THEFREEMAN IDEAS ON LIBERTY FEATURES 412 The Trouble with Keynes by Russell Shannon A dubious legacy ofpolitical activism and short-run solutions. 416 Macroeconomics Reconsidered by Kyle S. Swan Toward formulating a defensible theory ofcapital. 419 Cholecystectomy, How Is It Made? by LeonardA. Metildi A surgeon applies the lesson of"I, Pencil" to gall bladder surgery. 422 A Sales Pitch for Laissez-Faire Health Care by Daniel B. Klein The benefits of establishing freedom ofproperty, consent, and contract in medical care. 426 Is Environmental Pollution the Principal Environmental Problem? by Hugh Macaulay Rethinking pollution as an economic problem. 429 The Greening of the Cross by E. Calvin Beisner Misstatements of a new environmental movement. 433 The Rise of Market-Based Management by Jerry Ellig and Wayne Gable Looking to the free market system for business management insights. 439 The Economic Safety Net (a parable) by Jes Beard The dangers oftrading liberty for security. 444 Special Interests and the Internment of Japanese-Americans During World War II by Steven B. Caudill and Melody Hill National security was not the primary motivating factor. 448 Peace for Europe? by William J. Watkins, Jr. The centralizing effort ofthe European Union could generate the very conflict it seeks to avoid. 451 Economics 101: A True-False Test by Ralph R. Reiland How much do you know about the American economy ofthe 1980s? 452 Hail to Prices! by Jeffery G. Lee In Pangbae, as in Peoria, prices convey vital information about supply and demand. 456 Don't Believe the Hysterical Preservationists by James D. Saltzman Supplanting the aesthetic choices ofthe property owner with government edict is bad economics and bad political philosophy. 461 Free Banking and Economic Development by David Glasner Why free banking is so well suited for less-developed and former Eastern Bloc countries. 467 Thomas Jefferson's Sophisticated, Radical Vision of Liberty by Jim Powell A tribute to Jefferson's monumental accomplishments. 472 Forrest Gump: A Subversive Movie by Aeon J. Skoble A review of one ofthe year's most celebrated films. COLUMNS Center NOTES from FEE-Degenerate Democracy by Hans F: Sennholz 424 IDEAS and CONSEQUENCES-Block Grants Are Not the Answer by Lawrence W Reed 442 A MAITER of PRINCIPLE-Beyond the Pale by Robert James Bidinotto 454 POTOMAC PRINCIPLES-Freedom from Taxes? by Doug Bandow 474 ECONOMICS on TRIAL-Sorry, Charley, But That's Not Capitalism! by Mark Skousen DEPARTMENTS 410 Perspective-James M. Buchanan, Randall G. Holcombe, Paul Heyne, Henry Hazlitt, Christopher DeMuth 476 Book Reviews -Cliches ofPolitics edited by Mark Spangler, reviewed by Robert Batemarco; Death by Government by R. 1. Rummel, reviewed by Doug Bandow; Beyond Politics, by William C. Mitchell and Randy T. Simmons, reviewed by Gregory P. Pavlik; Investment Biker by Jim Rogers, reviewed by Richard A. Cooper. THEFREEMAN IDEAS ON LIBERTY PERSPECTIVE Published by Liberty and Individual The Foundation for Economic Education Irvington-on-Hudson, NY 10533 Potential Phone (914) 591-7230 FAX (914) 591-8910 President: Hans F. Sennholz Man wants liberty to become the man he Managing Editor: Beth A. Hoffman wants to become. He does so precisely Guest Editor: Donald J. Boudreaux because he does not know what man he will Editor Emeritus want to become in time.... Man does not Paul L. Poirot Lewisburg, Pennsylvania want liberty in order to maximize his utility, Book Review Editor or that of the society of which he is a part. Robert Batemarco Marymount College, Tarrytown, New York He wants liberty to become the man he Assistant Editor Gregory P. Pavlik wants to become. Columnists -JAMES M. BUCHANAN Doug Bandow Cato Institute, Washington, D.C. "Natural and Artifactual Man" Robert James Bidinotto Lawrence W. Reed What Should Economists Do? Mackinac Center for Public Policy Midland, Michigan (Liberty Press, 1979) Mark Skousen Rollins College, Winter Park, Florida Contributing Editors Charles W. Baird Freedom and Responsibility California State University, Hayward E. Calvin Beisner Covenant College, Chattanooga, Tennessee In a free society, individuals should have Peter J. Boettke New York University the right to make choices, even if their Donald J. Boudreaux Clemson University choices might harm them. With freedom Clarence B. Carson comes responsibility, and if we tum our American Textbook Committee Wadley, Alabama responsibility over to the government, we Thomas J. DiLorenzo Loyola College, Baltimore, Maryland turn our freedom over at the same time. Joseph S. Fulda New York, New York -RANDALL G. HOLCOMBE Roger W. Garrison Auburn University Public Policy and the Quality ofLife Bettina Bien Greaves Resident Scholar, FEE (Greenwood Press, 1995) Robert Higgs The Independent Institute, Oakland, California John Hospers University ofSouthern California Theory into Practice Tibor R. Machan Auburn University Ronald Nash We can successfully ride [a bicycle] with­ Reformed Theological Seminary Maitland, Florida out knowing how we do it. Moreover, we Edmund A. Opitz Chatham, Massachusetts can hold a totally erroneous theory about James L. Payne Sandpoint, Idaho bicycle balancing without getting into any William H. Peterson trouble, unless we try to design the bicycle AdjunctScholar, Heritage Foundation, Washington, D.C. Jane S. Shaw in accordance with ourfaulty theory. That is PERC, Bozeman, Montana Richard H. Timberlake when we will get into trouble. In the econ­ University ofGeorgia Lawrence H. White omy, we can enrich one another without University ofGeorgia knowing how we do it. And we can maintain The Freeman is the monthly publication of The Foundation for Economic Education, Inc., Irvington-on-Hudson, NY 10533. FEE, completely fallacious views of how any established in 1946 by Leonard E. Read, is a non-political, educa­ tional champion of private property, the free market, and limited economy works without creating any great government. FEE is classified as a 26 USC 501(c)(3) tax-exempt difficulties for anyone. But if our practical organization. Copyright © 1995 by The Foundation forEconomic Education. success generates excessive confidence in Permission is granted toreprint any article in this issue, except''Thomas Jefferson's Sophisticated, Radical Vision ofLiberty," provided appro­ our erroneous theory, and we try to use that priate credit is given and two copies of the reprinted material are sent to The Foundation. theory to improve the operation of the The costs of Foundation projects and services are met through donations, which are invited in any amount. Donors of$30.00 or more system, we can do a great deal of damage. receive a subscription to The Freeman. Student subscriptions are $10.00 for the nine-month academic year; $5.00 per semester. Additional When we put faulty theories about bicycle copies ofsingle issues of The Freeman are $2.00. For foreign delivery, riding into practice, we are instantly refuted. a donation of $40.00 a year is suggested to cover mailing costs. Bound volumes of The Freeman are available from The Foundation Few of us are either stubborn or stupid for calendar years 1972 to date. The Freeman is available in microform from University Microfilms, 300 N. Zeeb Rd., Ann Arbor, MI 48106. enough to persist in a faulty theory that is 410 PERSPECTIVE skinning our elbows or bruising our bot­ to cooperate more effectively with the buy­ toms. We admit our ignorance. There is ing public. And so, indirectly,-triangu­ nothing similar, however, to correct faulty larly, so to speak-General Motors and theories that are applied to the reconstruc­ Ford cooperate. Each makes the other more tion of economic systems. The links be­ efficient. tween causes and effects are too numerous -HENRY HAZLITT and too difficult to trace. The Foundations ofMorality -PAUL HEYNE "Why Johnny So Rarely Learns Any Eco­ The New Manifest Destiny nomics," in Richard M. Ebeling, Ed., Eco­ nomic Education: What Should We Learn Traditionally, the nation-state provided About the Free Market? (Hillsdale College two major benefits, both ofwhich tended to Press, 1994). increase with the state's territory ... phys­ ical protection against external enemies and Competition and Cooperation an extensive internal market. ... But the first. .. is becoming less important with the Now what the critics of economic com­ spread of democratic forms of government, petition overlook is that-when it is con­ because democracies are highly disinclined ducted under a good system of laws and to make war on their neighbors; and the a high standard of morals-it is itself a second is becoming less important with the form ofeconomic cooperation. ... General growth of international trade and com­ Motors and Ford are not cooperating di­ merce-some of it due to the liberalizing rectly with each other; but each is trying actions ofgovernments, some ofit due to the to cooperate with the consumer, with the emergence of technologies resistant to gov­ potential car buyer. Each is trying to con­ ernment control, all ofit tending to make the vince him that it can offer him a better car economic benefits of extended markets than its competitor, or as good a car at a available without regard to the geographic lower price. Each is "compelling" the oth­ size of the individual state. er-or, to state it more accurately, each -CHRISTOPHER DEMUTH is stimulating the other-to reduce its pro­ President of the American Enterprise In­ duction costs and to improve its cars. Each, stitute. The American Enterprise, Vol. 6, in other words, is "compelling" the other March/April 1995. 411 THEFREEMAN IDEAS ON L1BER1Y The Trouble with Keynes by Russell Shannon "In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again." -John Maynard Keynes (1923)1 eynes' remark about the inevitability of indulge in a drunken spree tonight, don't we K death is now famous.