THEFREEMAN IDEAS ON LIBERTY

FEATURES

525 The Perversity of Doing Good at Others' Expense by Dwight R. Lee The destructive effect ofgovernment transfers.

529 Competition and Cooperation by David Boaz Essential elements ofthe simple system ofnatural liberty.

532 Discovery and Economic Freedom by Daniel B. Klein The role ofthe unexpected in economic advancement.

538 Yes, Virginia, There Is a Free Lunch by William H Peterson But you can't eat your cake and have it, too.

543 Guardians of the Constitution or Watching Out for Their Own? by Daniel J. Pilla Are a federal judge's constitutional rights more sacred than those ofan average citizen?

547 Federal Government Growth Before the New Deal by Randall G. Holcombe The surprising origins ofgovernment expansion.

555 Market-Based Environmentalism vs. The Free Market by Roy E. Cordato Why incentive-tampering should be viewed with suspicion.

558 Mises's Legacy for Feminists by Wendy McElroy Class analysis within the framework ofindividualist thought.

563 Special Announcement

564 Lafayette: Hero ofTwo Worlds by Jim Powell An apostle and defender ofliberty.

COLUMNS

Center NOTES from FEE-The Nanny State by Donald J. Boudreaux 541 IDEAS and CONSEQUENCES-Government and Disaster Relief by Lawrence W Reed 553 POTOMAC PRINCIPLES-Military Follies and Memorial Day Memories by Doug Bandow 576 ECONOMICS on TRIAL-Getting Published-An "Austrian" Triumph by Mark Skousen

DEPARTMENTS

522 Perspective-Sheldon Richman 579 Book Reviews •Poor Policy-How Government Harms the Poor by D. Eric Schansberg, reviewed by George C. Leef; The Concise Conservative Encyclopedia by Brad Miner, reviewed by Aaron Steelman; The Diversity Machine: The Drive to Change the "White Male Workplace" by Frederick R. Lynch, reviewed by Brad Stetson; The Conservative Intellectual Movement in America: Since 1945, 2nd edition by George H. Nash, reviewed by Robert Batemarco; The Young Entrepreneur's Guide To Starting and Running a Business by Steve Mariotti, reviewed by Richard A. Cooper. THEFREEMAN IDEAS ON LIBERTY PERSPECTIVE Published by The "Right to Medical Care" The Foundation for Economic Education Irvington-on-Hudson, NY 10533 Phone (914) 591-7230 FAX (914) 591-8910 The idea of a right to medical care is so E-mail: [email protected] blithely tossed around that most people FEE Home Page: http://www.fee.org President: Donald J. Boudreaux never take time to ponder the rather serious Managing Editor: Beth A. Hoffman consequences that would flow from it. It is Guest Editor: Sheldon Richman Editor Emeritus a classic pseudo-right. A pseudo-right is any Paul L. Poirot claim expressed in rights language that Lewisburg, Pennsylvania Book Review Editor would expand the power of the state at the George C. Leef Adjunct Professor ofLaw and Economics, expense of genuine rights. Northwood University The "right to medical care" is seductive. Editorial Assistant Mary Ann Murphy People not accustomed to dissecting polit­ Columnists Doug Bandow ical discourse will think of the benefits of Cato Institute, Washington, D. C. having their medical services provided Lawrence W. Reed Mackinac Center for Public Policy "free" or at a guaranteed affordable price. Midland, Michigan Mark Skousen More sophisticated people may see the Rollins College, Winter Park, Florida proposal as a giant insurance system and Contributinf( Editors Charles W. Baird feel that there can be no danger in it. If all California State University, Hayward Peter J. Boettke citizens pay and all have access to care when New York University Clarence B. Carson they need it, what could be wrong? American Textbook Committee Well, a lot could bewrong. Let's startwith Wadley, Alabama Thomas J. DiLorenzo something basic: for a right to be genuine, Loyola College, Baltimore, Maryland Joseph S. Fulda it has to be capable ofbeing exercised with­ New York, New York Bettina Bien Greaves out anyone's affirmative cooperation. The Resident Scholar, FEE full exercise of my right of self-ownership John Hospers University of Southern California requires you to do nothing except refrain Tibor R. Machan Auburn University from killing or assaulting me. The full exer­ Ronald Nash Reformed Theological Seminary cise of my property rights requires you to do Edmund A. Opitz nothing except refrain from taking what is Chatham, Massachusetts James L. Payne mine. You have no positive, enforceable Sandpoint, Idaho Jim Powell obligations to me, apart from any you Westport, Connecticut William H. Peterson accept through contract. Adjunct Scholar, Heritage Foundation, That principle of nonobligation is an Washington, D. C. Sheldon Richman excellent test to which we can submit any The Future ofFreedom Foundation Jane S. Shaw proffered right. How does the right to PERC, Bozeman, Montana medical care hold up? Leaving out self­ Richard H. Timberlake University of Georgia treatment, it is difficult to see how there can The Freeman is the monthly publication of The Foundation for Economic Education, Inc., Irvington-on-Hudson, NY 10533. FEE, be such a right. Medical care, unlike air, is established in 1946 by Leonard E. Read, is a non-political, educational champion ofprivate property, the free market, and limited government. not found superabundant in nature. It is FEE is classified as a 26 USC 501(c)(3) tax-exempt organization. Copyright © 1997 by The Foundation for Economic Education. produced by someone who spends re­ Permission is granted to reprint any article in this issue, except "Lafayette: Hero of Two Worlds," provided credit is given and two sources to acquire expertise and education. copies of the reprinted material are sent to FEE. The costs of Foundation projects and services are met through dona­ It requires the use ofinstruments and drugs, tions, which are invited in any amount. Donors of $30.00 or more receive a subscription to The Freeman. Student subscriptions are $10.00 for the which have to be manufactured by some­ nine-month academic year; $5.00 per semester. Additional copies of this issue of The Freeman are $3.00 each. For foreign delivery, a donation of one. Who is to provide these things? Does $45.00 a year is suggested to cover mailing costs. Bound volumes of The Freeman are available from The Foundation for the provider have any choice in the matter? calendar years 1972 to date. The Freeman is available in microform from University Microfilms, 300 N. Zeeb Rd., Ann Arbor, MI 48106. What if he refuses? Should he be forced? If

522 PERSPECTIVE so, how shall we distinguish that person to endless disagreement over who needs from an indentured servant or slave? how many apples. I may think I need many Since the "right to medical care" requires more than you. There is no way to resolve an affirmative obligation, it fails the rights a dispute of that nature. Well, there is one test. Put simply, that "right" cannot coexist way: the state can ration apples. We could with the right to be left alone. trust the government to scientifically deter­ Implementation of the "right" does not mine how many apples each of us needs. typically entail forcing doctors, nurses, and And ifyou believe that, you will also believe manufacturers of medical instruments and that the ruling party won't manage to get pharmaceuticals to provide their services at more apples than the rest of us. gunpoint. So what I have said above may Government control of apples might be not seem germane. But it is, because al­ no more than an inconvenience. Govern­ though providers are not compelled, the ment control of medical care would be life taxpayers are. Taxation is somewhat less threatening. Yet what is the alternative egregious than conscription, but it is still once a "right to medical care" is declared? compulsion. Appropriating people's earn­ There is no way all people can have all the ings is tantamount to appropriating their medical care they wish to have if it is (that time and labor. Since the compulsion of is, appears to be) costless. The government taxation is spread across large numbers of will have to decide who gets what. How people, it is less noticeable than the con­ many of us would take comfort in that? scription of medical personnel. But it Here is the crux of the issue. The right to doesn't fundamentally change what's going medical care must mean-no exceptions­ on. the power of government, in principle, to That is only the beginning of what's determine who gets what. It may not exer­ wrong with trying to enforce a right to cise that power immediately. But given the medical care. Imagine for a moment a right economics of the matter, it will, sooner or to apples. That may sound nice, but an later. I submit that this has nothing to do immediate problem arises. How many ap­ with rights and everything to do with con­ ples? Scarcity is the natural condition, trol, literally, of people's lives. which means that any given moment our I do not exaggerate. A major ethical issue wishes exceed the supply of the things we these days involves the "right to die," or the want. (Freedom and free markets have this right to assisted suicide. That is overshad­ knack for loosening nature's rather strict owing one that may be more consequential, bonds of scarcity.) Declaring such a right the so-called "duty to die." Some years ago, would be an efficient way of emptying the then-Colorado Governor Richard Lamm shelves of apples. And let us ignore the sig­ argued that old people should know when nificant question of who would produce it is time to quit this earth in favor of apples if we all had a right to them. younger people. (The civil libertarian Nat We might decide to trust people to take Hentoff wrote recently that Lamm is, inex­ only what they need. But that doesn't get us plicably, a devotee of exercise.) John Hard­ out of trouble. Even if we assume a popu­ wig, a medical ethicist and social philoso­ lation ofconsiderate people, "need," in this pher, has now picked up the cause of the context, is a subjective notion. You can duty to die. Hewrites that medical advances probably live without apples; so in one and an "individualist culture" may have sense, you need none. But if we expand the many people believing that "they have a concept of"need" a little, we open the gates right to medical care and a right to live,

523 PERSPECTIVE despite the burdens and costs to our fam­ at Medicare and proposals to reform med­ ilies and society." He adds that "there may ical care in general, too little attention has be a fairly common responsibility to end gone to that uncomfortable fact. If govern­ one's life in the absence of any terminal ment controls medical spending, it controls illness ... a duty to die even when one you, including the very length of your life. would prefer to live." We may correlate the progress of man­ For our purposes we need not address kind with the extent of its independence whether an old person should preserve his from the state. To put it mildly, national heirs' inheritance rather than spend it on health insurance would be a setback. medical care. At the moment, that is a Yet that is the direction in which we private, not a political, matter of how one move. New regulations governing the port­ spends one's own money. (The inheritance ability ofinsurance policies and coverage of tax could have consequences for such a existing conditions all portend creeping decision.) What is relevant is how that comprehensive control. The newest cause, ethical issue is transformed when govern­ uninsured children, does the same. Ludwig ment controls medical spending via "the von Mises explained why in his Critique of right to health care." The Lamm-Hardwig Interventionism. One regulation creates line would be translated into a rather un­ problems, which are used to justify the next pleasant public policy: the withholding of intervention. For example, if Congress says care for the elderly in the name of "making mental-health benefits have to be equal to room" for the young. The government medical benefits, the cost of insurance will giveth rights; the government taketh them go up. That will then be the excuse to force away. As a matter of public policy, might young people who don't wish to pay those not the politicians and bureaucrats decide premiums to buy insurance. Next on the that heart transplants, knee replacements, agenda will be price controls on doctors and and mastectomies for octogenarians are a insurance companies. When companies flee waste of money? This sort of thing is not the straitjacketed market, the government considered beyond the pale in the increas­ will step in. This is not conspiracy. It's logic. ingly fragile welfare states of western Eu­ It all starts with an innocuous phrase, the rope. right to medical care. Language is a potent All of this is a rather roundabout way of thing. Let us handle it with care. identifying the worst aspect of the "right to medical care": the tethering ofthe citizen to -SHELDON RICHMAN the state. For all the criticism that is leveled Mr. Richman is this issue's Guest Editor.

524 THEFREEMAN IDEAS ON LIBERTY

The Perversity of Doing Good at Others' Expense by Dwight R. Lee

ssume your 45-year-old friend is critically shortening the life of everyone in the general A ill and will die by tomorrow morning population by a few seconds ifI had the power unless something extraordinary is done. Mi­ to do so. Although the gain in life for him raculously, it becomes possible for you to would be less than the total loss of life for save your friend. But to do so you have to others, the gain would be dramatically visible, shorten the lives of all other Americans by a greatly appreciated, and easily associatedwith small amount. By taking away ten seconds my act of "kindness," while the loss would be of life from someone else, you can extend so diffused that it would go completely unno­ the life of your friend by five seconds. When ticed. Even if the others were aware of their this transfer is made from all 260 million cost for saving my friend, a large majority of Americans, he will receive approximately an them would probably vote in favor of making additional 41 years and four months of life, their individual sacrifice (and obligating oth­ thus achieving an enviable life span ofover 86 ers to do the same) to extend his life, since years. that sacrifice was so low. We could all feel the Will you use your power to save your warm glow of compassion over our virtuous friend? Almost surely the answer is yes. Will sacrifice for the good of another. saving your friend be an act of virtue? The There is a problem here, however. Ifit is so answer to this question is more complicated. noble to save my friend's life by transferring Saving your friend's life will be widely per­ a few seconds from everyone else, then it must ceived as a virtuous act, but a strong case can also be equally noble to extend this benefit to be made that it would be a harmful act of others. But consider the destructive conse­ callous self-interest. The sharp contrast be­ quences ofeach ofus having the power to add tween perception and reality in this fabricated years to our best friend's life (which in most example is unfortunately relevant to the world cases would be our own) by reducing the life of politics, and explains why organized inter­ of everyone else by a few seconds (but with est groups can capture small private gains at the total life lost being twice that gained). great social costs through political actions With everyone trying to lengthen his or her widely seen as virtuous. life at the expense of others, the result would I readily admit that if a good friend of mine be an early death for everyone. Generalizing were desperately ill, I would save him by the earlier example of a two-second loss for a one-second gain, if everyone attempted to Dr. Lee teaches economics at the University of capture 41 years of additional life by trans­ Georgia. ferring seconds from others, everyone would 525 526 THE FREEMAN • SEPTEMBER 1997 have his or her life shortened by 41 years. Real-World Transfers For someone my age this would, at best, mean instant death, and more likely a retroactive Of course, my example of extending the one. lives of some by reducing the lives of others is So if the ability to extend one person's life fortunately a fanciful one. Unfortunately, it by shortening the lives of others were imme­ describes all too well the type of transfer that diately generalized to everyone, the conse­ increasingly dominates the political process. quences would be quickly recognized as dis­ The coercive power of the federal govern­ astrous. But if only a few had this ability ment to perform its few legitimate functions initially, and it was expanded to more people has always been a source of temptation for very gradually, it would take a while for the those who see the possibility of solving their harmful consequences to be noticed.1 And problems through transfers from others. The probably people would be unaware of the case for yielding to this temptation is super­ connection between the reduced life expect­ ficially appealing because government trans­ ancy of most and the longer life span of the fers could create concentrated and visible few, the result being a clamor to expand benefits for politically organized and appre­ the method prolonging the lives of the few. ciative groups while spreading the costs so Even when the connection between the widely that they go largely unnoticed. expanded transfer process and the ever­ Fortunately, for approximately the first 100 shortening life expectancy began to be recog­ years after the ratification of the U.S. Con­ nized, no one would willingly cease attempt­ stitution, the prevailing understanding was ing to benefit from the transfers. The person that the role ofgovernment was a limited one. who unilaterally refused to transfer years Government was not intended to solve the from others to himself would lose twice the problems of individuals; rather it was to life expectancy as before, as others continued establish a setting in which they could best to transfer life from him to themselves. Of solve their own problems in productive coop­ course, there might be a movement to stop the eration with each other. That view was exem­ transfer process if anyone were left alive to plified by Grover Cleveland's 1887 veto of a initiate it. bill passed by Congress to provide $10,000 to But what if the destructive effect of the drought-stricken farmers in Texas. In his veto transfer process were masked by medical message Cleveland stated, "A prevalent ten­ advances that caused a slight increase in life dency to disregard the limited mission of [the expectancy? Then the life lost because of the government's] power and duty should be transfers might go largely unnoticed. Some steadfastly resisted, to the end that the lesson would understand the harm being imposed should be constantly enforced that, though by the transfers, but they would find it difficult the people support the Government, the to get people exercised by the loss ofwhat they Government should not support the people."2 never had, which exists only in a counterfac­ Unfortunately, as Cleveland was vetoing tual setting with which they are not familiar. seed bills, U.S. Supreme Court decisions Also, any attempt to get people to oppose the began opening the door for increased gov­ transfers faces a serious free-rider problem. ernment regulation of the economy.3 Regu­ Why should an individual incur a private lation, supposedly aimed at protecting the cost in an effort that, even if successful, general public against abuse by business and provides general benefits to everyone regard­ other organized interests, is invariably con­ less of his or her contribution to the effort? trolled by those interests to reduce the com­ For each person the advantage is in devoting petition they face. That amounts to a transfer the effort necessary to benefit from transfers, from the general public to those being regu­ an effort that concentrates a benefit entirely lated, in the form of higher prices and a less on him or her, rather than in making the far productive economy. The growth of such less decisive effort to achieve benefits for the transfers began rather modestly. Resistance general public. to it was well entrenched, but the concen- THE PERVERSITY OF DOING GOOD AT OTHERS' EXPENSE 527 trated benefits appeared larger than the dif­ done more to help large corporate farms than fused (but actually larger) costs. As the num­ small family farms, and corporate welfare has ber of beneficiaries increased with little hindered American competitiveness by sub­ apparent cost, the case for including more sidizing failure. beneficiaries seemed compelling. Even when Those failures are rooted in the fact that, the costs of government transfers were no­ just as in my life-extending example, govern­ ticed, they were seldom associated with the ment transfers add less value than they de­ transfers that caused them. Indeed, the costs stroy. Government transfers systematically created by the transfers were commonly cited reduce the productivity of the economy, pro­ as problems that justified government solu­ ductivity essential for solving the social prob­ tions in the form ofyet further transfers. The lems the government claims to be addressing. most egregious example of hoping the cause The wastefulness of government transfers is can be the cure was the expansion of govern­ inherent in the very process that explains ment control in response to the depression them. Because the benefits of transfers are of the 1930s, a depression prolonged, if not concentrated, they are magnified by the po­ caused entirely, by a combination of federal litical process, while the dispersed costs are tariff increases and Federal Reserve misman­ devalued. The result is that the political agement of the money supply. benefit-cost comparison continues to show Soon government transfers were going be­ gains from transfers long after the social yond protective regulation and increasingly benefit-cost comparison is decisively negative. taking the form of direct payments and sub­ The ratio of losses to gains from many polit­ sidies. In 1900 the entire federal budget ical transfers is far larger than the 2-to-1 ratio amounted to only about 3 percent of the assumed in the example of life-expectancy nation's GDP, with little of it devoted to transfers. For example, in California taxpay­ transfers. By 1962 federal transfers to indi­ ers are paying for water-diversion projects viduals (not including interest payments) that provide water at $212 per acre-foot to amounted to 27 percent offederal outlays and farmers who pay for it at a rate of $3.50 per to 5.2 percent of GDP. By 1993 federal acre-foot. 5 Or consider amendments to the payments to individuals had increased to 56 Clean Air Act that protected Eastern coal percent of federal outlays (85 percent when producers against competition from Western interest payments and national defense are coal by imposing scrubber requirements on excluded) and to 10.5 percent of the GDP.4 electric generating plants to remove sulphur even if they burn low-sulphur Western coal. It Noble Objectives has been estimated that this requirement costs electricity consumers approximately one These budgetary transfers are almost al­ dollar for every nickel it transfers to coal ways rationalized in the name of some noble producers, not to mention the resulting re­ public objective-helping the poor, protect­ duction in environmental quality.6 ing American jobs, saving the family farm, Yet, attempts to point out the failure of an making the American economy more com­ ever-expanding government role in the econ­ petitive. The reality is that the benefits from omy are typically met with complacency and these transfers are concentrated primarily on often hostility. Again, as with the example of organized interest groups and do little to transferring life expectancy, it is easy to see achieve the noble objectives. Indeed, progress the concentrated benefits from government toward the goal is invariably retarded as the transfers. It's even easier to ignore the gen­ costs of transfers spread inefficiencies through­ eralized costs and see them as unrelated to the out the economy. Poverty programs have benefits. The economy, after all, has contin­ increased the number and dependency of the ued to grow. It would be difficult for anyone poor, trade restrictions and export subsidies to know just how much greater that growth have destroyed more productive jobs to save could have been, and most people are un­ less productive ones, farm subsidies have aware of how costly even a slight reduction in 528 THE FREEMAN • SEPTEMBER 1997 economic growth is over time.7 And even if The dynamic of government transfers is people were aware of the general costs of an insidious one that invariably leads to the government transfers, no individualwould see disastrous situation Bastiat predicted: the the advantage in opposing them in general state becomes "that great fictitious entity by since the private advantage lies in getting which everyone seeks to live at the expense of more transfers for your group. Those who do everyone else.,,9 suggest cutting back on transfers will encoun­ Both the fanciful possibility of helping ter hostility from the beneficiaries, who real­ some peoplewith transfers oflife from others, ize that the amount they have to pay for the and the factual possibility of helping some transfers to others is independent ofwhether people with government wealth transfers or not they continue to receive theirs. Even from others, illustrate the perversities that many of those paying for a benefit going to result when people attempt to do good others often respond negatively to advocates at others' expense. Such attempts always give of reducing, or eliminating, that benefit be­ the appearance of promoting virtue while cause of its visible virtue and the lack of a destroying the discipline and accountability detectable cost to any individual.8 that makes real virtue possible. D

1. I assume here that there is a strict limit on how much life services. Since there is generally no market for government­ can be transferred from others. provided services, they enter into the national income accounts 2. Quoted in Robert Higgs, Crisis and Leviathan: Critical at the cost of providing them, which is almost always greater than Episodes in the Growth of American Government (New York: their value. So GDP can, and often is, increased by government Oxford University Press, 1987), p. 84. transfers that reduce the total value ofeconomic output. To bring 3. Higgs discusses many of these decisions and their con­ my example of transferring life expectancy in line with govern­ sequences in ibid. Also see Terry Anderson and Peter J. Hill, The ment transfers, the additional life one received from a transfer Birth of a Transfer Society (New York: University Press of would have to be counted for more than it actually is. America, 1989). 8. Because the influence ofany individual voter on a political 4. These figures come from Herbert Stein and Murray Foss, decision to make a transfer is effectively zero, the opportunity cost The New Illustrated Guide to theAmerican Economy (Washington, of favoring a transfer is also effectively zero, even if the transfer D.C.: The AEI Press, 1995), p. 212. is known to be individually costly. Therefore, if a person has been 5. See Dennis C. Mueller, Constitutional Democracy (New led to believe that a transfer is virtuous and he places even a York: Oxford University Press, 1996), p. II. modest value on the sense of virtue that comes from supporting 6. See George Daly and Thomas Mayor, "Equity, Efficiency the transfer, he will vote for it regardless of the personal cost if and Environmental Quality," Public Choice, vol. 51, no. 2(1986): it passes. See Geoffrey Brennan and Loren Lomasky, Democracy 141-59. andDecision: The Pure Theory ofElectoralPreference (Cambridge: 7. It should be noted that the larger government involvement Cambridge University Press, 1993). in the economy, the more the official national income statistics 9. Quoted in George Roche, Free Market, Free Men: Frederic overstate the national income. The growth in the private sector Bastiat, 1801-1850 (Hillsdale: Hillsdale College Press and The is determined by the amount people voluntarily pay for goods and Foundation for Economic Education, 1993), p. 150. THEFREEMAN IDEAS ON LIBERTY

Competition and Cooperation by David Boaz

efenders of the market process often ronment; it may well be applicable to the D stress the benefits of competition. The competition of enterprises in the market, but competitive process allows for constant test­ it certainly is never intended to imply the ing, experimenting, and adapting in response survival of only the fittest individuals in a to changing situations. It keeps businesses capitalist system. It is not the friends but the constantly on their toes to serve consumers. enemies of the market process· who use the Both analytically and empirically, we can see term "survival of the fittest" to describe that competitive systems produce better re­ economic competition. sults than centralized or monopoly systems. What needs to be made clear is that those That's why, in books, newspaper articles, who say that human beings "are made for and television appearances, advocates of free cooperation, not competition" fail to recog­ markets stress the importance of the compet­ nize that the market is cooperation. Indeed, itive marketplace and oppose restrictions on as discussed below, it is people competing to competition. cooperate. But too many people listen to the praise for competition and hear words like hostile, cut­ Individualism and Community throat, or dog-eat-dog. They wonder whether cooperation wouldn't be better than such an Similarly, opponents of classical liberalism antagonistic posture toward the world. Bil­ have been quick to accuse liberals of favoring lionaire investor George Soros, for instance, "atomistic" individualism, in which each writes in the Atlantic Monthly, "Too much person is an island unto himself, out only for competition and too little cooperation can his own profit with no regard for the needs cause intolerable inequities and instability." or wants of others. E. J. Dionne Jr. of the He goes on to say that his "main point ... is Washington Post has written that modern that cooperation is as much a part of the libertarians believe that "individuals come system as competition, and the slogan 'sur­ into the world as fully formed adults who vival of the fittest' distorts this fact." should be held responsible for their actions Now it should be noted that the phrase from the moment of their birth." Columnist "survival of the fittest" is rarely used by Charles Krauthammer wrote in a review of advocates of freedom and free markets. It Charles Murray's What It Means to Be a was coined to describe the process of biolog­ Libertarian that until Murray came along the ical evolution and to refer to the survival of libertarian vision was "a race of rugged indi­ the traits that were best suited to the envi- vidualists each living in a mountaintop cabin with a barbed wire fence and a 'No Trespassing' David Boaz, executive vice president of the Cato Institute, is author ofLibertarianism: A Primer and sign outside." How he neglected to include editor of The Libertarian Reader (both published "each armed to the teeth" I can't imagine. by The Free Press, 1996). Of course, nobody actually believes in the 529 530 THE FREEMAN • SEPTEMBER 1997 sort of "atomistic individualism" that profes­ sources available to fulfill our needs. Because sors and pundits like to deride. We do live of those circumstances, it is necessary for us together and work in groups. How one could to cooperate with others and to have rules of be an atomistic individual in our complex justice-especially regarding property and modern society is not clear: would that mean exchange-to define how we can do so. Those eating only what you grow, wearing what you rules establish who has the right to decide make, living in a house you build for yourself, how to use a particular piece of property. In restricting yourself to natural medicines you the absence of well-defined property rights, extract from plants? Some critics ofcapitalism we would face constant conflict over that or advocates of "back to nature"-like the issue. It is our agreement on property rights Unabomber, or Al Gore if he really meant that allows us to undertake the complex social what he wrote in Earth in the Balance-might tasks of cooperation and coordination by endorse such a plan. But few libertarians which we achieve our purposes. would want to move to a desert island and It would be nice if love could accomplish renounce the benefits of what Adam Smith that task, without all the emphasis on self­ called the Great Society, the complex and interest and individual rights, and many op­ productive society made possible by social ponents of liberalism have offered an appeal­ interaction. One would think, therefore, that ing vision of society based on universal sensible journalists would stop, look at the benevolence. But as Adam Smith pointed out, words they typed, and think to themselves, "I "in civilized society [man] stands at all times must have misrepresented this position. I in need of the cooperation and assistance of should go back and read the libertarian writ­ great multitudes," yet in his whole life he ers again." could never befriend a small fraction of the In our time this canard-about isolation number of people whose cooperation he and atomism-has been very damaging to needs. If we depended entirely on benevo­ advocates ofthe market process. We ought to lence to produce cooperation, we simply make it clear thatwe agree with George Soros couldn't undertake complex tasks. Reliance that "cooperation is as much a part of the on other people's self-interest, in a system of system as competition." In fact, we consider well-defined property rights and free ex­ cooperation so essential to human flourishing change, is the only way to organize a society that we don't just want to talk about it; we more complicated than a small village. want to create social institutions that make it possible. That is what property rights, limited Civil Society government, and the rule oflaw are all about. In a free society individuals enjoy natural, We want to associate with others to achieve imprescriptible rights and must live up to their instrumental ends-producing more food, ex­ general obligation to respect the rights of changing goods, developing new technolo­ other individuals. Our other obligations are gy-but also because we feel a deep human those we choose to assume by contract. It is need for connectedness, for love and friend­ not just coincidental that a society based on ship and community. The associations we the rights of life, liberty, and property also form with others make up what we call civil produces social peace and material well­ society. Those associations can take an amaz­ being. As John Locke, David Hume, and ing variety of forms-families, churches, other classical-liberal philosophers demon­ schools, clubs, fraternal societies, condomin­ strate, we need a system of rights to produce ium associations, neighborhood groups, and social cooperation, without which people can the myriad forms of commercial society, such achieve very little. Hume wrote in his Treatise as partnerships, corporations, labor unions, ofHuman Nature that the circumstances con­ and trade associations. All of these associa­ fronting humans are (1) our self-interested­ tions serve human needs in different ways. ness, (2) our necessarily limited generosity Civil society may be broadly defined as all the toward others, and (3) the scarcity of re- natural and voluntary associations in society. COMPETITION AND COOPERATION 531

Some analysts distinguish between com­ firm that provides me with peace of mind via mercial and nonprofit organizations, arguing an answering machine. that businesses are part of the market, not of Critics of markets often complain that civil society; but I follow the tradition that the capitalism encourages and rewards self­ real distinction is between associations that interest. In fact, people are self-interested are coercive-the state-and those that are under any political system. Markets channel natural or voluntary-everything else. their self-interest in socially beneficent direc­ Whether a particular association is estab­ tions. In a free market, people achieve their lished to make a profit or to achieve some own purposes by finding out what others want other purpose, the key characteristic is that and trying to offer it. That may mean several our participation in it is voluntarily chosen. people working together to build a fishing net With all the contemporary confusion about or a road. In a more complex economy, it civil society and "national purpose," we means seeking one's own profit by offering should remember F. A. Hayek's point that the goods or services that satisfy the needs or associations within civil society are created to desires of others. Workers and entrepreneurs achieve a particular purpose, but civil society who best satisfy those needs will be rewarded; as a whole has no single purpose; it is the those who don't will soon find out and be undesigned, spontaneously emerging result of encouraged to copy their more successful all those purposive associations. competitors or try a new approach. All the different economic organizations we The Market as Cooperation see in a market are experiments to find better ways of cooperating to achieve mutual pur­ The market is an essential element of civil poses. A system ofproperty rights, the rule of society. The market arises from two facts: that law, and minimal government allow maximum human beings can accomplish more in coop­ scope for people to experiment with new eration with others than individually and that forms ofcooperation. The development ofthe we can recognize this. If we were a species corporation allowed larger economic tasks for whom cooperation was not more produc­ to be undertaken than individuals or partner­ tive than isolated work, or if we were unable ships could achieve. Organizations such as to discern the benefits of cooperation, then condominium associations, mutual funds, in­ we would remain isolated and atomistic. But surance companies, banks, worker-owned co­ worse than that, as Ludwig von Mises ex­ operatives, and more are attempts to solve plained, "Each man would have been forced particular economic problems by new forms to view all other men as his enemies; his of association. Some of these forms are dis­ craving for the satisfaction of his own appe­ covered to be inefficient; many of the corpo­ tites would have brought him into an impla­ rate conglomerates in the 1960s, for instance, cable conflict with all his neighbors." Without proved to be unmanageable, and sharehold­ the possibility of mutual benefit from coop­ ers lost money. The rapid feedback of the eration and the division of labor, neither market process provides incentives for suc­ feelings of sympathy and friendship nor the cessful forms oforganization to be copied and market order itself could arise. unsuccessful forms to be discouraged. Throughout the market system individuals Cooperation is as much a part ofcapitalism and firms compete to cooperate better. Gen­ as competition. Both are essential elements of eral Motors and Toyota compete to cooperate the simple system ofnatural liberty, and most with me in achieving my goal of transporta­ of us spend far more of our time cooperating tion. AT&T and Mel compete to cooperate with partners, coworkers, suppliers, and cus­ with me in achieving my goal of communica­ tomers than we do competing. tion with others. Indeed, they compete so Life would indeed be nasty, brutish, and aggressively for my business that I have co­ short if it were solitary. Fortunately for all of operated with yet another communications us, in capitalist society it isn't. 0 THEFREEMAN IDEAS ON LIBERTY

Discovery and Economic Freedom by Daniel B. Klein

''IJhen an economist stands at the black­ laborers to choose low-wage employment, or , , board and draws a supply-and-demand of consumers to choose the services of unli­ diagram, he pretends he knows all the rele­ censed electricians. Because equilibrium sto­ vant opportunities. Economists must posit ries posit the .industry, the preferences, and such settings to frame the story. When stories the opportuniti~s, all that freedom accom­ are given an exact formulation, especially plishes is a more efficient utilization of given when expressed in math or diagrams, they resources. are called "models." A resolution in such a Economists rarely talk of discovery, imag­ model is called "equilibrium." Models teach ination, or serendipity, and consequently they us much about competition, investment, and tend to neglect these as vital factors of eco­ many other important topics in economics. nomic progress. They often carry over their But overexposure to models can impair our habits of mind to public policy. In conse­ ability to see other important facets of eco­ quence, they are insensible to the fact that nomic processes. One begins to forget that government restrictions on freedom tend to there is so much that is not known. choke off the vital discovery factors. Focusing on blackboard models limits our For example, the economist might think understanding of economic freedom. Econo­ that in making policy for urban transit, gov­ mists focus so much on models like supply ernment experts can, after much careful and demand, rather than on public issues, study, adequately determine the transit tech­ that freedom is understood only for what it nologies and systems that would suit the achieves in such models. Equilibrium stories city's needs, and then implement the system. of price ceilings, price floors, and entry bar­ I would dispute that approach, regardless of riers lead us to think of markets as neatly the particular transit system proposed. We characterized procedures, and of freedom as shall return to the example of urban transit little more than the freedom to choose within throughout this essay. these procedures. It may be the freedom of Freedom to choose among a set of given tenants to choose high-rent apartments, of alternatives is but one facet offreedom. I will discuss three other facets offreedom. Each of Dr. Klein is associateprofessor ofeconomics at Santa them points to a kind of discovery. Clara University. This essay is a condensation of his article, "Discovery Factors of Economic Free­ dom: Respondence, Epiphany, and Serendipity," in Search and Respondence Uncertainty and Economic Evolution: Essays in Honour of Armen A. Alchian, ed. John R. Lott, Jr. As consumers we do not know fully what (London: Routledge, 1997). Reprinted by permission stores are offering or what prices they are ofRoutledge. charging. We need to gain information and 532 533 do so by searching. Searching takes time and of pursuing plan B, or plan C, or whatever trouble, butwe learn more about the available plan would best respond to the contingency. alternatives. For example, Arthur DeVany and Ross Eck­ In other cases, information simply comes ert tell how, in the golden age, motion-picture to us without our looking for it. Perhaps by companies worked on a contract system with chance we encounter advertisements that film stars and other talent, and vertically alert us to valuable opportunities. Perhaps we integrated into the movie-house business, get into a conversation and learn valuable because of severe and pervasive uncertainties informationwe hadn't been actively searching on both the supply side and the demand side for. Then we revise our plans and respond of the industry. They argue that the Supreme appropriately to the new information. I call Court's Paramount decision (1948), which this experience respondence. broke up the production-house system, was Whether the individual searches for infor­ based on an oversimplified notion of "re­ mation or simply receives it in the course of straint of trade," and resulted in losses for pursuing other goals, let's assume that the filmmakers and audiences alike.2 newly acquired information fits into his orig­ In our example of free-enterprise urban inal plans or intentions. He now pursues his transit, severe uncertainty and individuation plans somewhat differently in response to the might be fundamental, and adaptation cru­ new information, but he does not change his cial. Carriers might not expect current con­ basic interpretation of what he is doing. ditions to persist. New competitors might Search and respondence are similar and are invade their routes or current competitors treated here together. Economists can incor­ drop out. The carrier companies may wish porate both into their formal models. But to abandon certain routes or add others. For search and respondence certainly complicate such reasons they may wish to lease their the model, and typically such complications buses and vans, and form contracts that are not worth the trouble. In practice, econ­ permit them to alter on short notice how they omists usually leave such features out of their use their vehicles. They may form flexible storytelling, unless search and respondence contracts with their drivers, allowing the com­ are the very focus of their investigation. pany to alter hours and remuneration. In Some economists explore the importance unregulated private enterprise, such flexible of respondence and freedom. They explore respondence, as is common practice, is an how uncertainty gives rise to economic prac­ important source of both cost containment tices that economists might otherwise have and effective service. Butit is seldom captured difficulty explaining-practices like queuing, in equilibrium storytelling. order backlogging, second sourcing, and ver­ tical integration. Ronald Coase has empha­ Epiphany sized the importance of special opportunities and business idiosyncracies, such as "differ­ It is one thing for the entrepreneur to greet ences in the point of time at which payments fortune when it comes knocking. It is some­ are made and receipts obtained."l These thing else to apprehend fortune in its hidden points often show an appreciation for indi­ forms and seize it. Here we have the distinc­ viduation (uniqueness) and uncertainty in tion between responding to the realization local conditions, and suggest that infringe­ of events within a framework of recognized ments on freedom prevent proper respon­ variables and relationships and the discovery dence. of a fresh opportunity to embrace a new and Dnrestricted respondence carries not only better framework. This element of epiphany, a flexibility in making one's choices in isola­ of finding fortune by interpreting the world tion but also the freedom to form elaborate differently, is the subtle and vital element in contracts that grant one flexibility in relations human decision-making. Yet it is absent from with others. Though hoping to follow plan A, equilibrium model-building. one might contract in advance for the option An example of epiphany is found in 534 THE FREEMAN • SEPTEMBER 1997

W. Somerset Maugham's short story "The tobacco shop was not. The opportunity could Verger." A new vicar came to St. Peter's, have been missed entirely or noticed only Neville Square, and called in the church fleetingly. verger to discuss a troubling matter. "I dis­ Economists give some attention to innova­ covered to my astonishment that you could tion in the sense ofsignificant and identifiable neither read nor write," he told Albert Ed­ technological advance. But they give very ward Foreman, the verger of 16 years. When little attention to alertness or epiphany in all directed to learn to read and write, Albert their buzzing, blooming-yet very often mun­ Edward replied, "I'm too old a dog" and bid dane-manifestations. The verger's story is the vicar a friendly farewell. He hung up his material for neither a news headline nor an verger's gown and went into the street. He elegant model. Nor is it captured by any was a nonsmoker, but with a certain latitude, variable called "education" or "R&D." It is and it occurred to him that a cigarette would nonetheless the kind of small breakthrough comfort him. He looked up and down the long everyone makes now and then, and which, in street without finding a shop that sold ciga­ aggregate, accounts for significant economic rettes. improvement. It is creativity and imagination, achieved countless times over, in the individ­ "I can't be the only man as walks along uated worlds of individuals. Whereas search/ this street and wants a fag," he said. "I respondence explores the individual's adap­ shouldn't wonder but what a fellow might tation within his individuated world, Kirzner's do very well with a little shop here. Tobacco alertness is the individual's reformulation of and sweets, you know." that world.5 This human experience of refor­ He gave a sudden start. mulating, or reinterpreting, one's world, this "That's an -idea," he said. "Strange 'ow element of epiphany, is by its very nature things come to you when you least expect virtually impossible to capture within an equi­ it." librium model.6 He turned, walked home, and had his tea. Too often economists neglect the effects of "You're very silent this afternoon, Al­ public policy on alertness and the discovery bert," his wife remarked. process. Kirzner however queries: What eco­ "I'm thinking," he said. nomic and political institutions can be ex­ pected most successfully to evoke entrepre­ The former verger set up in business as a neurial alertness? tobacconist and news agent. Soon he set up In the Somerset Maugham story, the verger more shops, and in time accumulated a small noticed something thatwas now in his interest fortune. The distinguished gentleman went to to notice. At the heart of Kirzner's distinctive the bank to put his wealth into securities argument for economic freedom is his recog­ and startled the bank manager by announcing nition that two people walking down the same that he could not read or write. "Good God, street will see different things. That differ­ man, what would you be now if you had been ence, he writes, "can be ascribed, in part, to able to?" "I can tell you that, sir," replied Mr. the interests ofthe two individuals. Each tends Foreman. "I'd be verger ofSt. Peter's, Neville to notice that which is ofinterest to him. ,,7 The Square.,,3 claim is natural enough and beyond doubt. It Maugham's story tells of a man who not implies that profit opportunities will be best only discovered something he wasn't looking discovered and seized in a legal framework for, but discovered something he quite pos­ that gives individuals an interest in discover­ sibly might not have discovered at all. In Israel ing them. Kirzner's terms, theverger was alert to a profit In formal models, economic freedom (and opportunity.4 The verger's apprehension of a host of other assumptions) lead to perfectly the street as a bad place to find a cigarette efficient outcomes. But Kirzner's argument was a realization in his working framework. for freedom is totally missed by such logic and Apprehending it as a good place to set up a arises only because the ancillary assumptions DISCOVERY AND ECONOMIC FREEDOM 535 of the model do not hold. In real life, many new stylish cabs and bring this new service opportunities lie hidden from view. Not only to the consumer's attention by a clever ad­ are preferences, constraints, and opportuni­ vertising campaign. Finally, it plans on crack­ ties individuated in minute detail, but each ing the traditional market by offering-at actor's interpretation ofthem is individuated. least temporarily-a well-publicized low The market process generates a system of price-the lowest in town. human activities each of which is performed Kirzner's point is that when the govern­ in partial ignorance. There are always dis­ ment fixes taxi rates, besides running the risk crepancies between available opportunities of getting a shortage or surplus, we run the and market recognition of them. We there­ risk of regimenting the industry and choking fore value, Kirzner argues, a legal system off the vital process ofdiscovery. Ifthe upstart "which offers entrepreneurs the required in­ company cannot offer a new low price, then centives for the discrepancies to be noticed it is likely to forgo the campaign altogether. and corrected.,,8 The legal system that best Society loses not merely some "quantity sup­ does so is economic freedom, which keeps plied," but an entire foray into a local eco­ individuals alert to profit opportunities be­ nomic terrain, a vital entrepreneurial inves­ cause it grants them an interest in seizing tigation into new services and new ways of them. To Kirzner, the most impressive aspect producing them. In carrying out the would-be ofthe free market is not its ability to generate campaign, the upstart company would have efficient allocations within a framework of undergone a series of fresh decisions, each of fully recognized ends and means. Rather, "the which would have involved entrepreneurial most impressive aspect of the market system discoveries. The overtrained economic per­ is the tendency for [previously unrecognized spective fails to appreciate this larger social ends and means] to be discovered."g Yet this loss from government assaults on freedom. most impressive aspect, which cannot be captured in the language of mainstream eco­ Serendipity nomics, is poorly recognized in academic economic research and poorly imparted in In our discussion of search and respon­ economic education. dence we saw how freedom allows individuals Consider again the making of policy for to adapt to individuated conditions by re­ urban transit. It is typical for local govern­ sponding to changes in those conditions and ments to fix the price of taxi services and to forming contracts to cope with them. In our require official meters in taxicabs. An econ­ discussion of Kirznerian alertness we saw omist might argue that this policy remedies how freedom sparks individuals to adapt their problems of bad consumer information, in­ interpretations of local conditions, to incor­ frequent dealings, and cabby opportunism. porate available but undiscovered profit op­ With a model of supply and demand in his portunities into their interpretive framework. head, he might reason that so long as regu­ There is yet another facet of freedom that lators don't set the price too far from "the helps match appropriate behavior and oppor­ equilibrium price," the downside of price tunity. fixing may not be so bad. In a famous article entitled "Uncertainty, Kirzner would argue that his reasoning is Evolution, and Economic Theory," Armen glaringly inadequate. Price competition, he'd Alchian pointed out that in a market not only say, is crucial to the vibrancy of the market does behavior tend to adapt appropriately to and should not be seen in isolation from other opportunity, but opportunity tends to adopt activities in the market process. appropriate behavior. The survivors in a mar­ Perhaps an upstart company seeks to enter ket, he explains, "may appear to be those a sleepy local taxi market. It plans to utilize a having adapted themselves to the environ­ new maintenance system to keep the cabs in ment, whereas the truth may well be that the repair or a new dispatching system to provide environment has adopted them."lO prompter service to customers. It might offer Alchian gives an unreal but useful example: 536 THE FREEMAN • SEPTEMBER 1997

Assume that thousands of travelers set out auto parts, or of manufacturing textiles-hits from Chicago, selecting their roads com­ upon success, that behavior is imitated and pletely at random andwithout foresight. ... the social benefits increase. Behavior that [O]n but one road are there any gasoline does not hit upon success perishes. Alchian stations. . .. [T]ravelers will continue to introduces a ballistics metaphor to make the travel only on that road; those on other point: "[s]uccess is discovered ... not by the roads will soon run out of gas.... If gaso­ individual through a converging search ... line supplies were now moved to a new [but] by the econoniic system through a blan­ road, some formerly luckless travelers keting shotgun process.,,13 I think of Jed again would be able to move; and a new Clampett, the television character of "The pattern of travel would be observed, al­ Beverly Hillbillies," who inadvertently discov­ though none of the travelers had changed ered crude oil while out shooting for some his particular path.... All that is needed food. 14 That epitomizes serendipity. Freedom is a set of varied, risk-taking (adoptable) produces the widest and fullest blanket of travelers. The correct direction of travel buckshot, and the honest dollar rewards the will be established.ll shots that hit the mark. Sometimes serendipity comes about not by Alchian asks for an economic understand­ random shotgunning but by mistake. Many of ing that does not limit behavior to the tidy us have had the experience of making a forms of optimization that make equilibrium mistake in using our word-processing pro­ models cohere. He asks for a more evolution­ gram, and, in figuring out how to fix the ary understanding that allows "imitative, ven­ mistake, discovering some wonderful feature turesome, innovative, trial-and-error adap­ we hadn't known about. Mistake turns out tive behavior."12 Such behavior, even though to be a blessing. The historian Samuel Eliot not neatly rational, may nonetheless be for­ Morison tells of such a case in the early pages tunate enough to find serendipity. Serendipity of The Oxford History ofthe American People: is a major discovery that one was not looking "America was discovered accidentally by a for, that alters one's own interpretation of great seaman who was looking for something what one is doing, and that is obvious to the else; when discovered it was not wanted; and discoverer. Unlike the epiphany, serendipity most ofthe exploration for the next fifty years does not depend on alertness or insight. It hits was done in the hope of getting through or you in the face. around it.,,15 Alchian points out that a great Alchian's idea of opportunity adopting ap­ deal of "pioneering and leadership" in the propriate behavior points us toward another economic· realm occurs by failed attempts facet of economic freedom, again a facet at imitation.16 Because economic freedom eclipsed by equilibrium model-building. Al­ presses entrepreneurs into contact and exper­ chian's point tells us to value freedom even for imentation with their environment, it best human behavior that is foolhardy, romantic, generates serendipity. or arbitrary. Economic freedom carries the Compare Alchian's idea of shotgunning freedom to act regardless ofpermits, licenses, with Kirzner's theory of discovery based on certification, or other forms of government interest. In his example oftwo individualswho permission to use one's own property or to walk down the same city block, Kirzner argues enter consensually into dealings with others. that each tends to notice things that he would In conjunction with the freedom to exper­ best be able to make use of. But even if iment comes the responsibility offailure: only discovery is not led by interest and is merely if the individual or firm carries the responsi­ random, there is a definite benefit to having bility of failure will the selection mechanism two, rather than one, encounters with the of the competitive market operate to adopt environment, since with two it is more likely appropriate behavior. that at least one will serendipitously discover Once a particular type ofbehavior-be it a an as-yet undiscovered opportunity. And Al­ way of providing a restaurant, of distributing chian's shotgunning idea is especially impor- DISCOVERY AND ECONOMIC FREEDOM 537 tant if discovery depends not only on individ­ it makes little sense for the regulator, aided ual interest, as Kirzner maintains, but also on by the academic economist, to try to alter distinctive talents in perceiving the environ­ outcomes by regulating citizens. The wiser ment; thus it has been argued that immigrant course typically is simply to safeguard the entrepreneurs sometimes succeed by virtue rules of property, consent, and contract, and of their peculiar outlook on things. Each type leave citizens free to discover themselves of mind may have its own special propensity within that legal framework. D to have happy accidents. In our example of urban transit, market 1. Ronald Coase, "Business Organization and the Accoun­ experimentation might mean new modes, new tant" (from articles originally published in 1938), LSE Essays on vehicles, new pricing schemes, new routes, Cost, edited by J. M. Buchanan and G. F. Thirlby (New York: New York University Press, 1981), pp. 95-132. new schedules, new aspects of service, etc. 2. Arthur DeVany and Ross D. Eckert, "Motion Picture Those changes might come from within the Antitrust: The Paramount Case Revisited," Research in Law and industry, from newcomers, or from entrepre­ Economics, vol. 14 (1991): 51-112. 3. W. Somerset Maugham, "The Verger," in The Complete neurs initially based in other industries, per­ Short Stories of Jv. Somerset Maugham, Vol. III (Garden City, haps in hotel services, delivery services, or N.Y.: Doubleday, 1952), pp. 572-78. 4. Israel M. Kirzner, Discovery and the Capitalist Process even used-car dealing. A free-enterprise tran­ (Chicago: University of Chicago Press, 1985). sit policy would invite all comers to take their 5. "The crucial element in behavior expressing entrepre­ neurial alertness is that it expresses the decision maker's ability shot in the market, and let travelers select the spontaneously to transcend an existing framework of perceived most worthy. Depending on their discoveries, opportunities." Kirzner, p. 7. 6. Israel M. Kirzner, Perception, Opportunity, and Profit niche-finders would survive, or prosper, or (Chicago: University of Chicago Press, 1979), p. 155, wherein he says that the distinctive aspect of entrepreneurial activity is "its induce imitation. I inability to be compressed within the equilibrium conception of If economists were to allow more attention the market." I believe that the only hope of capturing epiphany to the discovery factors, they might find within an equilibrium model of optimizing agents is to model the individual human mind as a society of multiple agents; see my themselves in stronger support of economic paper "Entrepreneurship and the Deep Self." freedom. The discovery factors are all linked 7. Kirzner, Discovery, p. 28. 8. Ibid., p. 30. in their illumination of the following two 9. Ibid. points: (a) knowledge and opportunity are 10. Alchian's article was originally published in The Journal of Political Economy, 1950. It is reprinted in his Economic Forces at extremely local and individuated, (b) knowl­ Work (Indianapolis, Ind.: Liberty Fund, 1977), quote at p. 22. edge and opportunity are constantly chang­ 11. Ibid. 12. Ibid., p. 32. ing. These points humble us by telling us that 13. Ibid., p. 31. the economy will always be largely unknow­ 14. The genuine counterpart to Jed Clampett is James Marshall, a frontiersman who undertook to build a sawmill in the able, as Friedrich Hayek argued so power­ Sierra Nevadas in 1848. Instead he struck gold and triggered the fully. California gold rush. 15. Samuel Eliot Morison, The Oxford History oftheAmerican If, despite the best intellectual efforts, eco­ People (New York: Oxford University Press, 1965), p. 23. nomic processes will remain largely unknown, 16. Alchian, p. 30. THEFREEMAN IDEAS ON LIBERTY

Yes, Virginia, There Is a Free Lunch

by William H. Peterson

"I n the sweat of thy face shalt thou eat sources with alternative uses. Thus God's bread." commandment to banished Adam and Eve So an angry Lord Jehovah thundered down seems to have been: "Look, I'm no longer on Adam and Eve-that unrighteous couple promising you a rose garden, only the oppor­ who had eaten of the forbidden fruit and were tunity to grow one." forthwith banished from the Garden of Eden Catch-23 recognizes that nature still metes and its endless bounty. And so was born, in out her blessings sparingly, begrudgingly, the Old Testament version, the primal eco­ whether in the Third World or on Park nomic law of scarcity-man caught in a life­ Avenue. Man fatedly wants more than he is long dilemma of unlimited ends in a world of able to get. Man then has to strategically think limited means, including life itself. about wealth creation, to decide how and Here, Virginia, sweat means work, effort, what to choose among consumer and capital fatigue. It also means production, possible goods. At the same time, he must decide what economic growth (the creation of more and not to choose, given his limited-repeat, more goods and services to allay man's basic limited-time, energy, talent, and other re­ needs of food, clothing, shelter), and, amaz­ sources, including, of course, cash and credit. ingly nowadays, a fresh bounty of luxury So life foists decisions daily, hourly, and wealth, including cellular telephones, micro­ even faster, on the firm-and govern­ wave ovens, heart bypass operations, mutual ment-as well as on the individual. As if you funds, a winter flight to the sun in Cancun, didn't know firsthand, Virginia. Man's Mexico, or to the ski trails of Aspen. plight-and opportunity-is that he perforce The Catch-22 with wealth creation is gov­ has to choose and exchange among compet­ ernment intervention: state intrusion in the ing options. He has to give up one thing for market process that is supposed to make another. Choice by choice he seeks to opti­ things better (a free lunch) but ineluctably mize his resources. He has to sort out avail­ makes them worse. Catch-23 is its cost. Pro­ able options and single out but one in any duction involves choices, often hard choices, action. about how to use scarce, or economic, re- Early on in life, man gets a powerful message: He can't eat his cake and have it too. To get he must give, to earn more he must Dr. Peterson, an adjunct scholar at the Heritage Foundation, is Distinguished LundyProfessorEmer­ invest more in skills and tools so as to boost itus ofBusiness Philosophy at Campbell University, his output and consume more. Self-interest Buies Creek, North Carolina. under the rule of law spurs him to fashion 538 539 tools for mind, hand, and, not so incidentally, lesser loss in each and every action. He is society. driven to seek an ever greater output for Cost. Aye, there's the rub. Man soon finds an ever lesser input-a freer lunch. And he out that an opportunity taken means an can't help improving the lot of others in the opportunity forgone, that a costless Garden process. of Eden is not of this world. This law of Recall how Adam Smith tagged man's opportunity cost recognizes that making self-interest under the rule of law as "an choices innately involves cost-benefit analysis invisible hand [promoting] an end which was or, in the words of Ludwig von Mises in no part of his intention." As he went on in his Human Action, "taking and renunciation." The Wealth of Nations (1776): "By pursuing Take one benefit and you at once renounce his own interest he frequently promotes that another. of the society more effectually than when he really intends to promote it. I have never Tradeotfs known much good done by those who affected to trade for the public good." Nothing is for nothing. Something is only Another eighteenth-centurywriter, Jonathan for something. Remember that Robinson Swift, also gave credit for a more bountiful Crusoe took off precious time from fishing lunch to self-interest under the rule of law, to make a net in order to raise his catch. noting its intimately related drive for inven­ Trading-off is a rule of life, a facing-up to tion and entrepreneurship. In Gulliver's Trav­ universal scarcity, to feeling, say, a gnawing els (1726) he wrote, "And he gave it for his sensation in the tummy three (or more) times opinion, that whoever could make two ears a day, a gnawing not to be ignored (even if of corn or two blades of grass to grow upon yielding to it can be overdone). Hunger de­ the spot of ground where only one grew mands action but not just any action. Or as an before, would deserve better of mankind, old Chinese saying has it: A hungry man must and so do more essential service to his wait a long time before a roast duck flies into country, than the whole race of politicians his mouth. put together." Milton Friedman has popularized this Swift's point on interventionist do-gooding tradeoff idea as "There Ain't No Such Thing politicians is well taken. It came at the peak As A Free Lunch" (TANSTAAFL). Henry of mercantilism when politicians in Europe Hazlitt had a similar idea and got at state actively interfered in markets through guilds, intervention's blindness to opportunity cost in bounties, tariffs, quotas, production limits, his classic, Economics in One Lesson (1946): colonial restrictions, and other interventions, "The art of economics consists in looking not thus winding up doing bad. merely at the immediate but at the longer-run A lesson emerges: Free, or private, choices effects ofany act orpolicy; it consists in tracing tend to maximize returns and spur economic the consequences ofthat policy not merely for growth; coerced, or public, choices tend to one group but for all groups." minimize returns and impede economic Thus the law ofopportunity cost, or no free growth. Under private-property rights, the lunch, is a hard fact of life-as far as it goes. law of opportunity cost becomes a tool ad­ But in life's unending demand for choosing vancing wealth creation and social coopera­ this quid for that quo lies the makings of, if tion. not a free lunch and if not impeded by state To be sure, conditions change, private intervention, a freer lunch-and a tastier, miscalculations occur, private mistakes are healthier, more variegated lunch at that. made. "The Edsel is here to stay," said Henry Look, Virginia: Every human action, the Ford II in 1957. Nonetheless, thanks to pri­ good and the bad, the noble and the ignoble, vate enterprise, the history of man is onward substitutes one state of affairs for another-a and upward in terms of getting more of the perceived better state for a perceived inferior good things of life, a freer, if not quite free, state. The acting individual seeks a profit or lunch. That lunch shrinks in size and quality 540 THE FREEMAN • SEPTEMBER 1997

under state intervention. It can even sink out into the twentieth century for an even more of sight, as in the cases of ancient and inter­ dazzling display of technological advances ventionist Egypt, Greece, and Rome. from the refrigerator tojettravel, from kidney transplants to interactive TV, from the com­ Free to Choose puter to the World Wide Web. In all, witness how better tools increase Yet civilization struggles on. And in that productivity, making for freer lunches. Today struggle is the story of freedom and free human longevity in the West is well up in the enterprise, savings and investment, entrepre­ 70s, for an average gain of around 45 years neurship and invention-of payoffs in wealth in the last 250 years or so. All thanks to a long from what Milton and Rose Friedman see as succession of opportunity-cost cutters, of man's optimum political and economic state mostly unsung savers and investors, inventors of being "free to choose." Man's progress is and entrepreneurs. Thanks, too, to private­ seen in the long steady improvement of cap­ property rights-however unstable over the ital goods, or tools, with each tool represent­ history of still-rapacious government, even ing at once savings (forbearance) and invest­ here on the eve of the 21st century. ment (productivity), or cost and opportunity. Trade, Virginia, is another aspect of op­ That improvement stretches from the portunity cost. And because it is mutually Stone Age of a million years ago, when man productive, mutually profitable, it's anything made edged-flint hand tools, or crude eoliths, but a greedy zero-sum or negative-sum, win­ to remove bark, hunt wild game, and skin ner-take-all game, as some critics charge. animals. The eolith is a model of opportunity Rather, trade, including world trade, is a cost-anopening for better output at the cost of win-win process of social cooperation, a pos­ time in flint searching and edging, with a freer itive-sum game that as a rule enhances the lunch passed on to succeeding generations. well-being of each player and of society as a Some 250,000 years ago the model contin­ whole. It follows that protectionism is a pox ued when man perfected fire for cooking and and a destroyer of international harmony. later for smelting and forming metal from ore. The fly in this ointment of freer lunches is Some 15,000 years ago he invented spear­ nominally "productive," but inherently coun­ throwing and the bow and arrow; some 8,000 terproductive, intervention. Neomercantilis­ years ago he domesticated cattle for livestock tic states everywhere, including the United and invented a sickle for harvesting; some States, interfere with production, impede 7,500 years ago he developed agriculture and trade, foster inflation, inflict rent control, wove linen on wooden looms; some 6,000 impose stiff capital gains taxes, create a rising years ago he drew signs as a basis ofalphabets underclass via the welfare state, and generally and heightened communications. foist social trouble and raise opportunity Fast-forward to the Industrial Revolution, costs. It's an inadvertent policy of less for starting around 1750 (when human longevity more. Much less. was around 30 years), to see an explosion of Sure, in sum, the law of opportunity cost as highly productive inventions that sharply cut implying no free lunch is entirely correct, but opportunity costs, boosted output per man­ only as far as it goes. For in the history of hour, accelerated man's material well-being, state-harassed freedom and free enterprise, a and lengthened his life span. Study the impact far different picture of the law of opportunity of inventions such as Watt's steam engine in cost emerges. It is one of wealth creation: 1776, Whitney's cotton gin in 1791, Fulton's growing remunerative work opportunities, steamboat in 1807, McCormick's reaper in rising private savings and capital investment, 1841, Howe's sewing machine in 1845, Besse­ creative invention and entrepreneurship, mer's steel furnace in 1855, Drake's oil-well amazing productivity gains, plunging oppor­ strike in 1859, Bell's telephone in 1876, Edi­ tunity costs. It is this picture that enables the son's electric light in 1879, Duryea's automo­ viewer to say, "Yes, Virginia, there is a free bile ("the horseless carriage") in 1892, and on lunch." But can she keep it? D Ideas and Consequences by Lawrence W. Reed

Government and Disaster Relief

he North Dakota flood this past spring offering to the victims. President Clinton and Twas a heartbreaker. The scenes of devas­ four cabinet secretaries flew to Grand Forks tation gripped the nation andbrought tears to to announce a policy rarely adopted in fed­ the eyes of millions. eral relief efforts: Washington would pay 100 Back here in Michigan, my historian friend percent of the immediate emergency work, Burt Folsom used the occasion to acquaint not the "mere" 75 percent it paid in the past. me with an event about which I knew nothing: At the time ofthe Michigan fire, Americans the terrible Michigan fire of 1881. Folsom looked inward to themselves, not outward to noted a couple of differences between these the federal government, to assist the victims. two natural disasters, and gave me an earful They became the most generous people on of information that readers of this column earth, partly because they knew government may find interesting. had nothing to give except what it taxed away The first difference is that, bad as the flood in the first place, and partly because they saw on the Red River was, the Michigan fire it as a personal responsibility to help their exacted an even greater toll. Raging flames fellow citizens in need. For Michiganians in swept through the state's "Thumb" area, 1881, this meant an outpouring of help freely killing almost 200 people and destroying over given from fellow Americans everywhere. In one million acres of timberland. "The flames fact, the Michigan fire became the first disas­ ran faster than a horse could gallop," said ter relief effort of Clara Barton and the newly one survivor of this devastating blaze. Its formed American Red Cross. As the smoke hurricane-like fury uprooted trees, blew away billowed eastward across the nation, Barton's buildings, and destroyed millions ofdollars of home town of Dansville, New York, became property across four counties. a focal point of relief. According to the A second and more profound difference, officers ofthe Dansville Red Cross, a call from according to Folsom, may be seen in prevail­ Clara Barton "rallied us to our work." ing attitudes toward private charity and the "Instantly," they said, "we felt the help and role of government. In the North Dakota strength of our organization [the Red Cross], flood, a California philanthropist donated young and untried as it was." Men, women, $2,000 to every flooded household and many and children throughout western New York others pitched in, but much of the spotlight brought food, clothing, and other gifts. Before focused on high-profile politicians and other the Red Cross would send them to Michigan, people's tax money they were generously a committee ofladies inspected each item and restitched garments or replaced food when Lawrence "W: Reed, economist and author, is presi­ dent of the Mackinac Center for Public Policy, a necessary. free-market research and educational organization Speed was important, not only because headquartered in Midland, Michigan. many were hungry but also because winter 541 542 THE FREEMAN • SEPTEMBER 1997 was approaching. Bedding and heavy clothing admonition. Politicians seem to have a defi­ were in demand. Railroads provided the ship­ nition of"disaster" that gets more elastic with ping. People left jobs and homes and trekked each passing year. To be eligible for relief to Michigan to get personally involved in the disbursements under federal law, an event rebuilding. Soon the Red Cross in New York must "be of such severity and magnitude that and the local relief committees in Michigan effective response is beyond the capabilities of were working together to distribute supplies the state and affected local governments." until "no more were needed," according to The term "capabilities" often ends up mean­ the final report from the Red Cross. ing "willingness." When federal cash is a The Red Cross assistance was much appre­ prospect, it's amazing how many state and ciated. And it made disaster relief faster, local politicians think that both their govern­ more efficient, and national in scope. But even ments and private citizens are "incapable" of if such help had not come, Michiganians were getting by without it. prepared to organize all relief voluntarily Whereas federal disaster relief used to within the state. In a previous fire in 1871, apply to horrific events like hurricanes, earth­ nearly 3,000 Michigan families were left quakes, and floods, it also goes now for homeless. Governor Henry Baldwin person­ unfortunate episodes that never were thought ally organized the relief efforts and gave out of as anything but local and private-severe of his own pockets about $150,000 (over $3 cold, snowstorms, even the effects of the EI million in today's dollars). Few if any thought Nino current on the West Coast fishing fleet. it necessary to create a federal relief bureau­ Two years ago, the governor ofMassachusetts cracy. asked the president _to declare some fishing ,Henry Baldwin in 1871 and the Red Cross towns in his state disaster areas because the a decade later fulfilled the true definition of fish had disappeared. compassion. They suffered together with the It is vital that people understand the pre­ fire victims and worked personally to reduce emptive influence ofgovernment relief. There their pain. Perhaps Baldwin, the Red Cross, is little reason to believe that politicians are and the fire victims themselves felt that aid more compassionate or caring than the pop­ from Washington might dampen the enthu­ ulation that elects them. There is little reason siasm ofvolunteers who gave their energy and to believe that politicians who are not on the resources out of a sense ofbrotherly love and disaster scene and don't know the families duty. And this was in a year when the federal affected will be more knowledgeable about budget had a $100 million surplus, not the how best to help than those who are on the $100 billion deficit of today! scene and personally know the victims. There Why did so many Americans 100 years ago is even less reason to believe that politicians reject federal aid and insist on personal spend other people's money more effectively charity during natural disasters? Horatio than those people to whom it belongs in the Bunce, a farmer/philosopher of the 1800s, first place. Therefore, when government gets spoke for most citizens when he argued that involved, there is good reason to believe that federal aid to disaster victims was not only much of its effort simply displaces what pri­ unconstitutional, but also uncharitable: "If vate people and groups would do better and ... you are at liberty to give to any and more cost effectively if government stayed everything which you may believe, or profess home. to believe, is a charity, and to any amount you Another, equally-vital point should be not­ may think proper," he told his congressman, ed: The lofty status of"disaster relief heroes" "youwill very easily perceive what a wide door is earned every year by thousands of private this would open for fraud and corruption and citizens acting out of their own desire and favoritism, on the one hand, and for robbing resources, and whose names and selfless de­ the people on the other." votion often don't make headlines. The pol­ Indeed, modern relief efforts of govern­ iticians who show up with other people's ment show all the signs ofbearing out Bunce's money are in a different category. D THEFREEMAN IDEAS ON LIBERTY

The Supreme Court ofthe United States: Guardians of the Constitution or Watching Out for Their Own? by Daniel J. Pilla

y the very terms of the Constitution, all The founders knew that an independent ju­ B judicial officers, as well as others in diciary was critical to maintaining liberty. government service, "shall be bound by Oath The legislative powers are vested in Con­ or Affirmation" to support the Constitution. gress under Article I. They are intended to Article VI also sets forth what is known as pass laws necessary to carry out the terms of the "Supremacy Clause." It holds that the the Constitution as set forth in the preamble. Constitution, all laws pursuant to it, and all The executive department under Article II treaties are the supreme law of the land and possesses the power to carry out the legiti­ that "the Judges in every State shall be bound mate functions of government and to control thereby, any Thing in the Constitution or the armed forces. Described in modern terms, Laws or any State to the Contrary notwith­ the Supreme Court, on the other hand, is standing." intended to function as a goalie. It is to "kick It is for this reason the United States is out" any legislative or executive act that referred to as a nation of laws, not of men. infringes the plain language of the Constitu­ Our republican form of government assures tion. all citizens that basic law, justice, liberty, Regarding legislation, the court is to do and due process will be observed as to each nothing more than compare the language of person, regardless ofhis financial standing or the statute with that ofthe Constitution to see political influence. whether the former comports with the latter. As the highest court in the land, the Su­ Ifso, the statute is legitimate and enforceable. preme Court is intended to be the guardian If not, the statute is void under the terms of of liberty. In Federalist No. 78, Alexander Article VI. It is to be struck down. Hamilton referred to the judicial branch as Of the language describing the three the "citadel ofthe publicjustice and the public branches of government, Article III is by far security." The Supreme Court, indeed the the most succinct. The founders dedicated ten entire judicial branch of government under sections in Article I to explain the function of Article III, was set up as an element of the legislative branch and four lengthy sec­ government independent of the other two. tions in Article II to describe the executive. Article III has just three short sections. These, Mr. Pilla is a tax litigation consultant and author of combinedwith the concise language ofArticle nine books onsuccessfulmethods ofdealing with and VI, make it clear that the court has no power preventing IRS abuse. to make laws or negate specific Constitutional 543 544 THE FREEMAN • SEPTEMBER 1997 provisions or protections. The court is a taxes on judges possibly violate the Constitu­ goalie, not a forward. Goalies do not score. tion? Ifwe citizens have to pay taxes, why not For decades since the 1930s, however, the federal judges? The answer lies within the Supreme Court has taken an activist role. Too language ofArticle III, section 1, which holds many of its decisions fall outside the scope of that the compensation offederal judges "shall judicial review; they have the character of not be diminished during their Continuance legislation. As a result, our constitutional in Office." Hatter argued that the imposition liberties have eroded substantially, while at of the tax after he took office violated that the same time the power and reach of the clause. federal government has been extended to all Hamilton described the purpose of the areas ofourprivate lives in absolute disregard compensation clause as being essential to ofthe limitations set forth in the Constitution. protecting the separation ofpowers. Hewrote in Federalist No. 79 that, "in the general The Judges Go to Court course ofhuman nature, a power over a man's subsistence amounts to a power over his will." This is particularly true in tax cases. Nothing could more aptly describe the power Whereas the Constitution plainly confines the of the purse. Our founders knew that if the power of government in several important judiciary was to remain independent of Con­ areas, virtually all the limits have been declared gress and the executive department, their invalid as they relate to the Internal Revenue compensation would have to be beyond their Service. But when the power of taxation tampering. imposes upon the rights offederal judges, the The language ofArticle III has always been courts are quick to protect their own. broadly construed to prohibit any diminution Consider the case of Judge Terry J. Hatter in compensation during a judge's tenure. and 15 ofhis colleagues. Hatter and the others Indeed, a similar suit was brought by federal are federal judges all appointedto the bench judges in the years immediately following the sometime before January 1983. Like most adoption of the income tax in 1913. The case federal employees at the time, they were not ofEvans v. Gore found its way to the Supreme subject to the Social Security tax laws. Rather, Court, where it was held that the prohibition they enjoyed their own pension under the contained no exception for "diminution by Civil Service Retirement System. taxation." Judges appointed to the bench Beginning in 1982, however, Congress after the tax took effect were subject to it. changed the law. To address the growing However, those who held office before the tax concerns over the solvency of Social Security, was enacted were held exempt. two major tax laws were passed in 1982 and In the case of Hatter v. United States, the 1983. The first was the Tax Equity and Fiscal U.S. Court of Appeals reached the same Responsibility Act of 1982. The second was conclusion. The Supreme Court unceremoni­ the Social Security Amendments of 1983. The ously affirmed the ruling. first made the hospital insurance portion of Social Security applicable to federal employ­ Some Are More Equal ees, including judges, effective January 1, Than Others 1983. The second made the old age and survivors disability portion-the bulk of So­ When the question of the constitutionality cial Security taxes-applicable to federal em­ of a federal tax relates to a federal judge, the ployees, including judges, effective January 1, courts seem to have no difficulty ascertaining 1984. the plain language of the Constitution and As a result ofbeing brought within the pale applying it to the statute. When it is found that of the Social Security tax scheme by these two the Constitution prohibits the legislative act laws, Hatter and his brethren sued the federal prescribed by the statute, the courts have no government claiming a violation oftheir con­ difficulty slapping down the infringement. stitutional rights. How can imposing income But let us contrast thatwith a case involving THE SUPREME COURT: GUARDIANS OF THE CONSTITUTION? 545 a private citizen and his equally compelling when the government could show such an constitutional argument. That case is United "overriding interest," it could infringe the States v. Lee (1982). The case involved pre­ plain and clear constitutional rights of the cisely the same Social Security laws. The citizen. fundamental difference is that Lee was not a The Court held that Lee must be forced to federal judge but a self-employed farmer and participate in the Social Security program carpenter. Hewas a member ofthe Old Order despite its finding that this expressly violated Amish and employed several persons in his his First Amendment rights. It rationalized business. Lee's complaint grew not from the the infringement by citing the government's compensation clause but from the free­ "overriding interest" in collecting taxes and exercise clause of the First Amendment. stating that "mandatory participation is in­ Because the Amish are religiously opposed dispensable to the fiscal vitality of the social to the kinds of benefits offered by Social security program." Citing the questionable Security, Lee did not participate in the system. financial soundness of the system, Chief Jus­ He neither paid into it nor expected to draw tice Burger observed that "widespread indi­ from it. vidual voluntary coverage under social secu­ Prior to the Social Security amendments of rity ...would undermine the soundness ofthe 1982 and 1983, the law expressly provided that social security program." Lee and those of his religious community In no uncertain terms, the Supreme Court were not required to withhold Social Security said that because the government needs the taxes from their employees or pay the match­ money it is permissible to violate the consti­ ing funds. The new law, however, extended tutional rights of a citizen. Thus, the only the tax obligation to wages paid by employers "overriding governmental interest" involved to employees, even if the employees were not in the Lee case is financial. liable for the tax themselves. As a result, Lee In concluding, Chief Justice Burger rea­ found himself faced with the duty to pay soned that religious beliefs "can be accom­ matching funds for a tax that he was plainly modated, but there is a point at which accom­ opposed to on religious grounds and that he modation would radically restrict the was exempt from paying under prior law. operating latitude of the legislature." The Lee opted to stick to his religious principles Supreme Court was saying that Congress and did not pay the taxes. He was assessed must have free rein-absolute freedom-to several thousand dollars by the IRS, and after pass laws. Religious and presumably other paying a portion of the tax, he sued for a constitutional rights cannot be permitted to refund. After initial success, Lee found him­ exist if they threaten the government's ability self before the Supreme Court. to do so. The First Amendment, ofcourse, expressly Note how far this logic is removed from the states that Congress "shall make no law" model set forth by Hamilton in Federalist No. respecting an establishment of religion or 78. In affirming the court's power of judicial "prohibiting the free exercise thereof." In its review, Hamilton said, "If there should hap­ opinion, the Supreme Court found that be­ pen to be an irreconcilable variance between cause of the Amish faith, "compulsory par­ the two [the Constitution and a legislative ticipation in the social security system inter­ act], that which has the superior obligation feres with [Lee's] free exercise rights" under and validity ought, ofcourse, to be preferred; the First Amendment. This is the conclusion or, in other words, the Constitution ought to a liberty-minded person would have hoped be preferred to the statute." the court would reach. Unfortunately, its From beginning to end, the Bill of Rights reasoning did not end there. Chief Justice places express restrictions on government's Warren Burger went on to explain that the ability to pass laws. Without such restrictions, courts must strike a "balance" between the this government is no better than any dicta­ rights of the citizen and an "overriding" torship that has ever existed. Those restric­ governmental interest. He reasoned that tions directly and simply forbid the invasion of 546 THE FREEMAN • SEPTEMBER 1997 individual rights by a government eager to Constitution," he said, "the government will pass laws that infringe our liberty. Yet the acquire a spirit and tone productive of per­ Supreme Court in Lee held that the limita­ manent blessings to the community. If, on the tions are placed on the individual, not on contrary, the public counsels are guided by government. Individual rights can be "accom­ humor, passion, and prejudice; or from re­ modated," but only if they do not stand in the sentment to individuals, or a dread of partial way of some legislative goal. With such a test, inconveniences, the Constitution is slighted, there is literally nothing the federal govern­ or explained away, upon every frivolous pre­ ment cannot do in the name of some "over­ text, the future spirit of government will be riding interest." feeble, distracted and arbitrary." Hamilton's message is simple. Continuity Are Rights to Be Balanced? of the moral fabric of society is dependent upon legal absolutes, especially where citi­ Where in the First Amendment does it say zens' rights are concerned. If the government that your religious liberty is dependent upon is free to "explain away" the protections ofthe a "balancing" test? Where does it say that Constitution, in the end there will be no Congress should "accommodate" those Constitution. If the rights of the citizens are rights, but only if they do not interfere with its made the "sport" of every change of govern­ own right to legislate? Just as the Supreme mental opinion, in the end citizens will have Court noted in Evans regarding Article III no rights. and the compensation clause, there are "no How is it that a federal judge's constitu­ excepting words" in the First Amendment. tional rights are more sacred than those ofthe The right is absolute and is expressly intended average citizen? Judges are charged with the to limit Congress in its zeal to pass restrictive sacred duty of protecting the rights of all laws. What other purpose is possibly served citizens from encroachment by government. by the plain language "Congress shall make Yet, as we have seen, they embrace that duty no law"? when it comes to their own liberty and tear it When it comes to the rights of the average to shredswhen it would cloak the liberty ofthe citizen, the courts have abandoned a strict average man. reading of the plain language in favor of What has happened to our courts? They judicial creativity designed specifically to have caused our priceless constitutional sys­ achieve the predetermined goal of getting tem of law and limited government to dete­ into your pocket. Hamilton insisted on strict riorate. What system of taxation or social adherence to the letter of the document. "If program is so important that we should sac­ we set out with ... a scrupulous regard to the rifice our precious liberty to save it? 0 THEFREEMAN IDEAS ON LIBERTY Federal Government Growth Before the New Deal by Randall G. Holcombe

opular opinion holds that most of the ing its mandate. When the colonies came Pcredit (or blame) for the incredible growth together to form the United States, the of the federal government should go to Pres­ founders viewed the new government as the ident Franklin D. Roosevelt and his New defender of its citizens' liberty. That meant Deal. While Roosevelt certainly was a willing protecting their rights-and in those days the participant in that process, the federal gov­ most significant threat to the rights of indi­ ernment began its amazingly rapid growth viduals was, in nearly everyone's eyes, the well before the New Deal, and it is unlikely government itself. By 1913 the federal gov­ that it would be much smaller today even had ernment had been transformed into an orga­ FDR never come along. nization not to protect rights, but, ostensibly, The origins of federal growth are in the to further the nation's economic well-being. Constitutional Convention. But the modern The first part of our story, then, is how a period of growth began with the Progressive government that began in 1776 as a protector Era before World War I. Contrary to popular of individual rights had by 1913 evolved into belief, that growth continued through the one that presumed to guarantee the economic 1920s. The percentage by which the federal welfare of its citizens. The second part of the government grew was greater during Herbert story is how the federal government, armed Hoover's four years as president than during with a powerful new source ofrevenue, began the first seven years of the New Deal. Roose­ a continuous expansion that lasted through­ velt merely continued a long-standing trend. out the twentieth century. One might be The. story of the growth of the federal tempted to argue that the income tax was the government can be divided into two parts: cause ofthe federal government's growth, but before and after 1913, when the 16th amend­ that answer would be simplistic for two rea­ ment to the Constitution, which permitted sons. First, it focuses on spending alone and a federal income tax, was ratified. In 1913 ignores the growth of the federal govern­ federal spending was a mere 2.5 percent of ment's legal and regulatory power that began GNP (today spending is almost ten times that well before 1913. Second, it treats the income level); so if the federal government is mea­ tax as something thrust on the nation rather sured only by spending, little growth took than something chosen by its citizens. Con­ place before the income tax. Before 1913, stitutional amendments must have substantial however, the federal government grew in popular support to gain the approval of other ways, by enlarging its power and chang- two-thirds of both houses of Congress and three-quarters ofthe state legislatures. Amer­ Professor Holcombe teaches economics at Florida icans wanted an income tax because they State University. wanted more government, and they wanted 547 548 THE FREEMAN • SEPTEMBER 1997 more government because they believed it growth of the federal government was the would enhance their economic well-being. Civil War, which established its supremacy World War I was a period of enormous over the states. The Civil War brought much federal expansion, and the New Deal is like­ new power to the federal government, and wise well known as a period of government laid the groundwork for the growth ofinterest growth. Yet the time in between, the 1920s, is groups.3 The first interest group to systemat­ often characterized as a time ofretrenchment. ically raid the Treasury for its own benefit was In fact, the 1920s continued the growth that the war veterans. Originally, Union veterans began in the Progressive era and set the stage were entitled to pensions only if they had been for the New Deal. Before getting into details, injured in battle; they had up to five years to we need to place the decade in the context of claim them. In 1870 veterans pensions totaled the preceding history of the federal govern­ $286 million in 1990 dollars and should have ment. then declined. Instead they rose to $1,548 million by 1890, because the Republicans, Federal Growth from who dominated the White House and looked 1776 to 1920 to veterans for political support, increasingly liberalized the pension laws until every Union The first major event in the growth of the veteran of the Civil War qualified.4 federal government was the ratification ofthe While veterans were a model for future Constitution in 1789. Before that, the United interest groups, the Treasury at that time had States was governed under the Articles of decidedly limited means. At any rate, other Confederation. The Constitution is fre­ groups were more interested in regulatory quently praised as a document that protects benefits. The Interstate Commerce Commis­ the rights ofindividuals and limits the powers sion was created in 1887, and the Sherman of government. But a comparison of the Antitrust Act passed in 1890.5 The transfor­ Constitution with the Articles reveals thatjust mation of the U.S. government continued as the opposite is true. Under the Constitution the turn of the century ushered in the Pro­ the federal government gained more power, gressive Era. The Food and Drug Adminis­ was less accountable, and had greater latitude tration was created in 1906, the Federal to determine its own scope of action. That is Reserve in 1913, and the Federal Trade what the Constitution was intended to accom­ Commission in 1914. A government initially plish. I committed to protecting the liberty of its The Constitution established the Electoral citizens now seemed to be just as firmly College for the selection of presidents, but committed to looking out for their economic specified no method for choosing electors. welfare. Several methods were used, but in most states The Progressive Era was interrupted by the legislatures picked them. The framers World War I, during which federal power expected that in most elections no candidate advanced in unprecedented ways. The rail­ would get a majority of electoral votes. That roads were nationalized, waterborne shipping would permit the House ofRepresentatives to was regulated, and the United States Food name the president from the five top electoral Administration, created in 1917, controlled vote getters. That system never worked as all aspects of the food industry, from agricul­ envisioned, and by 1828, with the election of ture to distribution to sales. Similar regulation Andrew Jackson, the current system of pop­ was applied to fuels, and eventually to the ular voting for electors had become firmly whole economy.6 When the federal income entrenched, and along with it the party sys­ tax was introduced in 1913, the highest tax tem.2 From then on, successful candidates bracket was 7 percent for all income above owed their success to the support of their $20,000. Because of the demand for war­ parties, and in return used the political system related spending, by 1918 the highest rate rose to reward those who helped them get elected. to 77 percent beginning at $4,000. This was Undoubtedly the biggest event in the the context in which Warren G. Harding was FEDERAL GOVERNMENT GROWTH BEFORE THE NEW DEAL 549 elected to the presidency in 1920 with the Federal Spending theme, a "return to normalcy." During the 1920s Harding, Coolidge, and Hoover Aggregate federal spending declined slightly during the 1920s, when measured in If one looks only at total federal spending, inflation-adjusted dollars per person. How­ it appears that the Republican administra­ ever, that slight decline is really a combination tions of Harding and Coolidge are a period of two different underlying trends. In 1916, of retrenchment sandwiched between the federal spending per person was $83.60. (All big-spending Democratic administrations of data are in 1990 dollars.) By 1919 it had risen Woodrow Wilson and FDR. The Hoover 16-fold, to $1,329.77. By 1927, federal spend­ administration does not fit this view even ing had fallen to its low point of the decade, when examined superficially, because the per­ $180.57. The huge decline from 1919 is ac­ centage increase in spending during those counted for by a reduction in war-related four years exceeded the growth in the first spending, but nonwar spending actually in­ sevenyears ofFDR's New Deal, before World creased sharply. Note that spending in 1927 War II caused spending to skyrocket. Despite was well over double the prewar 1916 level. the conventional wisdom that big government A more detailed analysis reaches the same began with FDR, a closer examination reveals conclusion. The 1920s saw huge declines in that even the Harding and Coolidge admin­ federal military and transportation spending istrations were periods of substantial govern­ (because so much transportation was nation­ ment growth. It was masked, though, by the alized during World War I). When civilian reduction in war-related spending following spending programs are isolated, they show World War 1.7 The 1920s, then, were actually substantial growth. Throughout the 1920s a continuation ofProgressive Eragovernment the average annual growth rate of federal expansion, which would last through the New spending on commerce, overseen by Secre­ Deal. tary Hoover, was 13 percent. Agricultural Contemporary political-party ideological spending increased by more than 11 percent stereotypes do not fit the pre-New Deal era. a year, and spending on labor interests grew At the risk of some oversimplification, they more than 12 percent a year. Federal spend­ should be reversed. The Republican party, the ing on education grew by more than 10 party ofLincoln, was the advocate of a strong percent per year, as did spending on public federal government with increasing powers, improvements and the public domain. Among while the Democratic party, which had most broad categories, the fastest growth was fed­ of its power in the South, advocated states' erallaw enforcement, which averaged more rights and a smaller federal government. than a 17 percent growth rate during the Moreover, Harding and Coolidge were not 1920s. Thus, one can see that civilian spending particularly strong presidents, and the Con­ during the 1920s grew rapidly and that spend­ gress was dominated by Republicans with ing remained substantially higher than it ever substantial Progressive leanings. For Harding had been before World War I. Measured by and, after Harding's death in 1923, Coolidge, spending alone, the 1920s was a decade of a return to normalcy meant a return to the major federal government growth. Progressive policies begun before the war. This was even more true of Hoover, who was Prohibition an engineer by training and a firm believer in applying scientific principles of management Much of the rapid growth in the federal to government. During the Wilson adminis­ law-enforcement budget was due to the pro­ tration Hoover was the head ofthe U.S. Food hibition of alcohol, which began in 1920 with Administration. He was secretary of com­ the passage ofthe 18th amendment and lasted merce throughout the Harding and Coolidge until repeal by the 21st amendment in 1933. years, before being elected president in 1928. The Department of Justice enforced prohibi- 550 THE FREEMAN • SEPTEMBER 1997 tion, along with the Customs Service, Coast River, and in 1929 the Federal Farm Board Guard, and Bureau ofInternal Revenue. The was established to finance agricultural price bureau participated because, while alcoholic supports. Creation of those corporations was beverages were illegal, nonbeverage alcohol integral to the growth of the federal govern­ was to be taxed. But even when illegal alcohol ment during the 1920s, but their purpose was was discovered, as far as the Treasury De­ also significant. In each case they were estab­ partment was concerned, the reason it was lished to help further the economicwell-being illegal was that the taxes were not paid. From of a particular group of Americans, reinforc­ 1920 to 1930 bureau spending on enforce­ ing the federal government's transition from ment regarding illegal alcohol rose from just a guardian of liberty to an organization de­ over $2 million to more than $12 million, signed to oversee the national economy. while revenues rose. from just over $1 million to about $5.4 million. In no year during Agriculture Prohibition did the bureau collect more than it spent on enforcement. Apparently, even The 1920s were a difficult decade for Amer­ the Bureau of Internal Revenue viewed the ican agriculture, largely because the world law on alcohol not as a method of generating market for farm products was increasingly revenue but rather of extending federal law competitive. As a result, the decade is some­ enforcement. Prohibition is probably the most times viewed as having favored business over visible area in which the federal government agriculture. But in fact, the federal govern­ attempted to increase its control over the ment began a number of initiatives to further behavior of Americans during the 1920s. the economic interests of farmers. In 1921 Congress passed tariffs on farm imports, and Federal Corporations in 1922 the Capper-Volstead Act exempted agricultural cooperatives from antitrust laws. Early in its history, the United States in­ The Agricultural Credits Act of 1923 made it corporated the First and Second Banks ofthe easier for farmers to get credit from the United States. After the charter ofthe Second Federal Farm Loan Board. In 1926 the De­ Bank expired in 1836, the federal government partment of Agriculture established a Divi­ did not charter another corporation until sion ofCo-operative Marketing. The Agricul­ 1904, when one was formed to construct the tural Marketing Act of1929 created the Federal Panama Canal. Federally owned corporations Farm Board and, as noted, began federal proliferated during World War I, beginning price supports for agricultural products. with the Merchant Fleet Corporation in 1917. Adjusting for inflation, federal spending on After the war, most of these federal corpo­ agriculture expanded from $17 million (1930 rations continued in business and lost huge dollars) in 1920 to $49 million by 1930. sums of money. The War Finance Corpora­ Whether evaluated in terms of budgets or tion, chartered in 1918 to help strategic in­ number of federal programs, the increased dustries borrow money, had its charter ex­ support for agriculture in the 1920s was tended in 1921 to assist American business substantial. The charge that the federal gov­ in general. The Federal Land Bank, Spruce ernment slighted agricultural interests is in­ Production Corporation, and Sugar Equaliza­ correct. tion Board were other federal corporations begun during the war that lived on. Antitrust These corporations provided a model for government growth that extended through An examination of federal spending gives the 1920s to the present day. In 1923, 12 some indication of the growth ofgovernment, federally owned banks were created by the but regulation, though harder to measure, Federal Agricultural Credits Act. In 1924 the also had a big impact. Beginning with the Inland Waterways Corporation was estab­ Sherman Act in 1890, the federal government lished to operate vessels on the Mississippi tried to limit the economic power of business FEDERAL GOVERNMENT GROWTH BEFORE THE NEW DEAL 551 through antitrust laws. Before 1905 only 22 supporter of that effort. Indeed, many of the cases were brought under the Sherman Act. tenets of Keynesian economics that gained But antitrust enforcement picked up later in prominence during the 1930s were already the decade, with 39 cases brought from 1905 part of the conventional wisdom ofAmerican to 1909. From 1910 to 1919, 134 cases were economists in the 1920s.8 The alliance of brought, indicating more vigorous enforce­ academic institutions, private foundations, ment. In the 1920s, the number declined and government in the 1920s was yet another slightly to 125 cases. aspect of the growth of the federal govern­ That decline is deceiving, however, because ment during the decade. after the increased enforcement in the prior decade, businesses acted more cautiously. Conclusion The scope of antitrust enforcement was broadened in the 1920s, and cases were The New Deal is often seen as the pivotal brought against firms in unconcentrated in­ event in the growth of America's twentieth­ dustries for conduct that was not obviously in century Leviathan. But the federal govern­ violation of the antitrust laws as previously ment has grown since its inception. The most enforced. Antitrust enforcement is another important event in the history of federal area in which the federal government in­ government growth was undoubtedly the Civil creased its power-yet another reason to War. Then, supported by the popular demand question the conventional wisdom that it was for more government involvement in the excessively probusiness in the 1920s. economy, the ideological foundation of the massive growth in federal spending was laid during the Progressive Era at the beginning of Academic Influences the twentieth century. The federal income tax John Maynard Keynes, in a famous passage made that growth in spending possible. in his 1936 General Theory of Employment, That the federal government grew during Interest, and Money, remarked, "The ideas of FDR's presidency is undeniable. But Wilson economists and political philosophers, both and Lincoln had already set precedents for when they are right and when they are wrong, increases in government power in wartime. are more powerful than is commonly under­ Thus, the main factors underlying the growth stood. Indeed, the world is ruled by little else." in governmentwere firmly in place well before Intellectuals also pushed the federal govern­ the New Deal. D ment to broaden its scope in the 1920s. The 1. See Randall G. Holcombe, "Constitutions as Constraints: A Case Study of Three American Constitutions," Constitutional ideas of Karl Marx were gaining credibility Political Economy, vol. 2, no. 2 (Fall 1991): 303-328. and moving governments into economic mat­ 2. See Forrest McDonald, The American Presidency (Law­ rence, Kan.: University Press of Kansas, 1994), for a thorough ters. Perhaps just as significant, although with history of the evolution of the office. less ideological content, were the concepts 3. For an excellent history of the Civil War following this theme, see Jeffrey Rogers Hummel, Emancipating Slaves, En­ of scientific management that were gaining slaving Free Men: A History ofthe American Civil War (Chicago: credibility throughout the United States. Civil Open Court Press, 1996). 4. A good reference on the subject is Theda Skocpol, Pro­ Service reform had been initiated late in the tecting Soldiers and Mothers: The Political Origins ofSocial Policy 1800s to create a more professional federal in the United States (Cambridge, Mass.: Belknap, 1992). 5. In Terry L. Anderson and Peter J. Hill, The Birth of a work force, and there was increasing interest Transfer Society (Stanford, Cal.: Hoover Institution Press, 1980), in applying the principles ofscientific business the origin of big government is the Supreme Court's Munn v. Illinois case, which allowed the state regulation of grain elevator management to government. rates. In 1920 the National Bureau of Economic 6. An excellent study ofthe growth ofthe federal government during the twentieth century, including the effects of World War Research was established in cooperation with I, is Robert Higgs, Crisis and Leviathan: Critical Episodes in the government, private foundations, and aca­ Growth ofAmerican Government (New York: Oxford University Press, 1987). demic institutions to better measure eco­ 7. A more detailed exposition of this material appears in nomic performance statistically so that gov­ Randall G. Holcombe, "The Growth of the Federal Government in the 1920s," Cato Journal, vol. 16, no. 2 (Fall 1996), pp. 175-199. ernment could apply those principles to the 8. See J. Ronnie Davis, The New Economics and the Old economy. Secretary Hoover was a strong Economists (Ames, Iowa: Iowa State University Press, 1971). Announcing a New Printing of RELIGION AND CAPITALISM: ALLIES, NOT ENEMIES by Edmund A. Opitz, with a foreword by Robert A. Sirico*

"...a major refutation ofthe Christian-Socialist, social-gospel view that has become so dominant in Western religious thought....[Tlhe Opitz book, with its unusual combination of economic knowledge and vigorous theism, is a major break­ through in the scholarship offreedom. " -M. Stanton Evans, National Review

This book deals with the problem of the proper ordering of our economic affairs within the framework supplied by Christian values. It was originally published in 1970 as a Conservative Book Club selection and merited reviews in The Chicago Tribune, Christianity Today, Christian Economics, The Congregationalist, The Presbyterian Journal, Christian Scholar's Review, Journal ofChurch and State, and National Review.

Edmund Opitz is an ordained Congregational minister, the founder and coordinator of The Remnant (a fellowship of conservative and libertarian ministers), a founder and secretary of The Nockian Society, and a contributing editor of The Freeman. He served as a member of the staff of FEE from 1955 until his retirement in 1992.

In reprinting Religion and Capitalism, FEE honors the notable accomplishments of Edmund Opitz, and preserves an intellectual legacy for a future generation of Christian scholars.

*Father Robert Sirico is founder and president of the Acton Institute for the Study of Religion and Liberty in Grand Rapids, Michigan.

Published by The Foundation for Economic Education, Inc. Irvington-on-Hudson, NY 10533

ISBN 1-57246-070-9 • 328 pages • paperback $19.95 To order, call (800) 452-3518 or fax (914) 591-8910 The Foundation for Economic Education Irvington-on-Hudson, New York 10533 Tel. (914) 591-7230 Fax (914) 591-8910 E-mail: [email protected]

September 1997 The Nanny State

've never smoked. I even dislike being In short, popular sentiment against tobac­ near lit cigarettes. (Cigar and pipe co companies holds that Americans cannot I smoke don't bother me.) Moreover, I'm make sensible choices for themselves. sure that smoking is addictive and But on what evidence does this dogma unhealthy. Nevertheless, the ballyhooed rest? Merely showing that cigarette smok­ "tobacco settlement" announced in June ing is both addictive and increases smok­ leaves a taste in my mouth far more foul ers' chances of contracting fatal illnesses than would be left by choking my way does not prove that smoking is irrational. through an entire carton of unfiltered Smoking has costs, to be sure, just as cigarettes. almost all of life's activities have costs. But The foulest feature of government's smoking also benefits smokers. Non-smok­ long-running harassment of the tobacco ers' failure to appreciate these benefits no industry is the elitist presumption that tens more proves that smoking is without bene­ of millions of Americans are too dimwitted fits than does a bachelor's failure to appre­ to be trusted with their own fates. This ciate the benefits of marriage prove that presumption follows from the belief that marriage is without benefits. "Big Tobacco" profits by selling goods to Of course, anti-smoking zealots craven­ people who really don't want to buy what ly deny their puritanical busy-bodiness. they buy. Instead, anti-smoking snobs issue all man­ Tobacco companies are portrayed as ner of ad hoc excuses in attempts to manu­ enjoying boundless powers to warp the facture popular support for their fanatical judgment of all but the most perspicacious crusade. In addition to the tired refrain souls. Smokers smoke only because each that tobacco advertising hypnotizes vast encountered once too often the Marlboro numbers of otherwise sane folk, the anti­ man's rugged visage or a billboard show­ smoking lobby regularly shrieks that"chil­ ing Joe Camel's imminent success at scor­ dren must be protected!" or that "second­ ing with the jazz-club's most fetchin' hand smoke kills, too!" or that "smokers' camel-babe. These brushes with Madison health-care expenses are a cost to us all!" Avenue sorcery cripple people's self­ Let's examine each of these excuses for preservation faculties. Government (the expanding government power. argument concludes) must intervene on "Children must be protected!" Well, obvi­ smokers' behalf to punish "Big Tobacco," ously. But families, not governments, are for no earthly force except the state has the the proper source of protection from most fortitude or wisdom to rescue citizens of life's pitfalls. Government's job in a free from the spell of such a mighty demon. society is to police against violence and theft rather than to be an antidote for "Smokers' health-care expenses are a cost to each of life's innumerable imperfections. us all!" This increasingly popUlar anti­ It's up to families to instill those values smoking battle cry is correct only insofar that help children avoid life's perils. Out­ as health care is collectivized. Without side its legitimate domain of policing government-subsidized and regulated against violence, government is stagger­ health care, smokers' medical expenses ingly klutzy. Entrusting it with the all­ would not be unloaded on non-smokers important but delicate task of molding and taxpayers. To the extent that non­ children's character makes no more sense smokers' health-care costs (or taxes used to than entrusting a barroom bouncer to per­ fund government-subsidized health care) form laser surgery on your eyes. are higher because smokers smoke, the Not only will government fare worse best solution is to de-collectivize health­ than parents at keeping children clear of care funding. life's tempting dangers, it will simultane­ Another problem with justifying harass­ ously fail to treat adults as adults. Forget ment of tobacco companies on grounds that banning cigarette advertising in the that smoking increases non-smokers' name of protecting children necessarily also expenses is that it proves far too much. bans such advertising for adults. More omi­ Consider a good Samaritan who saves the nous is the threat that adults'-including life of a stranger severely injured in an auto parents'-actions will be ever more closely wreck. Without the Samaritan's help, the controlled by government on the grounds stranger would have died. But because of that adults influence children. With billions the Samaritan's intervention, the stranger of dollars poured hysterically into anti­ lives (say) another three years-years smoking campaigns "to protect kids," is it spent, however, undergoing expensive plausible that government will not deal government-subsidized medical treat­ heavy-handedly with parents and other ments. The Samaritan caused taxpayers' adults whose actions diverge from the offi­ health-care costs to rise. Should govern­ cial message issued from Washington? ment then sue the Samaritan for increasing Government is either a nanny for none taxpayers' health-care costs? Of course not. or a nanny for all. The alleged principle allowing government "Secondhand smoke kills!" Scientific data (in the name of taxpayers) to sue tobacco undermine this assertion. But let's sup­ companies because smoking increases tax­ pose that secondhand smoke does increase payers' burdens is not itself sufficient non-smokers' risks of serious illness. grounds for penalizing tobacco companies. Would government regulation then be jus­ But as with the secondhand-smoke tified? No. Owners of private buildings argument, facts deny that smoking increas­ have strong incentives to make appropri­ es taxpayers' costs of subsidizing collec­ ate trade-offs. If enough smokers wanted tivized health care. Precisely because "smoking" restaurants, owners would smokers are more likely to die earlier than supply them. Non-smokers would be free non-smokers-and because medical to avoid such restaurants. Likewise, if expenses are highest for the very old­ enough non-smokers wanted smoke-free smoking may actually reduce the amounts restaurants (as they surely would if that taxpayers pay to fund collectivized secondhand smoke truly were hazardous) medicine. owners would supply them. In fact, a I have my own proposed tobacco settle­ world spared one-size-fits-all government ment. Let's recognize that smoking is vol­ regulation would feature a wide variety untary. Let smokers enjoy their cigarettes, of options for both smokers and non­ and let tobacco companies be regulated smokers. Different non-smokers-each only by the market by putting an end to with different tolerances for the risks and government's odious molestation of smok­ unpleasantness of secondhand smoke­ ers and tobacco companies. would each choose what amounts of secondhand smoke to encounter. The case for regulation built upon secondhand smoke's alleged health risks is feeble-fee­ ble, that is, unless one resorts to the pater­ nalistic canard that non-smokers, like smokers, are too witless to do what's good Donald J. Boudreaux for them. President LABOR DAYBOOK SALE Free with each order: Hans Sennholz's pamphlet NMan Must Work"

E. Calvin Beisner Regular Sale PROSPERITY AND POVERTY $14.95 $12.95 A compassionate discussion of the visible differences in income and wealth. Clarence B. Carson THE FLIGHT FROM REALITY 15.95 11.95 An excellent analysis of our intellectual flight from economic and political reality. Abraham Ellis THE SOCIAL SECURITY FRAUD 14.95 10.95 The author brilliantly dissects the inherent problems surrounding America's Social Security system. Burton W. Folsom, Jr., editor THE INDUSTRIAL REVOLUTION AND FREE TRADE 14.95 10.95 This anthology discusses the changing social and economic thought that gave birth to the Industrial Revolution and the tremendous improvements in working and living conditions that followed.

Freeman Classics AMERICAN UNIONISM: FALLACIES AND FOLLIES 14.95 10.95 The intellectual origins and economic implications of the union ideology.

FREE TO TRY 14.95 10.95 The entrepreneur is celebrated as the moving force of economic activity and progress.

UP FROM POVERTY 14.95 10.95 Powerful essays reflecting on the ills of public assistance, which must be paid for by that chronically Forgotten Man, the taxpayer. F. A. Harper WHY WAGES RISE 8.95 6.95 An incisive discussion of the economic principles that determine wage rates. Hans F. Sennholz THE POLITICS OF UNEMPLOYMENT ((hardcover) 24.95 19.95 A brilliant examination of various programs and policies leading to unemployment. Gustavo R. Velasco LABOR LEGISLATION FROM AN ECONOMIC POINT OF VIEW (hardcover) 6.95 4.95 A refutation of spurious arguments about labor legislation and unionization.

Sale ends September 30, 1997. All titles are paperback unless otherwise noted. Postage and handling: Please add $3 per order of $25 or less; $4 per order of $26-$50; $5 per order of more than $50. Send your order, with accompanying check or money order, to: FEE, 30 South Br-eadway, Irvington-on-Hudson, NY 10533. Visa and MasterCard telephone and fax orders ($10 minimum) are welcomed: (800) 452-3518; fax (914) 591-8910. IS POLITICS NEW FROM FEE! INSOLUBLE?

Is Politics Insoluble?

HENRY IlAzLITT by Henry Hazlitt EDITED BY FELIX R. LIVINGSTON Edited by Felix R. Livingston

During the ninth decade of a long and productive life, Henry Hazlitt (1894-1993) made plans to write a treatise on political science. In 1978 he prepared a provisional outline for a book that would have the title Is Politics Insoluble? Hazlitt planned to include chapters on legislation, government growth, centralization of power, and alternative forms of government. Other chapters would touch on ideas of prominent politi­ cal thinkers, including Plato, Aristotle, John Locke, America's Founders, James and John Stuart Mill, Herbert Spencer, T. H. Huxley, Wilhelm von Humboldt, Henry Maine, and Robert Nozick. In a 1984 letter confirming the donation of his personal library to The Foundation for Economic Education, Hazlitt wrote: "one particular book that I am still planning ... is already half written: Is Politics Insolu­ ble? The title chapter was published in Modern Age, and about four or five additional chapters in The Freeman. I hope to do up to perhaps a half dozen more to make a complete book." Unfortunately, Hazlitt never fin­ ished the project and eight of the outline's fourteen chapters remained unwritten at the time of his death. Now, The Foundation for Economic Education is proud to make the six essays-along with four other Hazlitt pieces-available in one col­ lection. Edited, and with an introduction by Felix R. Livingston, Hazlitt's essays remind us that just as there were two Greeces in history, constitutional Athens and despotic Sparta, so are there two Americas. The first is bound by the rule of law and upholds the private property order and its attendant obligation to self-reliance and self-discipline. In this America, "every man, whoever he is, can act best and live happily." But there is also a second America. Its laws go far beyond those that are "just, definite and minimal," and its judges twist precedent to transform judicial decision into judicial legislation. In the second America, oppor­ tunities to "act best" are narrowed and hopes to "live happily" are dashed. This anthology will help readers understand how the first America can be realized and how dangers inherent in the second Amer­ ica can be diminished. Felix R. Livingston, vice president of The Foundation for Economic Education from 1994 to 1997, is dean of institutional research at Washington and Jefferson College in Pennsylvania. Published by The Foundation for Economic Education, Inc. 30 South Broadway, Irvington-on-Hudson, NY 10533 ISBN 1-57246-067-9 • 152 pages • paperback $14.95 Visa and MasterCard orders: 1-800-452-3518 Potomac Principles by Doug Handow

Military Follies and Memorial Day Memories

ashington, D.C., is ever the city of pares well to that of other nations, it remains a Wcontradictions. Eloquent speeches mix of the good, the bad, and the ugly. about freedom by legislators voting to limit America has fought four ugly wars, ones liberty. Emotional promises to aid the needy at least partially inspired by the sort of base from policymakers whose actions cause pov­ motives that Washington usually ascribes to erty and destroy families. Heartfelt tributes to other countries. Another four were bad, military veterans from politicians who treat undercutting, rather than promoting, the soldiers as gambit pawns in a global chess national int~rest. Only two can claim to be game. good. The latter becomes particularly stark on Barely three decades after winning its in­ Memorial Day, always the most poignant of dependence, the United States found itself holidays. It is a celebration, but of a peculiar again at war with Great Britain. Washington kind: remembering the enormous sacrifice by had legitimate grounds for war-British war­ millions of Americans who have served, and ships routinely "impressed" (a form of gov- all too often died, in war. And such sacrifices /ernment kidnapping) American citizens off may not be over. U.S. vessels in order to man its fleets. But the Some conflict is probably inevitable given a most obvious trigger for war occurred in 1807 world full of imperfect nation-states headed when a British warship fired on an American by sinful human beings. But today, mercifully, ship that refused to stop and be searched. Five the dangers facing the United States are years then passed. When war came in 1812, slight. The primary risks to Americans result the so-called war hawks seemed motivated from Washington's continuing desire to in­ more by the prospect of seizing Canada than tervene around the globe irrespective of the of righting maritime wrongs. nation's fundamental security interests. In 1846 came war with Mexico, perhaps Memorial Day this year, like those before America's most unjust conflict. Criticized at it, had the obligatory presidential visit and the time by future Civil War figures Abraham wreath-laying at the Tomb of the Unknown Lincoln, Ulysses S. Grant, and Robert E. Lee, Soldier. The rhetoric was also the same-a the conflict was a war of aggression to wrest paean to past soldiers' willingness to safe­ the territory now comprising California, Ar­ guard Americans' freedom. Although the izona, and New Mexico from America's international record of the United States com- southern neighbor. The bravery of the U.S. soldiers cannot compensate for President James Knox Polk's dubious motives. Mr. Bandow, a nationally syndicated columnist, is a seniorfellow at the Cato Institute and the author and America came of age as an imperial power editor of several books, including Tripwire: Korea when it defeated Spain in 1898. Although and U.S. Foreign Policy in a Changed World. popular opinion was aroused through sensa- 553 554 THE FREEMAN • SEPTEMBER 1997 tionalistic (and often false) reporting of the There were no interests at stake that war­ brutal conflict between Spanish forces and ranted U.S. intervention in Vietnam. That Cuban guerrillas, President William McKinley Ho Chi Minhwas not a second Hitler andAsia wanted control of the Philippines and future was not ready to fall to communism is evident president Theodore Roosevelt simply wanted from the fact that two decades after America's war. That more than selfless concern for Cuba's humiliating ejection from Vietnam, interna­ liberation animated America is evident from tional hegemonic communism has disap­ President McKinley's insistence that Spain cede peared and the entire region, including Viet­ Guam and the Philippines to America. nam, is looking toward the United States. Even uglier than the Spanish-American Similarly bad was the Gulf War. There was War was the three-year conflict that followed no compelling reason to make the region safe as Washington defeated Filipino nationalists. for monarchy, since Iraq's threat to the Nothing except national greed motivated world's oil supply was overstated. And the oil Washington to suppress a foreign indepen­ embargo was sufficient to deny Baghdad any dence movement with policies even crueler benefit from its conquest. Today the United than those used by Spain in Cuba. Two States remains ensnared in the Persian Gulf, hundred thousand Filipinos died in the dev­ standing behind odious regimes like that of astating conflict, conducted for the sole pur­ Saudi Arabia. pose ofpreserving a Pacific outpost for Amer­ America's best conflicts were World War ican military forces. II, against potential hegemons that actually The Civil War was bad. Although the attacked (in the case of Japan) and declared welcome end ofslavery has given an enduring war on (as did Germany) the United States. moral gloss to the conflict, President Abra­ The Korean War can claim some legitimacy ham Lincoln repeatedly emphasized that not because Washington had any fundamen­ union rather than abolition was his goal, and tal interest in the Korean peninsula, but the outer four southern states, Arkansas, North because America had helped bring about the Carolina, Tennessee, and Virginia, seceded conditions that led to the war and could not only after Lincoln called out troops to invade easily walk away. the other seven. Any political union should be With such a dubious record ofsending good voluntary; no such ties are worth 630,000 lives. people to fight for bad causes, Washington Peaceful separation was the right solution. should be less promiscuous today in commit­ American participation in World War I, ting American servicemen to defend other an imperial slugfest devoid of relevance to countries. Yet U.S. soldiers are currently the United States, was equally stupid. The stationed in the Balkans, attempting to put great anti-Semitic despotism ofTsarist Russia back together the Humpty Dumpty state of and revenge-minded France (which had ac­ Bosnia. A bipartisan coalition wants to ex­ tually declared war first in the Franco­ pand NATO deep into Central and Eastern Prussian War some four decades earlier) were Europe, so Americans will defend the borders as much at fault as Wilhelmine Germany and of the Czech Republic, Poland, and who unstable Austria-Hungary in starting the war. knows who else. Policymakers are similarly The supposed chief victim, Serbia, was a committed to staying in East Asia, apparently blood-stained regime that used terrorism forever, even though America's allies are now against neighboring Austria-Hungary. The for­ all well able to defend themselves. mal justification for American entry in the The sad reality is that many of the enor­ conflict-toprotect the right ofU.S. citizens to mous sacrifices made by so many young travel on merchant ships of a belligerent Americans had nothing to do with freedom. power carrying munitions through a war This was not the fault ofthose who fought and zone-was simply inane. In fact, President died, but of the political leaders who sent Woodrow Wilson wanted America in so he them. For two centuries American politicians could reorder the world. Washington should have been treating the lives of American have stayed out. servicemen far too cheaply. D THEFREEMAN IDEAS ON LIBERTY

Market-Based Environmentalism vs. the Free Market

by Roy E. Cordata

eople on both the left and right are ever they want, how and when they want Prealizing that direct regulation ofproduc­ it-the result will be polluted air and water­ tion and market activities-"command and ways, littered streets, and depleted natural control"-is too costly. Yet free markets and resources. Pollution and environmental deg­ the outcomes they are likely to generate radation are often cited as evidence that continue to be unappreciated. To the extent Adam Smith was wrong. People pursuing that policymakers value markets, it is not their own self-interest may not advance the because markets maximize liberty and social well-being of society. welfare but because they can be manipulated Advocates of MBE fully subscribe to this to produce centrally planned ends. view. As MBE advocates Robert Stavins and That is the basic argument for market­ Bradley Whitehead argue, "policies are based environmentalism (MBE). In spite of needed to ... harness the power of market its calls for decentralized decision-making, forces ... to link the ... forces ofgovernment the purpose ofMBE is to subvert freely made and industry."l decisions by coercively altering incentives. That view, unfortunately found in many Thus, most MBE policies should be viewed economics texts, misunderstands the nature with suspicion, if not disdain, by those whose of both a free society and a free-market primary interest is to advance individual lib­ economy. Environmental problems occur be­ erty. (MBE should not be confused with cause property rights, a prerequisite of free free-market environmentalism, which is not markets, are not identified or enforced. Prob­ subject to these criticisms.) lems of air, river, and ocean pollution are all due to a lack of private property rights or Markets and the Environment protection. Since clarifying and enforcing property rights is the basic function of gov­ The standard view of environmental prob­ ernment in a free society, environmental lems is that they are inherent in a free society. problems are an example of government If people are left free to pursue their own failure, not market failure. self-interest-to produce and consume what- In a free society, environmental problems should be viewed in terms of how they im­ Dr. Cordato is the Lundy Professor at Campbell pinge on human liberty. Questions should University in Buies Creek, North Carolina. For a focus on how and why one person's use of much more detailed discussion ofthis issue see Roy E. Cordato, "Market-Based Environmentalism and resources might interfere with the planning the Free Market: They're Not the Same, " The Inde­ and the decision-making abilities of others. pendent Review, vol. 1, no. 3 (Winter 1997). Since people can legitimately make plans and 555 556 THE FREEMAN • SEPTEMBER 1997 decisions only with respect to resources that ent emissions, the amount of recycled paper they have rights to, environmentalism that has in grocery bags, or some other outcome a human well-being as the focus of its analysis desirable goal. Individual behavior is then must center on property rights. manipulated to achieve the goal. MBE poli­ From this perspective, environmental prob­ cies are meant to control markets by altering lems arise because different people attempt the incentive structure-that is, individual to use the same resource for conflicting pur­ decision-making-in order to thwart the out­ poses. This can occur only if the property comes of free-market activity. rights to that resource are not clear or are not Even the free-market advocate and chair­ being enforced. Two simple examples can man of President Reagan's Council of Eco­ highlight the possibilities. Imagine a commu­ nomic Advisers, Murray Weidenbaum, has nity that has a cement factory that emits argued, "the environmental pollution prob­ cement dust into the air. The dust causes lem is not the negative task of punishing people in the community to have to wash their wrongdoers. Rather, the challenge is a very cars and house windows more frequently than positive one: to alter people's incentives.,,2 otherwise and creates respiratory problems The two most common MBE approaches for those who have to breathe it. That is are excise taxes and "tradable permits." The clearly a property-rights enforcement prob­ excise tax is a direct implication of traditional lem. Note that the problem is not that the welfare economics, which argues that pollu­ dust is emitted into the air but that it lands tion is evidence of "market failure" in which on people's property-their cars, houses, and prices fail to incorporate the full "social cost" lungs-and interferes with their use of it. In of production; that is, the external costs this case, ownership rights are clearly defined, associated with the pollution are left out. but are not enforced. Since, under this theory, markets fail to Another example might involve a public generate the correct price and output, an waterway, such as a river. Along the river, excise tax equivalent to the pollution costs there is a factory that dumps the waste from would "correct" for the failure. The problem its production process. Downstream are is that this entire analysis is both practically homeowners who use the river for recre­ and conceptually unworkable. The concept of ational purposes, possibly fishing or swim­ social cost, if meaningful at all, would be the ming. The factory waste renders the river sum of the pollution costs experienced by unsuitable or less useful for those purposes. all the individuals in the community. Yet in The central problem here is that the rights to reality, each person's costs are strictly per­ the river are not clearly defined. The public­ sonal and subjectively experienced. They can­ policy issue involves who should have those not be measured and certainly cannot be rights or how they should be divided. It should added to the "pollution costs" experienced by be noted that the idea of privatizing rivers or others. sections of rivers is not new. Early American Furthermore, because any tax would cause Indian tribes had clearly defined and enforced a complete reallocation of resources in the property rights to sections of many rivers. economy, it could not possibly be known State governments nullified those rights. whether the tax would end up making society Since free markets require well-defined and as a whole better or worse off. Such policies enforced property rights, the solution to en­ ignore not only sound economics but also vironmental problems lies in extending capi­ sound science. The result is proposals that talism, not restricting it. promote the political agenda or aesthetic values of policymakers and interest groups. Altering Incentives For example, the World Resources Insti­ tute (WRI) has published a study claiming Market-based environmentalism has little that the use of automobiles imposes $300 in common with this approach. Under MBE, billion annually in external costs on society.3 government authorities deem a level of efflu- That figure includes the "costs" of global MARKET-BASED ENVIRONMENTALISM VS. THE FREE MARKET 557 warming, even though decades of satellite President Clinton's favorite think tank, is data actually show mostly global cooling, and calling for tradable permits to promote recy­ such pure aesthetics as the unsightliness of cling. The government would issue permits shopping malls and the loss ofopen space due to newsprint companies limiting them to a to urban sprawl. The proposed remedies are certain level of nonrecycled materials in their all "market based" and meant to "alter peo­ paper. Companies could sell their permits if ple's incentives." They include hefty new taxes they increase the recycled content. Those ongasoline, user fees for roads, and forcing all proposals exist, even though, as reported in shopping malls to charge for parking. the Washington Post and the Wall Street Jour­ Tradable permits (TPs), while often re­ nal, too much recycling may be causing in­ ferred to as a "property rights" approach, are creased pollution and waste of resources. not intended to expand property rights but to Such policies are best viewed as an attempt to rearrange and restrict existing ones to achieve impose personal attitudes, such as a disdain an "environmentally correct" and politically for landfills, on society. determined result. This approach begins by Market-based environmentalism and the identifying an undesirable activity and then free market are not the same. Free-market restricting it by issuing a fixed number of policies, even with respect to the environ­ permits to pursue the activity. The permits ment, would not have "environmental pro­ then can be bought and sold in a market tection" per se as their central focus. Instead setting. Firms can boost their revenues by the focus would be on resolving conflicts reducing the level of the activity in question among human beings as they put natural and selling permits to other firms that wish resources to use. An important by-product of to increase their activity beyond what their that would be a cleaner environment and a permits allow. While TPs "harness" market more conscientious stewardship of resources. forces to achieve politically determined envi­ MBE sees human activity as something that ronmental goals, they are in fact disdainful of must be harnessed by the government, albeit truly free markets based on the recognition through market incentives. The conflict, from and enforcement of property rights. this perspective, is not among human beings TPs simply legalize trespass to the extent but between them and the natural environ­ they allow actual rights-violating pollution to ment, with human beings wearing the black continue, for example, allowing cement com­ hats. D panies in the example above to pollute with­ out compensation to victims. As Robert Mc­ 1. Robert Stavins and Bradley Whitehead, The Greening of Gee and Walter Block have argued, "perhaps American Taxes: Pollution Charges and Environmental Protection the major fault with trading permits is that ... (Washington, D.C.: The Progressive Policy Institute, 1992), p. 3. 2. Murray Weidenbaum, "Reforming Government Regula­ they entail a fundamental and pervasive vio­ tion to Promote Prosperity," The World andI, August 1992, p. 497. lation of property rights."4 3. James MacKenzie, Roger Dower, and Donald Chen, "The Going Rate: What it Really Costs to Drive," World Resources In other instances, they simply create new Institute, June 1992. kinds of rights in an attempt to centrally plan 4. Robert McGee and Walter Block, "Pollution Trading Permits as a Form ofMarket Socialism and the Search for a Real industries in the name of environmental Market Solution to Environmental Pollution," Fordham Envi­ protection. The Progressive Policy Institute, ronmental Law Journal, vol. 16 (1994): 58. THEFREEMAN IDEAS ON LIBERTY

Mises's Legacy for Feminists by Wendy McElroy

he name of the eminent Austrian econ­ In some respects, the liberal feminism that Tomist Ludwig von Mises does not com­ arose during the early 1960s-called "second monly arise in feminist circles, which tend to wave feminism"-resembled what Mises de­ view the free market as an institution through scribed as a branch of classical liberalism. which men as a class oppress women as a Although the movement embraced a pro­ class. Ifthe subject ofMises ever did arise, the found bias against capitalism, much of the political incorrectness of his observations on thrust of liberal feminists was aimed at re­ female nature would be likely to create more, moving the legal barriers and inequities con­ not less, coldness. For example, in Socialism: fronting women. The call for legal equality An Economic and Sociological Analysis, he reached its peak in March 1978 when 100,000 wrote, "It may be that a woman is able to demonstrators marched on Washington, choose between renouncing either the most D.C., to express their determined support profound womanly joy, the joy of mother­ for the ultimately doomed Equal Rights hood, or the more masculine development of Amendment (ERA). Sixties feminists tended her personality in action and endeavor. It may to view men as recalcitrant partners who be that she has no such choice."l needed to be reminded of their social respon­ From these fighting words, Mises moved sibilities: from recognizing women's ability into political commentary about the feminist in the workplace to sharing the task of par­ movement itself. He argued that if feminism enting at home. But, by current standards, merely sought the economic and legal free­ the hostility expressed toward men in the doms that permit women to become self­ 1960s was muted. In the spirit of acknowledg­ determining, then feminism was no more than ing the presence of male members, the Na­ a "branch of the great liberal movement, tional Organization of Women even changed which advocates peaceful and free evolution." its name to the National Organization for On the other hand, if feminism sought to Women. alter the "institutions of social life under the impression that it will thus be able to remove Gender Feminism the natural barriers," then feminism "is a spiritual child ofSocialism."2 After all, one of Meanwhile, in the background, another socialism's characteristics is its attempt to brand of feminism was hammering out a reform nature and natural laws by reforming distinct ideology that Mises would have con­ social institutions. One illustration of that is sidered to be wholly "a spiritual child of the attempt to reform supply and demand Socialism." In her book Who Stole Feminism? through a planned economy. Christina Hoff Sommers referred to that Ms. McElroy is author of Sexual Correctness: The ideology as "gender feminism" because, on Gender-Feminist Attack on Women (McFarland, the basis of gender, it considers men and 1996). women to be separate and necessarily antag- 558 559 onistic classes. Gender feminists conclude this point of theory that Mises provides pen­ that all the ills afHicting women-from date etrating insights on modern feminism. rape to the wage gap-flow from the male system of total dominance, called patriarchy, Class Analysis and which is expressed partly through capitalism. Caste Analysis The pioneering gender theorist Adrienne Rich defined patriarchy in her book Of A class is nothing more than an arbitrary Woman Born as "the power of the fathers," grouping of entities that share common char­ that is, the "social, ideological, political sys­ acteristics as determined from a certain epis­ tem" through which men control women "by temological point of view. In short, what force, direct pressure or through ritual, tra­ constitutes a class is defined by the purposes dition, law, and language, customs, etiquette, of the definer. For example, a researcher education, and the division of labour.,,3 studying drug addiction may break society Regarding the emotional impact of patri­ into classes of drug users and nonusers. Per­ archy, Andrea Dworkin wrote in Our Blood, haps hewill further establish subclasses within "Under patriarchy, every woman is a victim, drug users based on the particular substance past, present, and future. Under patriarchy, used, the frequency of use, or some other every woman's daughter is a victim, past, factor salient to the researcher's purposes. present, and future. Under patriarchy, every Classes can be defined by almost any factor woman's son is her potential betrayer and considered salient to the definer, such as also the inevitable rapist or exploiter of an­ income level, hair color, age, nationality, other woman.,,4 Men were no longer merely sexual habits, and so on. recalcitrant partners. Gender feminists rede­ But, for gender feminists, class analysis is fined the opposite sex into a distinct political more than a mere epistemological tool. It is class whose interests were inherently antag­ converted into an ideological tool. That is, onistic to women. In the theory that followed, members of the class "male" do not merely Dworkin pronounced all men to be rapists. share an identity based on certain physical Kate Millett called for the end of the family characteristics, they also share specific polit­ unit. Catharine MacKinnon declared mar­ ical and social interests based on that identity. riage, rape, and prostitution to be indistin­ The foremost interest is to keep women, as a guishable from each other. class, under theircontrol. Thus, the concept of Viewed through the political lens ofgender gender as a class becomes so significant that feminism, maleness ceased to be a biological it is a causative factor: it predicts and deter­ trait and became a cultural or ideological one. mines how the members of the class will In Toward a Feminist Theory of the State, behave. MacKinnon insisted, "Male is a social and Class analysis is widely associated with Karl political concept, not a biological attribute."s Marx, who popularized it as a political ap­ In Our Blood, Dworkin agreed, "In order to proach to predicting interests and behavior. stop ... systematic abuses against us, we must For Marx, the salient political feature defining destroy these very definitions of masculinity a person's class was his relationship to the and femininity, of men and women.,,6 Male­ means of production: was he a capitalist or a ness could not be reformed. It needed to be worker? This is a form of relational class eliminated. analysis, which describes a class by its rela­ With the death of the ERA and the con­ tionship to an institution, in this case the sequent disillusionment of liberal feminists, capitalist system. the ideology of gender feminism came to the But the concept of class has a deep history forefront and began to exert a defining influ­ within individualist thought, which predates ence on many issues. Indeed, it is not an Marxism. In America, for example, the Jef­ exaggeration to state that much of current fersonian John Taylor ofCaroline argued that mainstream feminism is based upon gender his contemporaries who were involved in feminism's version of class analysis. It is on banking schemes constituted a "paper aris- 560 THE FREEMAN • SEPTEMBER 1997 tocracy"-a special class within society that These classes are not clubs, and the ins have benefited at the expense of others. Franz no power to keep out any newcomer."? Oppenheimer's key distinction between those Mises called static classes that labor under who use the political means to achieve their legal disabilities "castes." Castes are created goals and those who use the economic means when legal barriers are raised to cement was disseminated through Albert Jay Nock, people into a class and prevent social mobility. and it still forms the current conception of In Socialism, he expanded what he meant by class analysis within individualist thought. castes, or "estate-members": "Estates were The class is described in terms of its relation­ legal institutions, not economically deter­ ship to the institution ofstate power: Namely, mined facts. Every man was born into an is any given individual one ofthe rulers or one estate and generally remained in it until he of the ruled? Does he use the political means died.... One was master or serf, freeman or or become its victim? slave, lord of the land or tied to it, patrician Twentieth-century American society poses or plebeian, not because one occupied a a problem for Marxist analysis, which believes certain position in economic life, but because in fixed class interests-the inherent hostility one belonged to a certain estate.,,8 In essence, between workers and capitalists. American castes are legislated classes that create a static society is almost defined by the fluidity of its society. class structure and interests. People fre­ In The Free andProsperous Commonwealth, quently reclassify themselves from worker Mises defined a status society as one "consti­ to capitalist, from lower to upper class. Past tuted not of citizens with equal rights, but cultures, such as pre-revolutionary France, divided into ranks vested with different duties drew clear legal lines between the classes and and prerogatives."g It was under a caste recognized different rights for each of them. system, not a class one, that necessary con­ Even in eighteenth- and nineteenth-century flicts arose between legal categories ofpeople America-sometimes touted as a "classless who were accorded different privileges and society"- categories of people were denied disabilities. Thus, the phrase "class warfare" is such legal privileges as voting. As the law a mistaken one: it should be "caste warfare." became universally applied, class barriers Moreover, so-called "class warfare" con­ fell. tains further confusion. For example, the The fluidity of modern American society phrase usually assumes that there is an iden­ poses no theoretical problem for Mises's tity of interests among the members of the concept of class. To Mises, class was a matter separate classes. Yet as Mises explained, a of shared identity, not of shared interests. common identity does not necessarily mean Thus, the "working class" may share certain common interests since individual members objective economic realities, but this does of a class will tend to give their own individual not determine or predict the subjective values interests priority. Ironically, this may well lead and interests of its members. Indeed, in a to competition among "class" members, free market with legal equality, he expected rather than commonality. Mises wrote: "Pre­ to see a constant shift in the class structure. In cisely because 'class comrades' are all in the The Anti-Capitalistic Mentality, after defin­ same 'social situation,' there is no identity of ing the "three progressive classes" of society interests among them, but rather competition. as "those saving, those investing the capital The worker, for example, who is employed goods, and those elaborating new methods under better-than-average conditions has an for the employment of capital goods," Mises interest in excluding competitors who could explained: "Everybody is free to join the reduce his income to the average level. ... ranks of the three progressive classes of a What has been done by the labor parties in capitalist society. These classes are not closed this regard in every country during the last castes. Membership in them is not a privilege few years is well known."lO Mises raised conferred on the individual by a higher au­ fundamental questions regarding the con­ thority or inherited from one's ancestors. cepts of "class interest" and "class warfare." MISES'S LEGACY FOR FEMINISTS 561

Do shared interests even exist apart from the the theories to which it belongs; outside the sum of the individual self-interests of each context ofthese theories it is no more than an member? If objective shared interests do intellectual plaything."12 exist, do they take priority over the subjective Mises's theory of how society functions is value judgments of each member? If they do based on classical liberal thought, which con­ not have priority, what value do "class inter­ siders cooperation to occur only when both ests" have in allowing us to predict the sides benefit from the exchange. Indeed, the behavior of a group? Let us consider these very perception ofbenefit is what impels each questions with specific application to gender side to act. Even the infamous hostility be­ feminist ideology. tween workers and capitalists dissolves in a situation of equal individual rights because Class Conflict Within each group has no ability to coerce coopera­ Gender Feminism tion from the other. Only when force is introduced into the exchange do group con­ According to this ideology, gender is the flicts necessarily arise. politically salient factor that defines a class­ Gender feminism is based on different what Mises would call a caste-in terms ofits theory: MacKinnon has referred to the ide­ relationship to the institution of patriarchy. ology as "post-Marxist," meaning that it Men share not only an identity but also adopts many aspects ofMarxism but rejects its political and social interests, which are in insistence that economic status, rather than necessary conflict with the identity and inter­ gender, is the salient political factor deter­ ests of women. The identity of the class may mining a class. Thus, gender feminism incor­ be based on physical characteristics, but the porates such socialist ideas as "surplus labor," interests of the class are ideological. Consider by which human cooperation is viewed as the paragraph on rape that closes Susan the process ofone group taking benefits from Brownmiller's introduction to Against Our another group. To rectify the class inequity it Will: "Man's discovery that his genitalia could is necessary to do precisely what the free serve as a weapon to generate fear must rank market forswears-to forcibly intervene in as one of the most important discoveries of order to assure a "socially just" outcome. The prehistoric times, along with the use of fire. law must act to benefit one class at the ... It is nothing more or less than a conscious expense of the perceived self-interest of an­ process ofintimidation by which all men keep other class. Specifically, the law must act to all women in a state of fear."ll benefit women, who have been historically Here a shared identity based on a shared disadvantaged, at the expense of men, who manhood leads all men to a shared interest in have been the oppressors. In Misesian terms, using rape to intimidate all women. Mises women cease to be a class with shared identity would argue that the only valid step in the based on characteristics and become a foregoing ladder of logic is that men, as a caste-a group with shared political and so­ class, share a common anatomy. He would cial interests that are legally protected. This staunchly dispute that all members of the form of intervention is epitomized by such male class would evaluate that characteristic measures as affirmative action and compara­ identically or use it in a collective, rather than ble worth. an individualistic, manner. Indeed, the fact that men compete for women would undoubt­ An Individualist Feminist with edly lead to many sexual approaches, includ­ Doubts About Class Theory ing protection and familial affection. Mises questioned the very basis of class-conflict The form of feminism that draws most theory, which rests upon the assumption that heavily upon classical liberalism is undoubt­ what benefits one class must injure another. edly individualist feminism, which traces its As he pointed out, "the scientific significance roots as an organized force to the abolitionist of a concept arises out of its function in movement in America. As such a feminist, I 562 THE FREEMAN • SEPTEMBER 1997 question the value ofthe concept ofclass itself because you belong to a certain class you within the intellectual framework of individ­ share certain interests that predict future ualism. One reason is the substantive tension behavior. But it is possible to argue the that seems to exist between the concept of inverse. That is, because a group has demon­ class and other theories within classical liberal strated similar preferences or behavior, they thought. belong to the same class. But a class mem­ Consider subjective value theory as painted bership that depends entirely on past behav­ by Austrian economists, who argue that it is ior may well have little predictive value for the not possible-even on an individual level-to future. predict how anyone will value a certain object For example, consider the ruling class, or opportunity, or what anyone will perceive which uses the political means. According to to be in his own self-interest. Only in retro­ their demonstrated preferences, they may spect, by examining how the individual acted seem to share an interest in, for example, on his choices, can you judge what that protecting domestic industry through tariffs. person's perceived interests were. That is Moreover, they may also share loose ties to what is meant by the phrase "demonstrated state institutions that protect and enforce preference." Even then, having analyzed a those interests, just as strangers who use the person's former demonstrated preferences, it economic means share ties to the institution is not possible to predict how he will perceive of the free market. In that sense, the class his interests in the future. interests of the ruling class may be said to be Subjective value theory seems to argue institutionalized. against there being a predetermined interest Yet with an apparently strong structure of of any sort, especially of the sort so divorced class interest, we cannot predict the future from subjective individual evaluation as that preferences that individual members of the of an objective class interest. In short, two ruling class will demonstrate. History is re­ people who share identical class characteris­ plete with people who act against their pre­ tics, for example, retiring factory workers at dicted class interests. Human beings routinely Ford, may have extremely different percep­ act out of conscience, obedience, religious tions ofself-interest and, so, manifest entirely conviction, passion, whim, drunkenness-the different behavior. list ofthe causative factors that can determine This reservation about class theory hear­ behavior seems endless. kens back to a question raised by Mises's Perhaps the most valuable function ofclass commentary: Does it even make sense to talk analysis within the framework ofindividualist about class interests existing apart from the thought is as a methodological tool to under­ self-interest of the individual members of stand history rather than to predict the future. that class? Does it even make sense-on For example, a researcher might observe that anything other than an epistemological or a particular person was both an antebellum cognitive level-to deal with a class as though slave owner and a voting member of society. it were an empirical entity apart from its His class-or, in this case, caste-affiliation members? might provide insight into his voting pattern. Yet, despite such reservations, the concept Yet, even here, a cause-and-effect relation­ of class obviously has value in approaching ship cannot be drawn between his caste affil­ ideas and understanding certain aspects of iation and his behavior since other factors, social interaction. The "working class," for such as a sincere religious conviction, might example, does describe a particular economic have been causative. situation and distinguish it from others. The In short, the individualist tradition, within question becomes: does identifying the mem­ which individualist feminism is lodged, seems bers of a class provide any information about to allow limited scope for the concept of class the interests of that class as a whole? analysis. The scope is so limited, in fact, that In at least one sense, it clearly could. the concept of class may be stripped of its Marxist and gender-feminist theory claim that predictive and causative value. For some, this MISES'S LEGACY FOR FEMINISTS 563 may mean losing a powerful tool of analysis. 2. Ibid., p. 101. 3. Adrienne Rich, Of Woman Born: Motherhood as Experi­ On the bright side, however, this means there ence and Institution (London: Virago, 1977), p. 57. is no necessary conflict between the sexes. The 4. Andrea Dworkin, Our Blood: Prophecies and Discourses on Sexual Politics (New York: Harper and Row, 1976), p. 20. fact that men share certain physical charac­ 5. Catharine A. MacKinnon, Toward a Feminist Theory o/the teristics says nothing about their individually State (Cambridge, Mass.: Harvard, 1987), p. 114. perceived self-interests, 6. Dworkin, p. 48. or about how they 7. Ludwig von Mises, The Anti-Capitalistic Mentality (Prince­ will act in the future. Even if it could be ton, N.J.: D. Van Nostrand, 1956), p. 40. demonstrated that men andwomen-as class­ 8. Mises, Socialism, p. 332. 9. Ludwig von Mises, The Free and Prosperous Common­ es-have tended to clash historically, this says wealth: An Exposition ofthe Ideas ofClassical Liberalism (Prince­ nothing about whether we must remain ene­ ton, N.J.: D. Van Nostrand, 1962), p. 158. 10. Ibid., p. 164. mies in the future. D 11. Susan Brownmiller, Against Our Will: Men, Women and Rape (New York: Bantam Books, 1976), p. 5. Emphasis in the 1. Ludwig von Mises, Socialism: An Economic and Socio­ original. logical Analysis (London: Jonathan Cape, 1951), p. 100. 12. Mises, Socialism, p. 329. THEFREEMAN IDEAS ON LIBERTY

Lafayette: Hero of Two Worlds by Jim Powell

he freedom fighter Marquis de Lafayette not justly deprive an individual," he insisted. T changed history. He helped defeat the He maintained these rights aren't "subject to British at Yorktown, winning American inde­ the condition ofnationality," and they include pendence. In France, he helped topple two "freedom ofconscience and opinions, judicial kings and an emperor. Jean-Antoine Houdon, guarantees, the right to come and go." He the great eighteenth-century sculptor who promoted free trade. He fought for religious created busts of many great heroes, dubbed toleration and freedom ofthe press. When the Lafayette "the apostle and defender ofliberty French government harassed immigrants, he in the two worlds." sheltered many in his own house. He spent a Cornell University historian Stanley Idzerda lot of his own money to help free slaves in remarked, "Lafayette knew only one cause French colonies. during his long lifetime: human liberty. As a He did more than anybody else to link young man he risked his life in war and friends ofliberty everywhere. He was in touch revolution for that cause. In middle age, living with Thomas Jefferson, Thomas Paine, under the barely concealed dictatorship of George Washington, Benjamin Franklin, Napoleon, a regime he detested, he recalled James Madison, James Monroe, John Quincy how he had been wounded, denounced, con­ Adams, Daniel Webster, Andrew Jackson, demned to death, despised, imprisoned, beg­ and James Fenimore Cooper, among other gared, and exiled-all in the service ofhuman Americans. He was a friend of Pierre Samuel liberty. Poor, powerless, and with no pros­ Du Pont de Nemours, Germaine de Stael, pects at that time, Lafayette asked, 'How have Benjamin Constant, and Horace Say in I loved liberty? With the enthusiasm of reli­ France. He corresponded with Charles James gion, with the rapture of love, with the con­ Fox in Britain and Simon Bolivar, who helped viction of geometry: that is how I have always secure the independence of Venezuela, Co­ loved liberty.'" lombia, Ecuador, Peru, and Bolivia. Lafayette Lafayette was the principal author of the encouraged Italian liberals, Spanish constitu­ Declaration of the Rights of Man and of the tionalists, and Greek and Polish freedom Citizen. "There exist certain natural rights fighters. inherent in every society of which not only Lafayette stood out in a crowd. He was tall one nation but all the nations together could and bony with green eyes. "Pale, lanky, red­ haired, with a pointed nose and receding Mr. Powell is editor of Laissez Faire Books and a forehead," added biographer Vincent Cronin, seniorfellow at the Cato Institute. He has written for "he looked less like an officer than a wading the New York Times, the Wall Street Journal, Barron's, American Heritage, and more than three bird. Norwas he a shining courtier, being slow dozen other publications. Copyright © 1997 by Jim to speak and awkward." Powell. From the beginning, though, Lafayette im- 564 565 pressed people. His cousin, the Marquis de de La Fayette, Colonel of the French Gren­ Bouille recalled, "I found the young La Fay­ adiers. He descended from a long line of ette remarkably well informed for his age, warrior-aristocrats, one of whom fought with astonishingly forward in reason and reason­ Joan of Arc against the English. Lafayette's ing, and extraordinary for his reflections, his mother was Marie-Louise-Julie de la Riviere, wisdom, his moderation, his cool head and his whose family had money. discernment." Lafayette's tutors stressed Catholic doc­ Washington saluted Lafayette's abilities as trine and the battlefield exploits of his ances­ a strategist and commander: "He possesses tors, but he did acquire some proficiency in uncommon military talents, is of quick and the classics. "I was very good in Latin," he sound judgment, persevering, and enterpriz­ recalled. "I wasn't made to take Greek, which ing without rashness, and besides these, he is annoyed me. 1 spent four years at the College of a very conciliating temper and perfectly [de Plessis]. My essays were quite outstand­ sober, which are qualities that rarely combine ing." One of his early heroes was Vercinge­ in the same person." torix, who had defended Gaul against Julius Jefferson, representing American interests Caesar. in Paris, offered this candid assessment to When he was two, his father was killed by Madison: "The Marquis de La Fayette is a a British cannon ball at the battle of Minden most valuable auxiliary to me. His zeal is (about 40 miles west of Hannover, Germany) unbounded, & his weight with those in power, during the Seven Years War, and he became great. His education having been merely mil­ the Marquis de La Fayette (as he spelled it itary, commerce was an unknown field to him. before the French Revolution). His mother But his good sense enabling him to compre­ pulled strings to find a place at Versailles, hend perfectly whatever is explained to him, where the king held court. She died in April his agency has been very efficacious. He has 1770, and his grandfather, the Marquis de la a great deal of sound genius, and is well Riviere, died soon afterward, leaving Lafay­ remarked by the King, & rising in popularity. ette an inheritance which assured him of a He has nothing against him, but the suspicion sizeable annual income of around 120,000 of republican principles. 1 think he will one livres. day be of the ministry. His foible is, a canine At 15, he met 14-year-old Marie Adrienne appetite for popularity and fame; but he will Fran~oise de Noailles (known as Adrienne) get above this." Jefferson told Lafayette: and fell in love. The wealth and power of the "according to the ideas of our country, we do Noailles family were rivaled only by the royal not permit ourselves to speak even truths, house of Bourbon. They married about a year when they may have the air of flattery. 1 later, on April 11, 1774. According to biog­ content myself, therefore, with saying once rapher Andre Maurois, she had "large, brood­ and for all, that 1 love you, your wife and ing eyes and an air of alert intelligence." Her children." aunt the Comtesse de Tesse, remarked that The respected Lafayette scholar Louis Adrienne rooted her views in "the Catechism Gottschalk wrote that "For most of the last and the Rights of Man." fifty years of his long life, he was the out­ Lafayette became impatient with positions standing champion in Europe of freedom­ in the Noailles cavalry, and he didn't see a freedom for all men, everywhere." future for himself at the royal court. He heard insurgent Americans were looking for French Early Life recruits, so he called on Silas Deane, a Connecticut merchant who was representing Marie Joseph Paul Yves Roch Gilbert du the Continental Congress. He wanted to vol­ Motier was born September 6, 1757, in unteer at his own expense. He told Deane: "it Chateau de Chavaniac, Auvergne, in south­ is when danger threatens that I wish to share central France. His father was Michel Louis your fortune." Christophe Roch Gilbert du Motier, Marquis Lafayette bought a little two-gun merchant 566 THE FREEMAN • SEPTEMBER 1997 ship named La Victoire and set sail for Amer­ Washington's command, but Lafayette as­ ica on April 20, 1777. It was an anxious serted his loyalty. He wrote Washington: "I voyage, because the ship would have been am bound to your destiny, I shall follow it and easy prey for a faster, better-armed British will serve you with my sword and with all privateer. But Lafayette was lucky, and after my faculties." Washington replied: "I am well 54 days at sea, he arrived at the Bay of aware that you are quite incapable of enter­ Georgetown, South Carolina. He sailed on to taining plans whose success depends upon Charleston. He spent a month traveling to lies and that your spirit is too high to stoop Philadelphia, mostly on horseback. to seek a reputation by ignoble means and The Americans gave him the brush-off by intrigue." He became Washington's infor­ because previous French volunteers had mation officer. proven to be a troublesome lot. But General On May 18, 1778, Washington directed George Washington was in desperate straits. Lafayette to lead a force up between the There were only about 11,000 men in his Delaware and Schuylkill rivers and disrupt army, they were poorly equipped, and they British communications with Philadelphia. were being chased by British General William He displayed tactical genius by cleverly am­ Howe. Moreover, Benjamin Franklin, whom bushing several British detachments, then Lafayette had met in Paris, sent letters ask­ maneuvering his men back through British ing Washington to serve as a "discreet friend" lines. The British pulled their soldiers out of to Lafayette, "to advise him if necessary with Philadelphia and headed for New York, and a friendly affection." Franklin was confi­ Washington asked Lafayette to pursue them dent that a generous reception for Lafayette and inflict as much damage as possible. Work­ would make the French more willing to help ing with General Charles Lee, who turned America. out to be incompetent, Lafayette was nearly routed by the British at Monmouth, New Lafayette and Washington Jersey. He decided to see how he could help the Lafayette first met Washington during a cause by returning to France and leading dinner at Philadelphia's City Tavern, July 31, French forces against the British. He bid 1777. He welcomed Lafayette as the Ameri­ farewell to Washington, boarded L 'Alliance can forces began moving to evade an attack by in Boston, and sailed on January 11, 1779, British General Charles Cornwallis. They bearing a letter from Washington to Ben­ were overrun at Brandywine, Pennsylvania, jamin Franklin. At Lafayette's suggestion and Lafayette was wounded in the leg. Then France would send ships and soldiers to Washington's forces suffered serious losses America. Of course, Lafayette would have fighting British General William Howe loved to command the force, but he was only around Philadelphia. 22, and there were others with considerable Lafayette shared the hardships at Valley seniority. Forge in 1777-1778. "It is here," he explained to his wife, "that the American army will Lafayette versus the British spend the winter in little huts which are scarcely more cheerful than a cell.... Every­ Lafayette proved himself extraordinarily thing tells me to leave, but honor bids me stay, resourceful at harassing the British-and es­ and really, when you understand in detail the caping from them. One engagement with circumstances I am in, which the army is in, as about 2,500 British· soldiers at Petersburg, is my friend who commands it, and the whole Virginia, was marked by the death of General American cause, you will forgive me, my dear William Phillips-the same man who, as an heart, you will even pardon me, and I dare artillery officer 22 years before, had ordered almost say that you will congratulate me." the cannon fire that blew Lafayette's father to Washington's enemies tried to lure Lafay­ bits. ette into schemes that would undermine Traitor General Benedict Arnold took over LAFAYETTE: HERO OF TWO WORLDS 567

Phillips's command, and he was to be joined reported 139 Americans were killed, and by General Charles Cornwallis, marching up Lafayette spurred his horse through the gun­ from South Carolina, and by General Henry fire to rally his troops. It was a defeat, but Clinton, coming down from New York. Cornwallis withdrew as he dispatched forces Cornwallis's primary mission was to cut off to New York, and he planned on leaving the South from the North, destroy its arsenals, Virginia for Charleston. Lafayette regained and, if possible, capture Lafayette, who had Williamsburg. built up a force of about 3,500, including a His forces dwindled to about 1,500 as men 40-man cavalry and six artillery pieces-about went home and tended their fields, but he half the total force led by Cornwallis. Lafay­ kept tabs on Cornwallis. Lafayette feared he ette retreated as Cornwallis advanced. Hewas would miss the most important action. He careful to avoid being outflanked by always wrote Washington asking for an assignment staying on higher ground north and west of in New York. Meanwhile, Clinton ordered Cornwallis. His men found myriad ways to Cornwallis to maintain a presence on the cross the rivers of tidewater Virginia and Chesapeake Bay-a staging area for attacks harass Cornwallis from positions that were on Philadelphia-by occupying Yorktown. hard to assault. On July 31, Washington ordered Lafayette Cornwallis approached Fredericksburg, to rebuild his forces as fast as possible and then withdrew toward Williamsburg, and make the cavalry strong. He knew what that Lafayette followed. Hundreds of "Mad An­ meant: keep Cornwallis bottled up on the thony" Wayne's Pennsylvanians met Lafay­ peninsula where Yorktown stood. A subse­ ette at the banks ofthe North Anna River. He quent dispatch confirmed that Admiral Fran­ was joined by General Daniel Morgan's rifle­ ~ois-Joseph-Paul, Comte de Grasse, was sail­ men and by skilled horsemen from Virginia ing to Yorktown from French possessions in and Maryland. Lafayette's forces grew almost the Caribbean. And Washington and Ro­ as large as those of Cornwallis. The British chambeau were on the way! commander dispatched troops to destroy Lafayette amassed provisions. He beefed Lafayette's military supplies stored at Albe­ up his intelligence about British maneuvers. marle Old Court House, but Lafayette led his He repositioned his forces. He begged Vir­ forces through backwoods trails and thwarted ginia governor Thomas Nelson for help: "We the British. have not 2000 militia fit to bring into the field. We are destitute ofammunition, and the War's End army living from hand to mouth and unable to follow the enemy. So that on the arrival ofthe On May 31, 1781, Washington wrote Lafay­ Spanish, French and American forces, I may ette saying that at last he and Rochambeau be reduced to the cruel necessity to announce agreed to attack Clinton in New York. This, that I have not, that it was not in my power to Washington believed, would force the British stop the enemy." to withdraw forces from Virginia. Washing­ On August 30, Admiral de Grasse's ton told Lafayette he could head north if fleet-six frigates and 28 battleships, with he still wished, providing he could find a 15,000 sailors and 3,100 marines on board­ capable leader for his forces. The British reached Yorktown. These ships could prevent intercepted Washington's message, and Clin­ Cornwallis from escaping by water, and they ton concluded that he was more vulnerable could help bring American and French sol­ than Cornwallis. He ordered Cornwallis to diers to the scene more quickly. Soon Lafay­ establish a defensive position and send some ette commanded over 5,500 regular troops, ofhis forces to New York. Lafayette followed and there were another 3,000 militiamen. Cornwallis every step of the way, often Cornwallis's 8,800 English, Hessian, and pro­ through night maneuvers that eluded British vincial troops were outnumbered by the time detection. Two of his subordinates subse­ Washington and Rochambeau arrived on quently marched into a British trap, and a September 9. 568 THE FREEMAN·. SEPTEMBER 1997

"Through his own good luck and the bad Lafayette arrivedin New York onAugust 4, judgment of Generals Clinton and Cornwallis 1784. Two weeks later, he was at Mount had won for him much of his success," wrote Vernon at Washington's invitation. He spent historian Louis Gottschalk, "less persever­ 11 days there, then visited other American ance or more rashness might easily have friends and by November he was back with led to the annihilation of the force which he Washington. They traveled together to An­ had commanded. If Cornwallis now faced the napolis. They bid farewell on December 1. prospect of surrender, it was in large part Washington wrote Lafayette, "I felt all that because Lafayette had persisted where others love, respect and attachment for you, with might have given up or had been cautious which length of years, close connexion and where others, yielding to an alluring tempta­ your merits have inspired me. I often asked tion, might have proved too bold." myself, as our carriages distended, whether The siege ofYorktown began on October 6, that was the last sight I should have of you. 1781. Lafayette was in the thick of the action, And tho' I wished to say no, my fears an­ leading the capture ofBritish positions. Corn­ swered yes." Lafayette and Washington never wallis was almost out of food and ammuni­ saw each other again. tion, and about a quarter of his men were ill. Lafayette worked tirelessly for liberty. He He surrendered at noon, October 19. British promoted freer trade between France and soldiers marched between lines of American the United States. "There now exist in this and French soldiers as a band played a melody kingdom many obstacles to trade which I called "The World Turned Upside Down." hope, by little and little, will be eradicated.... When the British tried to slight the Amer­ I think my present duty is, and it ever shall be icans by looking only at the French, Lafayette my rule, to do that in which I hope to serve the ordered his drum-major to start playing "Yan­ United States." kee Doodle" as the British handed over their Lafayette became a charter member of the weapons and returned to Yorktown under Society of the Friends of the Blacks. He was militia guard. Historian Gottschalk observed: an honorary member of the New York "No other person (except perhaps De Grasse) Manumission Society and the British Com­ had contributed so much or so directly to the mittee for the Abolition ofthe Slave Trade. In capture of one of England's finest armies as 1785, Lafayette and his wife spent 125,000 had the young general fresh from the 'Society' livres to buy two plantations in Cayenne, of Paris." French Guiana. These came with 48 black slaves who were subsequently emancipated Continuing Efforts for Liberty and given some land with which to start providing their own livelihood. The aim was Back in France, after the war, Lafayette to show how emancipation could be handled suggested that he and Washington launch a successfully. joint venture against slavery: "permit me to propose a plan to you which might become Revolution in France greatly beneficial to the Black Part of Man­ kind. Let us unite in purchasing a small estate The slavery issue was soon overtaken by where we may try the experiment to free the revolution. The French government had in­ Negroes, and use them only as tenants-such curred enormous debts during the Seven an example as yours might render it a general Years War with Britain, and the situation practice, and if we succeed in America, I will worsened when the government gave substan­ cheerfully devote a part of my time to render tial aid to the American struggle against the method fascionable [sic] in the West Britain. Half the annual budget went to serve Indias. If it be a wild scheme, I had rather be the debt, another quarter was spent on the mad that way, than to be thought wise on the armed forces, and the royal court at Versailles other track." Washington replied that he was a costly drain. would welcome such an opportunity. The weak-willed Louis XVI had caved in to LAFAYETTE: HERO OF TWO WORLDS 569 special interests, dismissing his finance min­ Third Estate have as many representatives as ister, Anne Robert Jacques Turgot, who, clergy and nobles combined. during his brief tenure (1774-1776), had cut The Estates-General convened at Ver­ government spending, abolished monopolies, sailles in May 1789. The 47 representatives of abolished internal trade restrictions, and the Third Estate declared themselves to be a abolished forced labor. For a while, Turgot's National Assembly and boycotted the pro­ successor, Jacques Necker, had covered soar­ ceedings, demanding that clergy, nobles, and ing deficits with borrowing, but this had about commoners deliberate together and vote in­ reached its limit, and government spending dividually. Nobles insisted that the king close cuts couldn't be delayed any further. Thou­ the hall where the Third Estate met. He did, sands of people, long dependent on govern­ they continued their deliberations on .an in­ ment checks, were desperate. Moreover, in­ door tennis court, and Lafayette was there. efficient, high-cost producers shut down as They swore what became known as the Oath consumers gained the choice of spending of the Tennis Court on June 20, 1789, to their money on less expensive goods from remain in session until they had drafted a Britain and elsewhere. Unemployment in constitution for France. Paris soared to an estimated 50 percent. On July 14, 1789, Lafayette was having Louis XVI intensified demands that the lunch with the Duke d'Orleans, a rival of Parlement of Paris approve new taxes. They Louis XVI, when he heard the distant sound countered that approval must come from the of cannon. He found out that the Bastille, a Estates-General, an assembly of clergy, no­ medieval prison, had been seized by some 800 bles, and taxpayers (known as the "Third angry people. Almost a hundred attackers Estate"), which hadn't met in a century and a were killed, and the 49-year-old administrator half. The nobles who dominated the parlia­ of the Bastille was beheaded by a cook with a ment figured they would dominate a new butcher's knife. The Bastille held only seven Estates-General, which is what Louis XVI prisoners at the time, but it had come to was afraid of. symbolize the corrupt regime. Its fall to In 1787, the king nominated 143 lawyers, commoners launched the French Revolution. judges, and other influential people to the A disgruntled lawyer named Maximilien Assembly of Notables, and Lafayette was Robespierre described it with what would among them. Although this Assembly could become his bywords, "punish," "terror," and only advise the king, Lafayette hoped that it "victim." Hewas a leader ofthe Jacobins, who might persuade the king to limit his absolute got their name because they began meeting in power. When that failed, he became a vocal a hall which once belonged to Jacobin monks. member of the opposition. He constantly Generally well-to-do, the Jacobins promoted spoke out against taxation-and in favor of egalitarian doctrines with force and violence. liberty. After Louis XVI insisted on new taxes, Lafayette declared: "The oriental despotism The Declaration of Rights ofthe regime enfuriates me." Lafayette called for a national assembly. Lafayette believed if anything good was to On July 5, 1788, Louis XVI agreed that be accomplished, the aims of the revolution the following May he would summon the must be spelled out in a way that would win Estates-General. Representatives would have the hearts ofpeople. Accordingly, for months to be elected and an agenda drawn up. Clergy, he had been drafting what became the Dec­ nobles, and taxpayers had met and voted laration of the Rights of Man and of the separately, which meant that the tax-exempt Citizen. Lafayette was inspired by the Virginia clergy and nobles would always outweigh Declaration of Rights, and his draft reflected the Third Estate. This included taxpaying his view that the primary threat to liberty was lawyers, bankers, merchants, artisans, and royal absolutism. He affirmed the right of the peasants who didn't want to be forever dom­ individual to "assure his property, liberty, inated. The king acceded to demands that the honor, and his life." He advocated separation 570 THE FREEMAN • SEPTEMBER 1997 of powers, limited taxation, and freedom of the Assembly voted 490 to 89 for a legislature speech. He carefully specified how the con­ with a single chamber. It supported a suspen­ stitution could be revised. In January 1789 he sive veto for the king, giving Lafayette a gave this draft to Jefferson, who praised it and partial victory. sent along a copy to James Madison, then Citizen militias formed throughout France, contemplating a Bill of Rights for America. and they came together as the National As the National Assembly debated the Guard, which served the National Assembly. Declaration between July 11 and August 26, Lafayette was appointed commander of the more members became convinced the pri­ Paris National Guard. "The National Assem­ mary threat to libertywas mob violence rather bly," he declared, "recognizes with pleasure than royal absolutism, and they insisted on that all France owes the Constitution which is somewhat more conservative language. The going to ensure her happiness to the great final draft stressed obedience to law. It was efforts for public liberty just made by the more specific on freedom of thought. It spec­ Parisians." Soldiers throughout Paris swore ified freedom of religion. It emphasized the allegiance to Lafayette, which seemed to give importance of secure private property. It him more power than the king. Lafayette used didn't say anything about amending the con­ his power mainly to save people from being stitution. Despite these differences, the final murdered by mobs. version was based more on Lafayette's draft In the National Assembly, Lafayette was than any other-almost all of his first five pushing for reforms. He introduced a mea­ paragraphs were incorporated into the final sure for abolishing aristocratic privileges, and version. While less eloquent than the immor­ it passed on August 4. He proposed major tal opening lines of the American Declara­ reforms of criminal justice-accused persons tion of Independence, the Declaration of the must be provided with legal counsel, they Rights ofMan and of the Citizen, adopted on must have access to all documents in their August 27, offered a more fully developed case, they must be able to confront witnesses, vision of liberty. and trials must be public. The Declaration of the Rights of Man and During the night of June 20, 1791, Louis of the Citizen appeared in thousands of XVI secretly made his "flight to Varennes," broadsheets, pamphlets, and books. It was near the Belgian frontier, an attempt at read in public places. rallying royalists and, if necessary, joining the As for specific constitutional arrangements, Austrian army mobilized against the Revolu­ Lafayette believed that a separation ofpowers tion. Lafayette awakened his house guest, was essential. He favored a bicameral legis­ Rights of Man author Thomas Paine, and lature with a Chamber of Representatives, a exclaimed: "The birds have flown away!" lower house (short terms) that could initiate Outraged, since he had assured people that legislation, and the Senate, an upper house the king agreed to stay put, he signed the first (six-year terms) that could exercise a "sus­ order in French history for the arrest ofa king, pensive" veto on legislation, preventing en­ and he brought the humiliated royal family actment for perhaps a year. Similarly, he back to Paris. thought that legislative power should be sub­ On September 14, 1791, Louis XVI aban­ ject to check by a king with a suspensive doned royal absolutism as he signed the veto, preventing enactment through two elec­ Constitution. tions-unless overridden by a two-thirds vote This wasn't good enough for fanatics who in the Chamber of Representatives. were gaining more influence every day. Mob But there was a bitter split in the National violence became endemic. Lafayette was Assembly over checks and balances. Lafayette branded an enemy of the nation who must asked his friend Jefferson to host a dinner for be guillotined. On August 17, 1792, he was eight National Assembly leaders, but despite dismissed from the National Guard, an almost the Virginian's benevolent influence, the split certain prelude to execution. Lafayette remained as deep as ever. On September 10, headed for the Belgian border, on his way to LAFAYETTE: HERO OF TWO WORLDS 571

Holland. By fleeing the country, according to haven in America. He bore her letter to a 1792 decree, he forfeited all his properties. George Washington that said "I send you my son." Imprisonment Adrienne worked singlemindedly to see Lafayette. As Lafayette descendant and Lafayette was detained in Rochefort, Bel­ scholar Rene de Chambrun explained, gium, which was controlled by the Austrian "Lafayette had not spoken to a human being Emperor Fran~ois II. Although Austria wel­ and had been completely isolated from the comed French royalist emigres, Lafayette was outside world for nearly one year, when considered a dangerous revolutionary. He suddenly, on October 15, 1795, the door ofhis was sent off to Wesel in western Germany, narrow cell was thrown open." In came Lafay­ where he was placed in solitary confinement ette's wife and two daughters. It was the most in a dark, damp, moldy, rat-infested dungeon. "dramatic instant of his life." After about a year, the Prussian government Prison conditions took their toll on Adri­ agreed to serve as jailer for enemies of enne. She developed fevers, her arms became Austria, and Lafayette was transferred east to swollen, and there were open sores on her a fortress at Magdeburg, about 75 miles from legs. When she asked to visit a physician in Berlin-another dungeon. By January 1794, Vienna, she was told that if she left she could he had been transferred further east, a 12-day never return. She stayed, and her health journey through bitter-cold weather to yet worsened. another dungeon at Neisse, near the Polish George Washington wrote a confidential frontier. letter to Fran~ois II, pleading for their free­ The Prussians decided that Austria should dom and offering the United States as a jail its own enemies, and in the spring, Lafay­ sanctuary. In the British parliament, Charles ette was transferred to Olmiitz, Moravia (now James Fox and Richard Brinsley Sheridan part of the Czech Republic). Lafayette was championed Lafayette. stripped of virtually all possessions except a few books, including, ironically, a copy of Freedom Thomas Paine's radical Common Sense. He wrote a friend that "Liberty is the The October 17, 1797, Treaty of Campo­ constant subject of my solitary meditations. Formio stipulated, among other things, that ... It is what one of my friends once called my Lafayette and his wife would be released. 'holy madness.' And whether some miracle They went to Holstein, a province of Den­ releases me from here, or whether I testify mark that wasn't likely to become embroiled upon the scaffold, 'liberty, equality' will be my in war between France and England. On final words. Here, I can fight against the Christmas Day 1798, George Washington tyrants only for my soul and my body." He wrote his last letter to Lafayette, expressing expressed concern "that the Blacks who cul­ relief that his friend was free. tivate it [his estate in Cayenne] still keep their Finally in November 1799, Napoleon liberty." agreed they could return. Most of their prop­ Meanwhile, during the Reign of Terror in erties had been confiscated and sold during 1793 and 1794, when Robespierre ordered the French Revolution. They were left with some 60 executions a day, 40,000 altogether, La Grange, an abandoned fifteenth-century Adrienne Lafayette's mother, grandmother, castle about 35 miles east of Paris. Jefferson and sister had been guillotined, and Adrienne pleaded with Lafayette to make America his had been imprisoned in Brioude and Paris. home. But Lafayette was convinced that if he She was released thanks, in part, to efforts by left France, Napoleon would never let him American diplomat James Monroe, who had return. also helped free Thomas Paine from a French Rene Ie Chambrun emphasized that "Ma­ prison. Adrienne arranged for 14-year-old dame Lafayette's greatest concern was to find George Washington Lafayette to find a safe the hidden ditch where the beheaded bodies 572 THE FREEMAN • SEPTEMBER 1997 of her grandmother, mother, and sister Lou­ out at aristocrats scrambling back into ise lay with the other victims of the Terror. power. With her sister ... they one day found the When Napoleon attempted his comeback, dreaded hole. They were too poor to buy the claiming a conversion to liberalism, the sup­ surrounding land, so they raised a subscrip­ posedly naIve Lafayette declared, "I see no tion among the victims' kin. They built a sign of his doing so." The intellectual Ben­ chapel on the site of the one the Revolution jamin Constant, who had bet on Napoleon's had destroyed at Picpus." conversion to liberal principles, told Lafay­ Despite all he had suffered, Lafayette re­ ette: "You are my conscience!" Constant mained defiant. In 1802, Napoleon wanted to persuaded Lafayette to seek election for the be named a consul for life, but Lafayette Chamber of Deputies. He became a deputy expressed his opposition. "The French people from the department of Seine-et-Marne. have too well known their rights to have Defeated at Waterloo, Napoleon de­ forgotten them," he declared. manded dictatorial power. Lafayette rose in In 1807, Adrienne suffered the same pain­ the Chamber ofDeputies. "When for the first ful symptoms she had in prison. By October, time in long years," he declared, "I raise a she developed a fever and went into a dele­ voice that the old friends of liberty will still rium. Her family gathered around. On Christ­ recognize, I feel called upon, Messieurs, to mas Eve, she put her arm around Lafayette's speak to you of the dangers confronting the neck and whispered, "Je suis toute avous" ("I nation, which you alone, just now, have the am all yours"). She groped for his fingers, power to save.... This is the moment for us squeezed them, and was gone. to rally round the old tricolour standard, the Lafayette, Rene Ie Chambrun explained, standard of '89, the standard of liberty, of "seldom left La Grange, where he led a equality and public order; it is that alone farmer's life." He improved fertilization tech­ which we have to defend against pretensions niques. He introduced American corn to abroad and assaults at home." He proposed France. He planted apple and pear orchards, five resolutions that, among other things, and he did a good business selling cider. He asserted the supremacy ofparliamentary gov­ introduced new breeds of cattle, hogs, and ernment. sheep. He did well enough that he paid off Napoleon, still the most feared military debts and achieved some financial security. commander in Europe, was furious. Lafayette Every day he arose at five in the morning, urged his fellow deputies to join him in telling Chambrun reported, and "remained in bed the Emperor that "after all that has hap­ for two hours writing friends ofliberty all over pened, his abdication has become necessary the world: Poles, Hungarians, Greeks, Span­ to save the nation." Napoleon abdicated. iards and Portuguese, North and SouthAmer­ Lafayette withdrew from politics, but he icans ... and, alone on his knees, holding in remained an inspiration to friends of liberty his hand a small portrait of Adrienne and a everywhere. When fanatical royalists began to lock of her hair, he would spend a quarter of terrorize much ofFrance, friends encouraged an hour in meditative devotion." Lafayette to seek office again. In 1818, he was elected to the Chamber of Deputies from Lafayette's Return to Sarthe. He started a group called Friends of Public Life the Liberty of the Press, and he pleaded for toleration. He urged that people "return to After Napoleon's downfall in 1814, Lafay­ the national, constitutional and peaceable ette returned to public life. He visited Ger­ path-the path ofgood will. We have so many maine de Stael, who, after a decade of exile, public and personal interests to conserve, so had revived her influential liberal salon. He many common sorrows to deplore, so many protested as Napoleon's successor, Louis private qualities to recognize in one another, XVIII, affirmed the divine right of kings and when they are not denatured by the partisan issued one decree after another. He lashed spirit." LAFAYETTE: HERO OF TWO WORLDS 573

In 1823, Lafayette accepted President James Monroe's invitation for a farewell tour of America. He declined Monroe's offer to send a warship for him and instead traveled aboard the ordinary packet ship Cadmus. He arrived on August 15, 1824, and was greeted by some 30,000 people. An estimated 50,000 cheered Lafayette as he rode a wagon drawn by four white horses to New York's City Hall. People threw flowers at him. Mothers brought their children for his blessing. Some 6,000 people attended a ball in his honor. He began a 13-month tour through all 24 states. "I see you are to visit York-Town," Jeffer­ son wrote Lafayette in Boston, "my spirit will be there with you; but I am too enfeebled by old age to make the journey.... Our village of Charlottesville insists upon receiving you, and would have claimed you as its guest, if in the neighborhood of Monticello you could be anybody's guest but mine ... God bless and keep you; may He permit me to see you again and to embrace you." Lafayette commended Americans for what Lafayette they had accomplished: "In the United States the sovereignty of the people, reacquired by a glorious and spotless Revolution, universally Baltimore, and 70,000 in Boston. He was acknowledged, guaranteed not only by a con­ cheered. in Richmond, Columbia, Charles­ stitution . .. but by legal procedures which ton, Savannah, Augusta, Montgomery, Mo­ are always within the scope of the public will. bile, New Orleans, Natchez, St. Louis, Nash­ It is also exercised by free, general, and fre­ ville, Lexington, Cincinnati, Pittsburgh, quent elections.... Ten million people, with­ Buffalo, and Albany. He appeared at Catholic out a monarchy, without a court, without an churches, Protestant churches, and Masonic aristocracy, without trade-guilds, without un­ lodge gatherings. He attended receptions necessary or unpopular taxes, without a state open to everybody, and he publicly welcomed police, a constabulary, or any disorder, have blacks and Indians who came. Lafayette de­ acquired the highest degree of freedom, se­ scended to the vault of George Washington's curity, prosperity, and happiness, which hu­ tomb at Mount Vernon. There was a recep­ man civilization could have imagined." tion at the University ofVirginia. He saw John At Bunker Hill, Massachusetts, the orator Adams in Quincy, Massachusetts, and James Daniel Webster declared: "Heaven saw fit to Madison in Montpelier, Virginia. ordain, that the electric spark ofliberty should And Lafayette reached Monticello. "The be conducted through you, from the New Marquis got out of his barouche and limped World to the Old." Lafayette entered Phila­ as fast as he could toward the house," ex­ delphia, escorted by four wagons carrying plained biographer Brand Whitlock. "Be­ about 160 Revolutionary War veterans. He tween the white columns of the portico ap­ stopped at the Brandywine battlefield where peared a tall, spare figure of a man stooped he had been wounded. He returned to York­ with age, wearing the swallow-tailcoat, the town, which was still in ruins. Big crowds long waistcoat and the high stock of another welcomed him everywhere-for instance, epoch; he had cut off his queue, and his thin 10,000 in Newburgh (New York), 50,000 in white locks hung about his hollow temples 574 THE FREEMAN • SEPTEMBER 1997 and lean cheeks; he tottered down the steps, to shoot at the rebels. Some wanted a dem­ and came towards him. ocratic republic, while others wanted stronger "'Ah, Jefferson!' cried Lafayette. constitutional limitations on the monarchy, "The two old men broke into a shuffling and still others were mainly concerned about run. job security. "'Ah, Lafayette!' cried Jefferson. The 73-year-old Lafayette declared that the "No need for eloquence now! They burst regime of Charles X was politically finished into tears and fell into each other's arms." and that it was time for a new government. Sometime later, Lafayette's secretary Au­ "Make a revolution," he urged. "Without it, guste Levasseur described an awesome sight we shall have made nothing but a riot." As in Charlottesville: "the Nation's Guest, seated in 1789, he was asked to head the National at the patriotic banquet between Jefferson Guard, and he accepted, but he declined and Madison." On September 7, Lafayette suggestions that he become president of a went down the Potomac River on the steam­ French republic. While Paris seemed to favor boatMount Vernon, boarded the frigate Bran­ a republic, most people in the provinces dywine, and sailed back to France. feared violent upheaval and wanted a consti­ Lafayette began spending winter months tutional monarchy. Lafayette concluded that at 6 rue d'Anjou, Paris, and there held Tues­ "what the French people need today is a day evening receptions that attracted liberals popular throne surrounded by republican from America and Europe. The American institutions, but altogether republican." He author James Fenimore Cooper reported that believed the top priority for liberty was to the gatherings "are exceedingly well attend­ preserve the authority of the Chamber of ed." Benjamin Constant and Alexander von Deputies. Humboldt attended, as did members of the He proposed that the Duke d'Orleans Chamber of Deputies. Historian Lloyd become king. The duke was related to the Kramer noted that "Lafayette's soirees in Bourbon dynasty, had been in the republican Paris, like his long conversations with guests army during the French Revolution, and he at La Grange, thus facilitated contact between agreed to observe constitutional limitations different generations in much the same way as on royal power. Accordingly, the Chamber of they contributed to new connections between Deputies offered him the throne on August 7, politicians and writers or between his French and he became Louis-Philippe, "the bour­ friends and foreigners." geois king." He proved to be an adroit public Meanwhile, in 1824, Charles X had become relations man-displaying the revolutionary king of France and reasserted the power of tricolor flag, calling himself "king of the church and throne. The Roman Catholic French" (rather than king of France), dress­ Church regained control over French schools, ing in austere dark suits instead of opulent and anyone convicted of committing a sacri­ robes. Louis-Philippe made the Chamber of lege in a church building could be put to Peers an elected rather than hereditary body, death. In 1830, the Chamber of Deputies and the voting franchise was doubled to voted "no confidence" in the ministry, the include about 200,000 business people who king called for new elections, and voters possessed some property. supported the king's outspoken opponents. Lafayette defended individuals jailed for On July 26, 1830, the king issued four decrees political offenses. He opposed capital punish­ that dissolved the new Chamber of Deputies, ment. He denounced slavery. He supported suppressed freedom of the press, restricted insurgents in Belgium. He was a champion the voting franchise ofmerchants and bankers of Polish freedom, and-defying government and announced new elections based on the restrictions on refugees-he hid Polish patri­ restricted franchise. ots like Antoine Ostrowski and Joachim The day after the decrees were announced, Lelewell at his La Grange estate. Paris erupted in revolt. People barricaded the In early February 1834, Lafayette reported streets July 27,28, and 29. The army refused pain and fatigue, perhaps triggered by pro- LAFAYETTE: HERO OF TWO WORLDS 575 longed exposure to bitter cold air. He had two generations maintained the Tory ambi­ pneumonia. His children stayed with him. At ance of the place. about 4 o'clock in the morning, May 20,1834, Happily, there has come a renewed appre.,. Lafayette pressed to his lips a medallion with ciation for Lafayette. Rene Ie Chambrun, a picture ofAdrienne and took his last breath. descended from Lafayette's daughter Vir­ He was 77. The funeral service was at the ginie, acquired La Grange in 1955 and ex­ Church of the Assumption, Paris. Tens of plored the northwest tower attic. He and his thousands of people turned out to see 3,000 wife discovered a treasure of letters and National Guards accompany Lafayette's cof­ 'mementoes. fin to the humble Picpus cemetery, where he Historian Lloyd Kramer recalled the reve­ would join Adrienne and so many guillotined lation he experienced when he helped edit victims of the French Revolution. Lafayette Cornell University's vast collection of Lafay­ was laid to rest in American soil he had ette letters, gathered from Lafayette's,birth­ brought back on the Brandywine. place at the Chateau de Chavaniac: "I soon Lafayette was idolized during the nine­ came to realize the historical value of reading teenth century, especially in the United 'primary sources' and to believe that Lafay­ States. His portrait seemed to be every­ ette's life had been far more varied and where-American Friends of Lafayette has complex than the ironic, historical narratives over a thousand historic portraits of him. suggested." Dozens of American towns, counties, and Even a tart-tongued biographer like Olivier schools were named after him. "Pronounce Bernier acknowledged that "whatever his lim­ him one of the first men of his age," John itations, it is to Lafayette's glory that the one Quincy Adams proclaimed in his tribute, "and idea he seized on was that of liberty. Nothing you have not done him justice." can replace the right to speak, think, organize, But most twentieth-century historians­ and govern freely: from this all benefits de­ especially French-debunked Lafayette as a rive. With his vanity, his obstinacy, his self­ vain, immature, mediocre, doctrinaire simple­ satisfaction, his thirst for popularity, Lafay­ ton. Many conservatives, including his de­ ette never lost sight of that all-desirable scendants, viewed him as a traitor to his class. principle. For that, he deserved the gratitude Lafayette's grandson inherited La Grange, of his contemporaries and the esteem oflater and he married a British woman-a Tory. She generations. In a world where liberty is in very consigned Lafayette's books, papers, and short supply, there are worse heroes than a other personal possessions to the third-floor man who never stopped worshipping freedom." attic of the northwest tower, a space which So the one thing Lafayette's critics concede is Lafayette had called the "Couloir des Polon­ the most important of all. He still stands tall as ais" ("hiding place of free Poles"). The next the great hero of two worlds. D Economics on Trial by Mark Skousen

Getting Published- An "Austrian" Triumph "[Austrian economists] feel they've been Dethroning the King of Keynes frozen out of mainstream economics and seldom get even a footnote in standard There are two major stories that come out textbooks." of my study. First, Samuelson's Economics-the most -Todd G. Buchholz1 popular textbook ever published, with over 4 million sold and translated into 41 langua­ ges-taught students a lot of bad economics. ustrian economist makes good! I just got Until recently, the MIT professor taught A published in the Journal of Economic students that high saving rates were bad for Perspectives, the most widely read economics the country, federal deficits and progressive journal in the country. tax rates were beneficial, and Soviet central The article, "The Perseverance of Paul planning could work. In my review of his 15 Samuelson's Economics," is a damning review editions, which covers the entire postwar of the 15 editions of Samuelson's famous period, I point out that Professor Samuelson textbook.2 I am still in shock a year after spent whole chapters discussing the failed getting an E-mail from the JEP saying they economics of the Soviet Union and China, had accepted my paper. Undoubtedly it is a while writing little or nothing on the success watershed event when the No.1-read eco­ stories of West Germany, Japan, the East nomics journal in the country is willing to Asian Tigers, or Chile. He had numerous publish an article critical ofthe top Keynesian sections in his textbook on "market failure" economist in the world and first American to while offering very little on "government win the Nobel Prize in economics. One of the failure." He constantly highlighted the co-editors, Brad de Long, said that my study economics of Keynes, but downplayed the is "one of the best and most exciting papers economics of Friedman, Hayek, and other we published in the second half of the free-market economists. 1990s." Tim Taylor, the managing editor, said that ten years ago they would not have Samuelson's Economics: From published it. Keynes to Adam Smith Dr. Skousen is an economist at Rollins College, Not everythingwas negative in my review of Department of Economics, Winter Park, Florida Samuelson's textbook. On the positive side: 32789, and editor ofForecasts & Strategies, one of Samuelson frequently declared his optimism the largest investment newsletters. A reprint of "The Perseverance ofPaul Samuel­ about the future of capitalism and rejected son's Economics" (including Professor Samuelson's doomsayers' predictions of another Great response) is available from FEE for $3.00, postpaid. Depression or national bankruptcy. He reg- 576 577 ularly defended free trade and free markets in Following the postwar Keynesian revolution, agriculture. And he was highly critical ofKarl the economics establishment was unreceptive Marx and Marxian economics. to the works of Ludwig von Mises and The most amazing discovery I made in my Friedrich Hayek. In the 1960s, Austrian econ­ study is that Samuelson, under the influence omists depended on the conservative pub­ ofco-author William D. Nordhaus (Yale) and lisher Regnery and the engineering publisher recent events, has had a change of heart and D. Van Nostrand & Co. to get published. is gradually shifting back to classical econom­ ics. In more recent editions, he has reversed Future Is Brighter his position on a number of important issues. In the most recent edition, for example, Gratefully that's all changing. Today Aus­ Samuelson states that Soviet central planning trians hold a small but growing number of was a "failed" model, that national savings is positions at major universities (George Ma­ too low and needs to increase, and that the son, Auburn, NYU, University of Georgia, national debt is excessive. (For more on California State at Hayward, etc.), get pub­ Samuelson's transformation, see my article, lished by major university and academic "Another Shocking Reversal in Macroeco­ presses (Cambridge, Chicago, Oxford, NYU, nomics," The Freeman, February 1996.) Kluwer, Routledge, and Edward Elgar, The JEP also published a rejoinder by among others), and are getting accepted in Samuelson, which was surprisingly reserved major journals (Journal of Economic Litera­ and anemic in response to my blistering ture, History ofPolitical Economy, Journal of critique. "I am pleading no alibi nor extenu­ Macroeconomics, and Economic Inquiry). ations," he wrote. "My present-day eyes do Still, other "free-market" schools (the mon­ discern regrettable lags in sloughing off etarists and the new classicists) have advanced earlier skins."3 He only denied that he was much further because of their mathematical antisaving, one thing he is famous for. and empirical approach. The Austrian school My study of Samuelson's Economics points still largely remains a "book culture," as Peter to the real need for a college-level textbook on Boettke puts it, and needs to devote more sound economics. That is my primary goal efforts to "strategic" publishing in the journals right now. My forthcoming textbook is called rather than preaching to the choir if it wants Economic Logic and I hope to finish it next to have an impact.4 Happily, things are look­ year. I'll keep you posted. ing up. 0

Past Prejudices Against 1. Todd G. Buchholz, From Here to Economy: A Shortcut to Economic Literacy (Dutton, 1995), p. 238. Buchholz's popular Austrians history, New Ideas from Dead Economists (Plume, 1990), com­ pletely ignores the Austrians because Hayek and Mises weren't discussed at Harvard. Austrian economists have had a long strug­ 2. Mark Skousen, "The Perseverance of Paul Samuelson's gle in getting recognized by the profession. Economics," Journal of Economic Perspectives, vol. 11, no. 2 (Spring 1997), pp. 137-152. The mainstream has shown little interest if 3. Paul A. Samuelson, "Credo of a Lucky Textbook Author," not disdain for a school that is laissez faire in Journal ofEconomic Perspectives, vol. 11, no. 2 (Spring 1997), p. 155. 4. Peter J. Boettke, "Alternative Paths Forward for Austrian government policy and critical of mathemat­ Economics," The Elgar Companion to Austrian Economics (Ed­ ical modeling and empirical econometrics. ward Elgar, 1994), pp. 601-15. New Edition of a Classic History THE CONSERVATIVE INTELLECTUAL MOVEMENT IN AMERICA: SINCE 1945 George H. Nash n this revised and updated edition of what I Insight magazine recently called "the stan­ dard work" on the history of post-World War II American conservatism, George Nash shows how an exceedingly diverse group of think­ ers-among them William F. Buckley, Jr., Richard M. Weaver, Ludwig von Mises, Milton Friedman, Frederick Hayek, and Russell Kirk­ formed a number of distinct, yet highly influ­ ential, positions toward politics and life in America. The Conservative Book Club, in choosing the title as a featured main selection, hails this work as "the book that picks up where Russell Kirk's The Conservative Mind leaves off." "In an epilogue to the 1996 edition...biographer­ historian Nash describes the conservative forces $24.95 hardback, 455 pages emerging over the last 20 years, or what he calls 'the age of Reagan.' He describes the growing New Sections Include: conservative commitment to restoring civil • Preface society from the bottom up." • Epilogue chapter, entitled -LEE EDWARDS, Policy Review Conservatism Ascendant: The Age of Reagan and Beyond "This book is a masterful study that can be • Bibliographical Postscript read for pleasure as well as edification by people on the entire range of the political To Order: Send check payable to spectrum." lSI to the below address, or for VISA or MasterCard orders, call -FORREST McDONALD toll-free 1-800-526-7022. Please add author of The American Presidency 50 cents per copy for postage. Book information can be requested via INTERCOLLEGIATE STUDIES INSTITUTE fax: (302) 652-1760. P. O. Box 4431 • Wilmington, DE 19807-0431 (Visit the lSI web page at www.isi.orgfor a complete book list.) 579

I particularly commend the author for attacking sacred cows. Social Security? Sorry. It harms the BOOKS poor. Drug prohibition? It harms the poor also. Public education? A cataclysm for the poor. Given that so many Americans have been conditioned to Poor Policy-How Government ask of any proposed public-policy change, "How will it impact the poor?" we should use Schans­ Harms the Poor berg's book (as well as the works of Charles by D. Eric Schansberg Murray, Marvin Olasky, and others) to bludgeon Westview Press. 1996.244 pages. $25.00 Social Security and so onwith the argument, "They hurt the poor!" Reviewed by George C. Leef The book also takes some well-aimed shots at the pernicious idea that Christianity demands that we have a governmental welfare system. s Thomas Sowell correctly observes, before one Big-government advocates shamelessly resort to A can be a partisan of the poor, he must first be this form of moral blackmail, but the author a partisan of the truth. Unless we understand the replies, "The bottom line is that there is no relation truth about the causes of poverty and the truth between the biblical call to Christians and the use about the effects of what are called "anti-poverty of government to help the poor. In fact, they are programs," we are not going to be able to do diametrically opposed. The use of government to anything to help the poor. Indeed, trying to aid the reach certain ends is based on coercion. The poor without an accurate analysis of the causes change in behavior designed to accompany the and the effects of the proposed cures, we are apt Christian's Spirit-filled life is completely volun­ to make their condition worse. In medieval times, tary." The use of coercion to accomplish anything, doctors used to bleed people suffering from dis­ whether it is feeding the hungry or exploring Mars, eases on the assumption that bad blood was caus­ is simply wrong. Schansberg has here hit upon what ing their distress; this was almost never beneficial I believe must be the foremost goal of defenders of and fatal in many cases. Could it be that govern­ liberty, namely, to get people to pay attention to ment policy today toward poverty is on a par with the morality of the means and not just the desir­ bleeding? ability of the ends. In Poor Policy, D. Eric Schansberg argues that, Poor Policy is a useful, nontechnical book that like bleeding, government policy to help the poor neatly organizes a lot of data and arguments actually is harmful. Welfare programs aren't just against the ideas that government can, does, and ineffective. They are harmful. Furthermore, the should assist the poor. Bravo. 0 author, who is assistant professor of economics at George C. Leef is book review editor of The Free­ Indiana University-Southeast, makes a strong case man. that many of the poor are poor (or at least poorer than they would otherwise be) due to the effects of laws and policies designed to benefit various groups ofnon-poor people. In short, Schansberg is The Concise Conservative Encyclopedia arguing the classic laissez-faire position against by Brad Miner interventionism by demonstrating that it creates Free Press. 1996 • 318 pages. $15.00 and exacerbates poverty. Virtually everything government does outside of Reviewed by Aaron Steelman its Jeffersonian core ofprotecting individual rights to life, liberty, and property creates wealth trans­ fers that make the society poorer on the whole, and he free-market movement in the United States have their worst impact on those who can least T has prospered tremendously over the past 20 afford it. Schansberg devotes several chapters to years. Dozens of market-oriented think tanks and the familiar list of laws that especially hurt the journals have been created, and an increasing poor-the minimum wage, occupational licensing, number ofstudents are becoming interested in the rent control, and so on. In doing so, he introduces ideas of liberty. The Concise Conservative Encyclo­ the reader to public-choice economic theory. Once pedia provides a valuable and easy-to-read intro­ people understand the logic of public choice, they duction to the ideas, individuals, and organizations are less apt to be taken in by the claims that laws that have shaped this burgeoning intellectual like those are "well-intentioned." movement. 580 THE FREEMAN • SEPTEMBER 1997

Miner's book contains 200 brief entries, an Gregory Wolfe and A Dictionary of American afterword by the author, and five succinct essays on Conservatism by Louis Filler. It belongs in the the origins of conservative thought, ranging from library of every student of liberty, beginner or antiquity to the modern era. Those essays are veteran. 0 by Carnes Lord, Jacob Neusner, James written Mr. Steelman is a staff writer at the Cato Institute. Schall, S.J., Peter Stanlis, and Charles Kesler. In the preface, Miner argues that the "purpose of a 'reader's encyclopedia' such as this one is not to provide the last word on the topics and people The Diversity Machine: The Drive to it covers, but to offer the inquiring reader just enough information about the subject in question Change the "White Male Workplace" to enable him to go on reading in some other book by Frederick R. Lynch with a modicum of improved perspective." Toward The Free Press. xv + 416 pages. $27.50 that end he has succeeded marvelously. The entries have been chosen wisely and the Reviewed by Brad Stetson author has given more than adequate attention to all the major strains of modern free-market thought, including classical liberalism. Every major ven though race-and-gender-based double classical liberal and libertarian figure-including E standards are encountering increasing public Mises, Hazlitt, Bastiat, Friedman, and Hayek, to opposition, the affirmative action steamroller and mention but a few-is incisively and intelligently the diversity machine have continued their work. profiled. In addition, Miner has included entries Affirmative action has sustained some severe crit­ for a number of other individuals and institutions ical and legal blows lately, but its commercial that readers of The Freeman will undoubtedly be cousin, the diversity movement, has escaped close familiar with, but that many nonlibertarians will scrutiny-until now. With this wide-ranging book, not. Among those are Frank Chodorov, Bertrand sociologist Frederick R. Lynch of Claremont de Jouvenel, and Felix Morley. The book also McKenna College, crushes the Potemkin Village contains brief, yet insightful, descriptions of the of slogans, moralisms, and stereotypes that have Austrian, Chicago, and Virginia schools of eco­ shielded diversity management from careful anal­ nomics. And Miner doesn't shy away from dis­ ysis. cussing differences of opinion on the Right. He Lynch diligently traces the diversity movement discusses the debates over an interventionist for­ from its roots in the affirmative action campaigns eign policy and free trade, and he deals with the of the 1960s to its entrenchments in the board­ seeming divide between traditionalism and liber­ rooms oftoday's largest corporations. He carefully tarianism, which he argues has been overblown. documents the language and rationales of "diver­ For newcomers to free-market thought, his sity trainers," the salespeople for the movement suggested readings at the end of each entry will who practice a subtle form of extortion by urging be valuable-although there are a few exceptions CEOs and personnel managers to have a workforce to that rule. For example, the lone book by Mises that "looks like America" or "reaches out" to the that he has recommended is Human Action. While "underrepresented." In other words, the best way there can be little question that Human Action is to avoid being called names at an interest group's the most comprehensive statement of Mises's press conference or to preempt discrimination is to worldview, how many beginners are going to be artificially pump up the number of women able to actually get through it? Listing, for example, and minorities employed and promoted. Ofcourse Liberalism or Planning for Freedom as well would subsequent training in "cultural sensitivity" and have been more helpful. multiculturalism also looks good-and is very Moreover, there are some exclusions that seem profitable for the firms devoted to providing such a bit puzzling. The Institute for Humane Studies, "services" to corporations. the Cato Institute, and the Volker Fund do not While Lynch is respectful ofthe good intentions receive individual listings, nor do Israel Kirzner of many in the diversity movement, he does not and Richard Epstein, two giants of free-market accept their rhetoric at face value. At conference scholarship. after conference, he encounters "diversity experts" Despite those problems, The Concise Conserva­ who, for all their multicultural awareness and tive Encyclopedia is a tremendous improvement self-proclaimed sensitivity, are unwilling to ac­ over its two principal competitors: Right Minds: A knowledge either intragroup differences or the Sourcebook ofAmerican Conservative Thought by legitimate grievances of white males. BOOKS 581

The diversity machine's general blindness to ing. The diversity machine's momentum will not internal group differences stemming from age, soon slow, and we should be deeply concerned religion, education, and even gender undercuts the about where the irrational ethnic and gender group validity of its generalizations about group traits. consciousness it stimulates will lead us. 0 As Lynch illustrates, "The Hispanic manager could Brad Stetson is director of The David Institute, a be a fourth generation Mexican-American with social research group in Tustin, California. He is an Anglo mother and a Stanford M.B.A.; subor­ co-author of Challenging the Civil Rights Estab­ dinates might be first-generation Guatemalans lishment (Praeger Publishers, 1993), and author of with a sixth grade education." Similarly, dismissive Human Dignity and Contemporary Liberalism talk of white male "backlash" and "resistance" is (forthcoming, Praeger). His E-mail address is the ready response of many diversity "facilitators" [email protected]. A shorter version of this review to the white male employee who voices disagree­ appeared in First Things. ment with the diversity mandate. Lynch shows that the diversity machine's dispute with "white male" culture is in fact a veiled argument with the values and methods of capitalism and meritocracy. The Conservative Intellectual The basic reality that supports the diversity Movement in America: Since 1945, juggernaut is the same phenomenon that sustains affirmative action programs and so much politically 2nd edition correct cant about race and gender in American by George H. Nash life: "preference falsification." This phrase, coined Intercollegiate Studies Institute. 1996 • 467 by economist Timur Kuran, refers to the mobili­ pages. $24.95 zation of social pressure to make people publicly praise ideas as true which they privately believe to Reviewed by Robert Batemarco be false. So in public, out of fear of being labeled "racist" .or "insensitive," people may accept the reasonableness of affirmative action, but in private "we see so far because we stand on the they deem it a cloak for racial discrimination. The shoulders of giants." In a nutshell, this is same holds true for corporate diversity programs, the major lesson to be learned from The Conser­ except that the pressure to be approving is mag­ vative Intellectual Movement in America: Since 1945 nified, as people's promotions and jobs may well by George Nash. First published 20 years ago, this be jeopardized if they are too forthright in their tome breathes life into those "giants of conserva­ disagreement. Indeed, as Lynch clearly shows with tism" and the battles they waged not only against interviews and vignettes from the diversity semi­ the dark forces of leftism, but at times against one nars, dissenters from diversity orthodoxy experi­ another. ence an enormous amount of fear and intimida­ That the internecine struggles of conservatism tion. occupy a large part of this book should come as no The exhaustiveness and relentless detail of surprise, given that conservatism was less a coher­ Lynch's investigation have a cumulative effect that ent movement than a coalition of three move­ will be persuasive to any open mind. Emerging ments: libertarianism, traditionalism, and anti­ from this meticulous dissection of the diversity communism. The Second World War had just movement is the unsettling truth that both the finished giving each of them a pounding. To fight means and goals of this now largely mainstream, the war, governmental powers were swollen to institutionalized philosophy are antithetical to the unprecedented levels utterly inconsistently with basic liberal values of the American founding: free libertarian notions of limited government; the speech, individualism, equality of opportunity, and ghastly carnage of that conflict shook the faith of nondiscrimination on grounds of race, gender, or many in the superiority of the Western tradition; religious faith. The diversity machine, with its and diplomatic intrigues plus the power vacuum underlying ideology of ethnic-gender proportion­ caused by Germany's defeat left Stalin's Soviets the alism, cultural relativism, and identity politics can most powerful force in Europe. only foment social acrimony and, ironically, given Yet some thinkers saw these events not as a its banner and rhetoric, a homogeneity of thought. death knell, but rather as a wake-up call. The Were this a nascent or fringe movement, it would insight that the rise of totalitarianism was the be troubling enough. But given that the mantras of logical conclusion of seemingly benign accretions diversity have already mesmerized American pol­ of state power was the core message of Friedrich itics and business culture, it is even more distress- Hayek's The Road to Serfdom. Like the first crocus 582 THE FREEMAN • SEPTEMBER 1997 when the snow still covers the ground, this book ren Court's landmark decisions, and the states' was a harbinger of future events. These included rights aspects of the civil rights movement. This the founding of institutions as well as the prolif­ book's forte is ideas-their origins, connections, eration of scholarship aimed at furthering the and consequences. cause of freedom. Indeed, the Foundation for Having read the first edition of this book 20 Economic Education and The Freeman loom large years ago, I got even more out ofit the second time in this story and Nash devotes several pages to their around. However, a major disappointment was early days. The contributions of Mises, Hazlitt, finding that to deal with the important events of Rothbard, Ropke, and Friedman, among others, those two decades, the author could muster no also receive their due. more than a 13-page epilogue. While he manages Iflibertarians blamed the rise ofbig government to fit a lot into those 13 pages, including the for most ills ofthe twentieth century, traditionalists blossoming of right-wing think tanks, the impact found greater fault in the realm of ideas. Richard of neoconservatism on the movement and the Weaver, in his book Ideas Have Consequences, paleoconservative response, and the rise of the drew a straight line from William of Occam's Religious Right, his discussion of paleolibertari­ fourteenth-century denial of the existence of uni­ anism was skimpy. He also all but ignores the versals to the twentieth century's moral relativism impact of talk radio, an end run around the and denial of ultimate truth. Eric Voegelin, Leo liberal-dominated news media that, while not orig­ Strauss, and Russell Kirk were other major con­ inating new conservative ideas, played a major role tributors to this strand of conservative thought. in disseminating them. These lacunae notwith­ While these thinkers berated libertarians for fail­ standing, this book remains an authoritative source ing to venture beyond the realm of economics, the of information of those who have done so much to libertarians responded by accusing traditionalists put liberalism on the defensive. 0 of not standing for anything in a principled way. Dr. Batemarco is director ofanalytics at a marketing Frank Meyer sought to find common ground research firm in New York City and teaches econom­ between traditionalist and libertarian camps by ics at Marymount College in Tarrytown, New York. emphasizing "reason operating within tradition." He is book review editor ofthe Review of Austrian Despite Meyer's efforts, however, the insistence of Economics. many traditionalists on using the state as a vehicle for the promotion ofvirtue kept them at odds with libertarians. The third element of the amalgam known as The Young Entrepreneur's Guide To conservatism were the cold warriors. The threat that communism posed to both limited government Starting and Running a Business and traditional values was particularly obvious to by Steve Mariotti those who had witnessed its depravity from the Times Business. 1996 • 322 pages. $15.00 inside. Itwas from the ranks ofthose who could not answer in the negative the second half of the Reviewed by Richard A. Cooper question, "are you now or have you ever been a communist?," such as Whittaker Chambers and James Burnham, that sprung the fiercest anti­ teve Mariotti was mugged twice-once by the communists. The conflict between the cold war­ Shoodlums who beat him while jogging on the riors and the libertarians arose over whether it was Lower East Side of Manhattan and then by the appropriate to jettison many American freedoms realization that these street punks were forgoing in order to preserve the rest from communism. the greater returns possible by honest effort in Many libertarians correctly pointed out that this business. Did this bookish financial analyst and was a false dilemma. Fortunately, history proved export/import trader pack his bags and flee Man­ them correct. hattan for the relative peace of suburbia? No, he The Conservative Intellectual Movement in Amer­ left his previous line ofwork and became a teacher ica: Since 1945 covers all this and much more. I in the New York City public schools. He volun­ found it a fascinating story and a great way for teered for assignment to the worst schools. There anyone taking an interest in conservative or liber­ he had another revelation. tarian ideas to get to know the key players. Political Steve Mariotti's primer could just as easily have junkies be forewarned, however. You will find very been called The Beginner's Guide to Starting and little politics here: mainly discussions of the con­ Running a Business. But it is called The Young troversyover Senator Joseph McCarthy, the War- Entrepreneur's Guide to Starting and Running a BOOKS 583

Business for good reason. His focus has been on is no longer a schoolteacher. He left the New York teaching entrepreneurship as a way of imparting City school system and established the National both business principles and basic skills to young Foundation for Teaching Entrepreneurship in people, especially disadvantaged youth, including 1988. Today, he is still president of NFTE (pro­ the poor and handicapped. Personal transforma­ nounced "nifty"). NFTE conducts classes in entre­ tion and self-fulfillment of students were the orig­ preneurship in schools, both public and private, as inally unexpected side effects. well as through various youth programs. Mariotti is Mariotti discovered that he could grab the not just interested in helping people start business, attention of students, even those labeled "border­ but in also showing them the liberating implica­ line retarded" when he talked about business and tions of entrepreneurship and the free-market making money. "What had begun as an intuition economy. He is quite frank about this being one of slowly developed into a certainty: whenever I could the purposes of NFTE. manage to focus a lesson on some phase of en­ Step by step Mariotti explains the key principles trepreneurial business, I had the students' atten­ of entrepreneurship in practical, basic (sometimes tion. I'began to do this consciously, using all my a little too basic for my taste, having spent my adult ingenuity to get across the bedrock principles of life in business), and inspirational style. Examples business: buy low, sell high; keep good records. I are given of well-known entrepreneurs as well wanted these young people to appreciate the as NFTE graduates and their businesses. Some of principles of free enterprise: (1) ownership and the topics include negotiations, keystoning, market (2) honest relations with other human beings research, costing, accounting, banks, busi­ through the rational self-interest of voluntary ness plans, and so forth. Suggestions are made for trade." businesses teenagers could start. With e:t;ltrepreneurship in mind, Mariotti's stu­ Whatever your role in society, you can benefit dents became interested in math, reading, and from reading The Young Entrepreneur's Guide to writing skills because they saw it benefited them. Starting and Running a Business. You will better Instead of preaching or hectoring the students, understand what you or others can do to make Mariotti awakened the spark of recognition in yourself and society more educated and more them. Entrepreneurial education transformed the prosperous. This entertaining and sometimes mov­ students' behavior as well as their academic out­ ing book tells the story of entrepreneurship as look. Courtesy, deferred gratification, and con­ personal empowerment while also revealing the scious decision-making planted roots within them. path that led Steve Mariotti to his life's work from He discovered that their tough lives gave them a number-cruncher to teacher in the worst public "natural aptitude" for entrepreneurship. "I found schools in New York to entrepreneurship that the negative characteristics of my students, missionary. D when channeled into entrepreneurial activities, became positives." Richard A. Cooper makes his living as an export­ Given what we know about educational bureau­ import manager while exploring ideas as a freelance cracies it comes as no surprise· that Steve Mariotti writer. These can keep you infonned. Only this can keep you inside.

The balance ofpower has shifted. Conservative thought is now dominating the debate on Capitol Hill. Isn't it time you started reading a magazine with a direct link to this power base?

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