WEBVTT NOTE XXVII. The Government and the Market (continued) 1 00:00:00.000 --> 00:00:25.000 4. Righteousness as the ultimate standard of the individual's actions According to a widespread opinion, it is possible, even in the absence of government interference with business, to divert the operation of the market economy from those lines along which it would develop if left to exclusive control by the profit motive. 2 00:00:25.000 --> 00:00:43.000 Advocates of a social reform to be accomplished by compliance with the principles of Christianity, or with the demands of true morality, maintain that conscience should also guide well-intentioned people in their dealings on the market. 3 00:00:43.000 --> 00:00:53.000 If all people were prepared not only to concern themselves selfishly about profit, but no less about their religious and moral obligations, 4 00:00:53.000 --> 00:00:59.000 no government compulsion and coercion would be required in order to put things right. 5 00:00:59.000 --> 00:01:07.000 What is needed is not a reform of government and the laws of the country, but the moral purification of man, 6 00:01:07.000 --> 00:01:17.000 A return to the Lord's commandments and to the precepts of the moral code, a turning away from the vices of greed and selfishness. 7 00:01:17.000 --> 00:01:26.000 Then it will be easy to reconcile private ownership of the means of production with justice, righteousness and fairness. 8 00:01:26.000 --> 00:01:34.000 The disastrous effects of capitalism will be eliminated without prejudice to the individual's freedom and initiative. 9 00:01:34.000 --> 00:01:40.880 People will dethrone the Moloch capitalism without enthroning the Moloch state. 10 00:01:40.880 --> 00:01:46.120 The arbitrary value judgments which are at the bottom of these opinions need not concern 11 00:01:46.120 --> 00:01:47.680 us here. 12 00:01:47.680 --> 00:01:51.720 What these critics blame capitalism for is irrelevant. 13 00:01:51.720 --> 00:01:55.320 Their errors and fallacies are beside the point. 14 00:01:55.320 --> 00:02:01.800 What does matter is the idea of erecting a social system on the two-fold basis of private 15 00:02:01.800 --> 00:02:08.880 Property and of Moral Principles Restricting the Utilization of Private Property. 16 00:02:08.880 --> 00:02:14.920 The system recommended, say its advocates, will be neither socialism nor capitalism nor 17 00:02:14.920 --> 00:02:17.160 interventionism. 18 00:02:17.160 --> 00:02:23.360 Not socialism because it will preserve private ownership of the means of production. 19 00:02:23.360 --> 00:02:29.920 Not capitalism because conscience will be supreme and not the urge for profit. 20 00:02:29.920 --> 00:02:35.200 and Interventionism because there will be no need for government interference with the 21 00:02:35.200 --> 00:02:36.520 market. 22 00:02:36.520 --> 00:02:42.160 In the market economy, the individual is free to act within the orbit of private property 23 00:02:42.160 --> 00:02:43.820 and the market. 24 00:02:43.820 --> 00:02:46.000 His choices are final. 25 00:02:46.000 --> 00:02:53.360 For his fellow men, his actions are data which they must take into account in their own acting. 26 00:02:53.360 --> 00:02:58.840 The coordination of the autonomous actions of all individuals is accomplished by the 27 00:02:58.840 --> 00:03:02.000 and the Operation of the Market. 28 00:03:02.000 --> 00:03:06.240 Society does not tell a man what to do and what not to do. 29 00:03:06.240 --> 00:03:12.120 There is no need to enforce cooperation by special orders or prohibitions. 30 00:03:12.120 --> 00:03:16.520 Non-cooperation penalizes itself. 31 00:03:16.520 --> 00:03:21.700 Adjustment to the requirements of society's productive effort and the pursuit of the individual's 32 00:03:21.700 --> 00:03:24.960 own concerns are not in conflict. 33 00:03:24.960 --> 00:03:30.480 Consequently, no agency is required to settle such conflicts. 34 00:03:30.480 --> 00:03:36.680 The system can work and accomplish its tasks without the interference of an authority issuing 35 00:03:36.680 --> 00:03:43.160 special orders and prohibitions and punishing those who do not comply. 36 00:03:43.160 --> 00:03:48.760 Beyond the sphere of private property and the market lies the sphere of compulsion and 37 00:03:48.760 --> 00:03:50.640 coercion. 38 00:03:50.640 --> 00:03:56.640 Here are the dams which organized society has built for the protection of private property 39 00:03:56.640 --> 00:04:01.560 and the market against violence, malice and fraud. 40 00:04:01.560 --> 00:04:07.240 This is the realm of constraint, as distinguished from the realm of freedom. 41 00:04:07.240 --> 00:04:13.600 Here are rules discriminating between what is legal and what is illegal, what is permitted 42 00:04:13.600 --> 00:04:20.720 and what is prohibited, and here is a grim machine of arms, prisons and gallows and the 43 00:04:20.720 --> 00:04:26.640 men operating it, ready to crush those who dare to disobey. 44 00:04:26.640 --> 00:04:32.480 Now the reformers with whose plans we are concerned suggest that along with the norms 45 00:04:32.480 --> 00:04:38.400 designed for the protection and preservation of private property, further ethical rules 46 00:04:38.400 --> 00:04:40.520 should be ordained. 47 00:04:40.520 --> 00:04:46.640 They want to realize in production and consumption things other than those realized under the 48 00:04:46.640 --> 00:04:52.960 social order in which the individuals are not checked by any obligation other than that 49 00:04:52.960 --> 00:05:00.040 of not infringing upon the persons of their fellow men and upon the right of private property. 50 00:05:00.040 --> 00:05:06.300 They want to ban those motives that direct the individual's action in the market economy. 51 00:05:06.300 --> 00:05:12.780 They call them selfishness, acquisitiveness, profit seeking, and to replace them with other 52 00:05:12.780 --> 00:05:14.020 impulses. 53 00:05:14.020 --> 00:05:21.540 They call them conscientiousness, righteousness, altruism, fear of God, charity. 54 00:05:21.540 --> 00:05:27.180 They are convinced that such a moral reform would in itself be sufficient to safeguard 55 00:05:27.180 --> 00:05:30.920 a mode of operation of the economic system. 56 00:05:30.920 --> 00:05:37.040 are more satisfactory from their point of view than that of unhampered capitalism, without 57 00:05:37.040 --> 00:05:44.800 any of those special governmental measures which interventionism and socialism require. 58 00:05:44.800 --> 00:05:50.100 The supporters of these doctrines fail to recognize the role which those springs of 59 00:05:50.100 --> 00:05:55.480 action they condemn as vicious play in the operation of the market economy. 60 00:05:55.480 --> 00:06:01.400 The only reason why the market economy can operate without government orders telling 61 00:06:01.400 --> 00:06:07.840 everybody precisely what he should do and how he should do it, is that it does not ask 62 00:06:07.840 --> 00:06:14.800 anybody to deviate from those lines of conduct which best serve his own interests. 63 00:06:14.800 --> 00:06:20.440 What integrates the individual's actions into the whole of the social system of production 64 00:06:20.440 --> 00:06:24.120 is the pursuit of his own purposes. 65 00:06:24.120 --> 00:06:30.600 In indulging in his acquisitiveness, each actor contributes his share to the best possible 66 00:06:30.600 --> 00:06:33.400 arrangement of production activities. 67 00:06:33.400 --> 00:06:39.520 Thus, within the sphere of private property and the laws protecting it against encroachments 68 00:06:39.520 --> 00:06:46.160 on the part of violent or fraudulent action, there is no antagonism between the interests 69 00:06:46.160 --> 00:06:50.400 of the individual and those of society. 70 00:06:50.400 --> 00:06:56.640 The market economy becomes a chaotic muddle if this predominance of private property, 71 00:06:56.640 --> 00:07:01.480 which the reformers disparage as selfishness, is eliminated. 72 00:07:01.480 --> 00:07:07.220 In urging people to listen to the voice of their conscience and to substitute considerations 73 00:07:07.220 --> 00:07:14.340 of public welfare for those of private profit, one does not create a working and satisfactory 74 00:07:14.340 --> 00:07:16.320 social order. 75 00:07:16.320 --> 00:07:22.560 It is not enough to tell a man not to buy on the cheapest market and not to sell on 76 00:07:22.560 --> 00:07:24.400 the dearest market. 77 00:07:24.400 --> 00:07:31.920 It is not enough to tell him not to strive after profit and not to avoid losses. 78 00:07:31.920 --> 00:07:40.240 One must establish unambiguous rules for the guidance of conduct in each concrete situation. 79 00:07:40.240 --> 00:07:46.400 As the reformer, the entrepreneur is rugged and selfish when, taking advantage of his 80 00:07:46.400 --> 00:07:53.660 own superiority, he underbids the prices asked by a less efficient competitor, and thus forces 81 00:07:53.660 --> 00:07:56.600 the man to go out of business. 82 00:07:56.600 --> 00:08:00.760 But how should the altruistic entrepreneur proceed? 83 00:08:00.760 --> 00:08:06.280 Should he, under no circumstances, sell at a price lower than any competitor? 84 00:08:06.280 --> 00:08:12.760 Or are there certain conditions which justify underbidding the competitor's prices? 85 00:08:12.760 --> 00:08:18.720 Says the reformer on the other hand, the entrepreneur is rugged and selfish when taking advantage 86 00:08:18.720 --> 00:08:20.840 of the structure of the market. 87 00:08:20.840 --> 00:08:27.780 He asks a price so high that poor people are excluded from purchasing the merchandise. 88 00:08:27.780 --> 00:08:31.420 But what should the good entrepreneur do? 89 00:08:31.420 --> 00:08:34.720 Should he give away the merchandise free of charge? 90 00:08:34.720 --> 00:08:41.280 If he charges any price, however low, there will always be people who cannot buy at all, 91 00:08:41.280 --> 00:08:45.780 or not so much as they would buy if the price were still lower. 92 00:08:45.780 --> 00:08:53.840 What group of those eager to buy is the entrepreneur free to exclude from getting the merchandise? 93 00:08:53.840 --> 00:08:59.420 There is no need to deal at this point of our investigation with the consequences resulting 94 00:08:59.420 --> 00:09:06.380 from any deviation from the height of prices as determined on an unhampered market. 95 00:09:06.380 --> 00:09:12.720 If the seller avoids underbidding his less efficient competitor, a part at least of his 96 00:09:12.720 --> 00:09:15.660 supply remains unsold. 97 00:09:15.660 --> 00:09:21.300 If the seller offers the merchandise at a price lower than that determined on an unhampered 98 00:09:21.300 --> 00:09:27.900 market, the supply available is insufficient to enable all those ready to expend this lower 99 00:09:27.900 --> 00:09:34.340 for Market Prices to get what they are asking for. We will analyze later these as well as 100 00:09:34.340 --> 00:09:41.100 other consequences of any deviation from the market prices. What we must recognize even 101 00:09:41.100 --> 00:09:48.160 at this point is that one cannot content oneself simply by telling the entrepreneur that he 102 00:09:48.160 --> 00:09:55.060 should not let himself be guided by the state of the market. It is imperative to tell him 103 00:09:55.060 --> 00:10:00.180 How far he must go in asking and paying prices. 104 00:10:00.180 --> 00:10:05.700 If it is no longer profit-seeking that directs the entrepreneur's actions and determines 105 00:10:05.700 --> 00:10:11.760 what they produce and in what quantities, if the entrepreneurs are no longer bound by 106 00:10:11.760 --> 00:10:18.580 the instrumentality of the profit motive to serve the consumers to the best of their abilities, 107 00:10:18.580 --> 00:10:22.760 it is necessary to give them definite instructions. 108 00:10:22.760 --> 00:10:29.400 One cannot avoid guiding their conduct by specified orders and prohibitions, precisely 109 00:10:29.400 --> 00:10:34.880 such decrees as are the mark of government interference with business. 110 00:10:34.880 --> 00:10:42.280 Any attempt to render such interference superfluous by attributing primacy to the voice of conscience, 111 00:10:42.280 --> 00:10:46.740 to charity and brotherly love, is vain. 112 00:10:46.740 --> 00:10:53.820 The advocates of a Christian social reform pretend that their ideal of greed and profit-seeking, 113 00:10:53.820 --> 00:11:00.140 tamed and restrained by conscientiousness and compliance with the moral law, worked rather 114 00:11:00.140 --> 00:11:02.460 well in the past. 115 00:11:02.460 --> 00:11:08.460 All the evils of our day are caused by defection from the precepts of the Church. 116 00:11:08.460 --> 00:11:14.780 If people had not defied the commandments and had not coveted unjust profit, mankind 117 00:11:14.780 --> 00:11:20.860 would still enjoy the bliss experienced in the Middle Ages, when at least the elite lived 118 00:11:20.860 --> 00:11:23.860 up to the principles of the Gospels. 119 00:11:23.860 --> 00:11:30.060 What is needed is to bring back those good old days, and then to see that no new apostasy 120 00:11:30.060 --> 00:11:34.920 deprives men of their beneficent effects. 121 00:11:34.920 --> 00:11:40.100 There is no need to enter into an analysis of the social and economic conditions of the 122 00:11:40.100 --> 00:11:46.940 of the 13th Century, which these reformers praise as the greatest of all periods of history. 123 00:11:46.940 --> 00:11:53.380 We are concerned merely with the notion of just prices and wage rates, which was essential 124 00:11:53.380 --> 00:11:58.300 in the social teachings of the doctors of the Church, and which the reformers want to 125 00:11:58.300 --> 00:12:04.020 raise to the position of the ultimate standard of economic conduct. 126 00:12:04.020 --> 00:12:11.160 It is obvious that with theorists this notion of just prices and wage rates always refers 127 00:12:11.160 --> 00:12:18.940 and always referred to a definite social order which they considered the best possible order. 128 00:12:18.940 --> 00:12:25.000 They recommend the adoption of their ideal scheme and its preservation forever. 129 00:12:25.000 --> 00:12:28.460 No further changes are to be tolerated. 130 00:12:28.460 --> 00:12:35.620 Any alteration of the best possible state of social affairs can only mean deterioration. 131 00:12:35.620 --> 00:12:41.600 The worldview of these philosophers does not take into account man's ceaseless striving 132 00:12:41.600 --> 00:12:47.020 for improvement of the material conditions of well-being. 133 00:12:47.020 --> 00:12:52.380 Historical change and a rise in the general standard of living are notions foreign to 134 00:12:52.380 --> 00:12:53.440 them. 135 00:12:53.440 --> 00:13:00.120 They call just that mode of conduct that is compatible with the undisturbed preservation 136 00:13:00.120 --> 00:13:04.680 of their utopia, and everything else, unjust. 137 00:13:04.680 --> 00:13:11.200 However, the notion of just prices and wage rates as present to the mind of people other 138 00:13:11.200 --> 00:13:14.480 than philosophers is very different. 139 00:13:14.480 --> 00:13:20.400 When the non-philosopher calls a price just, what he means is that the preservation of 140 00:13:50.400 --> 00:13:54.400 The price of wheat, however high, appears unjust. 141 00:13:54.400 --> 00:13:59.400 To the wage earner, no wage rates, however high, appear unfair. 142 00:13:59.400 --> 00:14:07.400 But the farmer is quick to denounce every drop in the price of wheat as a violation of divine and human laws, 143 00:14:07.400 --> 00:14:12.400 and the wage earners rise in rebellion when their wages drop. 144 00:14:12.400 --> 00:14:18.400 Yet the market society has no means of adjusting production to changing conditions 145 00:14:18.400 --> 00:14:43.240 The absurdity of all endeavors to stabilize prices consists precisely in the fact that 146 00:14:43.240 --> 00:14:51.400 Stabilization would prevent any further improvement and result in rigidity and stagnation. 147 00:14:51.400 --> 00:14:58.200 The flexibility of commodity prices and wage rates is the vehicle of adjustment, improvement 148 00:14:58.200 --> 00:15:00.360 and progress. 149 00:15:00.360 --> 00:15:07.100 Those who condemn changes in prices and wage rates as unjust, and who ask for the preservation 150 00:15:07.100 --> 00:15:14.220 of what they call just are in fact combating endeavors to make economic conditions more 151 00:15:14.220 --> 00:15:16.660 satisfactory. 152 00:15:16.660 --> 00:15:22.740 It is not unjust that there has long prevailed a tendency towards such a determination of 153 00:15:22.740 --> 00:15:29.180 the prices of agricultural products that the greater part of the population abandoned farming 154 00:15:29.180 --> 00:15:32.820 and moved toward the processing industries. 155 00:15:32.820 --> 00:15:40.000 But for this tendency, 90% or more of the population would still be occupied in agriculture, 156 00:15:40.000 --> 00:15:44.760 and the processing industries would have been stunted in their growth. 157 00:15:44.760 --> 00:15:50.440 All strata of the population, including the farmers, would be worse off. 158 00:15:50.440 --> 00:15:56.900 If Thomas Aquinas' doctrine of the just price had been put into practice, the 13th century's 159 00:15:56.900 --> 00:16:01.360 economic conditions would still prevail. 160 00:16:01.360 --> 00:16:06.000 The human figures would be much smaller than they are today, and the standard of living 161 00:16:06.000 --> 00:16:08.440 much lower. 162 00:16:08.440 --> 00:16:14.740 Both varieties of the just price doctrine, the philosophical and the popular, agree in 163 00:16:14.740 --> 00:16:21.580 their condemnation of the prices and wage rates as determined on the unhampered market. 164 00:16:21.580 --> 00:16:27.460 But this negativism does not in itself provide any answer to the question of what height 165 00:16:27.460 --> 00:16:34.340 the Just Prices and Wage Rates Should Attain If righteousness is to be elevated to the 166 00:16:34.340 --> 00:16:41.260 position of the ultimate standard of economic action, one must unambiguously tell every 167 00:16:41.260 --> 00:16:47.920 actor what he should do, what prices he should ask, and what prices he should pay in each 168 00:16:47.920 --> 00:16:50.040 concrete case. 169 00:16:50.040 --> 00:16:57.340 And one must force, by recourse to an apparatus of violent compulsion and coercion, all those 170 00:16:57.340 --> 00:17:02.140 is venturing disobedience to comply with these orders. 171 00:17:02.140 --> 00:17:10.140 One must establish a supreme authority issuing norms and regulating conduct in every respect, 172 00:17:10.140 --> 00:17:16.380 altering these norms if need be, interpreting them authentically and enforcing them. 173 00:17:16.380 --> 00:17:23.900 Thus, the substitution of social justice and righteousness for selfish profit-seeking requires 174 00:17:23.900 --> 00:17:30.180 As for its realization, precisely those policies of government interference with business which 175 00:17:30.180 --> 00:17:36.960 the advocates of the moral purification of mankind want to make superfluous. 176 00:17:36.960 --> 00:17:45.220 No deviation from the unhampered market economy is thinkable without authoritarian regimentation. 177 00:17:45.220 --> 00:17:51.460 Whether the authority in which these powers are vested is called lay government or theocratical 178 00:17:51.460 --> 00:18:00.500 The reformers, in exhorting people to turn away from selfishness, address themselves 179 00:18:00.500 --> 00:18:07.220 to capitalists and entrepreneurs, and sometimes, although only timidly, to wage earners as 180 00:18:07.220 --> 00:18:08.220 well. 181 00:18:08.220 --> 00:18:14.100 However, the market economy is a system of consumer supremacy. 182 00:18:14.100 --> 00:18:18.760 The sermonizers should appeal to consumers, not to producers. 183 00:18:18.760 --> 00:18:24.320 They should persuade the consumers to renounce preferring better and cheaper merchandise 184 00:18:24.320 --> 00:18:30.740 to poorer and dearer merchandise, lest they hurt the less efficient producer. 185 00:18:30.740 --> 00:18:36.660 They should persuade them to restrict their own purchases in order to provide poorer people 186 00:18:36.660 --> 00:18:39.920 with the opportunity to buy more. 187 00:18:39.920 --> 00:18:46.500 If one wants the consumers to act in this way, one must tell them plainly what to buy, 188 00:18:46.500 --> 00:18:53.900 in what quantity, from whom, and at what prices, and one must provide for enforcing such orders 189 00:18:53.900 --> 00:18:57.100 by coercion and compulsion. 190 00:18:57.100 --> 00:19:03.720 But then, one has adopted exactly that system of authoritarian control which moral reform 191 00:19:03.720 --> 00:19:07.340 wants to make unnecessary. 192 00:19:07.340 --> 00:19:14.340 Whatever freedom individuals can enjoy within the framework of social cooperation is conditional 193 00:19:14.340 --> 00:19:19.680 all upon the concord of private gain and public wheel. 194 00:19:19.680 --> 00:19:26.260 Within the orbit in which the individual, in pursuing his own well-being, advances also, 195 00:19:26.260 --> 00:19:32.500 or at least does not impair, the well-being of his fellow men, people going their own 196 00:19:32.500 --> 00:19:39.140 ways jeopardize neither the preservation of society nor the concerns of other people. 197 00:19:39.140 --> 00:19:45.340 A realm of freedom and individual initiative emerges, a realm in which man is allowed 198 00:19:45.340 --> 00:19:49.500 to choose and to act of his own accord. 199 00:19:49.500 --> 00:19:55.180 This sphere of economic freedom is the basis of all the other freedoms compatible with 200 00:19:55.180 --> 00:19:58.840 cooperation under the division of labor. 201 00:19:58.840 --> 00:20:05.460 It is the market economy, or capitalism, with its political corollary, the Marxians would 202 00:20:05.460 --> 00:20:11.100 have to say with its superstructure, representative government. 203 00:20:11.100 --> 00:20:16.980 Those who contend that there is a conflict between the acquisitiveness of various individuals 204 00:20:16.980 --> 00:20:22.640 or between the acquisitiveness of individuals on the one hand and the common wheel on the 205 00:20:22.640 --> 00:20:29.740 other cannot avoid advocating the suppression of the individual's right to choose and to 206 00:20:29.740 --> 00:20:30.740 act. 207 00:20:30.740 --> 00:20:37.020 They must substitute the supremacy of a central board of production management for the discretion 208 00:20:37.020 --> 00:20:38.900 of the citizens. 209 00:20:38.900 --> 00:20:45.380 In their scheme of the good society, there is no room left for private initiative. 210 00:20:45.380 --> 00:20:51.580 The authority issues orders, and everybody is forced to obey. 211 00:20:51.580 --> 00:20:53.080 5. 212 00:20:53.080 --> 00:20:56.640 The Meaning of Laissez-Faire 213 00:20:56.640 --> 00:21:03.640 In 18th century France, the saying laissez-faire laissez-passer was the formula into which 214 00:21:03.640 --> 00:21:08.960 some of the champions of the cause of liberty compressed their program. 215 00:21:08.960 --> 00:21:13.900 Their aim was the establishment of the unhampered market society. 216 00:21:13.900 --> 00:21:20.720 In order to attain this end, they advocated the abolition of all laws preventing more industrious 217 00:21:20.720 --> 00:21:43.760 In our age of passionate longing for government omnipotence, the formula laissez-faire is 218 00:21:43.760 --> 00:21:45.960 in disrepute. 219 00:21:45.960 --> 00:21:51.760 Automatic opinion now considers it a manifestation both of moral depravity and of the utmost 220 00:21:51.760 --> 00:21:53.520 ignorance. 221 00:21:53.520 --> 00:22:01.240 As the interventionist sees things, the alternative is automatic forces, or conscious planning. 222 00:22:01.240 --> 00:22:08.320 It is obvious, he implies, that to rely upon automatic processes is sheer stupidity. 223 00:22:08.320 --> 00:22:14.240 No reasonable man can seriously recommend doing nothing and letting things go as they 224 00:22:14.240 --> 00:22:38.880 Laissez-faire is said to mean, let the evils last, do not try to improve the lot of mankind by reasonable action. 225 00:22:38.880 --> 00:22:41.640 This is utterly fallacious talk. 226 00:22:41.640 --> 00:22:48.000 The argument advanced for planning is entirely derived from an impermissible interpretation 227 00:22:48.000 --> 00:22:49.640 of a metaphor. 228 00:22:49.640 --> 00:22:56.420 It has no foundation other than the connotations implied in the term automatic, which it is 229 00:22:56.420 --> 00:23:02.920 customary to apply in a metaphorical sense for the description of the market process. 230 00:23:02.920 --> 00:23:11.920 Automatic, says the concise Oxford Dictionary, means unconscious, unintelligent, merely mechanical. 231 00:23:11.920 --> 00:23:18.920 Automatic, says Webster's Collegiate Dictionary, means not subject to the control of the will, 232 00:23:18.920 --> 00:23:24.920 performed without active thought and without conscious intention or direction. 233 00:23:24.920 --> 00:23:30.920 What a triumph for the champion of planning to play this trump card! 234 00:23:30.920 --> 00:23:38.280 The truth is that the alternative is not between a dead mechanism or a rigid automatism on 235 00:23:38.280 --> 00:23:42.760 one hand and conscious planning on the other hand. 236 00:23:42.760 --> 00:23:47.040 The alternative is not plan or no plan. 237 00:23:47.040 --> 00:23:50.960 The question is, who's planning? 238 00:23:50.960 --> 00:23:57.460 Should each member of society plan for himself, or should a benevolent government alone plan 239 00:23:57.460 --> 00:23:59.580 for them all? 240 00:23:59.580 --> 00:24:04.020 The issue is not automatism versus conscious action. 241 00:24:04.020 --> 00:24:11.620 It is autonomous action of each individual versus the exclusive action of the government. 242 00:24:11.620 --> 00:24:17.060 It is freedom versus government omnipotence. 243 00:24:17.060 --> 00:24:22.560 Laissez-faire does not mean let soulless mechanical forces operate. 244 00:24:22.560 --> 00:24:28.660 It means let each individual choose how he wants to cooperate in the social division 245 00:24:28.660 --> 00:24:35.700 of Labor, Let the Consumers Determine What the Entrepreneurs Should Produce. 246 00:24:35.700 --> 00:24:42.500 Planning means let the government alone choose and enforce its rulings by the apparatus of 247 00:24:42.500 --> 00:24:46.000 coercion and compulsion. 248 00:24:46.000 --> 00:24:51.500 Under laissez-faire, says the planner, it is not those goods which people really need 249 00:24:51.500 --> 00:24:58.420 that are produced, but those goods from the sale of which the highest returns are expected. 250 00:24:58.420 --> 00:25:05.420 It is the objective of planning to direct production toward the satisfaction of the true needs. 251 00:25:05.420 --> 00:25:09.300 But who is to decide what the true needs are? 252 00:25:09.300 --> 00:25:15.740 Thus, for instance, Professor Harold Lasky, the former chairman of the British Labour Party, 253 00:25:15.740 --> 00:25:21.540 would determine, as the objective of the planned direction of investment, that the use of the 254 00:25:21.540 --> 00:25:26.320 investor's savings will be in housing rather than in cinemas. 255 00:25:26.320 --> 00:25:31.600 It is beside the point whether or not one agrees with the professor's view that better 256 00:25:31.600 --> 00:25:35.400 houses are more important than moving pictures. 257 00:25:35.400 --> 00:25:41.360 It is a fact that the consumers, in spending part of their money for admission to the movies, 258 00:25:41.360 --> 00:25:43.860 have made another choice. 259 00:25:43.860 --> 00:25:50.720 If the masses of Great Britain, the same people whose votes swept the Labour Party into power, 260 00:25:50.720 --> 00:25:56.200 were to stop patronizing the moving pictures, and to spend more for comfortable homes and 261 00:25:56.200 --> 00:26:01.940 and Apartments, profit-seeking business would be forced to invest more in building homes 262 00:26:01.940 --> 00:26:07.600 and apartment houses, and less in the production of expensive pictures. 263 00:26:07.600 --> 00:26:14.420 It is Mr. Lasky's desire to defy the wishes of the consumers, and to substitute his own 264 00:26:14.420 --> 00:26:17.300 will for that of the consumers. 265 00:26:17.300 --> 00:26:23.040 He wants to do away with the democracy of the market, and to establish the absolute 266 00:26:23.040 --> 00:26:26.060 rule of a production czar. 267 00:26:26.060 --> 00:26:32.340 He may believe that he is right from a higher point of view, and that as a superman he is 268 00:26:32.340 --> 00:26:39.220 called upon to impose his own valuations on the masses of inferior men, but then he should 269 00:26:39.220 --> 00:26:42.820 be frank enough to say so plainly. 270 00:26:42.820 --> 00:26:48.980 All this passionate praise of the super-eminence of government action is but a poor disguise 271 00:26:48.980 --> 00:26:53.980 for the individual interventionist's self-deification. 272 00:26:53.980 --> 00:27:00.820 The great God state is a great God only because it is expected to do exclusively what the 273 00:27:00.820 --> 00:27:06.920 individual advocate of interventionism wants to see achieved. 274 00:27:06.920 --> 00:27:13.080 Only that plan is genuine which the individual planner fully approves. 275 00:27:13.080 --> 00:27:16.040 All other plans are simply counterfeit. 276 00:27:16.040 --> 00:27:22.300 In saying plan, what the author of a book on the benefits of planning has in mind is, 277 00:27:22.300 --> 00:27:28.780 and, of course, his own plan alone. He does not take into account the possibility that 278 00:27:28.780 --> 00:27:35.440 the plan which the government puts into practice may differ from his own plan. The various 279 00:27:35.440 --> 00:27:42.940 planners agree only with regard to their rejection of laissez-faire, that is, the individual's 280 00:27:42.940 --> 00:27:50.180 discretion to choose and to act. They entirely disagree with regard to the choice of the 281 00:27:50.180 --> 00:27:53.500 and the unique plan to be adopted. 282 00:27:53.500 --> 00:28:00.660 To every exposure of the manifest and incontestable defects of interventionist policies, the champions 283 00:28:00.660 --> 00:28:04.740 of interventionism react in the same way. 284 00:28:04.740 --> 00:28:09.940 These faults, they say, were the results of spurious interventionism. 285 00:28:09.940 --> 00:28:16.260 What we are advocating is good interventionism, not bad interventionism. 286 00:28:16.260 --> 00:28:22.240 And of course, good interventionism is the professor's own brand. 287 00:28:22.240 --> 00:28:27.360 Laissez-faire means, let the common man choose and act. 288 00:28:27.360 --> 00:28:31.840 Do not force him to yield to a dictator. 289 00:28:31.840 --> 00:28:33.880 6. 290 00:28:33.880 --> 00:28:38.520 Direct Government Interference with Consumption 291 00:28:38.520 --> 00:28:43.680 In investigating the economic problems of interventionism, we do not have to deal with 292 00:28:43.680 --> 00:28:49.360 with those actions of the government whose aim it is to influence immediately the consumer's 293 00:28:49.360 --> 00:28:52.800 choice of consumer's goods. 294 00:28:52.800 --> 00:28:59.720 Every act of government interference with business must indirectly affect consumption. 295 00:28:59.720 --> 00:29:05.640 As the government's interference alters the market data, it must also alter the valuations 296 00:29:05.640 --> 00:29:08.760 and the conduct of the consumers. 297 00:29:08.760 --> 00:29:14.200 But if the aim of the government is merely to force the consumers directly to consume 298 00:29:14.200 --> 00:29:20.480 goods other than what they would have consumed in the absence of the government's decree, 299 00:29:20.480 --> 00:29:25.640 no special problems emerge to be scrutinized by economics. 300 00:29:25.640 --> 00:29:32.040 It is beyond doubt that a strong and ruthless police apparatus has the power to enforce 301 00:29:32.040 --> 00:29:34.360 such decrees. 302 00:29:34.360 --> 00:29:40.120 When dealing with the choices of the consumers, we do not ask what motives induced a man to 303 00:29:40.120 --> 00:29:47.720 buy A and not to buy B. We merely investigate what effects on the determination of market 304 00:29:47.720 --> 00:29:55.880 prices, and thereby on production, were brought about by the concrete conduct of the consumers. 305 00:29:55.880 --> 00:30:02.400 These effects do not depend on the considerations which led individuals to buy A and not to 306 00:30:02.400 --> 00:30:10.520 to Buy B. They depend only on the real acts of buying and abstention from buying. It is 307 00:30:10.520 --> 00:30:16.100 immaterial for the determination of the prices of gas masks, whether people buy them of their 308 00:30:16.100 --> 00:30:23.400 own accord, or because the government forces everybody to have a gas mask. What alone counts 309 00:30:23.400 --> 00:30:29.880 is the size of the demand. Governments which are eager to keep up the outward appearance 310 00:30:29.880 --> 00:30:36.720 of Freedom, even when curtailing freedom, disguise their direct interference with consumption 311 00:30:36.720 --> 00:30:40.280 under the cloak of interference with business. 312 00:30:40.280 --> 00:30:45.640 The aim of American prohibition was to prevent the individual residents of the country from 313 00:30:45.640 --> 00:30:48.320 drinking alcoholic beverages. 314 00:30:48.320 --> 00:30:55.600 But the law hypocritically did not make drinking as such illegal, and did not penalize it. 315 00:30:55.600 --> 00:31:01.240 It merely prohibited the manufacture, the sale and the transportation of intoxicating 316 00:31:01.240 --> 00:31:07.640 liquors, the business transactions which precede the act of drinking. 317 00:31:07.640 --> 00:31:14.140 The idea was that people indulge in the vice of drinking only because unscrupulous businessmen 318 00:31:14.140 --> 00:31:16.240 prevail upon them. 319 00:31:16.240 --> 00:31:22.400 It was, however, manifest that the objective of prohibition was to encroach upon the individual's 320 00:31:22.400 --> 00:31:29.480 has freedom to spend their dollars and to enjoy their lives according to their own fashion. 321 00:31:29.480 --> 00:31:36.600 The restrictions imposed upon business were only subservient to this ultimate end. 322 00:31:36.600 --> 00:31:42.720 The problems involved in direct government interference with consumption are not catalactic 323 00:31:42.720 --> 00:31:43.720 problems. 324 00:31:43.720 --> 00:31:49.320 They go far beyond the scope of catalactics and concern the fundamental issues of human 325 00:31:49.320 --> 00:31:52.640 Human Life and Social Organization. 326 00:31:52.640 --> 00:31:58.720 If it is true that government derives its authority from God and is entrusted by Providence 327 00:31:58.720 --> 00:32:04.440 to act as the guardian of the ignorant and stupid populace, then it is certainly its 328 00:32:04.440 --> 00:32:09.240 task to regiment every aspect of the subject's conduct. 329 00:32:09.240 --> 00:32:15.160 The God-sent ruler knows better what is good for his wards than they do themselves. 330 00:32:15.160 --> 00:32:20.400 It is his duty to guard them against the harm they would inflict upon themselves if left 331 00:32:20.400 --> 00:32:22.760 alone. 332 00:32:22.760 --> 00:32:29.680 Self-styled realistic people fail to recognize the immense importance of the principles implied. 333 00:32:29.680 --> 00:32:34.480 They contend that they do not want to deal with the matter from what, they say, is a 334 00:32:34.480 --> 00:32:38.080 philosophic and academic point of view. 335 00:32:38.080 --> 00:32:44.020 Their approach is, they argue, exclusively guided by practical considerations. 336 00:32:44.020 --> 00:32:49.520 It is a fact, they say, that some people harm themselves and their innocent families by 337 00:32:49.520 --> 00:32:52.500 consuming narcotic drugs. 338 00:32:52.500 --> 00:32:57.860 Only doctrinaires could be so dogmatic as to object to the government's regulation 339 00:32:57.860 --> 00:32:59.840 of the drug traffic. 340 00:32:59.840 --> 00:33:02.980 Its beneficent effects cannot be contested. 341 00:33:02.980 --> 00:33:07.500 However, the case is not so simple as that. 342 00:33:07.500 --> 00:33:11.940 Opium and morphine are certainly dangerous habit-forming drugs. 343 00:33:11.940 --> 00:33:17.420 But once the principle is admitted that it is the duty of government to protect the individual 344 00:33:17.420 --> 00:33:24.900 against his own foolishness, no serious objections can be advanced against further encroachments. 345 00:33:24.900 --> 00:33:30.640 A good case could be made out in favor of the prohibition of alcohol and nicotine. 346 00:33:30.640 --> 00:33:35.060 And why limit the government's benevolent providence to the protection of the individual's 347 00:33:35.060 --> 00:33:36.980 body only? 348 00:33:36.980 --> 00:33:44.700 Is not the harm a man can inflict on his mind and soul even more disastrous than any bodily evils? 349 00:33:44.700 --> 00:33:50.660 Why not prevent him from reading bad books and seeing bad plays, from looking at bad 350 00:33:50.660 --> 00:33:54.940 paintings and statues, and from hearing bad music? 351 00:33:54.940 --> 00:34:01.400 The mischief done by bad ideologies surely is much more pernicious both for the individual 352 00:34:01.400 --> 00:34:06.940 and for the whole society than that done by narcotic drugs. 353 00:34:06.940 --> 00:34:13.460 These fears are not merely imaginary specters terrifying secluded doctrinaires. 354 00:34:13.460 --> 00:34:19.420 It is a fact that no paternal government, whether ancient or modern, ever shrank from 355 00:34:19.420 --> 00:34:24.260 regimenting its subjects' minds, beliefs and opinions. 356 00:34:24.260 --> 00:34:30.340 If one abolishes man's freedom to determine his own consumption, one takes all freedoms 357 00:34:30.340 --> 00:34:31.820 away. 358 00:34:31.820 --> 00:34:37.120 The naive advocates of government interference with consumption delude themselves when they 359 00:34:37.120 --> 00:34:43.100 neglect what they disdainfully call the philosophical aspect of the problem. 360 00:34:43.100 --> 00:34:49.220 They unwittingly support the case of censorship, inquisition, religious intolerance and the 361 00:34:49.220 --> 00:34:52.260 persecution of dissenters. 362 00:34:52.260 --> 00:34:58.380 In dealing with the catallactics of interventionism, we do not discuss these political consequences 363 00:34:58.380 --> 00:35:09.600 We are exclusively concerned with those acts of interference which aim at forcing the entrepreneurs 364 00:35:09.600 --> 00:35:16.000 and capitalists to employ the factors of production in a way different from what they would have 365 00:35:16.000 --> 00:35:20.780 done if they merely obeyed the dictates of the market. 366 00:35:20.780 --> 00:35:26.520 In doing this, we do not raise the question of whether such interference is good or bad 367 00:35:26.520 --> 00:35:29.760 from any preconceived point of view. 368 00:35:29.760 --> 00:35:36.440 We merely ask whether or not it can attain those ends which those advocating and resorting 369 00:35:36.440 --> 00:35:38.880 to it are trying to attain.