- ment is people management. It is inherently ton administration’s Environmental Protec- paternalistic and must, by definition, thwart tion Agency and Department of the Interior. individual liberty and personal decision- Norris’s arguments are not only theoretical- making. For that reason alone, those ly unsound; they also ignore the short-term policies should be rejected by any society that and long-term history of oil pricing, both in considers itself free. this country and around the world. Norris —Roy E. CORDATO cites as evidence for his hypothesis that “it’s Lundy Chair in Business Philosophy the demand, stupid,” the fact that oil prices Campbell University fell dramatically in 1998 because worldwide and Fellow, The Institute for Research on the demand was down due to problems with Economics of Taxation ===== PAGE 8 ===== IDEAS ON [IBERTY NovemMBER 2000 “I Support Coercion and I Vote” by Jon Sanders eople place a wide variety of slogans on support the arts, the environment, or whatever the bumpers of their cars, and the mes- other cause at all. They don’t give a dime to a sages those bumper stickers convey range damn about the cause; if they did, they'd pay from the ridiculous to the sublime. I've read for it themselves. Their mindset is similar to many a bumper sticker in my commute, and that of the NIMBYS, the infamous “Not In My I’ve come to the studied opinion that there is Back Yard” bumpkins who didn’t mind a no more ridiculous genre of bumper sticker hazardous-waste operation so long as it wasn’t than that of “I support [insert a political near them. But those folks are worse than the cause] and I vote.” NIMBYs; they actually want the program in Whenever I have the misfortune of being question, but they don’t want to pay for it, behind a car proclaiming “I support the arts except through taxes, which everyone else has and I vote,” “I support the environment and I to pay, too. Call them the Not In My Back vote,” or “I support farming,” I am stricken Pockets, or NIMBPies. with the urge to confront the driver to get his If the NIMBPies truly cared for their pet explanation for it. I don’t do so, of course, causes, they'd see the utter void of virtue in because it’s dangerous to confront drivers being too stingy to pay for what they like. If these days and I already know what he means. they cared for a cause, they would give to it. The meaning of “I support the arts and I Surely they wouldn’t want to consign it to the vote” is not only obvious, it’s gushing with yoke of governmental largess, thereby sub- smarmy priggishness. It also happens to be jecting it to the fickle whims of legislators and entirely self-defeating. The meaning is, of voters. They would therefore make contribu- course, “I don t support the arts, but I vote for tions to save that cause from an ill-advised politicians who have convinced me they’ll reliance on politicians who get elected by force you to give money to the arts.” What promising enough nongiving voters that they, vainglorious hooey! Not only are they tight- too—with a lot of help from their neighbors, wads who conscript others into paying for of course—can “support” the cause. After all, their desires, they’re proud of it. And if that’s those politicians could be replaced at any not enough, they expect us to appreciate them election by politicians of a different stripe for it. who support nongivers of an opposing cause. The fact is these vehicular vanities don’t The original cause, accustomed to receiving pilfered bounty rather than raising its own Jon Sanders is a master’s student in economics at funds, would then languish and perhaps fail in North Carolina State University and the director of its sudden inability to earn money. No true publications for the Pope Center for Higher Educa- Supporter of a cause would wish to imperil tion Reform in Raleigh, N.C. it so. ===== PAGE 9 ===== 9 An Honest Bumper Sticker know that I am extraordinarily pleased with myself for being personally responsible in Oblivious to that, of course, the bumper- small part for your high taxes. How would sticker “supporter” putts along, snug in his you like to bring home just a little more to car and smug in the knowledge that he has your family tonight? Well, tough! I ‘support’ done his part for his cause. Can you imagine the arts. But since I’m a cheapskate, I found what would happen if the rhetorical filters me some politicians who take money from fell from that bumper sticker for just a you and your family to fund my personal moment? Picture the scene when, in heavy fetish. Am I deserving of your praise or downtown traffic, the bumper sticker sud- what? Can you believe I’m so satisfied with denly read, “Hey, you! Driver! I want you to myself?” Od FEE’s Book Service: An Important Announcement We are proud to announce a distribution alliance with Laissez Faire Books, the supplier of the world’s best selection of books on liberty. Lais- sez Faire Books will now take and fulfill orders for all the titles in FEE's Essential Library. When FEE started its book service decades ago, there were few ways for our readers to obtain good solid works on freedom and the market econ- omy. Fortunately, that situation has changed. Laissez Faire Books has earned an excellent reputation for service, competitive pricing, and guar- anteed customer satisfaction. FEE is committed to keeping in print works of Frederic Bastiat, Henry Hazlitt, Ludwig von Mises, Leonard E. Read, Henry Grady Weaver, and others that have long been associated with our foundation. But beginning November 1, please direct your orders to: ¢ Laissez Faire Books, Dept. FEE, 938 Howard Street #202, San Francisco, CA 94103 You may also * Fax your order to 415-541-0597, Attention: Dept. FEE, * Telephone toll-free 800-326-0996 (identify yourself as a FEE customer), or * Use FEE’s online bookstore at www.fee.org We are excited that this arrangement will enable loyal buyers of our titles to receive excellent service and enjoy shopping for other books and tapes on liberty, allowing FEE to concentrate on its other educational activities. If you have comments or questions, please do not hesitate to contact us. ===== PAGE 10 ===== IDEAS ON [IBERTY Novemser 2000 Enemies of the Automobile by Ralph W. Clark he automobile age is approximately 100 access to the conveniences of downtown years old. With the approach of a new areas. The catch phrase for this much- century and new millennium there could be denounced phenomenon is “urban sprawl.” no better time to celebrate the automobile But shouldn’t people be allowed to decide for its profound contributions to human for themselves whether suburban living is happiness. desirable? If they wish to try it, they should be Unfortunately, automobiles have enemies. free to do so, which means they will need An influential movement is underway to make access to automobiles. If suburban living is as it much more difficult for people to use and undesirable as some critics claim, then expe- enjoy their cars. rience will teach people. The lesson of the Even people who are not enemies of the suburbs—if there is a lesson—will have been automobile frequently view it as a mundane learned on a wholly voluntary basis, which is piece of machinery whose main function is to always best. provide transportation from point A to point The alternative favored by the critics is B. Cars cost a lot to buy and to operate, these to make it much more difficult for people to people say. Public transportation is cheaper use and enjoy their cars: they seek to raise and more rational even if not always as gasoline taxes, cut back on building new convenient. highways and improving existing highways, Automobiles have done more than any place additional restrictions on the use of other single invention or discovery in history the streets and highways that we already to expand the freedom that human beings can have, and require that new construction for exercise day in and day out. Cars play an homes and businesses be “high density,” important role in supporting human autonomy which means squeezed into a small space, for large numbers of people. And this number even when there is plenty of land available would be considerably larger if the enemies of for development. Taken together, these poli- the automobile were less influential. cies are what politicians mean these days Many critics of the auto charge that its when they talk about “smart growth”—but widespread availability in countries like the the term itself is nonsense because the United States has contributed to the break- policies are not smart and they also don’t down of cities and the spread of suburbs, with have much to do with growth. Even more a resultant loss of community and ready important, these policies don’t have much to do with what most people really want regarding better places to live and more Ralph Clark is a professor of philosophy at West Vir- ~~ COnvenient ways to go about their daily busi- ginia University. ness. 10 ===== PAGE 11 ===== 11 Some critics of the automobile contend that On purely practical grounds, there is much federal and state governments have subsi- to be said for public transportation, especially dized cars at the expense of other forms of in areas with dense populations. The greater transportation and that therefore the lesson of the density, the more we need subway sys- the suburbs has not been voluntary. This claim tems, commuter trains, buses, and other types is simply not true. Gasoline taxes and other of “people movers.” Mass transportation sys- highway user fees provide virtually all the tems contribute in their own way to free- funds for highway construction and mainte- dom—namely, freedom from worry about nance. As Randal O’Toole observed, “I once parking or driving on bad roads. But everyone believed the myth that autos and highways are already understands this. The citizens of the subsidized. It turns out that the subsidies are United States know all about both the negligible. . . . In the past decade, the average strengths and the weaknesses of mass trans- subsidy to auto users works out to less than a portation systems, and therefore they are per- tenth of a cent per passenger mile, while the fectly capable of deciding for themselves how average subsidy to transit is around 40 cents much they want to use buses and trains in per passenger mile.”’! relation to automobiles. What they do not need is to have someone else make the choice Cars Versus for them and force it down their throats while Alternative Transportation calling it “smart growth. Politicians everywhere like to talk about < o “shared burdens” and “cooperation”—which What About Global War ming: mean doing things the governments way. A more serious criticism of the automobile American’s must work together, sacrifice concerns the possibility of global warming. together, plan for the future together, and ride There is no denying that automobiles con- everywhere together on subways, trains, and tribute to carbon dioxide levels in the atmos- buses. This theme is echoed by numerous phere. Critics say that an increase in atmos- social scientists and journalists as well as by pheric carbon dioxide will exacerbate the politicians. Media stories refer to “sophisti- greenhouse effect, change the world’s climate, cated” European countries that have better melt portions of the polar icecaps, raise the public transportation systems than we do. The sea level, and produce other undesirable con- Europeans and others are held up as models sequences. for us to emulate. The first question to ask is whether scien- The policy the United States has pursued tists know with any degree of assurance that up to this point—a policy based on the ideal predictions of an impending harmful green- of letting cars be available for people in all house effect are correct. Second, do we know economic classes—is far superior. European how much automobiles contribute to any policies make ownership of cars impossible global warming that is actually occurring? for poor people and many members of the According to prominent climatologists, such middle class. One reason is that value-added as Patrick Michael and Robert Bolling, Jr., the taxes increase the prices of new cars dramati- evidence for dangerous manmade global cally. Only the wealthy can use their cars fre- warming is lacking, making draconian mea- quently for long trips because gasoline costs sures, such as raising gasoline taxes substan- so much. Few individuals can use their cars tially, unwarranted.? anywhere near as much as they would like to The immense benefits that people enjoy use them. And in places where new cars are because they live in what I like to call an extremely expensive and few new ones are “automotive civilization” can easily be docu- sold, many fewer used vehicles are available mented. Cars make our lives better in numer- for people with modest incomes. Visitors to ous ways, and cars are improving all the time. Europe who look around for used car lots are By contrast, predicting future weather pat- surprised to find how rare they are. terns is hugely complex and highly problem- ===== PAGE 12 ===== 12 IDEAS ON LIBERTY ® NOVEMBER 2000 atic. It is virtually impossible to do it over the long term. The interplay of causal factors is extremely difficult for scientists to sort out, and no adequate computer simulations have yet been devised for mapping and predicting the course of any future increase in the green- house effect. One reason for this failure is that gases pro- duced from the burning of hydrocarbons con- tribute to changes in the earth’s surface tem- perature in at least two important ways—first, by trapping heat that reaches the earth’s sur- face, and second by contributing to an increase in cloud cover which blocks out some of the heat from the sun. Moreover, car- bon dioxide is not the most important green- house gas—water vapor is. According to the best models, the contribution made by carbon dioxide to the presently existing greenhouse effect (which overall keeps the earth from becoming so cold that it would not support life as we know it) is only about one-twentieth that of water vapor. Even among the products of chemical interactions involving hydrocar- bons, carbon dioxide is not the main green- house gas—methane is. But methane produc- tion has nothing to do with the use of auto- mobiles, coming as it does primarily from agricultural sources. A major believer in global warming has come around to this view. In August, James Hansen of NASA’s Center for Climate Sys- when carbon dioxide levels were increasing at tems Research said he no longer believes car- a much lower rate. One possible explanation bon dioxide is an important contributor to the is that fluctuations in levels of solar activity greenhouse effect. “We argue that global may be a much more significant determinant warming in recent decades has been driven of the earth’s surface temperature than carbon mainly by non-CO2 greenhouse gases such as dioxide levels are. chlorofluorocarbons and [nitrogen oxides], As far as the polar icecaps are concerned, a not by fossil fuel burning” Hansen said small increase in global temperatures would (emphasis added). This revised view, con- likely produce an increase in evaporation tained in “Global Warming in the 21st Centu- from the oceans, which in turn could mean ry: An Alternative Scenario,” published by the more rain and snow. That could increase the National Academy of Sciences, dramatically thickness of the icecaps. defangs the case against the automobile.? There is also the question of whether we Furthermore, there is no historical correla- are living during an interglacial period that is tion between actual increases in the earth’s about to wind down. (Even less is known surface temperature and increases in carbon about the causes of the earth’s many ice ages dioxide levels. Instead, from about 1940 to than is known about possible roles played by 1970, when carbon dioxide levels were rising, greenhouse gases in climatic changes.) If that the earth’s temperature dropped slightly, after is the case, then a strengthening of the green- having risen during the previous 25 years house effect over the long term might be ===== PAGE 13 ===== ENEMIES OF THE AUTOMOBILE 13 desirable to counteract the onset of an ice one or more of them will undoubtedly be age. developed and made commercially feasible Critics of the automobile will ask: What if early in the twenty-first century within the scientists do succeed in demonstrating that competitive atmosphere of a flourishing glob- increases in the greenhouse effect are real, al economy. Among the new ideas for auto- harmful, and linked to rising carbon dioxide motive power currently being tested and levels? Would this not prove that the enemies actively developed are fuel cells that convert of automobiles had been right all along? gasoline and ethanol directly to electricity— It would prove nothing of the kind. If cars with almost no pollution. do contribute significantly to a harmful green- The same approach that is best for dealing house effect, then we need to put into place with problems that may be connected to measures that address this specific harm atmospheric carbon dioxide levels is appro- caused by cars. After all, there is no essential priate for other potential problems brought link between the “automotive ideal” and the about by the use of automobiles. Step one: use of internal combustion engines or the Identify the problem rationally (get the facts burning of hydrocarbons. straight; use reasonable caution). Step two: Require that the specific harm in question be The Automotive Ideal removed or reduced to acceptable levels, but leave the question of how it should be The “automotive ideal” is the concept of removed to market forces. We must not allow affordable and practical self-propelled vehi- politicians to exaggerate the problem for cles for people and their belongings, regard- demagogic, political reasons. Od less of the power source. - : Internal combustion engines can run on . oO Randal O’Toole, “Dense Feedback,” Reason, April 1999, hydrogen—which produces no carbon diox- 2. See Patrick J. Michaels and Robert C. Bolling, Jr., The Satan- are much more efficient than present designs. ing—Hot Problem or Hot Air?” The Freeman: Ideas on Liberty, A number of promising alternatives to the April 1998 pp. 231-36. . . . 3. UPI, “Global Warming Scientist Downplays Fossil Fuel internal combustion engine are possible, and Threat,” August 18, 2000. Making a List? Checking It Twice? Simplify your holiday shopping: See the inside front cover of this issue for details on giving gift subscriptions to Ideas on Liberty ===== PAGE 14 ===== IDEAS ON [IBERTY NovemBER 2000 Freeing the Freeways by Leigh Jenco itting in rush-hour traffic every working sioned a well-paved, reliable cross-country day of your life is enough to make you road to avoid urban congestion, encourage forget how much highways used to represent travel, promote the automobile industry, and liberation. That’s why a popular exhibition build up the rural communities along the way. that ran recently at the National Building His idea was so popular and necessary, in fact, Museum, titled “See the U.S.A.: Automobile that droves of private citizens, fed up with Travel and the American Landscape,” offered muddy backcountry roads, paid $5 each to more than just a walk down a pop culture become members of the highway organization lane. It provides a solution to the modern mis- that Fisher founded with Frank Seiberling of management of highways: a story of how the Goodyear and Henry Joy of the Packard free market freed the roads. Motor Car Company.! Local communities, in Since the Eisenhower administration and its exchange for providing labor, received free aggressive road-building policy, many people road-building materials from the organization have concluded that only the federal govern- and, more important, a significant boost to ment has the wherewithal to coordinate a local commerce.2 Automobile manufacturers huge, multistate project like a coast-to-coast saw the highway plan as an essential founda- highway. Since the road benefits the entire tion for the growth of their industry and vol- community, it is difficult to determine how unteered substantial funds. much a road is worth to each individual Despite its lack of federal support, the user—and once a road is built, individual highway plan was anything but uncoordinat- users are unwilling to pay for its funding and ed. As a 1916 guidebook touted, the Lincoln upkeep since they can literally free ride. Highway cut the time needed for cross- Added to all this, the project’s sweeping geo- country travel by two-thirds and reduced the graphical scope makes participation by the cost to an affordable $5 a day.3 Even when private sector and even local governments lack of funds threatened the future of the seem unlikely. road, the association worked with local gov- However, the facts of history stand in direct ernments to build sections of the highway opposition to the theories of politicians. Pri- to connect with the “seedling miles” of con- vate initiative provided not only roadside con- crete road built in strategic locations by the veniences but, in the case of the Lincoln association.4 Highway, also the road itself. In 1912, Carl The federal government realized too late Fisher, father of the Indianapolis 500, envi- the importance of what the Lincoln Highway Association was the first to promote, and by Leigh Jenco is pursuing a Ph.D. in political science 1921 it was anxious to catch up. The private at the University of Chicago. initiative symbolized by the highway associa- 14 ===== PAGE 15 ===== 15 tion was crowded out by the Federal Highway degradation, as when the Forest Service Act, taking with it the knowledge of where builds access roads into pristine national for- roads were most needed. New, less-direct fed- est for the lumber industry, or when the feder- eral highways wound through those states and al government funds miles of unnecessary towns that could muster the most political highways around Los Angeles, resulting in clout, adding hours (or days) to cross-country unprecedented congestion and dangerously driving time.5 It was political lobbying, and high levels of pollution. not the “failure” of a market, that led to Today private industry has begun, little by uncoordinated and unnecessary highway little, to pick up where the Lincoln Highway building. Association left off: four private highways in California join the Dulles-Greenway toll road ] in Virginia as examples of profitable, well- Mismanagement Abounds managed private highway projects.” As feder- al highway agencies become ever more sus- ceptible to pork-barrel spending and special- interest groups, the history of America’s first major highway speaks for the ability of local- ized and private development to serve the needs of an entire nation—profitably and appropriately. The situation today is much worse. The fed- eral highway budget (which provides 80-90 percent of all state highway money) requires no appropriations action from the legislature (that is, the part of government that is sup- posed to be representing you), divesting it of its fiscal responsibility to those who actually use the roads. Examples of mismanagement I. Chris Lewis, “Ambition Paved the Way,” Oakland Tribune, abound: President Eisenhower began the ae he UE A Automobile Travel and the American Land- modern highway system for purely military scape” National Building Museum Exhibition, Washington, D.C., purposes, and levied huge taxes that support- Jo re Exhin oa Sh is available online ed more than just the military-industrial com- 3. Lewis, p. 17. . : : 4. James Lin, “From Dirt to Concrete: 1913-1925,” The Lincoln plex: for decades, the trucking industry has Highway: A Brief History. Available at www.ugcs.caltech.edu/~jlin/ enjoyed free capital inputs at the expense of lincoln/history/part3.html. . . 5. Tbid. taxp ayers 1n the form of government subsi- 6. U.S. Department of Transportation, Federal Highway Admin- dized road building. Political conditions unre- istration, “Financing Federal Aid Programs: Authorization.” Avail- : : able at www.fhwa.dot.gov/reports/fifahiwy/fifahila.htm. Sponsive to actual economic demands for new 7. Peter Samuel, “The Case for Privatizing America’s High- roads have led to notorious environmental ways,” USA Today Magazine, January 1997, pp. 5, 7. SLT > \-7 Ae 2 SLI CMa es 4 ld oon ===== PAGE 16 ===== Ideas and Consequences by Lawrence W. Reed IDEAS ON [IBERTY NovemBer 2000 Incentives and Disincentives: They Really Do Matter! f you encourage something, you get more Robert Rector and William F. Lauber of it. If you discourage something, you get offered a stark but accurate assessment in a less of it.” Whoever first said that deserves a 1995 publication from the Heritage Founda- medal for putting to words one of the most tion, America’s Failed $5.4 Trillion War on profoundly important elements of human Poverty. In their view, a half-century of wel- nature. Human beings respond—often power- farism produced substantial “behavioral fully—to both incentives and disincentives. poverty” because it subsidized illegitimacy, An understanding of this great truth is crit- divorce, and idleness. Family disintegration ical for sound public policymaking. When encouraged by the dole in turn spawned dra- lawmakers ignore it, they raise taxes and then matic increases in crime and other social wonder why people don’t work as hard or save problems. According to Rector and Lauber, as much. Or they give people welfare checks for not working and then wonder why they’re not polishing their résumés. Indeed, the welfare reforms of the 1990s came about largely because Americans saw the tremendous toll that welfare had exacted on families and on virtues like work and self- reliance. We came to realize, for example, that one outcome of boosting handouts when the father left the home was that fathers often dis- appeared. We also discovered how counter- productive it was to cut a dollar of welfare benefits for each dollar of earned income—in effect, imposing a 100 percent marginal tax rate on welfare recipients who found jobs. Clearly, we had to stop penalizing work and rewarding nonwork! Unfortunately, in spite of some notable reforms at the national and state levels, a wide Lawrence Reed is president of the Mackinac Center ~ array of programs here in Michigan (and for Public Policy (www.mackinac.org), a free-market probably in all other states as well) are research and educational organization in Midland, undoubtedly still sending the wrong signals. Michigan, and chairman of FEE's Board of Trustees. Over the years, we’ve piled one well-inten- (Mr. Reed would like to thank Peter T. Leeson, a tioned tested top of anoth Hillsdale College student and a summer research toned means-iested program onl top of anoth- scholar at the Mackinac Center, for his assistance in €I—the cumulative effect of which may well preparing this column.) be to say to untold numbers of families, “If 16 The anti-marriage ‘and anti-work effects of welfare are simple and profound. The current welfare system may be conceptual- ized best as a system that offers each single mother with two children a “paycheck” of benefits. . . . The mother has a contract with the government. She will continue to receive her “paycheck” as long as she ful- fills two conditions: She must not work and she must not marry an employed male. Thus, the welfare system . . . has trans- formed marriage from a legal institution designed to protect and nurture children into an institution that financially penalizes near- ly all low-income parents who enter into it. ===== PAGE 17 ===== 17 you earn less than a certain amount, you're » State-subsidized low-interest mortgage eligible for lots of things but if you start to loan availability goes away when annual earn much more than that, you can lose it all.” income exceeds $43,575. Every means-tested program state or local government offers has the unintended effect of Recently, a commission appointed by Gov- reducing incentives for most able people to ernor John Engler proposed a “Postsecondary become self-reliant. Get a job and surpass the Access Student Scholarship” (PASS) pro- program’s income threshold and the aid disap- gram. If enacted, it would offer two years’ pears. Stay below this level and government free tuition for the pursuit of an associate’s pays you to stay unemployed or to remain degree to students coming from families earn- in a low-paying job. And surely, some hard- ing $40,000 or less. working people who are earning slightly above It’s not precisely scientific, but it’s fair to the maximum allowed for certain benefits have say that under the current panoply of aid pro- days when they wonder if their efforts to take grams, at somewhere around the $25,000— care of themselves are all worth it. $35,000 annual family income level lots of In Michigan, families below certain income benefits disappear. For some citizens, that limits qualify for a laundry list of benefits. means it may be more lucrative to accept a The other way to look at it is as a list of the low paying job than it is to accept a higher freebies low-income workers can get if they paying one because the value of government just work less. benefits more than offsets the loss of income from more gainful employment. * A family of four whose income rises Careful empirical surveys might illuminate above about $573 a month loses Family the extent to which current programs are hav- Independence Agency (FIA) cash subsi- ing unintended, negative effects. Suffice it to dies for living expenses (actual limit say for now that simply recognizing that depends on recipient tier, shelter area, and incentives and disincentives matter would be employment deductions). The same house- progress in the public-policy discussion, and it hold also loses state-provided employment just might make a few legislators think twice and training services when its income before adding more programs to the problem. exceeds that threshold (again, actual limit The ultimate answer to this dilemma is not depends on FIA classification). some reconfiguration of public welfare laws. * A family of four earning more than $755 As long as government is taking from some a month no longer qualifies for cash subsi- and giving to others, “reforming” the system dies provided by the State Emergency Relief in any fashion still leaves a relatively indiffer- program to cover housing and utility costs. ent and unaccountable public bureaucracy * Households of four with monthly spending other people’s money on behalf of incomes exceeding $1,783 may no longer people who need something much more ful- receive food stamps. filling than a government check. They need * Unemployment benefits disappear when the uplifting effects of thoughtful and efficient per-week earnings reach $450. private initiative—either their own or that of * Subsidized housing eligibility for a fami- others who really care about them. ly of four vanishes when annual income The best way to reform government welfare exceeds approximately $24,725 (actual programs is to eliminate them. Excise the limit depends on city and income grouping). middleman of government and stimulate the * A household of four gets subsidized direct civil-society approach of people help- child day care until its monthly income ing people. Ultimately, there’s no reason to grows beyond $2,586 ($31,032 per year). believe that politicians are more compassion- * A family of four grossing more than ate than the people who elect them, and judg- $2,876 a month ($34,512 a year) loses aid ing by the effects of the politicians’ programs, from the Low Income Energy Assistance theres not much reason to think they’re any Program to cover heating costs. smarter either. [] ===== PAGE 18 ===== IDEAS ON [IBERTY The Economic Virtues of Federalism by Dan Alban and E. Frank Stephenson he political benefits of federalism as a nals in interjurisdictional flight and special- mechanism for dispersing and restrain- ized forensics, like DNA testing. That is, ing governmental power are well understood policing is primarily the domain of city and by students of public policy. Often over- county officials who levy local taxes to finance looked, however, are the economic benefits. it. Placing the responsibility for local policing Take the federal government’s Community on local officials is sensible because they are Oriented Policing Services (COPS) program. more aware of crime conditions than state or The COPS program has been the subject of federal officials and are better able to judge much criticism since its inception in 1994. their constituents’ willingness to pay for addi- This criticism, recently repeated in a front- tional police protection. Local officials have page Wall Street Journal story, usually an incentive to compare the improvement in focuses on the questionable claim that the community safety from additional officers to program will add 100,000 new officers to the the cost of financing them through local taxes. streets and the dubious proposition that com- Hence, federalism, by providing for a divi- munities will retain the newly created police sion of labor among different levels of govern- positions as the federal government phases ment, serves to enhance economic efficiency out its financial support. The efficacy of the because local officials have better knowledge program is indeed questionable, but the quib- of their constituents’ willingness to pay for bling over the precise number of police offi- policing or other services than do state or fed- cers added by COPS ignores the fundamental eral officials. issue of whether the program should have COPS, however, weakens the link between been created in the first place. Critics seem to hiring additional officers and local willing- have overlooked the fact that COPS misallo- ness to levy taxes to pay for them. A commu- cates scarce resources that communities or nity’s cost of hiring an additional police offi- individuals could have put to more highly val- cer is greatly reduced because three-fourths of ued uses. the program is funded from federal revenues. Traditionally, municipal policing hasbeena Consequently, even if a community has what local issue, with state and federal assistance it considers to be an adequate police force, limited to purposes such as capturing crimi- COPS induces it to hire an additional officer — at only one-fourth the usual cost. It is a bitter Dan Alban is a recent graduate of Berry College and irony that this affront to federalism, which a fellow at the Institute for Humane Studies. Frank moves Congress yet another step closer to Stephenson is an assistant professor of economics in . . . . the college's Campbell School of Business and an becoming, in the words of Bloomington, Min- adjunct scholar with the Georgia Public Policy nesota, police chief Bob Lutz, “the gigantic Foundation. city council of the United States,” is foisted 18 ===== PAGE 19 ===== 19 on the public under the name “Community Can’t Raise Taxes? Oriented Policing Services.” Since no community solves or prevents all This reveals another possible argument for its crimes, communities might benefit from federal funding of local police: Local com- obtaining the additional police officer since munities need additional police officers, but that officer might deter or solve crimes that for some reason local officials are either otherwise would have occurred or gone politically unable to raise taxes to fund such unsolved. This, however, does not mean that officers or too ignorant to realize that the the benefit of the additional officer outweighs benefit of additional officers would outweigh his cost. Since the community does not bear their expense. Putting aside the rank pater- the full cost of the officer, it may add an offi- nalism present in this line of reasoning, it is cer to handle low-priority items like jaywalk- apparent that this contention is false. Local ing and traffic enforcement. This results in the officials, at least those in Floyd County, have misallocation of society’s resources: Local not seemed constrained in raising taxes to officials choose not to hire an officer if they pay for questionable things such as subsidiz- must pay his entire salary and expenses, but ing a hotel construction project or building a they do hire the officer when they have to municipal golf course. It strains credulity, pay only 25 percent of his cost. Since com- especially given the public’s near hysteria munities bear such a small share of the cost of about crime in recent years, to believe that an officer, even an officer assigned to low- local officials are politically able to raise priority duties might be considered worth- taxes for such projects but are unable to pay while by local officials. for local policing. Consider Floyd County, Georgia, the home Rather than alleviating a dearth of police of Berry College. Floyd County has nine fed- officers, COPS causes local police depart- erally funded officers and receives a grant in ments to proclaim how desperately “under- excess of $600,000 over three years. While funded” they are, thereby creating an these officers have undoubtedly captured artificially high demand for police officers. some real criminals and deterred other would- That local requests for COPS grants be criminals, the Floyd County “C.O.P.S. Unit exceeded available funds, as COPS Director 1998 Annual Report” touts the following Joseph Brann boasted in a 1997 letter to the accomplishments: General Accounting Office, does nothing to prove that local communities are somehow e Conducted 37 training programs in local politically constrained from directly funding schools, contacting 3,515 students. community policing. It simply indicates » Participated in eight church events —no surprise here—that communities will involving 128 people and providing security queue up to receive free money from Uncle for a crusade held at the local civic center. Sam. » Assisted 11 local charity events for, While some local officials would no doubt among others, the Special Olympics and Mus- argue that they are just trying to get back what cular Dystrophy Association. their communities paid in federal taxes, this » Sponsored a youth baseball team, the argument is specious because if all communi- “Bullets.” (This politically incorrect name ties got back what they paid in federal taxes must drive gun-control advocates nuts.) there would be no point in sending the funds » Established the Floyd County Police to Washington in the first place. And since the Youth Boxing League. contention that communities are only getting back what they paid disregards the bureau- Local citizens might consider these worth- cratic overhead and the stipulations requiring while, perhaps even high-priority, policing communities to use the grants to hire unnec- activities. But if that’s the case, then the local essary police officers, it overlooks the real officials should have ample political support means by which COPS squanders society’s for locally funding the additional officers. resources. Od ===== PAGE 20 ===== IDEAS ON [IBERTY NovemBer 2000 The Governiment’s Assault on Golf by Raymond J. Keating To professional Casey Martin cheats at tices, or procedures, when such modifications golf. And he does so with the govern- are necessary to afford such goods, services, ment’s help through a particularly bad federal facilities, privileges, advantages, or accom- law and judicial overreach. modations to individuals with disabilities, Since late 1997 Martin has been riding in a unless the entity can demonstrate that making golf cart, which is against both the rules of the such modifications would fundamentally alter Professional Golfers Association Tour (PGA the nature of such goods, services, facilities, Tour) and the 500-year tradition of golf privileges, advantages, or accommodations.” played at the highest levels. The ADA, of course, is one of those feel- However, Martin suffers from a disability. good laws that turn out to be vague and over- The former college teammate of Tiger Woods ly broad, thereby placing enormous discre- at Stanford University has a rare and painful tionary power in the hands of regulators, circulatory disease called Klippel-Trenaunay lawyers, and the courts. Formidable legal and Syndrome afflicting his right leg, which pre- compliance costs have been imposed not only vents him from walking for long periods. In on the private sector, but also on state and late 1997 Martin sued the PGA Tour, which local governments—that is, taxpayers. And a operates the PGA Tour, the Buy.com Tour, long line of absurd lawsuits and actions has and the Senior PGA Tour, for a “right to ride” been undertaken in the name of the ADA. In under the 1990 Americans With Disabilities recent years, reports about ADA inanities Act (ADA). have ranged from the Air Line Pilots Associa- The ADA says: “No individual shall be dis- tion’s arguing that the ADA protects pilots criminated against on the basis of disability in who are alcoholics, to a deaf woman’s suing the full enjoyment of the goods, services, Burger King a few years ago claiming that facilities, privileges, advantages, or accom- drive-through windows discriminate against modations of any place of public accommo- deaf people. dation by any person who owns, leases (or If Martin ultimately wins his case, the leases to), or operates a place of public courts would empower themselves under the accommodation.” The act goes on to state that ADA to actually set many of the rules of “discrimination” includes “a failure to make sporting contests. reasonable modifications in policies, prac- A preliminary court injunction was issued in November 1997 to allow Martin to ride in Raymond Keating is chief economist with the Small g Fa 1 Business Survival Committee, a weekly columnist a cart during the PGA Tour Qualifying Schoo with Newsday, and co-author of U.S. by the Num- (Q-school) that December. Normally, the Tour bers: Figuring What’s Left, Right, and Wrong with does not allow carts in the final rounds of Q- America State by State (Capital Books). school. In his lawsuit, Martin claimed that 20 ===== PAGE 21 ===== 21 without a cart he “would be unable to pursue portions of the place of exhibition that are his profession at this high level” Martin open to the general public.” The Ninth Circuit missed the PGA Tour, but played well enough concluded that “a golf course is a place of over the Q-school’s 108 holes to make it onto public accommodation while PGA is con- the Buy.com Tour (formerly the Nike Tour), ducting a tournament there.” It agreed with which basically is professional golf’s minor the lower court that letting Martin use the cart leagues. “was a reasonable accommodation to his Before his case went to trial, Martin shot a disability . . . and . . . did not fundamentally 69 on January 11, 1998, in the final round and alter the nature of the PGA and Nike Tour rode to victory in the Buy.com Tour’s Lake- tournaments.” land Classic. For someone with Martin’s dis- ability, this was a noteworthy accomplish- el yee ment—although it should also be noted that Inj udicious Leaps Martin beat by one stroke Steve Lamontagne, In reality, Judge Coffin and the Ninth Cir- who during the tournament had foot surgery cuit are both guilty of astounding, injudicious for an ingrown toenail and finished the tour- leaps. The use of a little bit of common sense nament with the tip of his shoe cut open. Mar- would reveal that while the spectator areas at tin has continued riding ever since on both the sporting events—such as grandstands—could Buy.com and PGA Tours while his case has be defined as places of “public accommoda- worked its way through the courts. tion,” the actual fields of play most certainly The trial phase of Casey Martin v. PGA are not. If “inside the ropes” during a PGA Tour Inc. began on February 2, 1998, and by Tour event falls under the ADA, then so February 12, U.S. Magistrate Thomas Coffin would diamonds during Major League Base- had ruled in Martin’s favor. Coffin decreed ball games, gridirons in National Football that walking in golf is “not significantly tax- League contests, rinks for the National Hock- ing.” He concluded, “Mr. Martin is entitled to ey League, the hardwood for the National his modification because he is disabled. It will Basketball Association, and so on. The courts not alter what’s taking place out there on the would be free to decide what rules are funda- course.” mental to the nature of each sport whenever In May 1999, the Ninth U.S. Circuit Court someone with a disability decided to chal- of Appeals in San Francisco heard the PGA lenge a sport’s particular rule. Tour’s appeal. Almost a year later, on March Such an interpretation is an arrogant abuse 6, 2000, the Ninth Circuit found in favor of of government’s power, which both Coffin and Martin in a 3-0 ruling. Judge William Canby the Ninth Circuit felt compelled to exercise. wrote: “The central competition in shot- They presumed to overrule hundreds of years making would be unaffected by Martin's of golf history, some of the greats that have accommodation. All that the cart does is per- played the game, and the people that write the mit Martin access to a type of competition in rules of golf in order to dictate that walking which he otherwise could not engage because was not fundamental to the sport. of his disability. That is precisely the purpose The counterarguments to the court’s con- of the ADA.” clusions are not only obvious to those of us The court decided that a “place of public who have played golf for many years, but, accommodation” pertained to the PGA Tour considering the sources, should not be ques- because ADA language includes golf courses, tioned by the courts. Let’s start with the PGA along with bowling alleys, theaters, stadiums, Tour and its commissioner, who effectively and other places of exercise, recreation, exhi- are hired by the players on the PGA Tours to bition, or entertainment. The court wrote: “If run their sport. a golf course during a tournament is not a In the Los Angeles Times (January 10, place of exercise or recreation, then it is a 1998), PGA Tour commissioner Tim Finchem place of exhibition or entertainment. The explained: “It’s really not an issue whether statute does not restrict this definition to those one player who has a particular disability ===== PAGE 22 ===== 22 IDEAS ON LIBERTY ¢ NOVEMBER 2000 should be allowed to ride a golf cart. This is and would be helped by a cart?” an issue, first and foremost, about whether or Venturi himself, of course, offers a striking not the courts should make the rules for the example of how important the walking rule is game or the governing bodies in the game get in professional golf. In 1964, Venturi not only to make those rules.” He added: “It is also, to overcame a multi-year slump, but also 100- some degree, about the question, I would plus-degree heat, 97 percent humidity, and admit, of walking and the extent to which severe dehydration to walk 36 holes at Con- walking is a part of the tradition of the game. gressional Country Club outside Washington, We feel very strongly that it is. For over 500 D.C. to win the U.S. Open. During testimony years, it has been part of the game at the high- in the Martin trial, Venturi declared: “The est level. We think that endurance is a part of doctor recommended I drop out because this our sport.” could be fatal . . . but this was something I had In a summary of its argument, the PGA prepared for all my life.” Tour said: “The ability to walk five miles each In videotaped testimony, two of the game’s day for four consecutive competitive rounds, greats weighed in on how important walking week after week, often under adverse condi- is to golf. Arnold Palmer declared, “I feel if tions and over challenging terrain, is part of we change this rule, we will change the nature the endurance and stamina required to play of golf on the face of the earth.” He contin- professional golf at its highest level.” It should ued: “A golf cart is a pretty relaxing way to also be noted that weather can dictate that as get around the golf course, and you would many as 36 holes be played in one day; that probably keep a lot more of the stamina. . . . contests like the Ryder Cup regularly require Part of the game is the physical fitness built more than 18 holes be played in one day; and into your body so you can compete.” Even that a playoff in the U.S. Open means at least though golf carts are available on the Senior another 18 holes be played on a fifth day. Tour, Palmer does not think they should be, and has often declared that once he can no The Tradition of the Game longer walk the course, he’ll quit the game. Jack Nicklaus also argued against Martin’s While some touring pros (including Tom assertion of a right to ride. Two months later, Lehman, Mark Calcavecchia, and the late Nicklaus at age 58 made a run at a seventh Payne Stewart) have supported Martin’s case, green jacket at the Master’s, but fell just short. the majority, though exhibiting great sympa- A few months later, he was forced to with- thy and respect for Martin, opposes the use of draw from the British Open, breaking his carts. When the case first became hot in the streak of 154 straight majors, because of a bad media, Curtis Strange told USA Today (Janu- hip. In both instances, a cart easily could have ary 7, 1998), “If you think with your heart, made a difference. you’ll feel for the young man. But you have to Martin’s former teammate Tiger Woods has think with your brain. You have to go with the walked a delicate line, being supportive of tradition of playing the game, and a large part Martin but saying he understands what the of that is walking.” PGA Tour is doing. He was quoted in the New In a January 1998 interview with the Asso- York Times (January 12, 1998): “As a friend, ciated Press, CBS golf commentator Ken Ven- I'd love to see him have a cart. But from a turi declared: “I think fatigue and being in playing standpoint, is it an advantage? It shape is really part of the game. It’s been that could be. If it’s 100 degrees in Memphis, does way since the beginning of the game. My feel- it help to ride?” ing is no carts.” He continued: “This is not a But it was 1992 U.S. Open winner Tom black and white issue, a heads or tails issue Kite who made the clearest case as to how that is just about Casey Martin. . . . Where do walking impacts the game of golf in a Febru- you draw the line? How disabled do you have ary 2, 1998, New York Times op-ed. Kite to be? What about guys like Billy Glasson and explained: “The mental, physical and emo- Scott Verplank who have had so many injuries tional aspects of the sport are closely linked. ===== PAGE 23 ===== THE GOVERNMENT’S ASSAULT ON GOLF 23 Fatigue can cause loss of concentration, which can cause poor shot selection, which can cause poor shotmaking, which can cause stress, which can cause more loss of concen- tration. | have seen a lot of tournaments over the years that were won or lost on the last few holes, when you have to be sharp mentally, physically and emotionally.” Thankfully, some federal judges seem to grasp that it might be better to leave the rules of golf to those who actually operate and play the sport. The day after the Ninth Circuit announced its decision in the Martin case, the Seventh U.S. Circuit Court of Appeals in Chicago issued a unanimous opinion directly contradicting the Martin decision. In Olinger v. USGA, Indiana club pro Ford Olinger had sued the United States Golf Association (USGA) under the ADA in order to ride a cart while trying to qualify for the U.S. Open. Olinger has a degenerative hip disorder. Dis- trict Court Judge Robert J. Miller, Jr. had ruled against Olinger, noting that the “point of an athletic competition . . . is to decide who, under conditions that are about the same for everyone, can perform an assigned set of tasks better than (not as well as) any other competitor. The set of tasks assigned to the competitor in the U.S. Open includes not merely striking a golf ball with precision, but doing so under greater than usual mental and physical stress. The accommodation Mr. Olinger seeks, while reasonable in a general sense, would alter the fundamental nature of that competition.” In upholding the lower court, the Seventh Circuit wisely concluded: “The decision on whether the rules of the game should be adjusted to accommodate him is best left to those who hold the future of golf in trust.” Golfers for Judges According to Sports Illustrated, Olinger complained that “Casey had three judges who attacked the legal issues, whereas I got golfers for judges.” Actually, he got judges who hap- pened to respect the sport of golf, but more importantly, they seemed to respect the law and the proper role of the courts. These judges restrained themselves from dictating the rules of a sport, whereby Judge Coffin and the Ninth Circuit did just the opposite, much to their disgrace. On July 5, 2000, the PGA Tour filed a request with the U.S. Supreme Court to review the Ninth Circuit’s decision. At the time, it was expected that Olinger’s lawyer would appeal the Seventh Circuit’s decision as well. The Supreme Court in fact did decide in late September to resolve the conflict by tak- ing up the Martin case. The ADA is bad news for all golf course owners and operators, and golf traditionalists as well. In effect, this law would preclude a golf lover from building and running a golf course meant just for walking. In addition, existing golf courses where the terrain does not lend itself to carts apparently would have to make costly alterations to comply with the ADA. Unfortunately, bad laws like ADA pass whether a Democrat or a Republican happens to be president. It was signed into law by Republican President George Bush in 1990, who also happened to be the biggest golfer in the White House since Dwight Eisenhower. In the end, when 1 see Casey Martin on television riding a cart at the latest PGA Tour stop, I often think about my late grandfather, Bernard Mitchell. While amateurs like me usually prefer walking, most of us have hopped in a golf cart. And then there are peo- ple like Bernard Mitchell, a fine golfer who taught me the game. We played a few rounds together as he climbed into his mid-seventies. As he got a bit older, he could still hit the ball straight and putt beautifully, but his legs wouldn’t let him walk the course any more. He so believed that golf meant walking that he never went out onto the course again (though he still putted on his living room car- pet and was more than willing to offer some tips). While I reflect on this today, I would love to have the memories of a few more rounds with my grandfather, but I also deeply respect his love for the traditional game of golf. In my view, Bernard Mitchell had a far greater love for golf than do the Casey Mar- tins and Ford Olingers of the world. After all, he played by the rules. OJ ===== PAGE 24 ===== Potomac Principles by Doug Bandow IDEAS ON [IBERTY Novemeer 2000 The Clinton Regulatory Miasma I's A t has been a sad spectacle: President Bill Last year the Federal Register, Uncle Sam’s Clinton, desperate to salvage his scandal- compendium of regulations, ran 71,161 laced legacy, crisscrossing the nation propos- pages, a 4 percent increase over 1998. That is ing new spending programs and regulatory the highest since 1980, when it peaked at initiatives with wild abandon. He seems 73,258 pages during the glory times of the determined to jettison perhaps his one good Carter presidency. bequest to the nation: a less loony left-wing The federal government spent about $1.7 Democratic Party. trillion last year. Despite the pervasive waste, President Clinton’s moderation was always at least there was theoretical accountability heavier on rhetoric than practice. His original since Congress voted the money. Not so regu- budget included the usual pork-barrel spend- lation, which Thomas Hopkins of the ing as well as tax hikes, and he proposed to Rochester Institute of Technology figures cost turn control of the health-care system over to Americans about $758 billion, almost 45 per- Uncle Sam. cent of official federal budget outlays. Nevertheless, his early political defeats Indeed, Clyde Wayne Crews of the Com- helped moderate his worst excesses, leaving petitive Enterprise Institute points out that left-wing social engineers apoplectic. They Americans spend almost as much on regula- need not have worried. Bill Clinton has tion as on the personal income tax. Rule mak- sought to bring back the liberal good ol’ days ing runs about four times as much as corpo- of regulation. rate income tax collections, and more than The Clinton administration has some 4,538 total corporate profits. regulations in process, 137 of which are All told, every American family is paying termed “economically significant” and will about $7,400 a year for the privilege of being cost at least $100 million each. The number of watched, controlled, prodded, nannied, and these big rules is up nearly a fifth from just a otherwise governed. That is essentially a sep- year ago. arate income tax of almost 20 percent—on The biggest rule maker is the Department top of all the other government levies, which of Transportation, followed by the Environ- currently constitute the highest peacetime mental Protection Agency; each accounts for burden in U.S. history. more than one-tenth of the total. The Depart- In effect, we are back to taxation without ments of Treasury, Commerce, Agriculture, representation. As Crews puts it, “regulatory and the Interior follow. initiatives allow government to direct private- _— sector resources to a significant degree with- Doug Bandow, a nationally syndicated columnist, is gn & oo ees a senior fellow at the Cato Institute and the author out much p ublic fuss. Politicians pass gener and editor of several books, including Tripwire: al laws expressing unobjectionable sentiments Korea and U.S. Foreign Policy in a Changed World. (cleaner air and water). Unknown staffers 24 ===== PAGE 25 ===== 25 buried within the bowels of the bureaucracy underlying assumptions. A benefit range become the real legislators by implementing between $97 billion and $1.595 trillion is the law. All told, more than 50 agencies essentially meaningless. Moreover, it is diffi- employ nearly 130,000 people and spend $19 cult to demonstrate many of regulation’s billion to boss the rest of us around. alleged benefits in practice. There is, for There was a time when some people instance, no evidence that OSHA, despite thought the answer was to elect the right rep- imposing billions in costs on American busi- resentatives. Give the Republicans control of ness and thus workers and consumers, has Congress, it was said, and they will rein in the reduced deaths or injuries. regulators. Now we know better. And many of the same benefits could be Four years ago Congress enacted the Con- achieved at far less cost. Markets, backed by gressional Review Act (CRA), which requires definable property rights, are the better way to all agencies to submit their rules to Congress. go. Lawmakers then have 60 days to use an expe- Where some overall regulatory framework dited legislative process to block the propos- is necessary (for the great common pools of als. Not once has Congress used the act, air and water, for instance), the United States despite the administration’s having imple- currently relies heavily on command-and- mented more than 14,167 new regulations control rules, demanding that companies since it was approved. employ a particular clean-up technology, for Too often Uncle Sam minimizes obvious instance. Setting overall emissions levels regulatory costs and overestimates specula- and allowing polluters to choose the most tive benefits, thereby inflating cost-benefit efficient reduction method would be a far calculations. For instance, the Office of Man- better approach. Devices such as emissions agement and Budget proclaims that while trading—essentially allowing high-cost busi- environmental regulations cost between $124 nesses to pay low-cost companies to cut pol- billion and $175 billion, they yield benefits lution more—and effluent taxes also better between $97 billion and $1.595 trillion. use market forces to advance environmental Transportation rules provide $84 billion to goals. $110 billion in benefits at a mere cost of $15 One of the greatest flaws of the current billion to $18 billion. Similar is the case for process is that regulators rarely conduct risk other regulations, says OMB. assessment, that is, compare the relative degree and likelihood of different harms. Uncle Sam often focuses his time and our Costs Uncounted money on minute risks. Several rules, ranging Yet OMB doesn’t count paperwork from benzene to dichloropropane to expenses, the cost of economic regulation, formaldehyde to chloroform, are estimated to such as market-entry restrictions, and the cost from hundreds of millions to literally tril- price of “transfer” payments, like farm price lions of dollars per life saved. This is not a supports. Some of the less obvious regulatory good use of scarce financial resources. costs are quite high. To help fix the problems, Crews proposes It has been evident for years that the Food “congressional approval—rather than agency and Drug Administration, by unnecessarily approval—of both regulations and regulatory slowing the introduction of life-saving phar- costs.” The people elected to make the laws maceuticals and medical devices, has actually should take responsibility for them, instead of cost lives. Indeed, a Harvard University study hiding behind nameless bureaucrats. figures that regulation kills 60,000 people a Contrary to the President’s famous pro- year by diverting money from productive nouncement, the era of big government never uses—medical research, safer homes, and really ended. Federal rule-making continues more—to combat trivial dangers. to run amok. Only by returning the regulatory OMB’s purported benefits are likewise state to the rule of law can we secure our dubious, being highly dependent on the freedom. [ ===== PAGE 26 ===== IDEAS ¥ Government, Economics ON [IBERTY Novemser 2000 Constitutional Protection of Economic Liberty by Norman Barry he Supreme Court has been deliberately indeed, substantive due process emerged neglectful of traditional American eco- then. The Court was particularly concerned nomic liberties. With the exception of some to prevent the police power (not itself in the important protections for property produced Constitution) being misused. It should be in the last 15 years (to be considered later in limited to the prevention of harm and not this article), economic liberties have been at invoked to promote the morals and well- the mercy of the legislature with little or no being of the community (though it sometimes protection from the judiciary. did); such action was especially reprehensi- While the Court has been anxious to sub- ble if it interfered with contract. Its endeavors ject legislative intrusions into civil liberty to here were not primarily validated by the util- the most rigorous constitutional standards, itarian value of the free market but by the this has not been so in relation to, say, con- Court’s reading of the Constitution and the tract, the individualistic rigor of which has justices’ understanding of the rights that it been significantly diluted. The constraints on embodied. legislative action contained in the Fourteenth The apogee of the free-market Court was Amendment have been interpreted substan- reached in the famous Lochner decision of tively, that is, the prohibitions on the taking of 1905 in which liberty of contract, derived life, liberty and property (possibly) without from the Fourteenth Amendment, was used to due process of law are thought to protect spe- strike down a New York statute that would cific liberties or rights that the states or the have limited the hours per week (or day) that federal government (in relation to the original a baker could work.! This was followed by ten amendments) ought not to transgress irre- other decisions that freed the labor market spective of the procedural correctness of the and significantly slowed the pace of the New legislation. Deal until 1937 when, under the threat of Not so with the right to reach a freely nego- Roosevelt’s Court-packing plan, the Supreme tiated contract with a potential employer. Court upheld (in West Coast Hotel v. Parrish?) But this was not always so. In the early part a Washington state statute that regulated the of the twentieth century, the Court was assid- pay of female hotel workers. uous in its protection of economic liberties; Equally important was a case the following year (U.S. v. Carolene Products) in which the Court separated economic rights, for exam- ) x of ple, contract, from civil liberties and dis- erty, is professor of social and political theory at the d blicati biect the fi University of Buckingham in the UK. He is the author avowed any obligation to subject the former to of An Introduction to Modern Political Theory (St. any serious scrutiny. The latter, however, Martin's Press). could not be left to unreliable elected legisla- 26 Norman Barry, a contributing editor of Ideas on Lib- ===== PAGE 27 ===== 27 tures. It was a doctrine that became the con- Current Institutional ventional wisdom of the Court and its modern Weaknesses liberal admirers. Undoubtedly the intellectual foundation for Some of us despair of the flimsy guarantees this was provided by Oliver Wendell Holmes’s of the familiar parchment protections, and the famous dissent in Lochner. The Court had Constitution does, in its original form, go repeatedly upheld interference with contract some way toward nurturing a kind of alterna- under the police power and would do so in the tive political action (the exit option) as a pro- future, he said. The Constitution did not enact tective device for freedom. The United States Herbert Spencer’s Social Statics. The Court is a federal system, and under proper compet- did not think so either; it simply enforced con- itive conditions individuals can avoid exces- stitutional rights even if they were not enu- sive regulation and taxation and enter states merated. (Modern liberals “discovered” the that offer more amenable environments. It’s a right to privacy, but it is not, strictly speaking, process that theoretically would probably lead in the Constitution.) to a reduction in intervention all round, as Holmes’s strictures have been widely states would be compelled to compete for cit- accepted, even by people whom one would izens by offering easier conditions. The Con- have thought to be sympathetic to the reason- stitution has the Tenth Amendment, which ing in Lochner. Richard Posner (who pio- says that, apart from the responsibilities neered the economic theory of law) refers to specifically allocated to Congress, all other Holmes’s “magnificent dissent,” and many legislative responsibilities lie with the states free-market conservatives have agreed with (or the people). But such permissiveness the decisions economics while objecting to could scarcely survive the New Deal, and the the Court’s implicit activism.3 Yet Posner final death knell of competitive federalism strongly objected to the egregious Williamson was officially sanctioned by the Supreme v. Lee Optical decision (1955) in which the Court when it said, in Garcia v. San Antonio Court upheld an Oklahoma statute that Metropolitan Transit Authority (1985), that reserved spectacle repair work for ophthal- the federal element in the Constitution con- mologists and optometrists, severely restrict- sisted in the several states’ equal representa- ing competent opticians. It was pure protec- tion in the Senate. In other words, state tionism. But maybe Posner’s famed philo- autonomy did not derive from the Constitu- sophical pragmatism can detect a difference tion; it was a gift generously donated by Con- between this case and Lochner, which con- gress with the approval of the Court. The cerned a statute clearly designed by the big Tenth Amendment is more or less senescent. bakers to drive out competition from the There is, of course, little left of the original smaller, mainly immigrant businesses. economic liberty at the center, and where Of course, modern legislatures are riven there is, as in freedom for commercial adver- with interest groups that frequently act against tising, it is the almost accidental outcome of a the public good of free competition and the favorite civil liberties instrument, the First rule of law, and it seems naive of the modern Amendment. Again, it is perverse decisions liberals to entrust them with our economic lib- by a Court supine before Congress (a position erties. Yet prominent modern liberals think it would never adopt in civil liberties) that is there is a philosophical difference between the to blame for the erosion of the economic lib- various liberties (Ronald Dworkin refers to the erties of the Constitution. The major example “stench of Lochner”) and write as if how we of this perfidy is its treatment of the com- earn our living and the contracts we make have merce clause, which was put in the Constitu- no connection with free expression, nondis- tion to enable Congress to guarantee free crimination, or any other civil right in the trade across state lines. Since the New Deal, litany of “liberalism.” All sorts of individual however, it has become the means for the cen- rights are threatened by majoritarianism or the tral regulation of intrastate commerce. tyranny of pressure groups. National standards apply everywhere so the ===== PAGE 28 ===== 28 IDEAS ON LIBERTY ® NOVEMBER 2000 value of exit is accordingly reduced. In 1942 due process of law.”5 For those conservatives Roscoe C. Filburn, who raised a small amount interested in “original intent,” it is certainly of wheat for his own private use was fined for the case that John Bingham, the author of the violating the Agricultural Adjustment Act Fourteenth, believed that the amendment pro- (upheld in Wickard v. Filburn), which limited tected property as well as assuring rights for wheat production. Apparently his action hada minorities. nationwide effect since without it he would However, throughout much of the twentieth have purchased wheat on the open market. If century the judicial system offered very little everything affects everything else, there real- in the way of protection for property. Of ly is no limit to Congress’s powers. course, if a government physically occupied a The Court, however, offered a glimmer of piece of property (normally, but not only, hope in a recent case, US. v. Lopez (1995), land) it would have to do so under eminent where it refused to enforce a federal gun- domain and provide compensation. But some- control statute (forbidding the carrying of a times a person’s property could be rendered gun near a school) on commerce clause virtually valueless by a regulatory taking and grounds. The weapon was not imported from without compensation. The government has another state, and there was a perfectly good always had power to regulate under the com- state (Texas) law anyway. (Congress rewrote mon law of nuisance, but most of the oppres- the law to apply only to guns that passed sive land-use planning (zoning) was done through interstate commerce.) under the police power. The courts seemed With regard to liberty of contract, the days eager to trust public bodies with virtually of Lochner really do belong to a different cen- unlimited power to plan, regulate, and control. tury. The Court seems to be oblivious to the After some significant critical evaluation of needs of a free and flexible market and the state law in the 1920s, in which Justice imperishable rights on which it depends. Holmes played an important part, the pattern Minimum-wage laws and the recent Ameri- was set for most of the rest of the century in cans With Disabilities Act are obvious exam- Euclid v. Ambler Realty Company (1926), ples of the breach of these simple require- which constitutionally validated zoning. (A ments. However, all is not lost for liberty, for village near Cleveland had introduced a zon- in a series of remarkable decisions in the past ing ordinance that restricted development of 15 years or so, the Court has abandoned its privately owned land to family dwellings.) customary abject surrender to legislatures Here the public interest was elevated virtually over economic matters and ushered in a new to the exclusion of private property rights, and era of the protection of property against the the Court showed an extraordinary deference voracious appetites of legislatures, a welcome toward public authority: the ordinance was refusal to accept that economic decisions upheld under the police power. Justice George made by elected representatives are necessar- Sutherland, who wrote the opinion in Euclid, ily for the public good. is historically associated with the allegedly free-market Court (pre-West Coast Hotel). Property and Land-Use Ambler Realty, prohibited from industrial development, lost considerably, as did the community whose use of land was henceforth Liberty of contract may not be specifically determined by politicians, not the market. protected by the Constitution, but the right to Although some later decisions softened the property certainly is mentioned, and the rigor of Euclid, by the later 1930s, judicial Founders surely intended it some guarantee: deference to elected bodies had become the the Fifth Amendment says that “private prop- norm in all takings cases. erty shall not be taken for public use without But in the 1980s things changed signifi- just compensation,” and the Fourteenth cantly. In Agins v. City of Tiburon (1980) a includes the injunction that no state “deprive challenge to an ordinance actually failed, but | any person of life, liberty or property without the Court still proposed standards, mainly to — Planning ===== PAGE 29 ===== CONSTITUTIONAL PROTECTION OF ECONOMIC LIBERTY 29 do with the establishment of legitimate gov- was that the Commission later tried to sell ernmental goals that must be met if municipal Lucas’s former property for vacation home planning were to succeed constitutionally. development. The case indicated that the In three later cases, the Court applied those destruction of all investment-backed expecta- norms more or less consistently to the advan- tions should not go uncompensated and that a tage of private property holders and to the regulation should not eliminate the commer- detriment of public authorities, which had cial viability of an asset. Implicit in the hitherto been insulated from serious examina- Court’s deliberations was the acceptance of tion of their activities. In Nollan v. California the fact that utilitarian value (not that there Coastal Commission (1987) Mr. and Mrs. seemed to be much in the Lucas case) of a James Nollan wanted a permit to demolish an regulation should not trump economic rights. old cottage they owned and replace it with a Some questions left unsettled in Lucas two-story dwelling. The Coastal Commission were answered by Dolan v. City of Tigard agreed, subject to one condition: the Nollans (1994). Florence Dolan, in order to get a per- should dedicate a public easement across their mit to extend her electrical and plumbing property. On appeal to the Supreme Court, the store, was told that she had to dedicate part of Nollans won because the justices (Antonin her land to public use (to abate the threat of Scalia wrote the majority opinion) ruled floods and to provide a bikeway). Dolan’s suit that the regulation did not advance common against these requirements was ultimately goals; and while the goals may have been successful in the Supreme Court, and the legitimate, the means used to achieve them decision provided the rationale of compensa- were disproportionate. The “essential nexus” tion for a partial taking; the burden imposed between means and ends had become outright on her for the cost of a public benefit was “extortion.” ruled invalid. Of equal importance was the The next, and most famous, of the recent fact that burden of proof for the necessity of takings cases was Lucas v. South Carolina the regulation now lay with the authority. Coastal Commission (1992). David Lucas had Euclid seems finally to have been buried. spent nearly a million dollars on the purchase Although Nollan and Dolan perhaps have not of beach property that he planned to develop been unfailingly followed in later cases, it is into two vacation homes. Unfortunately, the clear that the takings world is a very different Coastal Commission later introduced envi- place from what it was once. ronmental regulations that rendered his investment worthless (although, as was point- Economic Liberties and ed out, not quite worthless; he could still have . . picnicked on the beach). A lot of issues were the Constitution involved apart from the question of whether it While all this is encouraging, it would be was a “taking”: for example, was there pro- foolish to imagine that the economic constitu- tection against retroactive laws? Were claims tion has been rehabilitated. There are vast for partial takings admissible (early commen- areas of commercial life that get no protection tators on Lucas seemed to think not)? Was from the courts, and governments at all levels there protection for investment-backed expec- have pretty much a free hand. Contract law is tations? And what was the importance of subject to endless statutory depredations commercial viability? (whatever happened to employment at will?) Lucas won in the Supreme Court and was and arbitrary antidiscrimination law has duly compensated; it was conceded that he removed the market from the resolution of had suffered a total economic wipeout, many of the most contentious disputes. And I although some of the questions raised were haven’t even mentioned antitrust and its legal not fully answered. However, it was clear that and economic absurdities. the Court from now on would be much more It is also worth discussing something men- searching in its inquiries into the rationale of tioned earlier—the hitherto serious derelic- a regulation. One ironic aftermath of the case tion of duty by the judiciary itself in the pro- ===== PAGE 30 ===== 30 IDEAS ON LIBERTY © NOVEMBER 2000 tection of economic liberties. Is it feasible to relation.” And Scalia and Clarence Thomas expect the Supreme Court to defend econom- have expressed encouraging sentiments about ic rights in today’s hostile intellectual envi- economic rights. But I fear it is a libertarian ronment (as opposed to the public world, dream that one day economic and personal which does not entirely consist of graduates rights might be united. Ol from the country’s premier law schools)? A measure of a significant shift in the debate can 1. See Bernard Siegan, Economic Liberties and the Constitution . : : 11; _ (Chicago: University of Chicago Press, 1980), chapter 1. be gauged in Chief Justice William Rehn 2. A decision presaged in Nebbia v. New York (1934). quist’s opinion in Zigard: “[we] see no reason 3. Richard A. Posner, “The Constitution as an Economic Docu- : ment,” in Richard A. Posner and Francesco Parisi, eds., Law and why the Takings Clause of the Sth Amend- Economics (Cheltenham, England: Edward Elgar, 1997), p. 418. ment, as much a part of the Bill of Rights as 4. Richard A. Posner, Economic Analysis of Law (Boston: Little, Brown, 2nd ed., 1977), p. 502. the Ist Amendment or the 4th Amendment, 5. See Bemard Siegan, Property and Freedom (New Brunswick, should be relegated to the status of a poor N..: Transaction Publishers, 1997). THE CLASSIC BLUEPRINT FOR A JUST SOCIETY THE LAW BY FREDERIC BASTIAT New Introduction by WALTER E. WILLIAMS Foreword by SHELDON RICHMAN “Phenomenal! An amazing and timeless treatment of the cost of using government to solve problems.” — Russell Roberts, author of The Choice 96 pages with index, $3.00 paperback $12.95 hardcover Shipping within U.S.: $2.00. California residents: Add applicable sales tax. Call 800-326-0996 * Fax to: Dept. FEE at 415-544-0597 ===== PAGE 31 ===== The Therapeutic State by Thomas Szasz IDEAS ON [IBERTY Creativity and Criminality: The Two Faces of Responsibility “No productiveness of the highest kind, no remarkable discovery, no great thought which bears fruit and has results is in the power of anyone. . . . Man must consider them as unexpected gifts from above, as pure children of God. . . . The process savors of the demonic element which irresistibly does with a man what it pleases and to which he surrenders himself unconsciously while believing that he is acting on his own impulses.” —JOHANN WOLFGANG VON GOETHE hat makes “creative geniuses” different tation, too, lacks objective proof. Instead, its from “crazy criminals,” and both dif- “truth” is enshrined in the criminal law—in ferent from ordinary people? the practice of the insanity defense, allowing Plato regarded creativity as a form of pos- society to incarcerate some persons who session or madness, of which the Muses are break secular laws and are deemed mad in the source. The modern view is the same, prisons called “hospitals.” And it is enshrined except that it identifies the madness as a spe- as well in religion—in the practice of the cific disease, manic-depression, and attributes insanity excuse, allowing clergymen to bury its source to the brain. In the absence of in consecrated ground all persons who break objective evidence for this interpretation, its the religious law against suicide, and are “truth” is demonstrated by the volunteering of deemed automatically non compos mentis at public figures—such as writer William Sty- the precise moment of their sinful deed. ron, television journalist Mike Wallace, psy- The successful creator and the successful chologist Kay Redfield Jamison—as poster destroyer resemble one another in their children for madness, their malady controlled single-minded determination to achieve their or cured by chemistry. goals. Nineteenth-century French alienists Alongside the image of manic-depression medicalized single-mindedness by calling it as a cause of creativity that does not detract ‘“monomania.” According to the Oxford Eng- from the subject’s responsibility for his good lish Dictionary, the term, first used in 1823, deeds stands the image of schizophrenia as a refers to “A form of insanity in which the cause of criminality annulling the subject’s patient is irrational on one subject only”; it is responsibility for his bad deeds. This interpre- also used to identify “An exaggerated enthusi- asm for or devotion to one subject; a craze.” Thomas Szasz, M.D., is professor of psychiatry emer- Because in different times (or places) people itus at SUNY Upstate Medical University in Syra- value devotion to a particular subject differ- cuse. He is the author of Fatal Freedom. ently, certain persons dishonored as mad at 31 ===== PAGE 32 ===== 32 IDEAS ON LIBERTY © NOVEMBER 2000 one time are hailed as geniuses later, and vice behavior. Regardless of whether a person is versa. While he was alive, the Hungarian called “creative” or “crazy,” he is capable of obstetrician Ignaz Semmelweis—who discov- self-control; each yields to his inclinations ered the microbial causation of puerperal (“frenzy”), whose consequences others judge fever before the discovery of microbes as as good (“creative”) or bad (“crazy”). pathogens—was considered to be wedded to Sane or insane, persons possess more self- an erroneous belief, which he defended irra- control than we are willing to accord them. tionally. Diagnosed insane, he was incarcerat- The idea that mentally ill persons lack self- ed and died in a madhouse. Today, the medical control is a modern view, alien to people in school at the University of Budapest is named less advanced civilizations. The doctrine that after him. Conversely, while he was alive, the so-called insane person cannot control his Adolf Hitler was hailed, especially in Ger- (“psychotic”) behavior, rather than that he many, as a political genius. Today, he is does not want to control it, is, in my view, a loathed as a lunatic. postulate parading as a factual proposition. “There is no great genius without a touch of The evidence points decisively in the opposite madness,” declared Seneca. The image of a direction. Under extreme threats to life—as in person seized by a great force, often called a a concentration camp—mad persons sudden- “fire”—seemingly outside of himself—is a ly “recover” and cease to display symptoms of figure of speech for a powerful motive pro- their “disease.” pelling him toward certain kinds of actions. The idea of the irresistible impulse and the Misinterpreted, the metaphor implies that the problems it generates—epitomized by the subject has lost control over himself, is under insanity defense and claims for victimization the control of alien powers—“muses” in by voluntary behavior, such as smoking—are antiquity, “madness” today. Accordingly, we artifacts generated by the belief in mental ill- view the mad person as having a disease ness as a cause of diminished or annulled (insanity) that deprives him of moral agency responsibility. and hence responsibility. The evidence? That The behavior of every person—regardless mad persons (mental patients) disavow choos- of whether we regard him as creative, crimi- ing their actions and attribute their (illegal, nal, or normal—is intentional. Hence, he is destructive) actions to other agents, typically responsible for it. Nevertheless, we believe it God or “voices”; and that psychiatrists eager- is scientific to divide people into three groups: ly validate this misinterpretation by accepting individuals with exceptionally large amounts the patients’ claims as valid, attributing their of intentionality—creative geniuses; individ- “symptoms” to irresistible impulses lodged in uals with little or no intentionality—insane the chemistry of their brains, and excusing criminals; and individuals with an average their crimes as the products of “sick brains.” amount of intentionality—ordinary persons: I maintain that the “mental states” of the » We see the genius as full of intentionality creative genius and of the destructive genius and his creative act as the embodiment of self- are essentially similar. We view both as disciplined self-expression, equating the actor inspired or “monomaniacal,” but while we with his act (“It is a Renoir.”). regard the former as intentionality incarnate, * We see the madman as lacking intention- we regard the latter as devoid of intentionali- ality and his destructive act as the embodi- ty. In other words, we perceive the good ment of alienated impulsivity, separating the genius (artist) as possessing moral agency and actor from his act (“He is not himself.”). personal responsibility, and the bad genius The answer to questions such as “Was van (mad criminal) as bereft of these quintessen- Gogh or Hitler a genius or a mad person?” tially human qualities. These constructions depends on whether we perceive the person’s suit our needs for dealing with exceptional act as creative or destructive, good or bad, persons and their exceptional conduct. They rather than on the nature of his “mind.” Thus, are not scientifically valid accounts of the it tells us more about the speaker’s mind than good and bad genius’s ability to control his the mind of van Gogh or Hitler. OJ ===== PAGE 33 ===== IDEAS ON [IBERTY Psychiatry in a Communist Utopia by Miguel A. Faria, Jr. recently read a book that should shock quarters for harsh interrogation, then to the freedom-loving and civil-liberty-loving Havana Psychiatric Hospital (also known by readers, even the libertarians, Objectivists, its old name, Mazorra) where they underwent and Americans of other political persuasions unspeakable terror. They were not taken to the who (thanks to Dr. Thomas Szasz) have come meticulously polished floors and corridors of to be skeptical and even critical of psychiatry, the Paredes ward, where foreign dignitaries particularly in the courtroom. £0 to see the marvelous advances in psychia- The Politics of Psychiatry in Revolutionary try in the Cuban health-care system, but to the Cuba by Charles J. Brown and Armando M. horrible Salas Carb6-Servia and Castellanos Lago (Transaction, 1992) provides irrefutable wards, which are under the control of State evidence and graphically documents that the Security. totalitarian government of Cuba has used (and In those dreadful wards it became obvious continues to use) psychiatry for political pur- that the “patients” were not confined to be poses—in this case, political repression, the treated for “mental illness,” but rather to be crushing of dissent, and the establishment of terrorized. Some were placed days, weeks, or conformity within the political structure of months among those judged criminally insane the island prison of communist Cuba. to coerce them to submit and conform to the The authors have carefully investigated the dictates of State Security. Others were forced stories of 27 Cuban dissidents charged with to ingest large amounts of psychotropic drugs political crimes (nonviolent opposition to the (including Thorazine and other phenothi- regime), arrested, interrogated by the State azines) or to undergo even more barbaric Security apparatus, and then treated horribly “treatment” with electroconvulsive therapy as psychiatric cases. In Cuba, psychiatrists (ECT), usually without anesthesia or muscle must cooperate with State Security or face relaxants, under the supervision of a sadistic reprisals, arrest, and punishment by the com- orderly named Heriberto Mederos, who was munist government; thus there is no opposi- actually a State Security agent nicknamed “El tion to speak of. Enfermero.” A clear pattern emerges from the cases. Every morning at 5 o’clock Mederos and After arrest, the individuals were usually his sadistic assistants, one of whom was nick- taken to Villa Marista State Security Head- named “El Capitan,” would select the unfor- Miguel Faria, Jr., M.D., is editor-in-chief of the Med- tunate ones who would undergo ECT after ical Sentinel, published by the Association of Ameri- being doused with cold water (for better elec- can Physicians and Surgeons, and author of Medical trical conduction!) and thrown on the hard Warrior: Fighting Corporate Socialized Medicine. cement floor where the procedure was per- 33 ===== PAGE 34 ===== 34 IDEAS ON LIBERTY ® NOVEMBER 2000 formed. El Capitin would later sodomize had at least eight sessions of ECT without young prisoners. Others would be brutally anesthesia. Although he had fought in the beaten. One of them was found hanged and Revolution, he was in and out of prisons and incinerated with gasoline. psychiatric hospitals for almost 20 years, Psychiatrists were sometimes present. They from 1970 to 1989, until he was finally would interview the prisoners, classify them, allowed to emigrate to Miami where he lives and sometimes approve of the “treatment.” today as an artist. Other times they would admit to the prisoners in private that they had not specifically ordered their medication, torture, or rehabili- tation. After their detention and confinement Most amazing of all is that, although these patients would be suddenly “dismissed” and cases were verified by at least two sources, in transferred to prisons with or without a diag- some cases by civil rights organizations in the nosis. They would be told they had been “tried United States such as Freedom House, Of in absentia” and sentenced to long terms in Human Rights, and Americas Watch, as well such notorious prisons as Combinado del as international groups such as Amnesty Este, La Cabatia, El Principe Castle, El Morro International and the United Nations Human Castle in Havana province; other prisons or Rights Commission, these cases have not mental hospitals such as the Gustavo Machin received the attention they deserve. They rep- Psychiatric Hospital (the old Jagua) in Santi- resent only a small number among the thou- ago de Cuba; or other facilities throughout the sands of known Cuban political prisoners lan- island. guishing in Cuban jails. Charges brought against the dissidents The evidence is overwhelming that Cuban included anti-regime activity or trying to psychiatry is totally subordinate to the nefari- leave the country illegally. The case of ous purposes of Castro’s communist govern- Nicolas Guillén, the nephew of the former ment. In the past, the World Psychiatric Asso- poet laureate of Cuba by the same name, is ciation (WPA) has refused to investigate these noteworthy. He was accused of “ideological charges because “complaints are examined in deviationism” for making a short agricultural association with the WPA Member Society in film, Arabian Coffee, which contained a scene the country in question. As the WPA has no of Fidel Castro climbing a mountain while the Member Society in Cuba, we cannot examine Beatles’ song “Fool on the Hill” played in the the complaint appropriately.” Perhaps it is background. Guillén was picked up by State time for this information to become widely Security and taken to Villa Marista, held with- available to the American public so that a cry out trial, and interrogated for six months. He for justice will be made. OJ Languishing in Prison The apple icon ® identifies articles that are appropriate for teaching students sever- al major subjects—including economics, history, government, philosophy, and current issues. We also provide sample lesson plans for these articles on our Web site www.fee.org and in written form. Professors, teachers, and homeschooling parents need only to visit our Web site or request written lesson plans to take advantage of this unique service. ===== PAGE 35 ===== IDEAS ON [IBERTY Peanut Butter, Education, and Markets by Darcy Olsen H: you ever thought of petitioning Con- Why? One reason is that K-12 education in gress about the quality or quantity of the America is a legally protected monopoly—it’s peanut butter you eat? Have you ever thought protected from competition by its guaranteed of creating a reform movement around peanut tax base, and it’s bereft of the profit motive butter? Or have you ever wondered why there that spurs innovation and efficiency in every isn’t a federal department of peanut butter? other successful industry in the country. Maybe it’s because if customers don’t like America desperately needs an education sys- Peter Pan, they can buy Jif, and if they don’t tem where the customer is king. And when the like Jif, there’s Skippy. We can get it chunky customer is not treated as a king, he should be or smooth. We can even get low-fat peanut able to take his business elsewhere. Let’s call butter, of all things. this customer-driven education. Why are there are so many variations on a Naturally not everyone shares that vision. product that in the scheme of life is pretty Vice President Al Gore’s biggest-ticket educa- insignificant, but when it comes to educa- tion item is federal preschool for all 3- and 4- tion—a product that determines our chil- year-olds. Lost on Gore is the fact that 70 per- dren’s future incomes and the very charac- cent of preschool-aged children already ter of our society—America still relies on a attend preschool, and, call it old-fashioned, Soviet-style monopoly that provides almost but some parents still prefer to care for their no choice, variation, or freedom? preschoolers at home. This flexible approach Student achievement has been stagnant or to early education arguably is the best part of falling in almost every subject for the past 30 the American education system. According to years, as measured by several tests, including the Department of Education, U.S. preschool- the National Assessment of Educational ers have a strong start. On factors that kinder- Progress, the International Evaluation of Edu- garten teachers say are among the most cation Achievement, the Young Adult Survey, important for school readiness—physical the National Adult Literacy Survey, and the health, enthusiasm, and curiosity—today’s International Adult Literacy Survey. And it’s kindergartners are in top shape. As they enter not because we don’t spend enough. Over the kindergarten, more than 95 percent are in same 30-year period, real spending has dou- good health; nine out of ten are eager to learn; bled, increasing from $4,000 to $8,000 per and about 85 percent work and play creative- child. ly. In terms of concrete knowledge, 94 percent are proficient at recognizing numbers and shapes and counting to ten. Two in three know Darcy Olsen is director of education and child policy ~ their ABCs. at the Cato Institute. It’s also in the early years when American 35 ===== PAGE 36 ===== 36 IDEAS ON LIBERTY ® NOVEMBER 2000 students are most competitive internationally. progress, and there is a growing demand for Consider France, England, Denmark, Spain, more parental authority and less government and Belgium—any number of European control. countries with universal preschools—where more than 90 percent of 4-year-olds attend . . . public preschools. International tests show Online University that by age 9, when the benefits of preschool A few months ago, Michael Saylor, a high- should be most apparent, American children tech billionaire, put up $100 million to start outscore nearly all their universally pre- an online Ivy League university free to stu- schooled peers on tests of reading, math, and dents. Imagine an Ivy League-quality educa- science. The little known truth is that Ameri- tion freely available to any student in the ca’s free-market approach to preschool educa- world. That’s just one entrepreneur’s dream. tion is working. Now imagine the response of hundreds of While politicians like Gore may not be thousands of entrepreneurs when families of clamoring for educational freedom, parents 55 million students go shopping for an edu- are. The homeschooling universe is now cation. In a competitive environment who roughly the size of Los Angeles and Chicago knows where the schools will come from? city school systems combined, and growing. IBM, Disney, National Geographic, education Since just 1990, 36 states have passed charter- entrepreneurs, or universities. Maybe we’ll be school laws and already there are more than learning everything we need to know from 1,700 charter schools. Wisconsin, Ohio, and something the size of a Palm Pilot. Florida have adopted voucher programs. Min- Some people might say this is too radical. nesota, Illinois, Iowa, and Arizona have But the Wright Brothers weren’t looking to tuition tax credits. And half the states have make a faster steamship: radical may be just considered vouchers and tax breaks in just the what we need. As David Boaz of the Cato past year. Institute wrote, “Without that market, we’ll be Those plans are a long way from a pure, putting 20th century computers in 19th centu- customer-driven education system—but what ry schools and congratulating ourselves on this demonstrates is a tremendous shift in atti- preparing children for the 21st century.” The tude about who should provide education and monopoly is loosening, and the time has come how it should be financed. For a long time, the to replace it with a customer-driven education teachers’ unions dictated education policy. system characterized by competition, innova- The problem was money: the solution was tion, diversity, and excellence. Soon, our money. The only point of contention was how choosy mothers will finally have a choice, not much. Today, there is tremendous skepticism only in peanut butter, but somewhat more about the notion that more money can buy important, their children’s education. OJ ===== PAGE 37 ===== IDEAS ON [IBERTY How the Theory of Comparative Advantage Saved My Marriage by Ted Roberts y neighbor is a kindly man with the ry says that self-sufficiency is a myth. Nations pink and white complexion of a healthy and individuals should specialize in those turnip—and the generosity of a squash plant activities they do best. It’s a good deal for the in dark loam. He has two green thumbs and United States to supply pharmaceutical prod- big hands with long fingers obviously ucts to Japan, which sends us TVs that we buy designed to pluck weeds. with the yen we receive for our medicines. Like most southerners, there’s an agricul- Likewise with individuals. An accountant tural limb on his family tree. Even though doesn’t weave shirts or cobble shoes or raise currently he’s an engineer, every spring he beef. He spends his accounting wages for hears the earth calling and he responds with those products. tiller, fertilizer, and eventually seed, resulting Specialization determined by resources and in a 300-square-foot reproduction of the Gar- skills is the watchword. Don’t salinize the den of Eden minus the snake and the naked Mississippi River so you can grow Nova Sco- newlyweds. The gentle mist of an automatic tia Salmon. Have a fried catfish filet instead, sprinkler system substitutes for the Tigris and and if you still lust for salmon, import it. It’s Euphrates. OK, says the theory, to buy Japanese TVs and I, too, have horticultural ambitions. Or at sell those big Boeing jets to the Japanese. least I used to. I tried for years to install a gar- My adventure with David Ricardo—the den. But the mineral resources of my back- nineteenth-century economist—began one yard were only rusty nails and shingles left by afternoon as I inspected my cement yard— the builder. And my garden skills were mini- Hell’s Half Acre—after a three-week drought. mal. I much preferred puttering around in the My jovial neighbor yelled a hearty hello from kitchen. I'd rather stew a chicken using my his suburban Eden—a manicured yard fram- secret recipe that features Caffeine-Free Diet ing a cornucopia of squash, pole beans, and Pepsi than pull weeds. tomatoes that flourished under the mist of his Out of this neighborhood diversity arose regulated sprinklers. my first experience with that anthem of free- “Come on over and get ya a couple toma- trade economists—David Ricardo’s theory of toes for supper,” he shouted. comparative advantage—thereby demonstrat- And I did, which brought a warm ambience ing that economic theory has a down-home to my home since my wife was a homegrown- value to cookers of chicken as well as captains tomato addict. She had long complained of industry. The comparative advantage theo- about my garden shortcomings. But now, so what if I was a clumsy klutz Ted Roberts is a freelance writer in Huntsville, among the tomato stakes. In some wily way, Alabama, who often writes on public-policy issues. due to my intra-neighborhood skills, I put 37 ===== PAGE 38 ===== 38 IDEAS ON LIBERTY © NOVEMBER 2000 fresh sliced tomatoes on the breakfast, lunch, kiss. Yes, the theory of comparative advan- and supper table. Life was good. tage was everything David Ricardo said it One day, while biting into a No. 3 Better was. Boy, it occurred to me that common decency Let me stress that at no time in my pre- and the need for a continual flow of tomatoes tomato days did I ponder my lack of tomatoes required some reciprocal generosity on my and conclude that this nineteenth-century the- part. And since my backyard was as barren as ory was my solution. I was totally innocent of Sodom and Gomorrah after the fireworks, and the science of economics. To me, David since I couldn’t grow a dandelion in a pile of Ricardo sounded vaguely like a Latin band- potting soil, I'd better come up with a creative leader. Only later, when my son, the Universi- substitute. ty of Chicago-educated economist (and Ideas Aha, my famous Stewed Chicken with the on Liberty columnist), showed me his recent secret recipe I would pass on to my children book on foreign trade did I appreciate my as a rich inheritance and the major part of my independent discovery. Kids! They think they estate. The secret is the exotic flavoring of one know everything. small turnip. Perfect. I had culinary talent and All this time I thought 1 was swapping a freezer full of frozen chicken dating back to stewed chicken for tomatoes, but what was the ice age. really going on was a classical bubbling of the So—every week I'd carry a plateful of theory of comparative advantage as described Spécialité de la Maison to my obliging by a nineteenth-century trade theorist. neighbor and return with my pot full of those Hmmm—my neighbor on the other side scrumptious No. 3 Better Boys. My wife, sure has some nice-looking peaches hanging with an expectant grin (and knife and plate on his peach trees. Wonder if he likes stewed in hand), greeted me at the backdoor with a chicken with a tinge of turnip? J Ideas on Liberty—Reaching Out to New Readers If you know of a friend, student, or colleague who might appreciate a free sample issue of Ideas on Liberty, viv RIM please fill out the form below and Dif nd ota Sura return it to us in the postpaid TheCeolieind 8 envelope. Make sure to include your adie; NE own name—we will mention you in ERTOTIEE Sip \ A - the covering letter we send to the inti fl E\ WN potential subscriber. = : We appreciate your assistance in finding new friends for liberty! To: FEE 30 S. Broadway / Irvington-on-Hudson, NY 10533 e-mail: iol@fee.org / fax: 914-591-8910 Please send a sample of Ideas on Liberty to: Name Address City State Zip Suggested by: ===== PAGE 39 ===== Economic Notions by Dwight R. Lee ¥ Economics Sacrificing Lives for Profits pointed out in my last column that despite moral outrage when they hear the charge that what people commonly say about how corporations sacrifice lives to increase their human life is priceless, they put a price on profits by making unsafe products. their lives every day with their actions. People People are accidentally injured and killed take chances that shorten their life expectan- every day because products are not as safe as cies to do things that are fun, and for the con- they could be. More than ever before, the pre- venience and savings of not taking every pre- vailing legal environment encourages those caution possible. When people willingly harmed in these accidents to sue manufactur- accept risks to acquire things they value, they ers of “unsafe” products to compensate for are putting a price on their lives—telling us their pain and suffering. An obvious induce- with their actions that the marginal value of ment for these suits is that the payoff to plain- their lives is less than the often quite low tiffs and their lawyers can be high, occasion- value they realize from overeating, not exer- ally outrageously high. For example, in 1999 cising, driving too fast, and so on. a $4.9 billion judgment against General Unfortunately, when people take chances Motors was awarded to six people severely they sometimes have regrettable accidents. burned when their 1979 Malibu caught fire Nothing is more natural than feeling sorry for after being hit by a drunk driver going those who have suffered serious injury or between 50 and 70 miles per hour.* The death because they exposed themselves to charge that sways juries and offends public risk. But our sympathy for them should not sensitivities, and helps explain the large blind us to the fact that we would not be doing awards, is that greedy corporations sacrifice adults a favor by interfering with their ability human lives to increase their profits. to take risks that, given their preferences and Is this charge true? Of course it is. But this circumstances, make sense to them. Yet such isn’t a criticism of corporations; rather it is a policies are condoned and encouraged every reflection of the proper functioning of a mar- day by well-meaning people who (1) fail to ket economy. Corporations routinely sacrifice recognize that, at the margin, human life isnot the lives of some of their customers to priceless and (2) don’t understand how prices increase profits, and we are all better off and profits empower people to communicate because they do. That’s right, we are lucky to effectively their desires to business firms. live in an economy that allows corporations to These are people who are quick to express increase profits by intentionally selling prod- Dwight Lee is Ramsey Professor at the Terry College * The actual settlement will be less, though still much higher than : ; ; ; ; justified by how much people value the marginal safety involved in of Business, University of Georgia. and an ad) unct the case. As of March 2000 the plaintiffs have offered to settle for fe ow at the Center Jf or the ‘ fut y of Amer ican Busi- $400 million, but General Motors has refused so it can continue ness at Washington University in St. Louis. appealing the case. 39 ===== PAGE 40 ===== 40 IDEAS ON LIBERTY ® NOVEMBER 2000 ucts less safe than could be produced. The Through the prices they are willing to pay desirability of sacrificing lives for profits may for different types of cars and the profits not be as comforting as milk, cookies, and a generated by these prices. There would be no bedtime story, but it follows directly from a profit in making a car as safe as a Sherman reality we cannot wish away. tank because nobody would buy it. Car com- The reality is scarcity. There are limits to panies make more profit as they get closer to the desirable things that can be produced. If incorporating the inevitable tradeoffs in we want more of one thing, we have to do automobile designs to the liking of con- with less of other things. Those expressing sumers. So when car manufacturers compro- outrage that safety is sacrificed for profit mise on safety to increase profits, they are ignore this obvious point. For example, traffic doing what we want them to do—responding fatalities could be reduced if cars were built to our preferences. like Sherman tanks. But the extra safety This is not to say that mistakes aren’t made. would come at the sacrifice of gas mileage, Prices and profits don’t allow consumers to comfort, speed, and parking convenience, not communicate every aspect of their prefer- to mention all the things you couldnt buy ences for cars with surgical precision. But the after paying the extraordinarily high price of a advantage of profits in motivating auto safety Tankmobile. Long before we increased auto- 1s that when a car company doesn’t give con- motive safety to that of a Tankmobile, the sumers what they want, profit opportunities marginal value of the additional life expectan- increase for car companies that do. And cy would be far less than the marginal value although this market process doesn’t work of what would be given up. It simply makes perfectly, it works better than any other no sense to reduce traffic deaths as much as process. possible by making automobiles as safe as Unfortunately, with any reasonable level of possible. product safety, people will be killed and injured in accidents. The cost and carnage of these accidents are easily seen, as is the fact that the damage would have been less if only But how much safety is the right amount? more safety had been built into the product The answer varies among individuals. Some being used. Not as easily seen are the advan- people get so much enjoyment out of riding tages millions of people realize from not hav- motorcycles, for example, that they do so ing to pay for more safety than they want— even though the chances of surviving an acci- advantages like more money to spend on edu- dent are 17 times greater in a car. People typ- cation, medicine, clothing, and housing. And ically purchase more safety as their incomes more education, better medicines, and increase and when more people are dependent improvements in the clothing and housing on them. When I was in graduate school, I available are all associated with longer life drove a battered Volkswagen Bug with a door expectancies. Those whose lives are cut that wouldn’t close completely. I chose more short by accidents are obviously identifiable, education at the cost of less safety. Now that I while we will never know who avoided a have a family and more income, I am willing premature death because of the prosperity to pay for more safety, so I drive a Subur- generated by an economic system guided ban—not quite a Sherman tank, but close. by market prices and profits. But there can be How do people communicate their demand no doubt that the latter far outnumber the for safety to automobile manufacturers? former. Cl Communicating with Profits ===== PAGE 41 ===== ¥ Current Issues IDEAS ON IBERTY Novemser 2000 The Return to a Global Economy by lan Vasquez f we want to understand the current affordable and convenient than in the nine- advance of global capitalism, it is worth teenth century when restrictions on immigra- remembering that a liberal international eco- tion were minimal or nonexistent, today most nomic order has actually arisen twice, first at countries in the world—certainly most rich the end of the nineteenth century and now at countries—have an array of labor and immi- the end of the twentieth.! In many ways, the gration regulations. As economist Deepak Lal world economy has simply caught up to convincingly explains, such restrictions on the where it was 100 years ago, prompting promi- movement of people exist today because citi- nent economists to question whether the level zenship concedes rights to the services pro- of international integration is as high now as vided by the welfare state.3 Yet even as the it was before the interruptions of two world welfare state has grown, so have migration wars and the Great Depression. flows. From 1965 to 1990, the foreign-born In a recent study, economists Michael population rose from 75 million to 120 mil- Bordo, Barry Eichengreen, and Douglas lion people—with flows from poor to rich Irwin ask whether globalization today is real- countries accelerating the most. The number ly different from globalization a century ago.2 of people emigrating to the United States has Answering that question can help us deter- grown about ten times since 1945, for exam- mine whether we are living in unprecedented ple, but as a percentage of the U.S. population times, whether the nation-state is becoming immigration still represents only about one- obsolete, and whether the new liberal interna- third of its peak at the turn of the century. tional economic order promises to endure. By contrast world merchandise trade Indeed, as various observers have noted, the reached its 1913 level by the 1970s.5 Global mere fact that the first episode of global capi- exports as a percentage of global output stood talism met such a cataclysmic end should at about 12 percent in the early 1970s and has force us to reflect on the current features of since risen to about 18 percent. U.S. exports commercial, financial, and labor integration. as a share of the country’s economy are only One area in which the world is decidedly slightly higher today at 8 percent than they less liberal than it was under the Pax Britan- were in the late nineteenth century. Including nica is that of immigration. Although techno- trade in services, however, the U.S. export fig- logical advances have made travel far more ure rises to about 11 percent. Indeed, the rise of trade in services such as tourism, finance, — oo } insurance, and technical assistance has lan Vasquez is director of the Cato Institute's Project b £: d today than it on Global Economic Liberty and editor of Global ~0€COME lar more pronounced today than 1 Fortune: The Stumble and Rise of World Capitalism Was previously. Thus taking into account (Cato Institute, 2000). world exports of both goods and services, 4] ===== PAGE 42 ===== 42 IDEAS ON LIBERTY ® NOVEMBER 2000 global exports rise to about 23 percent of equity instruments and debt instruments, world output today. which predominated 100 years ago. At that Two other features distinguish commerce in time, international finance concentrated on the new liberal international economic order: funding certain sectors, principally railroads the rise of the multinational corporation and and government bonds. Today, with more the change in the composition of trade. Much rapid and perhaps more reliable information trade today involves corporations “slicing about investment opportunities, international up the value chain” and engaging in intra- funds flow into virtually every sector of coun- industry trade. As a result, manufactured tries’ economies. In short, although net capi- goods are increasingly exported from devel- tal flows are not as large as those of the nine- oping countries to developed countries. That teenth century, gross flows are unprecedented contrasts sharply with the nineteenth-century in size, as are the extent and sophistication of experience when countries on the periphery capital markets, suggesting that financial inte- exported primary goods to rich countries, gration is greater today than in the first which exported manufactured goods made episode of world capitalism. primarily in the center countries to the periph- ery. Bordo and his coauthors note, for exam- The Role of Technology ple, that 80 percent of U.S. imports from ore Mexico are manufactured products while 100 and Politics years ago that figure was only 10 percent. And Has globalization come about because of although U.S. exports of goods have not political change or technological change? increased dramatically as a share of its econ- Here again, Bordo and others suggest impor- omy, a much higher percentage of the produc- tant differences between the two episodes of tion of the United States’ tradable goods is world capitalism. During the last century, now exported.’ technological changes clearly led to global- ization. By the 1860s the political bases for a liberal international economic order were already in place. Great Britain repealed the Is the world more financially integrated Corn Laws and established its presence in than it was in the past? A look at net capital China in the 1840s; it conquered India by flows suggests that the answer is no. The out- 1857, and, with France, defeated Russia in the flow of capital from Great Britain reached 9 Crimean War by 1856. percent of its GDP during the Victorian era Contemporaneous and subsequent advances with similar figures in Germany, France, and in technology led to a 40 to 50 percent drop in the Netherlands. No country today even the cost of shipping in the latter part of the comes close to those levels of net flows. Inthe nineteenth century and early part of the twen- 1990s, the average capital outflow for leading tieth. The transatlantic cable was laid in the economies was slightly above 2 percent of 1860s; use of railroads and the telegraph GDP# proliferated; the Suez Canal was completed Other differences in capital market integra- in 1869; and the radio telephone linked tion suggest that the world is indeed more Europe and North America by 1900. Those globalized than ever. Gross flows of capital, at and other innovations led to the first rise of about $1.5 trillion per day, are much larger world capitalism. than at any time in history, and much of that Globalization today has benefited from money represents short-term investment. technological improvements but has been Investors can today react at a moment’s notice almost entirely due to dramatic political to economic and political developments changes. Countries around the world have around the world in a market that offers a lowered their trade barriers and opened their wide and growing range of international economies since the 1980s and especially so financial instruments. Investors, moreover, since the fall of the Berlin Wall. (That con- are almost equally putting their funds into trasts with the nineteenth-century experience, Financial Integration ===== PAGE 43 ===== THE RETURN TO A GLOBAL ECONOMY 43 as nations were raising tariffs incrementally price it has paid for stability, of course, has as the century wore on.) New technology such been enduring poverty. By contrast, Hong as air transport may have helped propel Kong has had a volatile economic history but today’s globalization, but the role of such has become one of the wealthiest places on change in leading to globalization should not earth. Indeed, even after the financial turmoil, be overstated. On the other hand, technology East Asian crisis countries are still eight to 15 in the information age may make it more dif- times richer than India. ficult for politicians to reverse the course of Financial crises also occurred in the first world capitalism. era of world capitalism. One common fea- Although globalization is often said to cre- ture between the two eras is that banking ate inequality and economic volatility, histor- and currency crises occurring at the same ical evidence points, in fact, to economic con- time tend to be more common in the periph- vergence in living standards among countries ery, or less-developed, countries than in that open their economies. Studies have the rich countries, where currency but not shown tendencies to converge among coun- banking crises are more common. However, tries in the Organization of Economic Co- under the gold standard of the Victorian operation and Development, among U.S. states, age, crises were resolved differently from and among Japanese prefectures.!® Signifi- how they are resolved under the current sys- cantly, economist Jeffrey Williamson found a tem of adjustable exchange rates based on fiat decreasing gap in living standards among money. people living in countries participating in the One significant difference was that finan- international economy during both periods cial rescues 100 years ago were undertaken by of global capitalism. “History offers an the private sector, while today they are offi- unambiguous positive correlation between cial, usually led by the International Monetary globalization and convergence. When the Fund. British Foreign Secretary Lord Palmer- pre-World War I years are examined in ston summed up the attitude that prevailed for detail,” Williamson adds, “the correlation turns the rest of the century when U.S. states out to be causal: globalization played the crit- defaulted in the 1840s: “British subjects who ical role in contributing to convergence.”!! buy foreign securities do so at their own risk and must abide the consequences.”!12 Largely The Financial System as a result of that approach, economic Tecov- ery was more rapid in crisis countries than it The incidence of financial crises in Asia, is today and crisis countries then did not expe- Russia, and elsewhere in recent years has also rience wealth losses as large as those experi- often been treated as novel and as a conse- enced by crisis countries today.!3 quence of globalization. Yet economists have examined the causes of the recent economic Liberalism from Above or turmoil and have generally agreed that the . . 9 causes included pegged-exchange rates, Liberalism from Below’ government-directed credit, protected finan- The distinct institutional framework under cial systems, moral hazard at the national and which liberalization is taking place world- international level, and the lack of transparen- wide—including the prominence of suprana- cy in official accounts. tional governmental organizations like the Despite that consensus, the crises are used IMF, the World Bank, the World Trade Orga- by critics of globalization to advocate moving nization, and the United Nations, and the away from a more market-based system and prominence of welfare and regulatory toward more interventionism. Thus India is states—causes both enemies and proponents cited as having followed more prudent poli- of globalization to attribute the market revo- cies than its East Asian neighbors since its lution to the efforts of those institutions, and more closed system allowed it to avoid suc- to recommend that further developments be cumbing to the regional financial crisis. The managed by international world bodies. ===== PAGE 44 ===== 44 IDEAS ON LIBERTY ® NOVEMBER 2000 Yet the evidence indicates that such inter- ciplines. In this context, international national organizations have at best been mar- regimes are manifestations of government ginal to the globalization process and at worst failure transplanted to the international have caused disruptions or delays along the level. Intergovernmental cooperation and "way. Decades of World Bank and IMF lending international agreements, far removed to inward-looking regimes, for example, have from public scrutiny and the control of certainly slowed the move to world capital- national legislatures and judiciaries, supply ism.14 Yet countries have unilaterally under- extra room for arbitrary activity by politi- taken economic restructuring, trade and capi- cians and bureaucrats. They exacerbate the tal account liberalization, and other policy malaise of Big Government and political reforms as past policies failed. That is even markets within nation-states. !6 true of countries that have entered into multi- lateral free-trade agreements, like Mexico, We have already seen some of that dynam- which reduced its trade barriers for years ic at work. For example, through internation- before proposing the North American Free al forums, rich countries have pressured poor Trade Agreement. China, in its bid to join the countries to adopt labor and environmental WTO, is following the same course. Thus regulations that did not exist in rich countries while aid agencies are likely to cause more at a similar stage in their development. Those harm than good in the globalization process impositions have come about against the (lending to Russia, for example), free-trade wishes of developing countries and the vast agreements such as the WTO are likely to be majority of consumers in rich countries. helpful. However, they serve more to preserve Examples of arbitrariness and lack of trans- trade liberalization reforms than to promote parency are amply provided by the IME. For them. !5 instance, the Fund does not tolerate the current In short, the world economy has evolved as account deficits of its member countries a result of changes coming from the national exceeding 4 or 5 percent of GDP even though level rather than from changes directed at the large deficits are beneficial in many cases. international level—what German liberal Indeed, Australia, Canada, and Argentina had Wilhelm Répke called an international order current account deficits greater than 10 per- “from within and beneath” rather than the cent for decades before 1913. The process by “false internationalism” that characterizes which the IMF decides the bailout amounts supranational organizations. The danger of nations receive is also unclear. Why did the the constructivist approach to achieving a lib- IMF put together a $57 billion rescue package eral economic world order is that it may lead for Korea as opposed to, say, a $30 billion to discretionary and arbitrary use of power. package? We may never know the criteria or Razeen Sally of the London School of Eco- the rationales used in that case or many others. nomics describes those hazards. In the end, globalization may make such international bureaucracies irrelevant. And Neoliberal institutionalists do not portray efforts to promote international liberalism international policy coordination in the from above may prove futile. In the meantime, frame of limiting general rules at the inter- we can come to some tentative conclusions. national level that proscribe discretionary The world has seen global capitalism before; government action; rather, they think of it what is unprecedented is not globalization per as an apparatus of complicated negotia- se, but the extent to which the world is more tions on particularistic policies intended to globalized today than it was 100 years ago. achieve specific results. This is the hall- That is especially so in terms of trade and mark not of limited government under the finance. Moreover, no matter how much inter- Rule of Law, but of unlimited and discre- national agencies would like to take credit for tionary government in an international the worldwide market revolution, those public policy cartel, avoiding both domes- changes have emerged at the national level and tic political accountability and market dis- have not been imposed from above. In that ===== PAGE 45 ===== THE RETURN TO A GLOBAL ECONOMY 45 sense, the nation-state remains quite relevant. 3. Deepak Lal, “The Challenge of Globalization: There Is No Third Way,” in lan Vasquez, ed., Global Fortune: The Stumble and But a backlash against global liberalism 1S in Rise of World Capitalism (Washington, D.C.: Cato Institute, 2000), fact more likely to occur if international agen- P29. . inol h 1d 4. Julian L. Simon, The Ec Consequences of Immigra- cies increasingly manage the world economy tO ion (Ann Arbor, Mich.: University of Michigan Press, 1999), the detriment of what poor countries consider »- 28. . 1 . h 5. Paul Krugman, “Growing World Trade: Causes and Conse- most important, namely, economic growt . quences,” Brookings Papers on Economic Activity, vol. 1, 1995, p. Happily, one of the biggest differences pat and International Monetary Fund, World Economic Outlook . . ashington, D.C.: IMF, May 1997), p. 112. between the two periods of world capital- 6. Economic Report of the President (Washington, D.C.: Gov- ism—the ideological environment—portends emment Printing Office, 2000), pp. 306-7, 422, and International Monetary Fund, World Economic Outlook (Washington, D.C.: IMF, well for the 21st century. At the end of the 1. 5000) pp. 203. 232. nineteenth century, the wave of the future was 7. Bordo et al. socialism and its variants, which intellectuals y pond Beonomic Outlook, p. 114 considered held great promise for humanity. 10. Sachs and Warner, p. 39, and Kevin H. O'Rourke and Jeffrey : G. Williamson, Globalization and History: The Evolution of a Nine- That belief system helped destroy the first era teenth-Century Atlantic Economy (Cambridge, Mass.: MIT Press, of globalization. Today, with socialism thor- 1999). : : NE cl 11. Jeffrey G. Williamson, “Globalization, Convergence, and ough ly discredited, basic liberal principles are History,” Journal of Economic History, June 1996, p. 277. generally accepted. That current climate of 12. Quoted in Harold L. Cole, James Dow, and William B. Eng- 11 : sra_ lish, “Default, Settlement, and Signalling: Lending Resumption in a opinion does not make continued globaliza Reputational Model of Sovereign Debt,” International Economic tion inevitable, but it removes a major obsta- Review, May 1995, p. 369. : 13. Bordo et al, and Michael Bordo and Anna J. Schwartz, cle on the path toward prosperity that the “Measuring Real Economic Effects of Bailouts: Historical Perspec- world has recently resumed. [J tives on How Countries in Financial Distress Have Fared with and without Bailouts,” paper presented at the Carnegie Rochester Con- 1. Jeffrey Sachs and Andrew Warner, “Economic Reform andthe ference on Public Policy, November 19-20, 1999. Process of Global Integration,” Development Discussion Paper no. 14. See Doug Bandow and Ian Vésquez, Perpetuating Poverty: 552, Harvard Institute of International Development, September The World Bank, the IMF, and the Developing World (Washington, 1996, p. S. D.C.: Cato Institute, 1994). 2. Michael D. Bordo, Barry Eichengreen, and Douglas Irwin, “Is 15. Brink Lindsey, “Free Trade from the Bottom Up,” Cato Jour- Globalization Today Really Different than Globalization a Hundred ~~ nal, Winter 2000, p. 363. Years Ago?” in Susan M. Collins and Robert Z. Lawrence, eds., 16. Razeen Sally, Classical Liberalism and International Eco- Brookings Trade Forum 1999 (Washington, D.C.: Brookings Insti- nomic Order: Studies in Theory and Intellectual History (London: tution Press, 1999), pp. 1-72. Routledge, 1998), pp. 196-97. Next Month's Ideas on Liberty: Our December issue features "WHO's Hidden Agenda” by Twila Brase, “Why Classical Liberals Should Love Harry Potter” by Andrew P. Morriss, "A Year at the Movies” by Raymond J. Keating, our annual index, and much, much more. Don’t miss it! ===== PAGE 46 ===== IDEAS ON [IBERTY Adam Smith: Moral Philosopher by James R. Otteson dam Smith was not solely an economist, decrease governmental interference in the though that is almost exclusively how operations of marketplaces. he is known today. His Inquiry into the WN was published in 1776, and the subse- Nature and Causes of the Wealth of Nations quent history of the nations that adopted (WN) is one of the most important books in Smith’s recommendations to the greatest the Western tradition. Aside from ushering in extent—America and England—would seem the modern market-based economic order, to have vindicated his argument: no place in which to varying extents has become the the world has seen as much increase in mate- worldwide norm, WN laid out several of the rial prosperity, before or since, as post-1776 fundamental elements of what has become America and England.2 Because of its enor- standard economic theory. The crucial mous historical influence and the corrobora- importance of the division of labor, the tion of its central tenets, then, Smith’s Wealth dependence of specialization on the extent of of Nations has rightfully earned for itself a the available market, the dynamic relation central place in the canon of great works of between supply and demand that sets prices, the Western tradition. and the generally salutary effects of free Smith became quite famous in both Britain trade are all notions that students learn in and on the continent during his lifetime, but, their first economics class. These topics are perhaps surprisingly, not so much for the all investigated systematically for the first Wealth of Nations. Rather, it was for his earli- time in Smith’s book. er book, first published in 1759, on ethics. The The argumentative strategy of WN is sim- Theory of Moral Sentiments (TMS) was writ- ple: given the way these elemental factors ten during an extraordinarily active period in operate, we should expect that material pros- ethical thought. Francis Hutcheson, who perity will vary indirectly with governmental founded the so-called sentimentalist school of regulation of the marketplace (the less gov- ethics, was Smith’s teacher; David Hume was ernmental interference, the greater the pros- Smith’s best friend and intellectual sparring perity); and when one looks at the historical partner; and Immanuel Kant, who read Smith record—which Smith does in enormous and carefully, was about to come onto the scene. It awesome detail—our expectations are in fact is no exaggeration to say that Smith’s book borne out.! WN’s conclusion, then, is in the was able not only to synthesize the impor- form of a hypothetical imperative: if we want tant theoretical work done before him, but increasing material prosperity, we must also to set the program for ethical philosophy for at least a generation after he died in 1790. James Otteson is a professor of philosophy at the Since about the middle of the nineteenth University of Alabama. century, however, when Smithian economics 46 ===== PAGE 47 ===== 47 began to make influential converts, WN has Since everyone finds this pleasurable, eclipsed TMS in recognition, readership, and, everyone seeks it out; and this mutual hence, influence. seeking-out of sympathy of sentiments I think that the inattention to Smith’s first becomes, for Smith, the engine of social book has been a mistake. TMS is a sufficient- cohesion and the centripetal force, as it ly subtle and sophisticated book to merit seri- were, of human communities. It encour- ous scholarly attention even absent its great ages people not only to enter into groups, influence on moral philosophy during the alliances, and communities with others (so eighteenth century. Indeed, TMS has another that they have opportunities to achieve asset that recommends it: as is the case with the much-sought-after mutual sympathy of WN, its argument is, in its essentials, sound. sentiments), but also to form associations Let me summarize the argument here, then, in of like-minded people (because this increas- the hopes that you will come to see Smith not es the chances of actually achieving such a merely as an economist, but as Smith saw sympathy). himself, something perhaps grander: a moral The mechanism, Smith thinks, is this: I philosopher. desire mutual sympathy of sentiments with you, which leads me to moderate my senti- Acquiring Moral Standards ments to the level that I think, based on my past experience, you are likely to “enter into. Smith’s goal in TMS is to discover by You, on the other hand, because you desire means of empirical investigation the process the same thing, also moderate your senti- that explains two phenomena: on the one ments to the level you think, based on your hand, the adoption by individuals of moral past experience, [ am likely to enter into. standards by which they judge others; and, on Over time this process trains our sentiments the other, their adoption of moral standards to gravitate toward mutually acceptable by which they judge themselves. One striking levels. Smith’s picture thus has a clear feature about both phenomena is that during anti-Freudian thrust: it denies the hydraulic their lifetimes people seem to go from having picture of human emotions according to virtually no such standards as children to which emotions build up “pressure” that having standards that are commonly shared must be “released.” Instead, and more plausi- with others as adults. What explains this bly, it conceives of emotions as things that transition? can be controlled and trained by exercising Smith argues that all human beings innate- what Smith calls “self-command.” The ly have something he called a desire for activity of reciprocal adjustment is then “mutual sympathy” of sentiments. What repeated numberless times in every person’s Smith means is that each of us gets pleasure lifetime, as it is between and among the on seeing his own sentiments echoed in oth- people in one’s community, resulting in ers. It gives us pleasure when, for example, the creation of an unintended and largely our friends find the same things funny that we unconscious system of standards. These stan- do, to the same degree, or we find the same dards then become the rules by which we things distasteful as our friends do, to the determine in any given case what kind of same degree. Smith thinks it is simply a fact behavior is, as Smith calls it, “proper” in a about human nature that we find this mutual situation and what “improper”—meaning accord, or concordance of sentiments—what what others can reasonably be expected to Smith terms “sympathy”—pleasurable. (And enter into. note, incidentally, Smith’s special use of the Think of a person laughing too long at a term “sympathy”: it means harmony or con- joke: at some point you start to form the judg- cord with any emotion whatsoever; it does not ment that his laughter is simply too much; you mean only pity or compassion.) In fact, he judge it, that is, to be “improper.” But how do thinks this pleasure is one of the finest that you know at what point the laughing becomes human beings experience. too much? According to Smith, you know by ===== PAGE 48 ===== 48 IDEAS ON LIBERTY ®¢ NOVEMBER 2000 judging this case against the standards you have unintentionally, and probably uncon- sciously, developed in conjunction with the members of your community over time. In different situations, the amount of laughter that is acceptable may differ; but in each case our experience with our fellows in similar sit- uations sets the parameters for our judgment of propriety. The same holds true with attire: there is such a thing as dressing inappropriately—in either direction, as it were: wearing black tie to a beach party, or wearing a bathing suit to a wedding—and your judgment of when a person’s attire becomes inappropriate is a function of the mechanism Smith describes. To take a final example, there is even, Smith thinks, such a thing as too little anger. If a man’s wife is being publicly humiliated by another man, then we think he ought to show anger, or what Smith calls Adam Smith “spirit.” If he does not—if he cowers, without rising to her defense—then we judge him to ourselves what the impartial observer would have acted improperly. The propriety or think. The voice of the impartial spectator impropriety of a person’s behavior, then, is becomes our second-nature guide of conduct. constituted by its accordance or discordance Indeed, Smith thinks it is what we call our with what is recommended by this system of “conscience.” The phrase “let your conscience standards. be your guide” really means to let the imag- To facilitate our ability to predict what our ined impartial spectator be your guide. And own behavior should be (that is, what would because we come to rely on this impartial enjoy mutual sympathy with others), Smith spectator to give us accurate moral guideposts thinks we learn to adopt the standpoint of an by which to judge our own behavior, our con- “impartial spectator” from which to judge our fidence in his judgments leads us also to own behavior. He believes that in time we employ him to judge others. In this way the come to take the impartial spectator’s judg- impartial spectator becomes the standard of ments as the standard of morality—first for morality. ourselves and then also for others. We have all Let me summarize Smith’s explanation of experienced the unpleasantness of being the process of developing moral standards. judged unfairly, that is, on the basis of biased Babies have only desires; they have no tinc- or incomplete information (people who donot ture of remorse, shame, or guilt at desiring know our situation thinking poorly of us). something improper. As they grow into chil- This leads us to desire that others refrain from dren, however, they have the first experience judging until they know the whole story; but of discipline, which teaches them that others because we all want this, our desire for mutu- judge them and expect them to behave in par- al sympathy of sentiments subtly encourages ticular ways. And they make the shocking, us to adopt an outside perspective, as it were, arresting discovery that they are not the most in judging our own conduct. That is, because important person in everyone’s life—only in we want others to be able to “enter into” our their own. Their desire for mutual sympathy sentiments, we strive to moderate them to be then encourages them to discover what others what we think others will sympathize with; expect of them and to strive to achieve it. The but we can only know what that is if we ask more experience they have, the better they ===== PAGE 49 ===== ADAM SMITH: MORAL PHILOSOPHER 49 become at anticipating others’ expectations and judgment, which enable us to assess and and hence of behaving in ways that lead to judge an increasingly diverse range of actions mutual sympathy. The children then develop and motivations. habits of behavior that reflect what they have Third, what seem when we are children to learned; what were once rules handed down be isolated and haphazard interactions with from on high become internalized principles others lead as we grow older to habits of by which the children routinely order their behavior; as adults the habits solidify into lives. principles that guide what we call our “con- As adults, larger and larger experience science.” leads to more and more complicated, internal- Fourth, people’s interests, experiences, and ized principles. These principles now cover a environments change slowly enough to allow large range of actions and motivations, and long-standing associations and institutions to they have been revised, corrected, and fine- arise, which give a firm foundation to the tuned as necessary. The principles inform rules, standards, and protocols that both set Smith’s procedure of making moral judg- the parameters for the initial creation of these ments: they are the standard against which associations and in turn are supported by people judge themselves and others. They are them. (These “associations” would today what, in practice, render the moral judgment. include everything from Elks clubs, YMCAs, A moral judgment, then, is the result of a and Boy Scouts, to the American Medical deduction by which one determines whether a Association, the National Academy of Sci- given act or motivation accords with these ences, and even the Catholic Church.) principles. Smith next argues that the development of personal moral standards, of a conscience and the impartial spectator procedure, and of the accepted moral standards of a community all Smith’s analysis of the way in which people depend on the regular associations people and communities come to have common make with one another. It is in these associa- moral standards is intriguing—and, indeed, tions, in the daily intercourse people have may in large part be true. This alone would with one another, that they encourage each recommend it for serious consideration. But other to discover and adopt rules of behavior Smith’s examination of human morality and judgment that will lead to mutual sympa- reveals a model for explaining the develop- thy. Without such interactions with others, ment and maintenance of large-scale human Smith argues, people would have no occasion institutions generall)—which would mean to pursue such rules, and hence they would that the book’s import is yet greater than ini- not. In that case moral judgments would not tially thought. I call Smith’s model a “market- be made at all, and people would not, as a place model.” Let me sketch it briefly, draw- Robinson Crusoe would not, have thoughts ing on the discussion so far. about virtue or vice, propriety, or impropriety. First, Smith argues that moral judgments, (Smith, in fact, speaks of a “solitary islander,” along with the rules by which we render them, who, with no “societal mirror” by which to develop in the way I have described, without view his actions, does not think of the virtue an overall, pre-arranged plan. They arise or vice of his actions—just as he would not and grow into a shared, common system of think about the “beauty or deformity” of his morality—a general consensus regarding the physical appearance.) nature of virtue, or what Smith calls propriety Finally, a person’s (largely unconscious) and merit—on the basis of countless individ- adoption of general rules, development of a ual judgments made in countless particular conscience, and employment of the impartial situations. spectator procedure are motivated by a funda- Second, Smith argues that as we grow from mental, innate desire—the desire for mutual infants to children to adults we develop sympathy. This desire is the sine qua non for increasingly sophisticated principles of action Smith’s theory of moral sentiments: without Institutional Theory ===== PAGE 50 ===== 50 IDEAS ON LIBERTY ®* NOVEMBER 2000 it, there would have been no reason to devise * Motivating Desire rules that enable people to achieve it, and, on 1. TMS: the “pleasure of mutual sympathy” Smith’s theory, there would therefore have of sentiments; been no moral standards at all. 2. WN: the “natural effort of every individ- The model at work in TMS, then, compris- ual to better his own condition”; es four central structural features: a system 3. “Languages”: the desire to make our of order arising unintentionally from the “mutual wants intelligible to each other.” actions of individuals (Smith was the first * Rules Developed person to develop and work out the notion of 1. TMS: rules determining propriety and what Hayek made famous two centuries later merit; as “spontaneous order”), an unconscious and 2. WN: protocols protecting private proper- slow development of rules by which the sys- ty, contractual agreements, and voluntary tem operates, the system’s dependence on exchanges; regular exchange among freely associating 3. “Languages”: rules of grammar, pronun- people, and a system that receives its initial ciation, and so on. and ongoing impetus from the desires of the » Market (medium or arena of exchange) people who make use of it. These four cen- 1. TMS: mutual exchange of personal sen- tral features of Smith’s account are, I would timents and moral judgments; like to suggest, also the central characteristic 2. WN: exchange of private goods and features of an economic market. We can, services; then, accurately view Smith’s conception of 3. “Languages”: verbal communication. the system of interactions in which moral * Resulting “Unintended System of Order” standards develop as a marketplace of 1. TMS: commonly shared standards of morals.3 morality and moral judgment; 2. WN: economy (large-scale network of Other Marketpla ces exchanges of goods and services); 3. “Languages”: language. By calling Smith’s model a “marketplace” model, I already suggest in what way Smith’s I can now suggest why Smith’s analysis in analysis can explain areas of human life out- TMS is of general applicability: the model it side of moral judgment-making. The first constructs for explaining the development of and most obvious application is to economic moral standards can be fruitfully employed to marketplaces, where the model Smith sets understand not only the development of out in TMS matches up perfectly. Another morality, economic markets, and languages, application is to the human institution of lan- but indeed the development of all human guages. In an early essay titled “Considera- social institutions. It can, for example, tions Concerning the First Formation of Lan- account for the accepted protocols of behav- guages,” Smith lays out how he suspects lan- ior in a fifteenth-century Indian bazaar as well guages first came into being and how they as those of late-twentieth-century American change over time. The processes he describes business; it can explain why certain forms of in that essay are instances of the processes he address and speech are peculiarly acceptable set out at greater length in TMS, and his among academic professors, on the one hand, model for language change foreshadows in and among inner-city gang members, on the important ways contemporary theories about other; it can explain why Americans think the language change4—a remarkable feat con- English are stuffy and why the English think sidering that linguistics was only in its infan- Americans are loose. Smith’s model is thus cy at the time. In fact, the three areas of extraordinarily powerful, and its scope may be morality, economics, and linguistics can be coterminous with the whole of human social mapped onto one another quite nicely in activity itself. terms of the four central features I listed This is not to say that the model as Smith above: presents it is perfect or flawless. One possible ===== PAGE 51 ===== ADAM SMITH: MORAL PHILOSOPHER 51 problem is its almost exclusive reliance on the Smith’s Theory of Moral Sentiments is thus desire for mutual sympathy of sentiments: full of far-reaching possibilities. One astonish- although this desire may well be a founda- ing surprise is that, although published exactly tional element of human nature, it seems clear 100 years before Darwin’s Origin of Species in that there are also other motivating desires. 1859, TMS’s examination of the way in which Thus one might object that Smith’s picture of these systems of unintended order, as I call human motivation may be too simplistic. On them, develop and change over time adum- the other hand, I see no reason to think that a brates in substantial part the way in which Dar- richer view of the range of human motivation win’s theory explains the development and would necessarily be incompatible with the change of species. If recent work in what is formal elements of Smith’s model. As long as called “sociobiology”—the field of inquiry that people still strive to satisfy the desires that attempts to explain large parts of human motivate them, and as long as the satisfaction social behavior by employing evolutionary of those desires requires the presence and insights>—has merit, then Smith’s TMS, which sometime cooperation of others, Smith’s is the first book in the Western tradition to try model would still seem to hold. to work out such a view, might well have been Another possible problem is that the moral on to something important indeed. standards that develop in the way Smith Thus The Theory of Moral Sentiments has describes would not seem to have any ulti- had enormous historical influence, is subtle mate sanction—they would seem justified, and sophisticated, develops an account of that is, solely because their peculiar historical morality that is plausible and persuasive, and course of social interaction produced them. works out a model for explaining human That would seem to imply a cultural moral interaction that is powerful enough to encom- relativism that many—including me—find pass virtually the entire range of human life. distasteful. It is a disputed point among Smith On top of that, some recent empirical research scholars whether he in fact thought that moral suggests his theory might be true. I can think judgments had any kind of transcendent justi- of little else a book would need to be includ- fication. I think the fact that they issue from ed as one of the greatest works of the Western natural human desires and needs begins to tradition. I therefore commend it to you for lend them objectivity, as does Smith’s claim your consideration, and I hope you will think that these “natural” desires and needs were of Smith not merely as an economist, but implanted in us by God—which would mean rather as he thought of himself: a moral that the moral standards that unintentionally philosopher. [] arise by their operation actually reflect the will of God. : 1. For contemporary evidence substantiating Smith’s conclu- Some scholars maintain, however, that sions, see the annually updated Economic Freedom of the World etiquette, are simply a matter of convention dri- 7The Wealth and Poverty of Nations: Why Some Are So Rich and ven by their relative utility at satisfying local, >" £08 SCV EC HEIL, ees Rots, contingent, or changing desires. But I would “Adam Smith's Marketplace of Morals,” Archiv fiir Geschichte der p oint to what Smith actually said, and it seems gC open are ud Keller, On Language Change: The to me that human nature is enough of a con- Invisible Hand in Language (London: Routledge, 1994) and Steven stant to anchor a “middle-way” objectivism— pe Ho oa 1905 the Mind Creates Language between personal subjectivism and absolutely 5. A classic statement of this view is E. O. Wilson’s On Human transcendent obj ectivism—that is sufficient to Nature (Cambridge, Mass.: Harvard University Press, 1978); a more ) oO recent treatment that draws explicitly on Smith’s work ts James Q. answer most worries about relativism. Wilson, The Moral Sense (New York: Free Press, 1993). ===== PAGE 52 ===== If I asked hikers on my property to keep their dogs on leash, surely Mr. Morriss would not applaud those who disregarded my request. Leash laws are not, as he implies, the doing of autocratic government trying to “get between people and their dogs,” but a recog- nition by communities that the use of public roperty by one individual ought not interfere Dog D ay Afternoon ith iil enjoyment of it To the Editor: —ABBEY LAWRENCE I recently read Andrew Morriss’s article Tuftonboro, New Hampshire concerning Missoula’s trail markers (August 2000). Mr. Morriss might be interested to know that he helped pay for the ten markers, which were funded by a $30,000 federal grant. At the time, I had just been elected (as a Republican!) to the City Council. If memory serves, 1 was the only one of 12 council members to vote against spending $3,000 per marker to enshrine the effective- ness of government. —MICHAEL A. BENNETT Missoula, Montana CAPITAL LETTERS Andrew Morriss replies: I completely agree with Ms. Lawrence that undisciplined dogs are a menace—but I must disagree that the “tragedy of the commons” caused by the existence of “public” property should be solved by government dictates such as leash laws. Many people, including appar- ently Ms. Lawrence, have well-behaved dogs and leash laws restrict the liberty of those dog owners by applying a “one size fits all” reme- dy to the problem of irresponsible dog-owner behavior. Of course, there would be no prob- lem with such people if the “public” parks were privatized and had an owner to enforce such rules as market demand required. The problem is no different, however, from the undisciplined behavior of unleashed poorly reared children and boorish adults without dogs. (The dogs I saw in Missoula, by the way, were uniformly well behaved.) I was enjoying Andrew Morriss’s “A (Revi- sionist) Walk in the Park” (August 2000) until his last paragraph, where he writes that the sight of dozens of unleashed dogs, whose owners were in violation of a clearly posted leash law, made him optimistic for the cause of liberty. I must strenuously disagree. I know from experience that a large propor- tion of those unleashed dogs are not under the verbal control of their owners. Thus, for other people who would like to use the park—chil- dren tossing a ball, families having picnics, people on horseback—those cavorting canines can be everything from a nuisance to a haz- ard. In my small town, I have more than once been forced to leave public property, where I was training my dog in preparation for obedi- ence trials, because of people who refused ) E Irvine. to keep their unleashed and untrained dogs oe Liban hi OE Ny Broadway nie from harassing me. One woman haughtily ol @F fax: 914-591-8910 informed me that she let her dog “run free.” iol@fee.org; fax: Her previous dog, also running free, had run into the street and been killed by a car. We will print the most interesting and provocative letters we receive regarding Ideas on Liberty articles and the issues they raise. Brevity is encouraged; longer letters may be edited because of space limitations. Address your letters to: Ideas 52 ===== PAGE 53 ===== Economics on Trial by Mark Skousen [DEAS ON IBERTY NovemBER 2000 The Anti-Capitalistic Mentality, Updated “In the excitement over the unfolding of his scientific and technical powers, modern man has built a system of production that ravishes nature and a type of society that mutilates man.” —E. F. SCHUMACHER! n 1956, Ludwig von Mises countered fashioned Schumacher cited favorably the myriad arguments against free enterprise Buddhist view that “large-scale employment in his insightful book, The Anti-Capitalistic of women in offices or factories would be a Mentality. “The great ideological conflict of sign of economic failure”4). our age,” he wrote, “is, which of the two sys- terms, capitalism or socialism, warrants a From Austrian to Marxist igher productivity of human efforts to improve people’s standard of living.”2 to Buddhist Unfortunately, Mises’s counterattack has Oddly enough, Fritz Schumacher’s back- done little to stem the tide of anti-market sen- ground is tied to the Austrians. Schumacher timents. One that continues to be popular iS ag born in Germany in 1911 and took a class E. F. Schumacher’s 1973 book, Small Is Beau- from Joseph Schumpeter in the late 1920s in tiful, which has recently been reprinted in an Bonn. It was Schumpeter’s course that con- oversized text with commentaries by Paul yjnced Schumacher to become an economist. Hawken and other admirers. Schumacher has while visiting England on a Rhodes scholar- a flourishing following, including Schumach- ship in the early 1930s, Schumacher encoun- er College (in Devon, England) and the Schu- (ereq F. A. Hayek at the London School of macher Society (in Great Barrington, Massa- Economics and even wrote an article on chusetts). Hawken hails Schumacher as a «Inflation and the Structure of Productions visionary and author of “the most important Byt his flirtation with Austrian economics book of [his] life.” Schumacher’s message ended when he discovered Keynes and Marx. appeals to environmentalists, self-reliant He renounced his Christian heritage and communitarians, and advocates of “sustain- pecame a “revolutionary socialist.” The Nazi able” growth (but not feminists—the old- threat forced him to live in London, where he - was “interned” as an “enemy alien” during Mark Skousen (http://www.mskousen.com; mskousen World War II. After the war, he worked with @aol.com) is an economist at Rollins College, Keynes and Sir William Beveridge and sup- Department of Economics, Winter Park, FL 32789, a . . . : Forbes columnist, and editor of Forecasts & Strate- ported the nationalization of heavy industry in gies. His textbook, Economic Logic, is now available both Britain and Germany. But his real from FEE. change of heart came during a visit to Burma 53 ===== PAGE 54 ===== 54 IDEAS ON LIBERTY ®¢ NOVEMBER 2000 in 1955, when he was converted to Buddhism. everyone in a life of “nonmatenalistic” val- “The Burmese lived simply. They had few ues. And second, it clearly results in a primi- wants and they were happy,” he commented. tive economy. Mises responded to both these “It was wants that made a man poor and this issues: “What separates East and West is . . . made the role of the West very dangerous.”¢ the fact that the peoples of the East never con- Schumacher greatly admired Mahatma ceived the idea of liberty. . . . The age of cap- Gandhi and his saying, “Earth provides italism has abolished all vestiges of slavery enough to satisfy every man’s need, but not and serfdom.” And: “It may be true that there for every man’s greed.” Eventually he wrote a are among Buddhist mendicants, living on series of essays that became his classic, Small alms in dirt and penury, some who feel per- Is Beautiful, published in 1973. In the 1970s, fectly happy and do not envy any nabob. he became passionate about trees and begana However, it is a fact that for the immense campaign against deforestation. After a suc- majority of people such a life would be cessful book tour in the United States, includ- unbearable.”8 ing a visit with President Jimmy Carter, he I have no objection to preaching the Bud- died in 1977 of an apparent heart attack. dhist value that sees “the essence of civiliza- tion not in a multiplication of wants but in the purification of human character.” Nor do I The Lure of disapprove of localized markets (see my Buddhist Economics favorable review last November of the Grameen Bank, which makes small-scale loans to the poor). But none of this idealism should be forced on any society. Ultimately we must let people choose their own patterns of work and enjoyment. Clearly, whenever Third World countries have been given their economic freedom, the vast majority have chosen capitalistic means of production and consumption. As a result, poor people have been given hope for the first time in their lives—a chance for their families to break away from the drudgery of hard labor, to become educated, see the world, and enjoy Schumacher’s message is Malthusian in substance. Small Is Beautiful denounces big cities and big business, which “dehumanizes” the economy, strips the world of “nonrenew- able” resources, and makes people too materi- alistic and overspecialized. According to Schumacher, individuals are better off work- ing in smaller units and with less technology. His most important chapter is “Buddhist Economics,” with its emphasis on “right livelihood” and “the maximum of well-being with the minimum of consumption.” Foreign trade does not fit into a Buddhist economy: a « . right living. to satisfy human wants from faraway places F . : SS reedom is beautiful! [] rather than from sources nearby signifies fail- ure rather than success.”’ In sum, traditional 1. E. F. Schumacher, Small Is Beautiful: Economics as if People : : _ : : Mattered: 25 Years Later with Commentary (Point Roberts, Wash.: Buddhism rejects labor saving machinery, Hartley & Marks, 1999 [1973]), p. 248. assembly-line production, large-scale multi- 2. Ludwig von Mises, The Anti-Capitalistic Mentality (South national corporations, foreign trade, and the Holland fil: Libertarian Press, 1972 [1956]), p. 62. . 3. Paul Hawken, Introduction to Schumacher, p. xiii. consumer society. 4. Tbid., p. 40. : p 5. See The Economics of Inflation, ed. by H. P. Willis and J. M. There are two problems with Schumacher’s Chapman (New York: Columbia University Press, 1935). glorification of Buddhist economics. First, it 6. Quoted in Barbara Wood, E. F. Schumacher: His Life and denies an individuals freedom to choose a Thug Racker Harper & Row, 1584), p. 245. capitalistic mode of production; it enslaves 8. Mises, p. 74. ===== PAGE 55 ===== popped to mind until he'd filled a sufficient BOOKS number of pages for Oxford University Press to consider the result a book. Blau’s principal problem is his fantasies about the facts. An incomparably better book on the current state of the American economy is W. Michael Cox’s and Richard Alm’s Myths Illusions of Prosperity: America’s Working Families in an Age of Economic Insecurity of Rich and Poor (1999). Cox and Alm show by Joel Blau beyond any doubt that Americans of all Oxford University Press ® 1999 e 272 pages income levels enjoy standards of living today * $30.00 that far exceed those of Blau’s imagined gold- en age of the early 1970s. Cox and Alm also Reviewed by Donald J. Boudreaux demolish many of the other myths that moti- vate Blau’s written rampage. For example, hen Joel Blau looks at the United material inequality is not increasing in Amer- States today, he sees a population of ica (it’s decreasing); Americans are not work- mostly poor, confused, frightened people ing harder and longer (they're working easier helplessly in the grip of greedy corporations and less); and job stability has not declined. who extract profits from the hides of workers, (See my review of Myths of Rich and Poor in welfare recipients, women, and minorities. the January 2000 issue of Ideas on Liberty.) He sees an environment rendered toxic, com- It’s impossible to take Blau seriously given munities made lifeless, and a federal govern- his outlandishly backward portrait of current ment suffering “perpetual deprivation.” He economic conditions. also sees big business monolithically dictat- Equally outlandish is the poor quality of ing government policy: selfishly pressing Blau’s arguments. For instance, he argues for for free trade, low taxes, privatization, and greater government interference in the labor deregulation. market (higher minimum wages; legislative When I read the dust jacket of this book I efforts to enforce a maximum wage; higher anticipated that Blau would present challeng- employment taxes; enforced worker participa- ing arguments against the free market. I hard- tion in corporate decision-making). He right- ly expected to be persuaded by such argu- ly anticipates that an objection to his scheme ments, but I wanted to sharpen my thinking is the fact that European unemployment is about the nature of capitalism and of state much higher than in America and that econo- intervention. My hope was to write a positive mists explain this fact by pointing to Euro- review that, while critical of the author’s faith pean governments’ greater interference in in government intervention, reported how their labor markets. those of us who are less enthusiastic about the Blau rejects economists’ explanation, offer- state can nevertheless benefit from reading ing instead his own theory that European Blau’s work. unemployment is higher than American I regret to say that I cannot write such a unemployment in large part because the 1992 review. In almost every way this book is Maastricht treaty obliged European govern- appalling. Not only is Blau’s factual analysis ments to reduce their budget deficits and to unsalvageable, his arguments are confused pursue tighter monetary policies. But if small- and often internally contradictory, and his er budget deficits and tighter monetary policy Marxist perspective is childish. Also, his writ- were the principal causes of unemployment ing style is horrid, with the organization of (as Blau implies), then the rate of U.S. unem- the material even worse. The book reads as ployment should now be at least as high as though Blau (professor of social work at those in European countries. Of course, it is SUNY-Stony Brook) just started writing one substantially lower. day, energized by his hatred of the market, Blau also entertains the naive assumption and kept on writing down anything that that business interests are monolithic—that 55 ===== PAGE 56 ===== 56 IDEAS ON LIBERTY ® NOVEMBER 2000 there is “a” business interest and that all busi- President Roosevelt, and celebrates the ness people pursue that interest in unison. Not growth of government in the United States once does Blau show a whiff of awareness during the 1930s and 1940s. In the process, that businesses compete against each other. alas, Kennedy picked up this year’s Pulitzer It is Blau’s hero, the state, that is the only Prize in history. proven entity capable of enabling businesses Kennedy covers Roosevelt’s complete to join forces and gang up on workers and administration—more than half the book, in consumers. fact, covers World War II and the $304 billion If the quality of all arguments against the spent to fight it. His 380 pages on the Great free market were no higher than Blau’s book, Depression and the New Deal, however, is I would confidently predict that overwhelm- what will most interest historians and readers ing intellectual victory for capitalism is on the of Ideas on Liberty. horizon. But this is not the case. Blau is hard- The book’s cover says that “Freedom From ly representative of the best scholars who Fear tells the story of the New Deal’s achieve- argue against liberty and for the state. And ments, without slighting its shortcomings, that’s the tragedy of this book: had Blau pre- contradictions, and failures.” This is some- sented seriously challenging arguments, he what misleading. Kennedy does sometimes would have assisted friends of freedom in concede that various New Deal programs honing their own thoughts and arguments. He failed and that “Roosevelt conclusively would have advanced scholarship and under- demonstrated in 1938 that it [the New Deal] standing. Instead, he’s only given us a cause to was not a recovery program, at any rate not an snicker. [1] effective one.” But Kennedy usually attributes these failings to improper administering or insufficient funding. What Kennedy never says is that most New Deal programs—from Donald Boudreaux is president of FEE. Freedom From Fear: The American AAA to NRA to the Silver Purchase Act— People in Depression and War, could never have worked regardless of fund- 1929-1945 ing. You can’t restore prosperity by having i government (read “taxpayers”) pay farmers by David Kennedy not to produce, by fixing prices of goods, or Oxford University Press ® 1999 ® 936 pages by purchasing silver at inflated prices. The "339.93 more thoughtful observers recognized this; as Walter Lippmann, an early supporter of the New Deal, concluded, “the common char- acter of all this legislation—from AAA to «Yt is clear that anybody who deviates a the Stock Market Bill, is that it constricts hair’s breadth from the Roosevelt line is enterprise.” in trouble, not only from the professional Kennedy rarely talks about taxes, which are smear Bund but also from ‘scholars.’” Thus the flip side of the government programs and spoke historian Charles Beard in 1948 to Ray need detailed attention. Roosevelt and his Moley, the New Deal brain truster. In the 50- allies pushed the tax rate on top incomes to 79 plus years since Beard wrote this, very few percent in 1935, and to over 90 percent in the historians have had the knowledge, the nerve, 1940s. Kennedy neglects to mention that, in and the integrity to challenge “the Roosevelt 1942, Roosevelt issued an executive order to line” that the New Deal was, on balance, a tax all incomes over $25,000 at 100 percent positive contribution to American economic (Congress repealed it). No wonder the econo- development. my did not recover—and that production dur- David Kennedy, professor of history at ing World War II was sometimes stymied. Stanford University, is the latest historian to While entrepreneurs worked out schemes to fall into line with his peers. In Freedom From avoid confiscatory taxes, FDR ran up the Fear he largely defends the New Deal, lauds national debt and supported excise taxes on Reviewed by Burt Folsom ===== PAGE 57 ===== Books 57 cars, tires, movie tickets, cigarettes, whiskey, last analysis, Franklin Roosevelt faithfully and even grape concentrates—all of which are discharged his duties. . . . He did mend the considered regressive because they hit lower evils of the Depression by reasoned experi- income earners hardest. Kennedy avoids dis- ment within the framework of the existing cussing the funding for New Deal programs social system.” Such lines may have helped from regressive taxes, but he clearly knows Kennedy win the favor of the Pulitzer Prize this happened because he cites the key committee, but they don’t illuminate the com- sources that demonstrate this point. plexities of the New Deal era. 4 Often Kennedy tells the part of the story Burton Folsom is historian in residence at the Center that supports the New Deal, or big govern- for the American Idea in Houston, Texas. He is the ment, and then omits the part where the pro- author of The Myth of The Robber Barons, which is gram didn’t work or where Roosevelt (or in its third edition. Hoover) endorsed a regressive tax scheme to help it survive. For example, Kennedy tells the reader about the $300 million spent (under The Titanic Story: Hard Choices, the Reconstruction Finance Corporation) for Dangerous Decisions the country’s first federal welfare program. But he fails to mention that it was a grab bag by Stephen Cox for whichever states could rush to Washington =~ Open Court © 1999 © 152 pages ® $16.95 quickest to get the cash. Illinois managed to snatch over $55 million; Massachusetts got Reviewed by George C. Leef zero. Kennedy tells the reader how skilled a cam- he story of the sinking of the Titanic is a paigner Roosevelt was, but conveniently monumental drama that will be told and omits much of the logrolling that made his retold for centuries to come. In recent years victories possible. In Roosevelt’s run for re- we have seen a blockbuster movie, a Broad- election in 1936, for example, he gave this way play, and a spate of books on the great order to Henry Wallace, his secretary of agri- 1912 disaster. The trouble with most of the culture: “Henry, through July, August, Sep- Titanic output is that it tells only part of the tember, October and up to the 5th of Novem- story, and often with a decided slant. ber I want cotton to sell at 12 cents. I do not Stephen Cox’s book is not intended to be a care how you do it. That is your problem.” full-fledged history of the Titanic—his exten- Also during that campaign a Gallup Poll sive bibliography gives the reader a long list showed that over 75 percent of the relief vote of books to consult, along with helpful short was for Roosevelt and only 17.5 for Alf Lan- analyses of them—but rather is an endeavor don, his Republican opponent. Therefore, to understand some of the “hard choices, dan- Roosevelt pumped millions into relief in the gerous decisions” (as the book is subtitled) key states right before the election. Had that occurred before, during, and after the Kennedy chosen to discuss FDR’s orders to sinking. In the course of his writing, Cox calls Wallace, the targeted spending for relief, or into question many of the widely held beliefs the many other examples of programs for that have grown up around the tragedy, beliefs votes, the reader would have had a more that suit the anti-market zealots who never balanced account of the changes taking place pass up an opportunity to depict capitalism as in American society with the growth of dangerous and immoral. government. The difficulty with most of the Titanic ver- Instead, Kennedy usually toes what Beard sions, Cox writes, is that they are “told as if called “the Roosevelt line.” He portrays the all the important issues were easy to resolve.” growth of government in an invariably posi- “If we had operated the Titanic, it is suggest- tive light. “In the yeasty atmosphere of Roo- ed, we would certainly have taken the trouble sevelt’s New Deal, scores of social experi- to determine just how far from ‘unsinkable’ ments flourished,” Kennedy writes. “In the she really was. We would have provided her ===== PAGE 58 ===== 58 IDEAS ON LIBERTY ® NOVEMBER 2000 with every conceivable safety device and everyone, shipbuilders concentrated on trying mechanism of escape. We would have antici- to make each ship “its own lifeboat”; that is, pated every hazard she might conceivably making the ship so seaworthy that in the event have encountered.” Cox, however, won’t play of a disaster, it could support those aboard the game of perfect hindsight, but asks about long enough for help to arrive. “In 1912,” the the situation that faced the decision-makers at author observes, “lifeboats were valued the time, what information they had, what chiefly for their ability to ferry a few people at beliefs they held. a time from a distressed liner to a rescue ship, Consider, for example, the famous matter which would use its own boats to speed the of the lifeboats. There were not enough operation.” Had the Californian come imme- lifeboats to provide places for all the passen- diately to the aid of the 7itanic—another issue gers and crew members, and for that decision that Cox tackles—there might have been few the White Star Line was pilloried. Supposed- if any casualties. ly, the firm’s decision to equip the ship with A fascinating aside is that because of regu- fewer than enough boats to allow everyone to lations enacted in the United States after the be able to escape showed its disregard for the sinking that mandated “lifeboats for all,” the well-being of passengers and crew—putting liner Eastland capsized and sank in Chicago, profits before people, as anti-capitalists are so killing 844 people because of its excess ready to chant. Cox’s analysis, however, weight added to the top of the ship by the shows that this is far from the indisputable obligatory new lifeboats. indictment of laissez faire that it is widely Among other interesting subjects, Cox assumed to be. dwells on the post-sinking hearings held both First, there is the element of time. On a pas- in Washington and London. The former con- senger liner, with large numbers of panicky sisted mainly of grandstanding by Senator civilians who don’t all behave ideally, getting William A. Smith of Michigan, whom Cox everyone into lifeboats and safely launching describes as “an ingenious busybody, cherish- them takes a great deal of time. The Titanic ing the . .. assumption that if anything goes stayed afloat for two hours and 40 minutes wrong, the United States government ought to after the collision—Ilonger than most ships do something about it.” The hearings in Lon- take to sink—but still, under perfectly calm don, in contrast, were held more to generate conditions, did not have enough time to light than heat. launch its full complement of boats. As Cox A valuable book, indeed. [] says, “The Titan ic literally could not have George Leef is the director of the Pope Center for used any more lifeboats, primarily because Higher Education Policy at the John Locke Founda- her crews were not organized well enough to tion and book review editor of Ideas on Liberty. save time by launching them simultaneously.” Moreover, the Titanic sank under the unusual conditions of calm seas and no port Money, Greed, and Risk: Why Financial or starboard list. Why does that matter? Cox crises and Crashes Happen points out that, “if a ship is going to sink, it ] may well develop a list so severe that lifeboats OY Charles R. Morris on one side cannot be lowered because they Times Books ® 1999 e 224 pages ® $25.00 will hit the hull and lifeboats on the other side cannot be loaded because they are swinging too far from the deck.” Therefore, the require- Reviewed by Larry J. Sechrest ment to have a lifeboat place for everyone he reader of Money, Greed, and Risk is would in practice require substantially more informed that the book’s author, Charles than “enough places” because of the likeli- R. Morris, has been a partner in a consulting hood that not all boats could be launched. firm, an executive with Chase Manhattan Instead of putting more money into making Bank, the secretary of health and human ser- certain that there was a lifeboat place for vices for the state of Washington, and assis- ===== PAGE 59 ===== Books 59 tant budget director for New York City. In les”); Howard Rubin, the exploiter of GNMA short, Morris has considerable experience asa “strips”; notorious “inside trader” Ivan manager and a bureaucrat. He is, in particular, Boesky; the brain trust behind Long Term seemingly well versed in the technical work- Capital Management; and “corporate raider” ings of various financial markets and financial T. Boone Pickens, among others. Even though instruments such as index futures, collateral- Morris seems to recognize that recent ized mortgage obligations, synthetic put financial developments, such as corporate options, and so forth. As long as Morris takeovers and derivative assets, have restricts himself to the operational details of increased efficiency and improved the man- “exotic” financial assets, the reader is likely to agement of risk, he nonetheless portrays the benefit. Unfortunately, most of the issues innovators as being “offensively” greedy and addressed by this book—the causes of finan- generally sleazy. And he retains that sort of cial crises—call for someone with an under- language even though, for example, he grants standing of economic theory, economic histo- that the legal charges against Milken were ry, and, especially, the perverse effects based on ambiguous and contradictory evi- wrought by government regulation. In those dence and were therefore unconvincing. areas, Morris is sadly deficient, and his book The third part of the book presents Morris’s fails to enlighten. ideas about the necessity of relying on gov- The book is divided roughly into thirds. ernments to regulate financial markets. Such a One part presents a survey, albeit brief, of position is a predictable outgrowth of certain American economic history from the early of his expressed beliefs. For example, he nineteenth century through the Great Depres- asserts that “the average investor probably is a sion. The emphasis is on finance, money, and fool,” and that recently even financial “gurus” banking, and it features the usual cast of char- often haven’t had “a clue to what was going acters: Nicholas Biddle, Andrew Jackson, Jay on in their own businesses.” Economists can- Gould, J. P. Morgan, John D. Rockefeller, not be relied on either. According to Morris, Cornelius Vanderbilt, Andrew Carnegie, and they can neither figure out the cause of the the British firm Baring Brothers. According to Great Depression nor offer any helpful advice Morris, this span of time was characterized by to nations experiencing currency crises. the “fleecing” of first British investors and Wrong and wrong. then the American middle class. Greed was Worse still, in his opinion economists are the motive force, and fraud was rampant. entirely too wedded to free markets and too Morris’s presentation is weakened, howev- skeptical of “enlightened” regulatory struc- er, by two interrelated flaws. First, he relies tures. As far as he is concerned, financial mar- almost entirely on a 1957 book by Bray Ham- kets were not safe “until the whole panoply of mond, which, although reissued in 1991, fails regulatory mechanisms and information fully to reflect recent scholarship on certain requirements were in place.” His core claim key banking issues. Second, Morris’s under- is that, unless they are reined in by regula- standing of money and banking is so mud- tors, financial innovators will always brutally dled that he (a) regards Nicholas Biddle as a exploit the populace, thereby creating period- genius and Andrew Jackson as a man con- ic crises. This he believes to be the dominant sumed by “prejudice and ignorance,” and theme in economic history. (b) insists that a central bank represents an I have three fundamental criticisms of this enormous improvement over the “chaos” of book. First, Morris is oblivious to a large and free banking. growing body of scholarship that demon- A second part of the book focuses quite strates (conclusively, in my opinion) that all closely on the financial innovations of the past systemic problems in monetary and financial 30 years and the many problems they alleged- markets have, in fact, been caused by various ly have caused. Here the reader will be intro- government regulations. Prohibitions on bank duced to the “junk bond king” Michael branching, the forced segmentation of finan- Milken (in a chapter titled “Mephistophe- cial services, legal tender laws, and the ===== PAGE 60 ===== 60 IDEAS ON LIBERTY ® NOVEMBER 2000 “moral hazard” of deposit insurance are some anti-Keynesian alternatives, including mone- of the more obvious examples. Fraud and cor- tarism, privatization, and public choice. Even ruption, except where protected by statute, Samuelson highlights the “public choice” have played a very minor role. Second, he work of Buchanan and Gordon Tullock in his offers no explanation of why some financial latest textbook. (I can’t let this paragraph end innovations, such as credit cards, NOW without expressing my outrage that Tullock accounts, and ATMs, have not precipitated did not share the Nobel Prize with Buchanan crises. Finally, the manner of presentation is in 1986; even Buchanan admits that Tullock shrill and sensationalistic. There is too much was the “catalyst” behind public choice hyperbole, too many pejorative terms, and too theory.) little scholarship. The fact that Buchanan, not Musgrave, won All in all, Money, Greed, and Risk is one of a Nobel is telling. Musgrave is in his late those much-hyped books that it’s best to eighties. Most of his books are out of print, avoid. [0 and he remains an unabashed Keynesian. Larry Sechrest is associate professor of economics at Still, the influence of his ap proach to the task Sul Ross State University, Alpine, Texas. of the state is pervasive, since the best that free-market economists have done is to help slow the growth of government, not reverse it. Public Finance and Public Choice: Two Public Finance and Public Choice is a Contrasting Visions of the State script of the papers and comments presented at a 1998 conference in Germany by by James M. Buchanan and Buchanan and Musgrave. In their debates, Richard A. Musgrave Musgrave defended social insurance, progres- MIT Press ® 1999 © 272 pages © $27.50 sive taxation, and the growth of the public ; sector as the “price we pay for civilization.” Reviewed by Mark Skousen Buchanan blamed democratic politics for a “bloated” public sector, “with governments Se there I was in the late ’60s, an under- faced with open-ended entitlement claims,” graduate economics major at BYU, a very resulting in “moral depravity.” He wants to conservative institution. My introductory constrain government through constitutional textbook was Paul Samuelson’s Economics; rules and limitations and describes their dif- my history of economic thought textbook was ferences thus: “Musgrave trusts politicians; Robert Heilbroner’s The Worldly Philoso- we distrust politicians.” phers; and for my public finance course we Musgrave responded: “Is the state of our used The Theory of Public Finance by civilization really that bad? . . . There is much Richard A. Musgrave. In other words, my that should go on the credit side of the ledger. “conservative” BYU professors were all using The taming of unbridled capitalism and the the most Keynesian of textbooks. No Fried- injection of social responsibility that began man, no Hayek, no Mises. with the New Deal. . . . Socializing the capi- Musgrave, a Harvard professor, argued the talist system . . . was needed for its own sur- need for a triumvirate government: (1) to pro- vival and for building a good society.” He also vide public goods that the private sector mentioned the “enormous gains” by blacks couldn’t; (2) to redistribute wealth and insti- and women in the twentieth century, appar- tute social justice; and (3) to stabilize an ently assuming that those groups could have inherently unstable capitalist economy. That made no “gains” were it not for government “mainstream” interventionist theory was intervention. taught with hardly a ripple of skepticism. The two professors’ exchange on the extent Fortunately, much has changed since I of justifiable government activity is enlighten- graduated. Friedman, Hayek, and Buchanan ing, but I have two complaints about the book. have won Nobel Prizes in economics, and the First, Buchanan and Musgrave assume the textbooks are filled with market solutions and reader has a great deal of economic sophisti- ===== PAGE 61 ===== Books 61 cation. They don’t define terms and often intent on grabbing tax dollars for themselves argue on a level suited to graduate students. don’t care whether the budget item is great or Second, I would have liked to have seen small. In recent years, federal funding for sci- a clearer discussion of today’s hot issues— entific research has become a prime target of privatization of Social Security, budget sur- the wastrels, and this pottage has since been pluses, tax reform, and the Medicare crisis. giving off the distinct aroma of sizzling Moreover, one of the problems with this “pork.” debate is that the two economists are not com- Pork-barrel science is the subject of James pletely at opposite ends of the political spec- D. Savage’s excellent study of an arcane but trum. This is no debate between an anarchist important aspect of American academic sci- and a socialist. Both advocate a substantial ence. He argues that the trend toward pork public sector. In fact, Buchanan admitted that both corrupts the merit system for research he is philosophically between Musgrave and funding and undermines the rational frame- Hayek. For all his skepticism about the ability work we have employed for the delivery of of public-sector decision-makers to arrive at federal funds to those who do science. good economic decisions, Buchanan still Federal science funding used to be driven endorses what seems to me an inordinate by the model of peer review. Congress would amount of government activity. appropriate money for general fields of One of the reasons Buchanan’s (and Tul- research, but decisions on the precise alloca- lock’s) public-choice approach has been so tion of those dollars would depend on the effective is that it applies market principles to evaluations of scientists called on by various government finance. By assuming that public agencies. That tax-funded system isn’t per- decision-makers will act in their self-interest, fect, but Savage says it tends to steer funds just like everyone else, they were able to strip toward the research proposals that seem to away much of the “romance” (as Buchanan have the greatest likelihood of success. Over puts it) of government action. The power of the last two decades, however, politicians that analysis is clearly lost on old Keynesians have been avoiding the peer review process like Richard Musgrave, but should not be lost more and more. Instead, much of the federal on younger economists. support for scientific research is now done Although this is not a book for those who through “earmarking,” which is to say that are in the early stages of their economic edu- money goes to institutions for purposes that cations, seasoned economists will find some may have only a tenuous relationship to provocative exchanges between these two science. Earmarking, as Savage puts it, is a well-known pillars of the profession. [J “collective action problem” that challenges Mark Skousen writes a monthly column for Ideas on the “dominant policy regime” of peer/merit Liberty. review. Savage brings a wealth of insight from his years near the sausage grinder of science pol- Funding Science in America: Congress, ~~ icymaking, having served as a consultant to Universities. and the Politics of the the Congressional Research Service and to Academic Pork Barrel the Office of Technology Assessment. One of the key reasons for the move away from by James D. Savage peer/merit review, he observes, was that its Cambridge University Press © 1999 ® 256 pages results were decidedly unegalitarian. The “old * $49.95 regime” of science funding sent the vast majority of the money to a small set of uni- versities where most of the top scientists worked. In other words, it became obvious to eave funding of science in America is many that a few states and universities were pretty meager compared to total federal getting most of the resources under peer/merit spending. But legislators and interest groups review, so direct political action to “balance” Reviewed by Jack Sommer ===== PAGE 62 ===== 62 IDEAS ON LIBERTY ® NOVEMBER 2000 the ledger was undertaken. Few university arrangement for federal scientific funding officials tried to hold out for meritocracy. might be like so as to eliminate the problems Most, as public choice theory would predict, of earmarking, but he does not. Nor does Sav- eagerly jumped on the earmarking bandwag- age tackle the deeper question of whether gov- on, trying to get as much as possible for their ernment subsidies for scientific research are institutions, even though it meant diverting necessary at all, as Terence Kealy did in his resources from more serious scientific uses. book The Economics of Scientific Research. Savage’s book is a detailed exposition of Furthermore, Savage does not address how the incentives for earmarking in our politi- federal funding of science in general, and cized distribution system, the activities of lob- pork-barrel funding in particular, crowds out byists in the employ of universities, and the or supplants funding from private firms, and battles within Congress and between Con- he fails to remark on the effects of the politi- gress and the White House over academic cization of public health, with its “disease of pork. He knows his stuff and he provides use- the decade” phenomenon. The heavy subsi- ful documentation of his colorful examples, dization of AIDS research, for example, redi- like Senator Ted Stevens’s infamous $40 mil- rects the efforts of medical researchers away lion earmark for the University of Alaska to from less “popular” but more deadly patholo- find out how to get energy from the aurora gies. borealis! And no legislator could rival fabled Those are sins of omission, however, in pork ranger Robert Byrd of West Virginia, what must be described as a welcome critique whose huge trough of goodies for his state of the hazards of the growing entanglement of included $40 million for Wheeling Jesuit Col- academic science and politics, and the grow- lege (annual budget: $14 million) for a “class- ing dependency of America’s nominally inde- room of the future.” pendent centers of wisdom on the largess of Science policy insiders will appreciate this the federal government. Perhaps we could say book more than the novice reader, but there is that they suffer from “trichinosis of the spir- also much that informs at a general level. My it.” OC criticisms are not of the books content, but Jack Sommer is Knight Distinguished Professor what it misses. One wishes that the author had of public Policy, University of North Carolina at ventured to comment on what a “best” Charlotte. ===== PAGE 63 ===== The Pursuit of Happiness by Charles W. Baird IDEAS ON [IBERTY NovemMBER 2000 Shameless in California year ago October the California legisla- are anointed with superior wisdom. Workers ture and Governor Gray Davis enacted who wish to be union-free may think that SB645, which empowers unions with monop- union representation confers harms rather oly bargaining privileges at California State than benefits, but they are benighted. The University and the University of California to anointed know the truth. The unions are like extract monthly fees from the paychecks of charlatans who thrust snake oil into the hands faculty and staff who want to remain union- of people and demand payment for it because free. Every Democrat and two Republicans in of its alleged healing powers. But not quite. the legislature voted in favor of this legalized Politicians usually don’t force people to pay theft. charlatans for snake oil they don’t want. The unions and the politicians in their thrall This is shameless pandering by politicians rationalized their actions with the same spuri- to the unions in exchange for a share of the ous argument they have always used—the loot in campaign contributions. It happens in mythical free rider. First, rather than limiting other states too, but California politicians have unions to representing only workers who want reached new depths of shamelessness. SB645 such representation, the politicians force is unlike all other laws empowering monopoly workers who want to represent themselves, or unions in California public education. For who want nonunion representation, to accept example, the 1975 Rodda Act allows unions to union representation. Unions, of course, are steal money from dissident K-12 public school happy to receive this monopoly bargaining teachers and community college instructors privilege. Next, the unions argue that since only if the unions can win the privilege they represent workers who want to be union- through collective bargaining with individual free those workers must be forced to pay for school boards and boards of trustees. Under the representation they do not want. Other- SB645 covered faculty and staff at the state’s wise those workers would receive the “bene- two public universities are commanded to pay fit” of the representation they do not want tribute to the unions as a condition of contin- without paying for it. They would be free rid- ued employment without any bargaining. ers. Of course, with members-only rather than Apparently California’s union-owned politi- monopoly bargaining there could be no free cians don’t think their masters are skilled riders. enough to bargain for theft rights. Notice that the free-rider argument rests on The politicians didn’t stop there. All so- the presumption that unions and politicians called agency-shop statutes include an escape hatch for the unions’ victims. Those theft Charles Baird is a professor of economics and the rights can be rescinded if 30 percent of cov- director of the Smith Center for Private Enterprise ered workers request an election and if a Studies at California State University at Hayward. majority of covered workers votes for rescis- 63 ===== PAGE 64 ===== 64 IDEAS ON LIBERTY ® NOVEMBER 2000 sion. In all cases in California except those For example, I am a Catholic. While the arising out of SB645, the Public Employment Church has no official doctrine against volun- Relations Board, a bureaucracy set up to carry tary support of unions, the Eighth Command- out the terms of the statutes, uses taxpayer ment proscribes theft. Moreover, I believe that money to pay for such elections. Under one of my obligations as a Christian is to SB645 those who request the election must refrain from supporting any organizations that pay for it out of their own pockets. promote conflict among people, especially Last February I and two others, represented: when those organizations have a record of by lawyers from the National Right to Work using violence and other forms of coercion to Legal Defense Foundation, challenged the get their way. All laws that empower American law in federal district court in San Francisco. unions promote adversarial labor relations, We argued that SB645 unconstitutionally and the historical record is clear—unions and denies us equal protection for the two reasons violence go together like left and right shoes. stated above. I, along with hundreds of other faculty Guess what? In March the same politicians members, requested a religious exemption who enacted SB645 set out to enact a new from the legalized theft. Most of us received a statute, SB1960, under which all California form letter from the union, the California public education employees become subject Faculty Association, which in part says, “In to the two uniquely oppressive provisions of reviewing your request, we considered SB645. They decided to meet the Fourteenth whether any statements contained therein Amendment’s equal protection restriction by about how CFA conducts itself are accurate. taking away as many rights from other public We also considered whether the proffered education employees as they took from us. belief is in fact religious, or instead merely Union-owned California politicians have no personal and philosophical. Finally, we con- shame whatsoever. They will do anything they sidered whether the proffered belief is sin- can to empower unions to steal money from cerely held. Based upon your letter, and in public employees in exchange for getting to light of the above-enumerated principles, your share in the loot. : request for religious accommodation 1s denied.” Under SB645 there is no appeal. What arrogance! Since I don’t belong to a religion or sect whose doctrines it will It gets even worse. Another of the provi- acknowledge, the CFA tells me my beliefs are sions of SB645 empowers unions unilaterally neither religious nor sincere. With the bless- to decide whether covered employees have ing of the shameless California legislature any sincerely held religious beliefs that pre- and governor, the CFA discriminates against vent them from supporting unions. To qualify me because I am a Catholic rather than asso- for a religious exemption from the legalized ciated with a group on the list the union has theft we must belong to a religion or sect that approved for this purpose. has opposition to supporting unions as part of Finally, just to show to what depths politi- its official doctrine, and the unions get to cians will sink in exchange for their share of decide which religions and sects qualify. We stolen money, consider that under SB645 we argue in our suit that this violates our First are forced to pay for “preparation for strikes, Amendment right to freedom of association. slowdowns, and work stoppages regardless of The unions are empowered to tell us that we their legality under state law.” In other words must belong to a union-approved religious SB645 encourages unions to “prepare” for organization in order to claim the exemption. illegal activities. If I collude with others to We argue, and various courts have agreed in commit illegal acts I am subject to prosecu- other cases, that our choice of religion is our tion even if those acts are never carried out. own and that we can have religious beliefs SB645 exempts unions from the rule of law. that preclude supporting unions based on our We shall see what the courts have to say own understanding of religious obligation. about all of this. J Religious Exemption