Ideas 011 Liberty' November 1999 Vol. 49, No. 11

, 8 Material Progress Over the Past Millennium by E. Calvin Beisner 13 Spontaneous Order on the Playground by Andrew P. Morriss 19 The End ofLiberty by Stephan F. Gohmann 23 Einstein's Brain and the Egalitarian Mind by Steven Yates 125 Is the Constitution Antiquated? by Wendy McElroy 30 Let's Not Promote Dependency by Daniel T. Oliver 33 Big Brother Wants to Read Your E-mail by Aeon J. Skoble 35 Just a Cigar by Jacob Sullum 40 The Growing Abundance ofFossil Fuels by Robert L. Bradley, Jr. 45 Fist of Steel by Dale R. DeBoer 48 Germany and the "Third Way" by Norman Barry

4 THOUGHTS on FREEDOM-Stop Stopping Price Cutting by Donald J. Boudreaux 17 IDEAS and CONSEQUENCES-States, Economic Freedom, and Wealth Creation by Lawrence W. Reed 28 POTOMAC PRINCIPLES-Emotive Policymaking by Doug Bandow 38 THE THERAPEUTIC STATE-Is Mental Illness a Disease? by Thomas Szasz 143 ECONOMIC NOTIONS-Comparative Advantage Continued by Dwight R. Lee 52 ECONOMICS on TRIAL-A Private-Sector Solution to Poverty by Mark Skousen 63 THE PURSUIT of HAPPINESS-The AFL-CIO: Renaissance or Irrelevance? by Charles W. Baird

2 Perspective-Who's Who in the School-Voucher Movement by Sheldon Richman 6 Invisible Hand Obsolete? It Just Ain't So! by Roy Cordato 54 Book Reviews Market Education: The Unknown History by Andrew 1. Coulson, reviewed by George C. Leef; China in the New Millennium: Market Reforms and Social Development edited by James A. Dom, reviewed by Steven W. Mosher; The Shadow University: The Betrayal of Liberty on America's Campuses by Alan Charles Kors and Harvey A. Silverglate, reviewed by Daniel Shapiro; Principles for a Free Society: Reconciling Individual Liberty with the Common Good by Richard A. Epstein, reviewed by William H. Peterson; Driving Forces: The Automobile, Its Enemies, and the Politics of Mobility by James Dunn, reviewed by John Semmens; President Grant Reconsidered by Frank 1. Scaturro, reviewed by Burton Folsom. Idc(ls 011 Llbcl tu Who's Who in the School Published by Voucher Movement The Foundation for Economic Education Irvington-on-Hudson, NY 10533 Watching the shifting line-ups in the school Phone (914) 591-7230 FAX (914) 591-8910 E-mail: [email protected] voucher contest is revealing. The voucher is FEE Home Page: http://www.fee.org one ofthose insidious "reforms" that its advo­ President: Donald 1. Boudreaux cates herald as an achievable "step in the right Editor: Sheldon Richman direction." The direction varies depending on Managing Editor: Beth A. Hoffman who's speaking. For some it's improvement of Editor Emeritus the government's monopoly schools through Paul L. Poirot competition. For others, it's elimination ofthe Book Review Editor George C. Leef government's role in education. That's one Editorial Assistant problem with the voucher movement: it's a Mary Ann Murphy coalition with incompatible objectives. Columnists Charles W. Baird To date, the coalition has consisted mainly Doug Bandow of conservatives, with a significant minority Dwight R. Lee libertarian element. Many other libertarians, Lawrence W. Reed however, have warned that the voucher is a Russell Roberts Venus flytrap. It looks pretty, but stay away. Mark Skousen It was only a matter oftime before someone Thomas Szasz Walter Williams other than conservatives and libertarians Contributing Editors became attracted to vouchers. Considering Peter J. Boettke that key constituents ofthe Democratic Party, Clarence B. Carson inner-city minority residents, poll in favor of Thomas J. DiLorenzo vouchers, it was inevitable that leaders ofthat Burton W. Folsom, Jr. Joseph S. Fulda party would take an interest. Bettina Bien Greaves An editorial in the May/June New Demo­ Robert Higgs crat, published by the Democratic Leadership John Hospers Council and Progressive Policy Institute (the Raymond 1. Keating "moderate" Democrats with whom Bill Clin­ Daniel B. Klein ton has long 1?een associated), embraced Wendy McElroy Tibor R. Machan vouchers in a new defense of government Andrew P. Morriss schools. These New Democrats are "gloomy" Ronald Nash that the public response to vouchers and pri­ Edmund A. Opitz vate scholarships has been so enthusiastic. James L. Payne Recent developments "should be a wake-up William H. Peterson call to liberal Democrats who have blocked, Jane S. Shaw Richard H. Timberlake watered down, or gummed up reforms such as Lawrence H. White charter schools and other types of public

The Freeman is the monthly publication of The Foundation for Eco­ school choice," the editorial states. Sensing nomic Education, Inc., Irvington-on-Hudson, NY 10533. FEE, that government schooling is in peril, it rec­ established in 1946 by Leonard E. Read, is a non-political, educational champion of private property, the free market, and limited government. ommends that any voucher bill be amended to FEE is classified as a 26 USC SOl(c)(3) tax-exempt organization. Copyright © 1999 by The Foundation for Economic Education. Per­ force private schools to admit all children and mission is granted to reprint any article in this issue, except "Material Progress Over the Millennium," provided credit is given and two copies "meet or exceed specified performance stan­ ofthe reprinted material are sent to FEE. dards to continue receiving taxpayer funds." The costs of Foundation projects and services are met through dona­ tions, which are invited in any amount. Donors of $30.00 or more Here's the punch line: "Such an amendment receive a subscription to The Freeman. For delivery outside the United States: $45.00 to Canada; $55.00 to all other countries. Student sub­ would effectively turn voucher-supported pri­ scriptions are $10.00 for the nine-month academic year; $5.00 per semester. Additional copies ofthis issue ofThe Freeman are $3.00 each. vate schools into public charter schools." As Bound volumes of The Freeman are available from The Foundation the editorial correctly points out, "A public for calendar years 1972 to date. The Freeman is available in microform from University Microfilms, 300 N. Zeeb Rd., Ann Arbor, MI 48106. Cover portrait of Albert Einstein: CORBIS/BeUmann. 2 school is not defined by who 'owns' it, but that it all depends on what the meaning of rather by two features: universal access and "charity" is. accountability to the public for results." The The Clinton administration has plans to use implicit third feature is tax financing. the FBI to monitor all traffic on the Internet­ The New Democrat anticipates that many for our own protection, of course. Prudent voucher champions will object. "Fine," it policy or another leech on liberty? Aeon says. "Let's separate the sheep from the goats Skoble e-mailed his conclusion. on education: let's find out who's really inter­ Freud said that sometimes a cigar is just a ested in improving student achievement and cigar. The Food and Drug Administration who's interested in simply gutting public edu­ would have you believe that in light of its cation." Education separationists understand alleged effect on health, a cigar is actually a that these two goals are not in conflict. pack of cigarettes. Jacob Sullum scrutinizes The question for voucherians who favor the latest call for warning labels. separation ofschool and state is: who is more A quarter century ago many people likely to shape the voucher legislation that believed the world's supply of fossil fuels eventually gets enacted? would run out. Considering that a gallon of I am not the first to predict it, but I foresee milk (a "renewable resource") costs more a day when the voucher advocates and vouch­ than a gallon of gasoline, that prediction er opponents (excepting the libertarians) seems flawed. It's even more flawed than you switch sides. It won't be long. think, says Robert Bradley, Jr. Once again Big Steel wants help from *** Washington. How good is its case that foreign steelmakers are "dumping"? And is that a bad With slightly more than a year to go before thing? Dale DeBoer has the unalloyed truth. the start of the new millennium, it's worth­ Western Germany, once the post-World while to contemplate how much wealth War II economic dynamo, today looks like human beings have created over the last any other European welfare state. Norman one. Calvin Beisner takes an inventory. Barry identifies the causes of decline. The theory of spontaneous order holds that Our columnists offer a smorgasbord of social cooperation and coordination occur insights: Donald Boudreaux pounces on without a central plan and with minimum "predatory pricing." Lawrence Reed exam­ force. Andrew Morriss has studied a particu­ ines the connection between the size of state larly striking example-involving elementary governments and economic success. Doug schoolchildren. Bandow analyzes post-Columbine gun policy. Once upon a time American coins honored Dwight Lee continues his discussion ofcom­ liberty not political leaders. The country's parative advantage. Thomas Szasz dissects founders insisted on it. That all changed. the metaphor of "mental illness." Mark Stephan Gohmann teaches a revealing lesson. Skousen relates the story ofa private bank in The newspapers heralded the finding: Ein­ the world's poorest country. Charles Baird stein's brain was different? What does that takes the pulse of the AFL-CIO. And Roy mean? Steven Yates gives the gray matter Cordato, meditating on the claim that the some thought. "invisible hand" will be irrelevant in the 21 st The U.S. Constitution contains terms that century, protests: "It Just Ain't So!" strike the modem ear as unfamiliar. The spe­ Reviewers this month assay books on a free cific practices referred to may be passe, but as education market, prospects for a civil society Wendy McElroy notes, the terms may not be in China, political correctness on campus, the as outmoded as one might think. principles of a free society, the automobile, For classical liberals, welfare is bad, chari­ and Ulysses S. Grant. ty is good. Really? Daniel Oliver points out -SHELDON RICHMAN 3 e>n. by Donald J. Boudreaux

Stop Stopping Price Cutting

"T here's nothing new under the sun." This capitalism compels business leaders to maxi­ aphorism speaks volumes about Uncle mize short-run profits at the expense of long­ Sam's antitrust suit against Microsoft. One of term growth.) the government's principal accusations in this Microsoft isn't the only firm accused today suit is that Microsoft is a predator-meaning ofpredatory pricing. The U.S. Department of that the attractive deals that Microsoft today Transportation accuses major airlines oflow­ offers to consumers cannot be matched by its ering their fares whenever their markets are rivals. When the hapless rivals eventually are entered by upstart carriers. The sole purpose bankrupted by Microsoft's pestiferous arti­ ofthese fare cuts, the department alleges, is to fice, Bill Gates and his lieutenants will use the run the upstarts out of the market so that the monopoly power they've acquired to raise major carriers face less competition. prices, restrict output, and slow the pace of And so it has been for all of antitrust's his­ innovation. The benefits that consumers get tory. From accusations in the l880s that from Microsoft's good deals today will be Chicago meatpackers charged too little for swamped by the costs that consumers endure their beef and pork, through accusations in tomorrow when Microsoft is a monopolist. the 1930s that A&P's low prices unfairly hurt This predation theory was endorsed by mom-and-pop grocers, to accusations in the MIT's Franklin Fisher, the government's chief 1990s that Wal-Mart predatorily prices down­ expert economist in the Microsoft lawsuit. town retailers into bankruptcy, antitrust has When asked on the witness stand to explain commonly been used to prevent entrepreneur­ why Microsoft currently charges so little for ial firms from improving the lot ofconsumers. its Web browser, Fisher testified that "while Sadly, the current harassment of Microsoft is the [predatory pricing] campaign is going on, simply the latest episode in 110 years of this consumers are getting a better deal." But anti-entrepreneur, anti-consumer campaign. beware the future! Fisher affirmed Judge Thomas Penfield Jackson's suspicion that What Is Predation? Microsoft is pursuing a strategy of "delayed gratification"-increasing its prospects for Is predation real? Yes-but not in the way future profits by purposely earning unneces­ that government and many economists sarily lower profits today. (As an aside, I find believe. In my view, predation occurs only it curious that many people who insist that when a firm relies on force or fraud to harm Microsoft purposely sacrifices profits today in its rivals. For example, ifMicrosoft dynamites hopes of earning higher, monopoly profits Sun Microsystem's production facilities, tomorrow also allege that modern American that's predation. If Delta Airlines advertises vicious lies about Southwest Airlines' safety Donald J. Boudreaux is president ofFEE. record, that's predation. If Barnes & Noble 4 successfully lobbies Congress to ban on-line one other strategies that firms use to attract book selling-thereby bankrupting Ama- . more business. Anything a firm does to attract zon.com-that's predation. But it's not preda­ more business-cutting prices, improving tion for a firm to offer consumers better deals. quality, or more intensely advertising its ser­ A firm is not a predator if the advantage it vices-"harms" its rivals. (Again, that's what wins over its rivals results from voluntary competition is about!) There's no justification consumer choices. for singling out a firm's low prices as a source None ofthis denies that each firm wants to ofpotentially fatal harm to rivals. be a monopolist. But desiring monopoly Suppose, for example, that Delta Airlines power is not akin to acquiring monopoly seeks more business not by lowering its fares power. A chief justification for free-market but instead by investing in safer aircraft (and competition is that by seeking maximum advertising the improved safety of its fleet). profit, firms yield benefits-as ifby an invisi­ Won't consumers then be more likely than ble hand-not only to their owners, but also to before to fly on Delta? Ofcourse-and a con­ their suppliers and consumers. Competition is sequence is that United, USAir, AirTran, and supposed to encourage firms to compete for other airlines will suffer. If they can't tum to consumers. It is supposed to encourage firms government, Delta's rivals can avoid losing to try to "harm" their rivals by offering con­ customers only by following its lead by mak­ sumers better deals and, therefore, attracting ing their airlines more attractive to con­ consumers away from rivals. That's how com­ sumers. These other airlines might cut their petition works; that's the only way that com­ fares, or they might also invest in a safer fleet, petition can work. or they might improve the quality oftheir in­ It is theoretically possible that Acme Cor­ flight service. They can compete with Delta in poration today offers deals so attractive to countless ways, all ofwhich are to be expect­ consumers that its rivals soon are bankrupted ed-and applauded-in a market economy. and, as a result, Acme tomorrow charges Any airline that doesn't adequately respond to monopoly prices. But this possibility hardly Delta's competitive move to increase the safe­ justifies government policing against low ty ofits fleet might well go bankrupt. Indeed, prices. it's remotely possible that Delta's investment First, this possibility is too remote. Not in a safer fleet will bankrupt every last one of only does the historical record contain scant its rivals, leaving Delta with a monopoly. evidence of predatory pricing, but even suc­ Surely, though, no one would seriously argue cessful predators cannot count on their that government regulators ought to have the monopoly power lasting. The reason is that authority to stop Delta from increasing the any market monopolized by a predatory pricer safety ofits fleet. is one in which the "monopolist" today enjoys When firms cut prices (rather than use other excessively high profits only because it earlier methods) to compete, it is because in those charged prices that were below its costs. That cases price cutting is deemed to be the most firm has no special cost or quality advantages. effective way to satisfy consumers. In other (If the firm did enjoy such advantages, it cases, firms deem other methods to be best. could have bankrupted its rivals without Trusting bureaucrats and judges to second­ charging below-cost prices.) Entrepreneurs guess entrepreneurs on how best to please con­ will surely sweep in rapidly to challenge that sumers unleashes the possibility of a genuine firm. Profits in such an industry are low-lying (and dangerous) form of predation-namely, fruit. disgruntled rivals filing predatory pricing suits Second, there's nothing special about low against entrepreneurial price cutters. prices to distinguish them from a million and All price cutting should be legal. D

5 Invisible Hand Obsolete? Unrealistic Conditions Perfect competition is an unrealistic set of conditions which, when present in all markets simultaneously, leads to an economy operat­ It Just Ain't So! ing with "perfect efficiency"-that is, with all firms producing at the lowest possible cost. These conditions include perfect knowledge by all market participants, many price-taking llen Murray's Wall Street Journal article buyers and sellers, complete homogeneity A"Pushing Adam Smith Past the Millenni­ within product lines, and zero transaction um" (June 21, 1999) purports to discuss the costs. When one or more of these conditions relevancy ofAdam Smith's invisible hand for are absent, most contemporary economists the 21 st century. In reality, Murray is not argue that markets are "failing." The obscure talking about Smith or his invisible-hand and otherworldly conditions of perfect com­ metaphor at all. The assumption beneath his petition are used as a benchmark to judge the conclusion that "Smith's ideas will need some success ofreal-world markets. rethinking in the years ahead" is based on a Murray implicitly takes this benchmark, false premise, namely, that Smith's ideas are illegitimately equates it with the invisible valid only when markets conform to the world hand, and converts the neoclassical theory of ofperfect competition. market failure into a theory of"invisible hand The validity of the invisible hand does not failure." With no textual reference, Murray depend on market structures or "excludabili­ characterizes Smith's views with the follow­ ty" in the provision of goods or any of the ing three statements: "In Smith's economy, if other "problems" addressed by Murray and you consume a good, I cannot"; "In Smith's associated with perfectly competitive mar­ world [rapidly declining marginal cost] leads kets. Smith was drawing out the implications to monopoly"; and "In order for Smith's econ­ ofa Lockean world based on "natural liberty." omy to work, sellers must be able to force In this world, property is privately owned and consumers to become buyers and pay for what freely exchanged. The idea that in pursuing they use." This analysis all came about 150 their own interest people will be led as if by years after Smith wrote and is integral to the an invisible hand to promote the well-being of world ofperfect competition, not the world of others is a logical implication of this institu­ The Wealth ofNations. tional setting. The invisible hand and perfect competition In Smith's system of natural liberty, if have little to do with each other. This is easily someone wants to significantly advance his seen in the "problems" that Murray associates material wealth he must produce things that with the markets and technologies he expects will advance the well-being of others, and will dominate the next century. He argues that hence society's wealth. If Murray wanted to "The cost to Microsoft of developing Win­ investigate whether the invisible hand would dows software may be huge; but the marginal be an appropriate metaphor for the 21 st cen­ cost ofputting it on one more computer is vir­ tury, he should have focused on the extent to tually zero." But this is only a problem within which private property and freedom of the realm of perfect competition, where effi­ exchange will be secure. Amazingly, this fun­ cient pricing requires that firms sell at mar­ damental issue wasn't even raised. ginal cost-an illogical result for any real- 6 7 world market. Under perfect competition, if payers from using software once it is in use. marginal cost is zero, a positive price gener­ The theory of perfect competition suggests ates "market failure." that this will cause the product to be "under­ But this has nothing to do with the invisible produced." hand. The fact is, unless he uses force, a per­ The "problem" is that the assumption of son selling a product whose marginal cost is zero transaction costs is being violated. The zero cannot sell to anyone who doesn't value costs ofexcluding free riders are too high. To it more than the price asked. No matter how the extent that these costs make production of far above zero the price, the seller-even one the good less profitable, the good will not be as powerful as Bill Gates-cannot make him­ produced. But, ofcourse, this is true oftrans­ self better off without making someone else portation costs, labor costs, and all other better off. Nothing Murray says negates that costs. Outside the world of perfect competi­ fact. tion there is no logical reason for placing Murray goes on to suggest that this zero­ transaction costs in a separate category. To the marginal-cost world could lead to monopolies extent that the good facing free-rider prob­ in industries where network effects are impor­ lems is not produced, resources are freed for tant. He states that "in the network economy other productive endeavors. Resources will ... tens of millions sharing the same e-mail flow to where the full costs of production, system may have distinct advantage over including transaction costs, are perceived to those who don't. ... In Smith's world, that be less than the potential revenues. leads to monopoly." Murray conflates Smith's Furthermore, Murray offers no historical world with the world of perfect competition evidence to support the underproduction and presents no historical evidence to support hypothesis. Indeed, his point has been true his claim. Under Smith's natural liberty, this of software from the beginning, and yet this "monopolist" would still have to make others is one of the fastest growing areas of com­ better off in order to make himself better off. merce in the world. To some extent, "non­ And so long as there were no legal barriers to excludability" has always been present for entry, he would always have to be concerned all kinds of products-radio and television about innovations and potential competitors. broadcasts, books and magazines, fashions. Murray states that "the danger comes ... if Indeed, non-excludability to some degree the pace of innovation slows and temporary may be the rule rather than the exception. Yet, monopolies become more permanent." But those preoccupied with perfect competition this is only a danger in the absence of entre­ seem unswayed by the lack ofreal-world ver­ preneurial freedom. The real threat comes ification oftheir theory. from governments that are likely to create The invisible hand may not be an appropri­ barriers to entry with protectionism, franchis­ ate metaphor for the workings of economies es, or regulations that allow large firms to in the next century. But this would be for the operate free of any threat from the outside. same reasons that it has not been an appropri­ This real and historically relevant danger, ate metaphor for most economies in the twen­ which was Adam Smith's most important tieth century. Liberty and the invisible hand concern, goes completely unrecognized by are corollary. If liberty is treated with the Murray. same disdain in the next century as it has been in the present one, then the invisible hand may Free-Rider Problem indeed be a relic ofdays gone by. -Ray CORDATa Finally, Murray frets about "the absence of Lundy Professor of excludability." His concern? "Digital data are Business Philosophy cheap and easy to copy." To the extent that this Campbell University is true, it may be too costly to exclude non- Buies Creek, North Carolina. • History

Material Progress Over the Past Millennium by E. Calvin Beisner

eginald Labbe, an English farmer better 33 shillings 8 pence (1 pound 73 pence), or R off than most in his time, died in 1293. about $2.75 at today's exchange rate. But of His will listed the following possessions: course in his day a shilling bought a great deal more than it does now, after seven centuries of • one cow and one calf inflation. • two sheep and three lambs What would his possessions have been • three hens worth had he died today? Precise calculation • a bushel and a half (about 90 pounds) of is impossible; we don't know the age, weight, wheat or health ofhis livestock or the quality ofhis • a seam (about 400 pounds) ofbarley other possessions. But rough estimates put the • a seam and a half offodder for cattle total value of his livestock today at around • a seam ofmixed grain $1,000 (assuming that they were smaller and • clothing comprising a hood, a tunic, and less healthy than typical livestock today), his a tabard (a short, heavy cape of coarse grain and fodder at around $475 wholesale, cloth) his tripod at around $10, and his clothing and • a bolster (a long, narrow pillow or cushion) bedding at nothing (because they would have • a rug (used as a blanket) been both very worn and of such inferior • two sheets make that no one today would be willing to • a tripod or trivet (for cooking food over a use them). The total value ofhis estate, then, fire) 1 might have been around $1,485 (or £935). For comparison, the average value offarms in the Like most English fanners of the time, he United States today is about $350,000. had used tools (probably little more than a hoe When Labbe died, the executor sold offhis and a scythe) belonging to his landlord­ possessions to pay expenses. He paid a penny which meant, too, that he owned neither land sterling (about $8.65 today) for the grave to nor dwelling. He had no money. The money be dug; twopence ($17.28) for the tolling of value of his estate in his day was figured at the church bell; sixpence ($51.84) for making his will; eightpence ($69.12) for court fees; E. Calvin Beisner is associate professor ofinterdisci­ 46 pence ($397.44) for food for the mourners plinary studies at Covenant College, Lookout Moun­ and pallbearers; and threepence ($25.92) for tain, Georgia, and the author of Prosperity and the clerk who drew up the account for the Poverty: The Compassionate Use of Resources in a estate-a total of66 pence ($570.25), or a lit­ WorId of Scarcity and several other books applying Christian theology and ethics to political economy. tle over a third of the value of his estate. (Of An earlier version ofthis article appeared in WorId course, he was not embalmed and had no her­ magazine (www.worldmag.com). metically sealed, velvet-lined, stainless steel 8 9 casket to preserve his body for a thousand mourners and pallbearers at Labbe's funer­ years.) al-by far the largest cost associated with his IfLabbe lived to the average age ofpeople death. That is because food was far more born in the thirteenth century, he was under expensive in the past, in comparison with 30 when he died. More likely, since he had labor and practically any manufactured prod­ survived infancy and childhood (about half uct, than it is today. Agricultural yields were did not), he died in his 30s or 40s. Probably at far lower, both per acre and per man-hour of least one wife had preceded him in death, per­ labor. haps in childbirth-one ofthe most common Eighteenth-century French farming, for causes of death for women at the time. instance, produced about 345 pounds of Assuming he had fathered eight children in wheat per acre; modern American farmers his years ofmarriage, he would probably have produce about 6.2 times as much, 2,150 buried four of them in their infancy, perhaps pounds.3 Early fifteenth-century French farm­ another before its fifth birthday, and another ers produced about 2.75 to 3.7 pounds of before puberty. If he was fairly typical, then, wheat per man-hour, and the rate fell by about two ofhis children survived him. half over the next two centuries; 4 modern American farmers produce about 857 pounds Slow Population Growth per man-hourS-about 230 to 310 times as much as their French counterparts around Such was life, for the moderately better off, 1400 and 460 to 620 times as much as French in a society in which the death rate was nor­ farmers around 1600. (By the way, this means mally so close to the birth rate that population modern farmers also manage to farm from 37 grew at only about 0.17 percent per year, to 100 times as many acres as their earlier doubling about every 425 years instead of counterparts did. Chalk it up to mechanized every 42 years, as it would at the world's aver­ equipment.) As the great French historian Fer­ age growth rate in the 1980s, or every 51 nand Braudel pointed out, life was difficult to years, as it would at the average rate for the live when productivity in wheat fell below 2.2 1990s.2 Even for the wealthy, life wasn't much pounds per man-hour, but for most ofthe 350 more secure. Infant and child mortality rates years from 1540 to 1890, productivity was were little better for the very rich-royalty well below that.6 and nobility-than they were for farmers and Such facts help to explain why earlier gen­ peasants, even into the eighteenth century. erations spent a major part of their incomes Britain's Queen Anne (1665-1714) was preg­ just on food (excluding its preparation, pack- nant 18 times; five ofher children survived birth; none survived childhood. To be more precise, such is a tiny glimpse of life for people through­ out most ofthe past mil­ lennium in countries that now are among the rich­ est in the world. There is a good deal more to describe. Most of it is about as dismal by com­ parison with our experi­ ence. You might have been surprised at the cost of the food served to the 10 THE FREEMAN/IDEAS ON LIBERTY • NOVEMBER 1999 aging, transport, and serving), while we spend No matter how rich you might have been a far less (under 6 percent of total consumer millennium-or even 150 years-ago, if expenditures in the United States in the you'd contracted a bacterial disease, you 1980s). These developments-along with the could not have been treated with antibiotics. advent of glass windowpanes (to admit light Ifyou had wanted to travel from Great Britain and heat but exclude cold and pests) and to Australia, you could not have done so in screens (to admit fresh air and exclude less than months, at great discomfort and disease-bearing insects); treatment of drink­ great risk, not in less than a day and at less ing water and sewage; mechanical refrigera­ risk than driving across London. You could tion (to prevent food spoilage and consequent not have enjoyed air conditioning or iced waste and disease); adoption ofsafer methods drinks during a hot summer. You could not ofwork, travel, and recreation; and the advent have talked with anyone by any means other of sanitary medical practices, to say nothing than direct voice. Until the advent ofthe tele­ of antibiotics and modern surgical tech­ graph in the second quarter of the nineteenth niques-also help to explain why people live century, you could not have communicated at about three times as long now. a distance in writing any faster than you could All this is just one way of looking at have traveled; and it was decades later before changes in human material conditions over telegraphic communication was readily avail­ the past millennium. Others also are impor­ able to most cities and towns. You could not tant and instructive. have taken or viewed photographs, listened to recorded music, or viewed-let alone made When Would You Rather your own!-motion pictures. Yes, the few rich of the past lived in opu­ Have Lived? lence. (Don't think of castles, most of which Try a thought experiment. Would you rather were cramped and quite uncomfortable, built live as you do today, with your present income for defense rather than comfort.) Think ofthe and expenditure patterns, or as royalty lived great mansions like Blenheim Palace in throughout the last millennium up to the late Oxfordshire, the Chateau Fontainebleau in nineteenth century? It is tempting to pick the France, or even, here in the United States, the life ofpast royalty. But consider just a few of Biltmore House in Asheville, North Carolina. the things you would have to do without: Or picture the homes ofroyalty, like Bucking­ ham Palace or Hampton Court in London, or • Electricity and all it powers: lights, tele­ the Palace ofVersailles in France. phones, radios, televisions, refrigerators, But however opulent the surroundings, air conditioners, fans, VCRs, X-rays, with their magnificent architecture, gardens, MRls, computers, the Internet, high­ carpets, furniture, china, silver services, and speed printing presses, and all other art collections, they were not very comfort­ industrial automation. able. Heating and especially cooling these • Internal combustion engines and all that mansions were constant problems. They were they power: cars, trucks, buses, planes, far less sanitary, and far more smelly, than farm and construction equipment, and most lower-class dwellings today. Indeed, the most trains and ships. very magnificence ofthe dwellings ofthe rich • Hundreds of synthetic materials like is testimony to the absence, in a pre- or prim­ plastic, nylon, orIon, rayon, vinyl, and itive-market culture, of other, more attractive the thousands of products-from gro­ uses of their wealth. A higher proportion of cery bags and pantyhose to compact people in advanced countries today can afford disks and artificial body joints and organ to build and furnish great mansions than parts-made from them. could in centuries past. But they don't. Why not? Because most ofthem invest their wealth None of these things were available to any­ in productive enterprises or spend it on travel one, at any price. and entertainment instead. MATERIAL PROGRESS OVER THE PAST MILLENNIUM 11

And sanitation? The literary historian Education was the province ofthe rich. Few James Clifford, after years of note-taking on countries before the Reformation had wide­ every reference he could find to sanitation in spread education, and even afterward, school­ London, wrote an article that American his­ ing was available principally to the rich. A torian Bernard Bailyn described simply as major exception was Scotland after John "horrifying."? "A bathroom was a very rare Knox's followers, convinced that personal luxury in ... seventeenth- and eighteenth­ knowledge of the Word of God was essential century houses. Fleas, lice and bugs con­ to the maintenance ofreligious as well as civil quered London as well as Paris, rich interiors liberty, arranged a parish-by-parish system of as well as poor," wrote Braudel. "So if we church-run grammar schools which ensured moderns were to enter into an interior ofthe that practically every child could at least past, we would very soon feel uncomfortable. become strongly literate. Scotland's high liter­ However beautiful it might be-and it was acy rate, coupled with its Calvinist ethics of often wonderfully so-what seemed like lux­ work and saving, were important factors in its ury to the people of the past would not be making contributions to the Industrial Revo­ enough for US."8 lution far out ofproportion to its small popu­ Overland travel even for the rich was by lation. But even there, few were schooled horseback or carriage, and the 450-mile jour­ for more than five or six years, and only a ney from London to Edinburgh, driven by tiny percentage attended college, let alone lower-class car owners today in a comfortable graduated. seven hours or flown in an hour, required two Today, by contrast, in the United States, 81 i8-hour days in a bumpy carriage with neither percent of persons 25 years old and over are air conditioning nor heat. For the poor, travel high school graduates and 23 percent are col­ was almost entirely on foot. lege graduates, and the growth in availability of education is worldwide. That is a particu­ Keep the Doctor Away larly crucial factor in predicting the world's material future, because the creation of Medical care? You don't even want to imag­ wealth depends primarily not on brawn but ine most of it. There were no more effective on brain. anesthetics than alcohol and cloves, so when The bottom line? Materially, the world is a limbs gone gangrenous from infections that far, far better place today than it was not only would be cured or more likely prevented easily a millennium ago but even a century ago. today had to be amputated, patients gritted Today, every raw material-mineral, plant, their teeth and hoped they would pass out from and vegetable-is more affordable (which the pain ofthe crude saws. Germ control? Non­ economists will recognize as meaning more existent. The germ theory of disease didn't abundant), in terms oflabor costs, than at any become current until the late eighteenth centu­ time in the past. Every manufactured product ry, and the use ofantiseptics didn't begin until is more affordable than it has ever been. And half a century later. Even then, what your doc­ in producing all this great abundance, we have tor didn't know could kill you. The high rate of also reduced health-threatening pollution. Put maternal death in childbirth in early nine­ simply, the world is both a wealthier and a teenth-century America is attributable in part healthier place today than ever. to belief in "laudable pus." Doctors believed The most crucial measures ofmaterial wel­ pus itselfwas curative, so they would purpose­ fare are mortality rates and life expectancy, ly spread it from patient to patient, including to since most people value preserving life more mothers in childbirth.9 Got a fever? Don't call than any other material good. A thousand the doctor; he's likely to bleed you to death try­ years ago, life expectancy everywhere was ing to cure it. In fact, medicine was so primi­ under 30 years; today, worldwide, it is over 65 tive it was a favorite cover for spies; physicians years, and in high-income economies it is were trusted everywhere, but it took little over 76 years. The under-five mortality rate knowledge to pass for one. 10 has plummeted from about 40 percent every- 12 THE FREEMAN/IDEAS ON LIBERTY. NOVEMBER 1999 where as late as the nineteenth century to in a positive direction, as long as we view the under 7 percent worldwide today, and under 1 matter over a reasonably long period oftime. percent in high-income countries. And That is, all aspects ofmaterial human welfare improved life expectancy comes not just from are improving in the aggregate.ll declining child mortality but from declining Simon's view has raised eyebrows through mortality rates at every age oflife. the years, but the empirical evidence supports The late economist and statistician Julian it overwhelmingly. If you're looking for a Simon, a friend and mentor, produced in 1995 good way to get a grasp of the material as his last major editing effort a big book, The changes we've experienced over the last mil­ State ofHumanity, to show long-term trends lennium, The State ofHumanity would be a in hundreds of material measures of human great place to start. 0 well-being. Parts cover such categories as life, death, and health; standard of living, produc­ 1. Russell Kirk, Economics: Work and Prosperity (Pensacola: A Beka Book, 1989), pp. 250-51. tivity, and poverty; natural resources; agricul­ 2. Femand Braudel, Civilization and Capitalism: 15th-18th Cen­ tury,3 volumes, volume 1, The Structures ofEveryday Life, trans. ture, food, land, and water; and pollution and Sian Reynolds (New York: Harper & Row, 1985), p. 41. the environment. Want to know long-term 3. Computed from ibid., p. 121, and Statistical Abstract ofthe United States, 1996, Table 1105. trends in slavery, housing quality and afford­ 4. Computed from Braudel, p. 135. ability, leisure time, energy resources, forest 5. Computed from E. Calvin Beisner, Prospects for Growth: A Biblical View ofPopulation, Resources, and the Future (Wheaton, growth, crop and livestock productivity, air Ill.: Crossway Books, 1990), p. 127. and water pollution, disease, murder and sui­ 6. Computed from Braudel, p. 135. 7. Bernard Bai1yn, On the Teaching and Writing ofHistory (Hanover, cide, even accident rates? They're all there, in N.H.: Dartmouth College, 1994), p. 51. chapters by 60 world-class scholars. 8. Braudel, pp. 310-11. 9. Private communication from Philip T. Newton, M.D. "This is the central assertion ofthis book," 10. Alan Marshall, Intelligence and Espionage in the Reign of Simon wrote: "Almost every absolute change, Charles II, 1660-1685 (Cambridge: Cambridge University Press, 1994). and the absolute component of almost every 11. Julian L. Simon, ed., The State of Humanity (Cambridge, economic and social change or trend, points Mass.: Blackwell Publishers, 1995), p. 7.

~1h.omdalJournaloldle "A fabulous journal... a beacon MEDICAT- ofhope and inteUectuai pursuit SENTINEL • 1>oJ,...:=:AJ1IoI.. mm• ediealJOurn• aDsm•••" nKHMSlA'.Sp.... ~r,JrM"At, J_5~1~E:~- The Medical Sentinel is the official, bimonthly, Ii , .::::,._.. N_ ... peer-reviewed journal of the Association of r.:~i:-'1"~ American Physicians and Surgeons. The AAPS is the national physician organization that successfully sued the Clinton Administration over the secret deal­ ings of Hillary Clinton's Health Care Task Force. Jane M. Orient, M.D., Executive Director, AAPS; Miguel A. Faria, Jr., M.D., Editor-in-Chief: Medical Sentinel.

Subscription OaII1-800-757-9873 $45.00 • Hacienda Publishing ISl~~l-178~er Fax: 1- 912-757-9725 • RO.Box 13648- Macon, GA- 31208-3648 Spontaneous Order on the Playground by Andrew ~ Morriss

recently observed an intriguing example of border between the school parking .lot and I the evolution ofa private property, market­ playground and the shared athletic field. Here based spontaneous order at my children's ele­ the fourth- and fifth-grade children have cre­ mentary school. A group of fourth and fifth ated a series of"houses" under various bush­ graders created a set ofplayground rules anal­ es and trees and an economy based on a pine­ ogous to those I learned about in my work on cone currency. I found what my daughter told spontaneous orders in the nineteenth-century me about their games fascinating, so I inter­ gold rushes throughout the western United viewed a large group ofher classmates about States. I was pleased, but not surprised, to how they play in the woods. find that fourth and fifth graders created a solution to a playground problem based on Establishing Property Rights property rights and markets. My children attend a Montessori elemen­ On the first day of a school year, children tary school in Cleveland Heights, Ohio. My claim their houses by marking offb9undaries older daughter, Kathleen, is in the fifth grade. with various materials (rocks, sticks, logs) At this school, as in all Montessori schools, that they find in the woods. They then devote children are grouped in multi-grade class­ considerable effort to improving their hous­ rooms-Kathleen's has fourth and fifth es-adding furniture constructed from mate­ graders together in each of two classrooms. rials found in the woods (by common agree­ Although the classrooms work separately on ment outside materials cannotbe brought into most academic subjects, activities like recess the woods). Some create "stores" in which are joint. There are thus about 60 children they "sell" materials they create such as (with four teachers and aides) in the two "paints" made by pounding plants and rocks classes, with a slight preponderance ofgirls. into dusts. Others have "hotels" where the The school grounds are not large, although homeless (children who come late to the there is a playground plus a large playing field game) can rent rooms until they can negotiate shared with a neighboring Catholic girls' high to join an existing house. Additional rooms school. One ofthe locations that attracts many are added to houses by clearing space under ofthe fourth and fifth graders is "the woods," nearby bushes and trees or by purchasing an area ofbushes and trees that lies along the them from neighbors. The rights to a space demarcated in this fashion appear to be wide­ ly accepted by both those playing in the Andrew Morriss, a contributing editor ofThe Free­ man, is a professor oflaw and an associate professor woods regularly and the fourth and fifth ofeconomics at Case Western Reserve University in graders who choose to do something else. (A Cleveland, Ohio. regular soccer game is a major alternative.) 13 14 THE FREEMAN/IDEAS ON LIBERTY. NOVEMBER 1999

Only two groups failed to respect the prop­ wishes. Unlike the commons ofa playground, erty rights the children had established. One where one group's fantasy game on the jungle was a group ofthree-, four-, and five-year-olds gym could be interrupted by another group (who have a different recess period) and who, that insists on its equal right to occupy the although technically forbidden from playing in space for a game oftag, no group of children the woods, sometimes crashed through the can impose on another by disrupting a game in houses in a herd. The second was a group of progress. I suspect that one ofthe major attrac­ elementary-age children from another school tions ofthe woods as a play space stems from who sometimes used the adjacent athletic field. the control those property rights provide. In creating their property rights in this fash­ Only one major property rights dispute ion, the children are behaving like the miners occurred during the past school year. One who flooded into the American west in child claimed a house occupied by another 1848-1849 and later years. Like the children at group ofkids. The issue was not decided on a my daughter's school, miners would appear in "might makes right" basis. Instead all agreed large numbers in an area of limited physical to choose an uninvolved child as the "judge" resources. Like the children, the miners quick­ and to conduct a court to settle the issue. After ly developed simple rules that guaranteed their the first candidate for judge was rejected as property rights. Like the rules developed at the potentially biased, they settled on a child school, the miners' rules were respected by whom several described as the "smartest kid latecomers. in the class." Each side then found a "lawyer" Also like the miners (and like most legal to present its case, and presented and cross­ systems), the children have developed a con­ examined witnesses. After a reportedly dra­ cept ofadverse possession. Houses left vacant matic presentation of factual inconsistencies for extended periods (all agreed it was more in one side's story, the judge decided for the than one week and less than a month) could other side. All accepted the decision-no be occupied by others, whose title to the prop­ appeal was lodged with the teachers. erty would be recognized by the group. Use of This brings us to another important point. property was thus encouraged. Similarly the One question always raised about privately miners in the gold rush respected claims left based legal systems is the extent to which unoccupied for short periods while their own­ such systems ultimately depend on external ers went for supplies, so long as the claim was enforcement of the rules they create. There marked in some fashion. was no such outside authority during the gold Property claims in both systems extended rush because the miners were too far from to moveable property. The western miners established centers of.political authority to often left piles of gold ore and valuable sup­ appeal to the state. In the rare case that there plies in their camps, unguarded out of neces­ were nearby military authorities, the tendency sity, while the miners sought more gold. By of troops to desert to the mines at every all accounts, thefts from the unguarded camps opportunity restricted the availability of gov­ were comparatively rare. Similarly, the chil­ ernment force. Surely children in an elemen­ dren leave their stashes of pine cone curren­ tary school, however, could appeal to their cy unguarded as well as their collections of teachers to settle disputes. materials. As part ofthe Montessori teaching method, the teachers at the school emphasize that the children must solve their own disputes. When Dispute Resolution I questioned the kids about whether the teach­ While no children's game would be com­ ers were available to settle property boundary plete without disputes, this game seems disputes and the like, they unanimously remarkably free of disputes in many respects. agreed that the teachers were no help at all. In part this is because the clear property rights "They just tell us to work it out," one com­ in their houses give each child a space free plained. Another agreed that "the teachers just from outside interference to playas each do what they always do, ask us how we'll fig- SPONTANEOUS ORDER ON THE PLAYGROUND 15 ure it out ourselves." Indeed, the children entrepreneurial activity. Children who agreed that they did not often seek assistance thought of new uses for the property were from the teachers since any major dispute able to accumulate significant pine-cone could result in the entire class being told they stashes. One group built a "golf course" and could not play in the woods for a week while charged to play; many others sold particular tempers cooled. items and rented rooms. Ofcourse, the children are not playing in a Interestingly the children resisted destabi­ state ofnature, as the nineteenth-century min­ lizing their currency and society by importing ers were. The threat ofa trip to the principal's outside pine cones. The Cleveland area has office exists for those who attempt to attack many trees and parks and pine cones are read­ others on the playground. Punching another ily available with much less effort than student is not the only way to use violence, "sweeping" another's house in the woods, yet however. In my school days the successful no one seemed to consider importing pine school bullies were the masters of applying cones as an alternative source of income. force in ways unnoticeable to the teachers. When I walked in areas thick with pine cones One of the things that struck me most about with my daughter and her friends, they resist­ "the woods" was the absence ofany evidence ed my suggestion to gather any of the of such behavior. "money" lying on the ground.

Exchange Origins In the first gold rushes, miners frequently The establishment of houses in the woods made rules forbidding sale of claims in an is a longstanding game, handed down from attempt to discourage "speculation." These class to class. Much as the experienced gold rules rarely lasted more than a few months as miners known as "old Californians" transmit­ both the new arrivals and original appropria­ ted miners' law throughout the western Unit­ tors quickly realized the mutual benefits that ed States mineral rushes, the fifth graders trade made possible. Because children often hand down the oral tradition of the rules for tqnd to have absolutist ideas about property play in the woods. Thus it is easy to see how (at least when it comes to sharing with sib­ the tradition has perpetuated itself. lings), I was curious to see how the children I should stress, however, that this is not the dealt with issues surrounding potential "Ayn Rand Learning Center" made famous in exchange ofproperty rights. an episode of the Simpsons. The Montessori Using pine cones as currency, the children system does not include any significant eco­ developed a cash economy. One could sell nomics content (at least through the fifth goods (items found in the woods), natural grade) and certainly no study ofAustrian eco­ resources (kids dug for stones), and labor nomics. No U.S. history is taught before the (owners frequently hired "sweepers" to clean middle school, so the children have not stud­ their houses). Alternatively, while pine cones ied the gold rush. Even the fifth graders are were relatively scarce commodities, they barely through ancient civilizations and so could be directly harvested by investing time unlikely to have devoted much time to study­ in a search. Property rights in houses were ing the developments of markets or trade. freely alienable and changed hands fairly Thus they haven't learned market solutions or often. Groups of children who played togeth­ property rights from a textbook. er might break up and some seek new homes; They might have learned these lessons at newcomers might join the game or players home but these children are also not, as far as might decide to switch to soccer and "cash I can tell, drawn from libertarian homes that out." Like the gold miners, the children intu­ emphasize such things. For example, as a itively understood the concept ofcomparative rough proxy of the political climate, in 1996 advantage. Bill Clinton overwhelmingly won a straw poll In addition, the overall game rewarded against Bob Dole and Ross Perot in my 16 THE FREEMAN/IDEAS ON LIBERTY • NOVEMBER 1999 daughter's lower elementary class (Harry between the nineteenth-century American Browne didn't even make the ballot). Thus gold rushes and my children's elementary they are no more likely than any other group school. Nonetheless the systems of rules and ofsuburban fourth-grade and fifth-grade kids property rights that evolved in both have sig­ to have spent much time pondering markets nificant features in common: a reliance on pri­ and property rights outside school. vate property rights and market exchange, a I think there are two explanations for the limited set ofrules facilitating individuals act­ emergence of a private-property, market­ ing in their own interest, and limited resort to based spontaneous order among my daughter outside sources for rule enforcement. It is no and her classmates. First, the Montessori cur­ accident that these features appear in such a riculum puts a heavy emphasis on children diverse set of social orders. It is precisely learning to solve their own problems. As because they are so easily generalizable that noted above, the teachers do not intervene to market-based systems of property rights can resolve disputes among children other than to accommodate both elementary schoolchild­ restrict the use of force and direct the chil­ ren's games and a gold rush. dren toward means of settlement. Appeals to The rule of law takes effort to establish, of outside authority are thus unavailable except course. The nineteenth-century miners had to where a child attempts to use force. Since no rely on their own resources to set it up. The one controls the game, the children were children can rely on the "night watchman" forced to develop mechanisms that respected state provided by the teachers and administra­ the autonomy ofthe other children and made tion to prevent violence. What is striking is peaceful interactions possible. Whenever the how little intervention was needed to establish first fourth and fifth graders hit on such a peace and good order among both the thou­ solution, its advantages would have become sands of mostly single young men who immediately apparent. flocked to the gold fields and the fourth and Second, and more important, markets and fifth graders described here. It is hard to property rights are natural in a way that imagine groups less likely to fall naturally authoritarian structures are not. The freedom into an orderly society on their own than gold such solutions provide is just what many chil­ miners and schoolchildren. That they both dren desire (and plenty of adults too!). My accomplished it so easily speaks well for our daughter and her classmates intuitively know chances to do so on a larger scale. how to facilitate the development oftheir own Many adults could learn quite a bit from the spontaneous order that enables them to play children in my daughter's class. The students the games they want to play while accommo­ found their way to a means of allocating pri­ dating their classmates' desires to play differ­ vate property rights in a desirable area ofthe ently. These children have discovered how to playground that gives each the freedom to coexist in an environment ofdiverse interests. playas he or she sees fit without impinging on the rights of others. If more adults imitated Learning from Kids such behavior in their lives, we would be much closer to a society of free and responsi­ There are obviously huge differences ble individuals. D Ideas and Consequences by Lawrence W. Reed

States, Economic Freedom, and Wealth Creation

ontesquieu once observed that "Coun­ their citizens. People respond to incentives M tries are well cultivated, not as they are and disincentives, and they tend to migrate, fertile, but as they are free." The 1999 Index taking their skills and capital with them, to ofEconomic Freedom, published by the Her­ those locales where those skills and capital itage Foundation and the Wall Street Journal, are relatively safe from the depredations of examined 161 countries and came to the same high taxes and regulation. Governors and state conclusion: "Countries that have the most legislators who want to accumulate power and economic freedom also tend to have higher centralize resources while proclaiming a rates of long-term economic growth and are desire to spur growth are trying to have their more prosperous than those that have less cake and eat it too. economic freedom." Unequivocally, the num­ bers show that "countries with the lowest lev­ Economic Freedom Defined els of economic freedom also have the lowest standards of living." From the start, the report assumes a defini­ One would expect that within a country the tion of "economic freedom" that comports same pattern would be evident. Indeed it is, with the ideas of classical-liberal thinkers. and now we have a comprehensive analysis The individual is a sovereign entity that the that proves it: Economic Freedom in Ameri­ state respects by minimizing its intrusions and ca S 50 States by economists John Byars, providing for a common defense. Economic Robert McCormick, and Bruce Yandle. Com­ freedom is expanded when governments limit missioned by the State Policy Network, an "encroachments on opportunities for individ­ association of some three dozen state-based uals to engage in voluntary exchange." It is free-market think tanks, the report argues that contracted when states interfere with volun­ "states with relatively more economic tary exchange through an array of costly freedom enjoy higher rates of growth impositions. ... because individuals in those states are Every state provides its own "bundle" of allowed to keep more of their income, and costs and benefits. The tax burden may be low thus the marketplace can more efficiently in a state at the same time the regulatory bur­ determine the allocation ofresources." den is high. A state may have low tax and reg­ There are profound lessons here for state ulatory burdens that are at least partially off­ governments. Their actions and policies do set by a judicial system that encourages frivo­ make a difference in the material welfare of lous lawsuits or bestows abnormally large damage awards that overcompensate harmed Lawrence Reed is president ofthe Mackinac Center for Public Policy (www.mackinac.org), afree market parties and thereby exposes individuals to research and educational organization in Midland, higher risks of property confiscation and Michigan, and chairman ofFEE's Board ofTrustees. redistribution. A relatively high level of wel- 17 18 THE FREEMAN/IDEAS ON LIBERTY. NOVEMBER 1999 fare spending indicates a state is engaged in colleagues show that residents of New York more income redistribution than others, a vio­ pay twice the state and local taxes than resi­ lation ofeconomic freedom, and this may off­ dents ofIdaho: $3,858 versus $1,955. set an otherwise friendly regulatory environ­ You're also more likely to be working ifyou ment. In any event, the report agglomerates live in Idaho rather than in New York. The all this information in about as scientific a unemployment rate in Idaho was 3.7 percent fashion as is possible. below the national average in 1996, while It assembles data on more than 200 indica­ New York's was 15 percent above. In the tors, grouping the resulting measurements 1990s, both per capita income and gross state under five key categories: fiscal, regulatory, product boomed in Idaho at almost twice the judicial, government size, and welfare spend­ respective rates ofNew York. ing. Each state is then assigned a rank, from 1 to 50. Idaho turned in the best score as the Business Incentives state with the greatest degree of economic freedom, while New York came in dead last. The strong, positive correlation between The five states with the most economic free­ economic freedom and economic growth that dom (Idaho, Virginia, Utah, Wyoming, and the report demonstrates has implications for South Dakota) boasted growth in personal the states in an increasingly controversial area income from 1990 to 1997 that was a spectac­ of policy: "incentive" packages designed to ular 59 percent higher on average than the five lure businesses. Almost every state is now states with the lowest levels ofeconomic free­ engaged in a tit-for-tat war of selective tax dom (New York, Rhode Island, New Jersey, abatements and direct subsidies. For example: Massachusetts, and Connecticut). To attract a new factory for Ohio and prevent Just as the human traffic around the world it from locating in neighboring Michigan, tends to move from the less free to the more Ohio politicians may offer to forgive several free countries, migration patterns within the years oftaxes due and even give the company United States show similar movement. The millions of dollars for job training and infra­ report confirms that "people are moving into structure. states with high levels of freedom and out of The report does not directly address this states with low freedom." Birth rates are not form of competition among the states, but its markedly different from state to state, so bottom line certainly points in one particular changes in population are heavily influenced direction. If states want to cultivate growth by the movement ofpeople. The difference in and prosperity, they should focus on the forest population growth between the top and and the trees will take care ofthemselves. To bottom of the freedom scale is especially the extent that these incentives are targeted dramatic: Idaho-the freest state-saw its at a few at the expense of the many, they population soar by 16.8 percent from 1990 to rearrange wealth and politicize it-which 1997, while New York-the least free state­ works against an improvement in overall eco­ barely held its own with a paltry growth rate nomic freedom. State governments would be ofjust 0.8 percent. better advised to reduce burdens on everyone Per capita personal income in Idaho in 1996 and foster a policy of "a fair field and no was a low $19,539 when compared to New favor." Economic freedom, not political redis­ York's $28,732-a fact which by itself might tribution, is what makes a state-and indeed, suggest a conclusion diametrically opposite a nation-prosper. ofthe report's general finding. Having lived in Byars, McCormick, and Yandle have done Idaho in the mid-1980s, however, I can certi­ us a favor by proving beyond a shadow of a fy that $19,539 goes a lot further than the doubt what we all should have instinctively same amount of income in a high-cost-of­ known. Freedom works, and more ofit works living state like New York. Indeed, Byars and even better. D The End ofLiberty by Stephan F. Gohmann

ave you checked the coins in your H pocket lately? If you see a shiny coin with the image ofa man on a galloping horse, be advised that it's not an arcade token but a real U.S. quarter dollar. This new coin is the first of50 state commemorative quarters to be released over the next decade by the U.S. Mint, which is allowing each state to design the back of the quarter for its own version. The Delaware horseman is Caesar Rodney, a Revolutionary War general who rode all night from Dover to Philadelphia to cast a crucial vote in an effort to assure unanimous support for independence by the 13 original colonies. The minting of "Caesar" on a U.S. coin cally, with this new Delaware quarter, Ameri­ symbolizes something that at least some cans now have a Caesar on their coins! members of the Second Congress worked to Prior to 1909, Americans came into contact avoid. A major disagreement during debate on with an image of Liberty every time they establishment ofthe mint was over the image touched a coin. Since then, that daily associa­ to engrave on coins-a political leader or a tion has diminished, and in 1947, when Ben­ symbol of Liberty. Although Liberty won, a jamin Franklin's visage ended the reign ofthe cursory check of the coins in your pockets "Walking Liberty" half dollar, the govern­ will make it clear that this victory, like others ment eliminated all incidental contact with of the founding fathers, was short lived. Not Liberty. The Liberty halfdollar supplanted by one currently circulating coin bears an image Franklin (without his permission), was the of "Lady Liberty" or anything similar; last U.S. coin in circulation to be minted with instead, the images are ofpoliticians. her image. While current coins bear the One contention of those members of Con­ inscription "Liberty," they no longer contain gress who were against the practice ofplacing her image. The sole exceptions are patriotic­ a politician's image on a coin was that it seeming coins intended to be sold to collec­ would seem emblematic of a monarch. Ironi- tors, such as silver dollars and gold and plat­ inum coins ofhigher denominations. It is time to bring Liberty back! Stephan Gohmann is a professor ofeconomics at the Although many may argue that what University ofLouisville. appears on our coins is of little importance, 19 20 THE FREEMAN/IDEAS ON LIBERTY. NOVEMBER 1999 the image ofLiberty gives a daily reminder of President. I am certain it will be more agree­ what the founders believed when the country able to the citizens ofthe United States to see began. That Liberty has been replaced on the head ofLiberty on their coin than the head every coin by a politician (with the current of Presidents. However well pleased they exception of the dollar) is an indicator ofhow might be with the head ofthe great man now the ideology of government leaders has their President, they may have no great reason changed. The Second Congress showed rever­ to be pleased with some of his successors."3 ence for liberty and limited government. Page obviously had great foresight. Today's coins, with the image of politicians, In rebuttal, Representative Samuel Liver­ show reverence for government and its leaders. more suggested that the head ofthe President would make a good emblem of liberty. After A Brief History of Liberty debate, the amendment was split in two. The first part striking the words "or representation On December 21, 1791, the Senate had the ofthe head ofthe President" passed 26 to 22. first reading of"a bill establishing a mint and The second part calling for an emblem ofLib­ regulating the coins ofthe United States." The erty passed 42 to 6. The Senate, however, dis­ bill contained a section pertaining to emblems agreed with this amendment and moved that to be placed on the coins. On one side of the the House should recede from its position. coin was to be "an impression or representa­ When the Senate's response was sent back tion ofthe head ofthe President ofthe United to the House, Livermore argued in support of States for the time being, with an inscription the Senate saying that it would flatter the Pres­ which shall express the initial first letter ofhis ident at no expense to the country. This notion Christian or first name and his surname at was rebutted by Representative John Francis length ... and upon the reverse ... shall be Mercer, who had been Washington's aide­ the figure or representation of an eagle."1 de-camp. He pointed out that rulers such as Apparently, there were senators who opposed Nero and Caligula had also had their images having the President's image on the coin on coins, so it might not necessarily be an because on the second reading an amendment honor. Representative Egbert Benson felt was proposed. The amendment said that the uneasy leaving the representation of Liberty coin should include an engraving of two up to the judgment of an artist and ridiculed hands united surrounded by circles equal to the idea that the people would be enslaved by the number of states in the Union at the time their president and his image on a coin. of coinage. On the reverse was to be a repre­ John Page again defended Liberty arguing sentation of the female figure ofjustice hold­ that "as long as the people were sensible of ing balanced scales, with the inscription, "To the blessings of liberty, and had their eyes all their due." This amendment was defeated open to watch encroachments, they would not on January 12, 1792, and the bill passed the be enslaved; but ifthey should ever shut them, Senate with its original wording intact.2 or become inattentive to their interests and the When the bill reached the House ofRepre­ true principles of a free Government, they, sentatives, an amendment was put forth to like other nations, might lose their liberties; strike the requirement of the President's that it was the duty of the members of that image in favor ofsome emblem ofLiberty. In House to keep the eyes of their constituents support of the motion, Representative John open and to watch over their liberties."4 He Page said "it had been the practice in Monar­ argued further that he did not want to treat the chies to exhibit the figures or heads of their president as a monarch and wanted to give kings upon their coins either to hand down in few incentives to those who wished to be the ignorant ages in which this practice was president. Page feared that certain ambitious introduced, a kind of chronological account individuals would hope to make a name for of their Kings, or to show to whom the coin themselves by becoming president and then belonged." He further argued that the money having their names handed down through his­ of the United States is "not the money of the tory through their image on coins. Given how THE END OF LIBERTY 21 almost every modem president has been con­ scious of the legacy he would leave, Page again seemed to be unusually insightful. The question that the House recede from its amendment was defeated 32 to 24. Then the Senate backed down, and the bill passed both houses. Liberty became the emblem for all United States coins. All was well for Liberty on our coins until 1890 when a bill passed Congress foreshad­ owing the beginning ofthe end. The Mint had often redesigned coins, but almost always included the figure of Liberty. The 1890 act allowed the director ofthe Mint, with concur­ rence from the secretary of the treasury, to redesign any coin as long as it then remained unchanged for at least 25 years. The director had great discretion regarding the emblem of Liberty. Over the next half of a century, Lady Lib­ Augustus Saint-Gaudens (1848-1907) erty would disappear from our coins. Liberty Sculptor and designer ofclassic coins. was removed first from the penny, and then The nickel five-cent piece, established by the from the nickel, quarter, dime, and halfdollar. Act of May 16, 1866, did not initially have a representation of Liberty. It had a shield on TR and the Coins one side and a "5" surrounded by 13 stars on the obverse. In 1883, these nickels were One of President Theodore Roosevelt's pet replaced by a Liberty-head nickel that was projects was the design of the U.S. coins. minted until 1913. In that year, Liberty was Some coins minted during his presidency are replaced by the Indian-head or buffalo nickel. thought to feature the most beautiful repre­ Twenty-five years later, the Jefferson nickel sentations of Liberty. Roosevelt commis­ replaced the buffalo nickel, again contrary to sioned Augustus Saint-Gaudens to design a the intent ofthe Second Congress. coin with Liberty in the classical Greek and The Washington quarter was issued in 1932 Roman design. One of Saint-Gaudens's stu­ to commemorate the 200th anniversary ofhis dents, Adolph Weinman, was responsible for birth. The standing Liberty quarter had been creating the Mercury dime, which is an image subject to considerable criticism due in part to of Liberty in Mercury's headdress.5 However the initial design that showed Liberty with in 1909, President Roosevelt wished to issue one breast exposed. Lady Liberty was a coin to commemorate Lincoln's 100th birth­ replaced with the word "liberty" imprinted day. The Lincoln penny would replace the next to the image of President Washington, Indian-head cent. But the image on that penny the President whose image Congress explicit­ was not an actual Indian; it was the head of ly debated against placing on coins. Liberty in Indian headdress. The minting of The dime was first minted in 1796 and con­ the Lincoln cent breached the intent of the tained a representation of Liberty until 1945. Second Congress. Liberty was replaced by the The change to the Franklin Roosevelt dime image of a president who many would argue was made by the director of the Mint, Nellie usurped constitutional powers held by the Tayloe Ross, shortly after Roosevelt's death, people and the states. at the urging of Representative Clyde Doyle. The five-cent piece was initially a half In his letter he said that using Roosevelt's dime. Liberty appeared on the silver half likeness would please the American people dime from its first minting in 1794 until 1873. and would increase the circulation ofthe coin. 22 THE FREEMAN/IDEAS ON LIBERTY • NOVEMBER 1999

Halfdollar (Kennedy type), 1964: Lady Liberty disappeared/rom coins in the 1940s.

He favored putting Liberty on the other side, cal hysteria."7 Hysteria won out. The bill but that did not occur. 6 The wings on Liber­ passed the House 352 to 6 and shortly there­ ty's headdress on the old Mercury dime repre­ after passed the Senate. sented liberty ofthought. How ironic that this Liberty has not appeared on a circulating dime was replaced in 1946 by one bearing the coin for 52 years. Most of the population of likeness ofthe great champion ofbig govern­ the United States was not alive when the last ment. Liberty coin was minted. In 1948 Nellie Tayloe Ross again removed So what does this history tell us? Our coins Liberty from a coin. This time the Walking originally were emblematic of liberty. Now Liberty half dollar was replaced by one with they are emblematic of strong centralized the image ofBenjamin Franklin. Fifteen years government and reverence for its past leaders. later, Franklin's image was replaced by that of One reason we don't have Lady Liberty on John F. Kennedy. The Kennedy halfdollar had our coins may be found in words spoken by to be legislated since the Franklin had been John Page during the debate on the mint: "it minted for only 15 years and not the required was the duty ofthe members ofthat House to 25. Weeks after Kennedy's death, President keep the eyes oftheir constituents open and to Lyndon Johnson sent a letter to Congress watch over their liberties." By removing the requesting that the half dollar bear the like­ image ofLiberty from our coins, perhaps fed­ ness of President Kennedy. Congress wanted eral authorities hoped to reduce any possibili­ to act quickly so that the new 50-cent dies ty that the American people would realize that would be ready in time for the new year. Rep­ their liberties were slipping away. 0 resentative William Moorhead of Pennsylva­ 1. Annals ofCongress, Second Congress, Senate, January 1792, nia used the precedent of the coinage of the p.7l. Roosevelt dime to argue for the immediate 2. Ibid. 3. Annals ofCongress, Second Congress, March 24, 1792, p. 484. change to the Kennedy half dollar. Represen­ 4. Ibid., p. 488. tative Durward Hall from Missouri opposed 5. See Ted Schwarz, Beginner's Guide to Coin Collecting (Gar­ den City, N.Y.: Doubleday Dolphin Books, 1980). the bill, arguing that the House was acting too 6. Congressional Record, 1945, pp. A2207-2208. quickly "under the guise ofmass psychologi- 7. Congressional Record, 1963, p. 248225. Einstein's Brain and the Egalitarian Mind by Steven Yates

ate last spring a team of neuroscientists tists theorized that the absence ofthis groove L based at McMaster University in Ontario, may have allowed far more neurons-brain Canada, released the first detailed study of cells that facilitate thinking and communicat­ Albert Einstein's brain, which had been pre­ ing-to develop and exchange information. served since his death in 1955. Einstein was As a result, they reasoned, Einstein developed sympathetic to the idea of having his brain into the mathematical genius who revolution­ studied by scientists after his death. ized modem physics beginning in 1905 with The team, led by Dr. Sandra F. Witelson, his paper on special relativity. concluded that Einstein's superior mathemati­ cal and scientific abilities resulted from cer­ Unique Structure tain features of his brain not shared by people of average intelligence. Their results Not all scientists are ready to endorse these were published in the June 19, 1999, issue of findings. Many are cautious because of the the British medical journal The Lancet under superficial similarity between the Witelson the title "The Exceptional Brain of Albert study and old studies that tried to correlate Einstein." brain size or weight with intelligence. Ein­ The area of the human brain thought to be stein's brain, however, was not exceptional in the seat of mathematical, visual, and spatial size or weight. Einstein's intelligence may reasoning is known as the inferior parietal have resulted from the unique structural prop­ region. It is found at ear height in the part of erty of his parietal lobes. Witelson and her the brain known as the cerebrum. What Witel­ colleagues, it is worth noting, do not consider son and her team found was that Einstein's their results conclusive. They welcome fur­ inferior parietal lobes were 15 percent wider ther investigation, recommending electronic than those of a control group of 91 "normal" imaging of the active brains of today's bril­ brains. In Einstein's brain, a cleft known as liant physicists and mathematicians to learn if the Sylvian fissure diverted from its usual theirs, too, have structural features similar to structure. Apparently, the change occurred Einstein's. when Einstein was in his infancy. It did not It seems possible, though, that a remark permit Einstein's brain to develop what is Ayn Rand once made will turn out to be right called a sulcus, a groove that normally runs and some people simply do have better brains through this part ofthe brain. The neuroscien- than others-better in that because of unique structural properties their owners have superi­ Steven Yates is the author of Civil Wrongs: What or mental capabilities. (See "An Untitled Let­ Went Wrong with Affirmative Action (ICS Press, ter" in Rand's Philosophy: Who Needs It.) 1994) and numerous articles and reviews. According to the egalitarian mind, all human 23 24 THE FREEMAN/IDEAS ON LIBERTY. NOVEMBER 1999 beings ought to be social and economic equals, and it is fundamentally unjust for a select few to soar ahead ofthe pack. The idea of superior intellect, egalitarians have often averred, is just a cover for the exploitation of the many by the few. They tend to sympathize with the idea that intelligence is either a "social construction" or exclusively a product of environment and upbringing. Either one can be changed by the right governmental­ educational tinkering. The rapidly advancing neurosciences may provide decisive refutations of all this. If the Witelson discoveries are right, then one's intellectual capacity is rooted in the structure of one's brain. People's brains are not all the same, and this is a fruit ofnature, not a social, political, or educational arrangement. The point is, left to themselves, a select few-an elite of talent and ability-always soars ahead. This has been true in science, art, Albert Einstein (1879-1955) political thinking, literature, philosophy, and every other human endeavor of note. There an immediate environment (including espe­ are leaders, and there are followers. If the cially a strong family unit) that both permits leaders have structurally better brains, then no and encourages the exercise ofone's mind and kind of government tinkering will change independent thought is important too. The this. All the latter can do is suppress a per­ plain truth is, beyond these commonsensical son's natural inclinations, which is what polit­ judgments, there is a lot we just don't know. ical systems implemented along egalitarian The human brain is the most complicated lines have always done. To see what an egali­ object we have ever studied, and we are not tarian America would look like, watch the even close to understanding how it generates movie Harrison Bergeron, based on a Kurt intelligence. Vonnegut short story. It portrays a society led Our ignorance is why no educational sys­ by "Handicapper Generals" who "equalize" tem ought to force students into a single those born with superior brains. mold, as though they were products on an Of course, no one can know in advance assembly line. The best educational systems who will soar ahead. We aren't in a position to have always been those that allow students scan children's brains and find out. Not only maximum freedom to develop at their own would such a procedure be vulnerable to pace, having created environments conducive abuse, we do not know if it would do any to learning. A free society will encourage good. We simply don't know enough about education along these lines, and then leave it the brain to know what to look for. Even if alone. There is no telling what educational Einstein's unusual parietal lobes explain his forms might develop, and no way to predict superior scientific mind, we do not know what what advances in learning might result. explains excellence in other endeavors. And In the meantime, it might be useful to assuming brain structure to be a factor in remember Murray Rothbard's characteriza­ superior intelligence, Witelson's team does tion of egalitarianism as a "revolt against not claim it to be the only factor. Obviously, nature." D • History, Government

Is the Constitution Antiquated? by Wendy McElroy

rticle I ofthe U.S. Constitution addresses civilian to arm a private ship in order to attack Athe legislative powers that are vested and plunder the merchant ships of an enemy in-held exclusively by-the Congress. One nation during war. This is the meaning the term of these powers is the right to "grant Letters had acquired by the eighteenth century. In ear­ of Marque and Reprisal" (Section 8, para­ lier use, it referred to the means by which a gov­ graph 11). Further, Section 10, paragraph 1, ernment righted a private wrong against one of ofthis Article reads: its citizens. For example, if an English trader had his goods stolen in Holland and could not No State shall enter into any Treaty, receive satisfaction through the Dutch legal sys­ Alliance, or Confederation; grant Letters tem, the English government might grant him a ofMarque and Reprisal; coin Money; emit letter of marque. He was then authorized to Bills of Credit; make any Thing but gold seize any Dutch ship to regain the value of the and silver Coin a Tender in Payment of goods stolen from him. By 1700, however, the Debts; pass any Bill of Attainder, ex post letter of marque had become an instrument of facto Law, or Law impairing the Obligation state by which government could expand its ofContracts, or grant any Title ofNobility. naval power during war. Paragraph 1 is an example of what many Private parties who met certain require­ consider to be antiquated language in the ments, such as the posting ofa security bond, Constitution, particularly with reference to could arm what was called a "private ship of the terms "Letters of Marque and Reprisal" war" and legally plunder enemy merchant and "Bill of Attainder." Yet many terms con­ ships. Such authorized parties were called pri­ sidered to be antiquated not only have rele­ vateers by their own government and pirates vance to our modern day, but they also offer a by the enemy. After being adjudged as "lawful window into the attitudes and historical prize" by a court, the seized goods became the events that created the United States. Only by property of the privateer. This was his pay­ understanding their context is it possible to ment. Thus, the government was able to dis­ understand the issues to which the Constitu­ rupt the commerce of an enemy nation with­ tion speaks-then, and now. out spending money. Letters of marque assumed importance in Letters of Marque American history as a response to the Pro­ hibitory Act passed by Great Britain in 1775. A letter of marque--or letter of reprisal-is By this Act, the rebellious colonies were the means by which a government authorizes a stripped of protection by the English crown. Wendy McElroy is a contributing editor of The Trade between the colonies and British mer­ Freeman. chants was forbidden; the seizure and plunder 25 26 THE FREEMAN/IDEAS ON LIBERTY • NOVEMBER 1999 of American ships was encouraged. In tum, States), but also in Section 9, paragraph 3, the Continental Congress issued letters of "No Bill of Attainder or ex post facto Law marque and reprisal that empowered colonial shall be passed" (prohibiting the Congress). privateers to loot British merchant ships. In his book The Supreme Court: How It The "Instructions to the captains and com­ Was, How It Is, Chief Justice William H~ manders ofprivate armed vessels which shall Rehnquist offers this definition: "A bill of have commissions of letters of marque and attainder was a legislative act that singled out reprisal," issued by Congress on May 2, 1780, one or more persons and imposed punishment offer a sense ofthe restrictions placed on pri­ on them, without benefit oftrial" (p. 166). The vateers. The primary restriction limited prohibition against bills of attainder was to attacks to vessels owned by traders of the prevent anyone from being tried by the legis­ enemy nation. The private ships of war were lature rather than by the judiciary. Rehnquist "to pay a sacred regard to the rights ofneutral explains that the phrase refers to a "precise powers." The purpose of this restriction was legal term which had a meaning under Eng­ partly to conform with international law and lish law at the time the Constitution was partly to avoid turning neutral nations into adopted." hostile ones. The privateer was ordered to In English common law, when a person was "bring such ships ... to some convenient condemned to death or deemed unfit to live port" where an Admiralty court could judge (for example, condemned as an outlaw), he whether the plunder was lawful. Privateers was labeled "attaint"-tainted or corrupted in were not to "kill or maim,-or, by torture or his blood-and his land was forfeited to the otherwise, cruelly, inhumanly, and contrary to crown. Because the blood was corrupted, a common practice of civilized nations in war, man whose "outlawry" was sufficiently egre­ treat any person or persons surprised in the gious could neither inherit land nor transmit it ship." to his children. Parliament began to use bills of On April 16, 1856, most ofthe major mar­ attainder in 1459 to exercise judicial authority. itime powers signed an international agree­ The method became infamous during the ment called the Declaration Respecting Mar­ reign of the Tudor monarchs-especially itime Law-more popularly known as the Henry VIII-who blatantly used it to punish Declaration of Paris-which abolished priva­ political dissenters, many of whom could be teering. The United States declined to sign on found legally guilty in no other manner. the grounds that its navy was so small that let­ Because bills of attainder had been used in ters ofmarque were required to bolster it dur­ colonial America, the framers ofthe Constitu­ ing war. Without. the letters the United States tion were well aware ofthis abuse. Thus, Arti­ would be at a disadvantage versus European cle II, Section 3, reads, "The Congress shall nations with large standing navies. have power to declare the punishment oftrea­ During the Spanish-American War (1898), son, but no attainder of treason shall work Spain and America-neither of which was a corruption of blood, or forfeiture except dur­ party to the Declaration of Paris-agreed to ing the life ofthe person attainted." eschew privateering. It was not until the Even the exigencies of the Civil War did Hague Conferences at the dawn ofthe twenti­ not entirely remove the American suspicion of eth century, however, that the United States bills ofattainder. On July 17, 1862, a wartime officially renounced the use of letters of Congress passed the Confiscation Act direct­ marque and reprisal. Thus, the term is anti­ ed at citizens of the Confederacy. The inten­ quated in that it no longer applies to an activ­ tion ofthe Act was to "suppress insurrection, ity in practice. to punish treason and rebellion, to seize and confiscate the property of rebels." But the term of confiscation was specified to be for Bill ofAttainder the life span ofthe offender, with his children The term "Bill of Attainder" occurs not carrying no taint of blood and thus able to only in Section 10 ofArticle I (prohibiting the inherit. Is THE CONSTITUTION ANTIQUATED? 27

Although "bill of attainder" may seem to punishes or puts people to death without a be as antiquated a term as "letters of trial." marque," some political commentators The debate over asset forfeiture raises an believe that recent asset-forfeiture laws con­ intriguing point. Although the specific form stitute bills of attainder under another name. of an abuse mentioned in the Constitution These laws allow authorities to seize the may no longer exist, the abuse may have property of people who have neither been merely assumed another shape. tried nor convicted of crimes. For example, In sculpting the Constitution-and espe­ by power oflegislation alone, authorities may cially in using certain terms repeatedly-the confiscate homes, boats, and cars in which framers were addressing real political abuses drugs are found. they had witnessed firsthand. Those specific Organizations such as the Institute for Jus­ forms of the abuse may no longer exist, but tice believe that such seizure without trial is a the appetite of some human beings for power violation ofconstitutional and civil rights. The and plunder seems to remain unchanged Bill of Attainder Project (www.isc-durant. through time. It is necessary to look beyond com/tom/billofattainder/) is attempting to the quaintness of any specific term and ask, have the phrase defined in law as "A law or what current legal practice corresponds, in its legal device which outlaws people, suspends essence, with one that is prohibited by the their civil rights, confiscates their property, Constitution? 0

THE CLASSIC BLUEPRINT FOR A JUST SOCIETY llHIIE ILAW By FREDERIC BASTIAT New Introduction by WALTER E. WILLIAMS Foreword by SHELDON RICHMAN

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Emotive Policymaking

e live in an age ofparadox. Media sat­ doubling the number of guns, especially W uration following events like the mur­ hand-guns, would increase homicide rates." ders at Columbine High School makes it appear that violence surrounds us. Yet the crime rate has been falling and school shoot­ Many Guns ings remain extremely rare. In contrast, the Anyway, it is too late to try to disarm a serious violence that pervades some inner­ society where 240 million guns are in private city schools never makes the news. hands. Only the exceedingly law-abiding and Moreover, tragedies like Columbine almost extremely docile would give up their always launch a spate of counterproductive weapons. Thus, only totalitarian controls policy initiatives-such as gun control. could eliminate private gun ownership. And Although inadequate morals rather than inad­ even police-state measures wouldn't be equate laws led to the Columbine murders, enough. Otherwise there would be no illicit activists, interest groups, and politicians drug trade today. immediately dusted off their old proposals to Nor is disarmament a reasonable goal. It is launch anew. easy to belittle the use offirearms for hunting The temptation to ban firearms is under­ or target-shooting, yet the right to engage in standable. Anything seems reasonable in an such activities is the bedrock ofa free society. attempt to save even a few people who die by Sportsmen rarely misuse their weapons; those bullet every year. Yet private possession of who don't should not be punished for the sins weapons does not automatically lead to their ofthe few who do. misuse: heavily armed societies like Israel Using guns for self-defense is even more and Switzerland have only a fraction of our important. There is no more fundamental violent crime. America's problem is the will­ right, especially in a world in which the police ingness to misuse guns, not the availability of offer only imperfect protection, at best. John guns. R. Lott, Jr., formerly of the University of That is evident even from the U.S. experi­ Chicago, figures that guns are used five times ence.Civil libertarian Don Kates points out as often to prevent as to commit crimes. that the number of firearms almost doubled Nor should one desire a world in which between 1973 and 1992, while the murder only state officials possess weapons. Although rate fell. The facts, he observes, are "com­ a standing army has replaced the militia as pletely inconsistent with the shibboleth that America's main defense against foreign foes, the nation's founders rightly distrusted giving Doug Bandow, a nationally syndicated columnist, is a senior fellow at the Cato Institute and the author government a monopoly on deadly force. and editor of several books, including Tripwire: Tyranny may seem exceedingly unlikely, but Korea and U.S. Foreign Policy in a Changed World. disarming average citizens makes it more 28 29 rather than less likely to occur. That's why the ings. As noted, there is no evidence that wait­ right to bear arms is enshrined in the Bill of ing periods lower crime rates. Such restric­ Rights. tions do, however, prevent people from buy­ Of course, Americans should hesitate to ing guns to protect themselves from imminent respond to even outrageous government abus­ danger. Proposals to ban possession of es with violence. Once loosed, the dogs of weapons by 18-to-21-year-olds would be revolution cannot be easily controlled. But the equally perverse. The federal government government murder (what else can it be already bars anyone under 21 from buying a called?) ofthe Branch Davidians at Waco and gun, but responsible adults between 18 and 21 Randy Weaver's family at Ruby Ridge cer­ should not be denied firearms: they are the tainly demonstrates that state authorities can­ most likely to be victims of violence. More­ not be trusted. over, John Loti has found that their use of Nevertheless, as predictable as the tides, concealed weapons also reduces crime. Columbine led to a new campaign to regulate In fact, kids who receive weapons from firearms. Proposals included background their parents are far less likely than their peers checks at gun shows, trigger locks, limits on to misuse guns later in life. Interestingly, they the number of guns that can be purchased, a are also far less likely to use drugs or other­ ban on concealable firearms, and increasing wise end up delinquent. the legal age to buy firearms. Even some past Trigger locks would save few lives. A critics ofgun controls have flipped in the face minuscule number ofchildren die in gun acci­ ofthe public relations onslaught. dents, fewer than the number who die in fires This sophisticated campaign has been run they started with lighters, riding their bikes, as if guns were getting easier to buy. To the or even drowning in water buckets. But trig­ contrary, argues Lott, "Gun availability has ger locks would hinder people from defending never been as restricted as it is now." As themselves in an emergency. (They might also recently as 30 years ago there were few cause some gun owners to be overconfident, restrictions on gun ownership, even by juve­ and thus less careful about keeping their niles. Since then the number of words in fed­ weapons out ofthe hands oftheir kids.) Indi­ eral gun laws has quadrupled, and state and vidual owners can best balance the one risk, if local regulations have mushroomed. they have small children, against the other, if It is hard to find any evidence that this they live in a dangerous neighborhood. growing body ofrules has had any impact on Licensed dealers already must conduct crime. Writes Lott: "Not one academic study background checks, including at gun shows. has shown that waiting periods and back­ Private individuals need not, but there is no ground checks have reduced crime or youth evidence that potential criminals flock to violence." So much for the vaunted Brady these very public gatherings to consummate law. illegal deals. Indeed, fewer than 1 percent of There is no reason to believe that the convicted felons obtained guns at shows; the plethora of new proposals would have any Justice Department found that just 2 percent better effect. Indeed, none would have of guns used in crime came from gun shows. stopped the Columbine massacre. As Lott The strongest response to gun crimes is to points out, the killers "violated at least 17 punish the criminal. Use of a firearm should state and federal weapons-control laws." A automatically increase the sentence. Those couple more on the books would have made who knowingly sell guns to criminals orjuve­ no difference. niles should be likewise punished. But new rules could make crime more like­ Legislators should pause before passing ly by disarming potential victims and "citizen any new gun-control measures. Tragedies like cops." Research by Lott suggests that allow­ Columbine too often trigger policymaking by ing people to carry concealed weapons lowers emotion. In this case, seeking to "just do the violent crime rate. Indeed, private individ­ something" is worse than doing nothing. It is uals with guns ended two recent school shoot- likely to make us all less safe. D Let's Not Promote Dependency by Daniel T. Oliver

espite the good news that national wel­ something for nothing, you set him trying to D fare rolls have declined nearly 40 percent get someone else to give him something for over the last five years and that recent federal nothing."3 Octavia Hill, a nineteenth-century and state reforms appear to be at least partly British landlady and housing reformer who responsible for this decline, the debate over was famous in her day for her work with low­ welfare reform is going nowhere. income tenants, similarly criticized what she Welfare-state liberals argue that if govern­ called "foolish almsgiving": "the lavish and ment programs are significantly cut (which to sudden rush ofill-considered gifts ... is dead­ date has not happened, as measured by feder­ ly. It is the cause of a steady deterioration of al welfare appropriations), charity will not be character pitiable to watch."4 able to make up the difference. 1 Independent Both the welfare-state liberal and conser­ Sector, a Washington, D.C.-based coalition of vative arguments fail to recognize that in an government-funded social-service organiza­ ideal society, there would be no welfare or tions, believes that "charities cannot come charity. Ideally, every adult would be able­ close to filling the gap for proposed cuts in the bodied and self-supporting. No individual or funding of social programs." 2 Conservatives, family would suffer the misfortunes of a on the other hand, argue that charities, house fire or devastating natural disaster. churches, neighborhood associations, and Noone would engage in self-destructive other voluntary institutions can assume most behavior such as excessive gambling or if not all responsibilities for the needy now drinking. carried out by government. Obviously, such a world will never exist, Yet both arguments overlook an important but it is the kind ofworld we should nonethe­ point: welfare and charity are both forms of less strive to approximate, however imperfect­ dependency. Why would we want to "fill the ly. The question, then, is not how to fill the gap" by replacing one form ofdependency­ gap but how to reduce dependency. welfare-with another-eharity? Henry Ford, one of the greatest entrepre­ What Causes Dependency? neurs and philanthropists ofthis century, once remarked that "the recipients of charity are There are really only two reasons why peo­ usually destroyed-for once you give a man ple come to rely on welfare or charity-mis­ fortune and foolishness: people are either vic­ tims ofcircumstances beyond their control, or Daniel Oliver (www.smart.net/--doliverl) is a Wash­ ington, D.C.-based editor and writer and a research they willingly engage in self-destructive associate at the Capital Research Center (www.cap­ behaviors. Each ofthese causes of dependen­ italresearch.org). cy needs to be examined. 30 31

By definition, a misfortune is an event beyond one's control. But in a free society where people are free to exercise their ingenu­ ity, experiment with new technologies, and cre­ ate better products to serve customers, many misfortunes that have long plagued mankind are lessened ifnot eliminated altogether. Because of weather radar and satellite images, we can now track and predict the like­ ly course of hurricanes, giving those in their paths time to board up their homes and busi­ nesses and move inland to safety. Ships no longer sail into storms and sink, as they did for centuries. Advances in construction have made homes and other buildings more hurri­ cane-proofand earthquake-proof, saving both lives and property. In this century alone, the life expectancy of Americans has risen nearly 30 years, thanks largely to biomedical research that has dis­ covered cures for scores of diseases that are no longer part of our everyday vocabulary. 5 These diseases once killed husbands and Henry Ford (1867-1947) fathers, sometimes leaving their wives and children in poverty. Thus, one way to reduce behavior to continue, and that often the most misfortunes that result in dependency is to compassionate course of action was to allow ensure that free markets, free inquiry, and such persons to suffer, perhaps until their suf­ entrepreneurship are allowed to work their fering became so great that they would be magic. motivated to change. Octavia Hill sometimes The other cause of dependency is self­ had to evict alcoholics and other tenants who destructive behavior. When those whose prob­ refused to work or pay rent, arguing that "the lems are oftheir own making receive welfare fact ofhaving to move may be a lesson [and] and charity, they are insulated from the natur­ if other landlords did the same, it would cer­ al consequences oftheir behavior. Rather than tainly stop much evil."6 suffering the effects of idleness, excessive But Hill also understood that charity could drinking, and other forms of irresponsibility, promote independence if recipients had to recipients are handed a "crutch" (free food give something in return. When her tenants and shelter, help with paying utilities) that suffered the misfortune of losing a job, she allows them to persist in their folly. Thus, the had them clean and repair her many proper­ "learning experience" that would occur in the ties in lieu ofpaying rent. This reinforced the absence ofwelfare or charity-"I have to stop value of work and allowed recipients to keep lounging around and find a job," "I have to their dignity until their fortunes improved. stop gambling"-is postponed and may never Similarly, when Henry Ford in the early 1930s occur. heard that the town of Inkster (a suburb of Detroit) had been particularly hard hit by the "Free-Lunch" Charity Great Depression, he hired its residents to work in his automobile plants and paid others Generations ago, most charity workers to clean the streets, grow crops, and crush understood this problem. They knew that slabs of concrete from demolished buildings "helping" those who were unwilling to help for use in paving streets and roads. As he themselves simply allowed self-destructive explained, "I do not believe in giving folks 32 THE FREEMAN/IDEAS ON LIBERTY • NOVEMBER 1999 things. I do believe in giving them a chance to Perhaps the most basic rule that could do make things for themselves."7 wonders to improve charity today is, Don't Unfortunately, too many charities today give away anything for free. lO Welfare rolls treat charity as a kind offree lunch. As one lit­ have dropped significantly in the last few eral example, over the last 20 years soup years as states and the federal government kitchens and other food charities have distrib­ have required recipients to work. It is likely uted roughly 10 percent more food each year. that charity rolls would similarly decline if Reliance on food charities has increased dur­ more charities made demands on recipients to ing both economic upturns and downturns­ find work, sober up, and the like. even though inflation-adjusted food prices Because misfortune and foolishness will have been falling for decades. The main rea­ always exist, there will always be a need for son for this growing dependency is simple: charity. But this need is without doubt far less better-off Americans are donating increasing than is commonly believed because bad char­ amounts of food to charities, and since all ity has encouraged many people to become food has a limited shelflife, it must be quick­ dependent. If all charities begin to follow the ly distributed.8 example of Henry Ford and Octavia Hill­ A recent national study by Second Harvest, and give nothing for free-many more Amer­ the nation's largest network of food banks, icans will be able to share in the American found that while nearly 40 percent of food­ Dream. D charity clients are unemployed, only 22 per­ cent offood charities offer employment train­ 1. The seeming paradox ofdeclining welfare caseloads and rising welfare expenditures is largely explained by the fact that federal and ing and only 9 percent offer actual jobs. state governments are spending more per welfare recipient on job Moreover, while 60 percent ofclients say they training and placement as well as on transportation, day care, and other "workfare" expenses. Heritage Foundation welfare analyst would like information on how to better bud­ Robert Rector calculates that in 1992, 75 federal welfare programs get their money (poor budgeting appears to be cost $304 billion. But under recent budget agreements, they will cost $538 billion by 2002. Major reasons for the increase include expand­ a major reason for reliance on food charities), ed health-care coverage for low-income children, higher Supple­ only one food charity in five offers budget and mental Security Income, food stamp, and Medicaid benefits, and new workfare grants. "Welfare Fares Well in Budget," Investor's Busi­ credit counseling.9 ness Daily, May 21, 1997. 2. "Statement by Sara E. Melendez," Independent Sector Web site, www.indepsec.org. 3. Henry Ford with Samuel Crowther, Today and Tomorrow The Task Ahead (Cambridge, Mass.: Productivity Press, 1930), p. 179. 4. Quoted in Robert Whelan, ed., Octavia Hill and the Social Many charities must re-examine their Housing Debate: Essays and Lectures by Octavia Hill (London: Institute ofEconomic Affairs, 1998), pp. 93, 116. methods to ensure that they are not promoting 5. Americans for Medical Progress (Alexandria, Va.), 1991 annu­ dependency. Individuals, foundations, and al report, pp. 1, 2, and American Council on Science and Health (New York, N.Y.), "America's Health: A Century ofProgress." businesses that give to charity must also take 6. Quoted in Whelan, p. 118. a closer look at the organizations they support 7. See Martin Morse Wooster, The Great Philanthropists and the to ensure that they promote independence. Problem of "Donor Intent" (Washington, D.C.: Capital Research Center, 1998), p. 20. And advocates ofa free society must work to 8. Robert Lerner and Althea Nagai, "Feeding the Hungry: Should eliminate welfare programs. Welfare has pro­ Food Charities Fear Welfare Reform," Alternatives in Philanthropy (Washington, D.C.: Capital Research Center, January 1998). moted dependency in the same way that "bad" 9. Second Harvest, Hunger 1997: The Faces & Facts (Chicago: charity has and, more fundamentally, it is VanAmburg Group, Inc., 1998). 10. In Overcoming Welfare: Expecting Morefrom the Poor and based on coercion. Welfare is the antithesis from Ourselves (New York: Basic Books, 1998), James L. Payne examines this rule at length. See also Marvin Olasky, The Tragedy of of charity and is incompatible with a free American Compassion (Washington, D.C.: Regnery, 1992), for an society. examination ofthis and other rules for effectively helping the needy. Big Brother Wants to Read Your E-mail by Aeon 1. Skoble

ome people concerned about privacy vio­ enables them to track everyone. All electronic Slations on the Internet object that many commerce and banking, all Web visits, and all Web site operators collect and use informa­ e-mail communication would be potentially tion about visitors for demographic research available for surveillance. This would include and, yes, advertising. Although "anonymizer" the retrieval of passwords for remote log-in. services are available, the simplest way to pre­ The director ofthe plan, Jeffrey Hunker ofthe serve one's privacy from such operators is National Security Council, claims he will simply to refrain from visiting their sites. make an effort to protect privacy rights. It is After all, no one forces you to buy books and not unreasonable to wonder if this is actually CDs online. If you want anonymity, go to a a real priority for him. store and pay cash. A more serious and unavoidable matter is Two Threats the government's newest scheme for invading everyone's online privacy. In late July, the There are two distinct threats to individual Clinton administration unveiled a new plan to liberties here. First, with this powerful sur­ use the FBI to monitor all Internet traffic, both veillance tool, government's snooping power on military and nonmilitary networks, under would grow astronomically. Unlike with wire­ the guise ofprotecting the nation from terror­ taps, Big Brother wouldn't even need a court ists who might use the Net for nefarious pur­ order to check up on anyone it wanted to poses. According to a draft of the plan, a investigate. Second, besides government sophisticated monitoring system would be put abuse, we would have to worry about the tool in place to constantly track all computer activ­ being used by others who could illicitly get ity, looking for "suspicious patterns." This access to the information either through would help keep tabs on the activities of the bribery or hacking. usual suspects: drug traffickers, child moles­ Predictably, the government claims that it is ters, and terrorists. not interested in eavesdropping, but only Of course, while that sounds like a reason­ searching for patterns that might indicate ille­ able precaution, the potential for abuse is both gal activity. But what does that mean? You can grave and apparent. The government could get support for pretty much anything if you monitor political dissidents as easily as it invoke the specter of child molesters or drug could monitor actual criminals. Any system dealers or terrorists. But when the authorities that enables the authorities to track anyone have the power to track child porn, they have the power to track anything. It's a very short Aeon Skoble is a visiting professor ofphilosophy at step to their reading our mail, investigating West Point. The views expressed here are his own. our medical records, and tracking commercial 33 34 THE FREEMAN/IDEAS ON LIBERTY. NOVEMBER 1999 and financial transactions. Of course, their trary to the spirit ofthe Bill ofRights and the answer to concerns of this sort is that if you presumption of innocence. Why even bother are not doing anything illegal, you have noth­ with search warrants? If you have nothing to ing to worry about. But this is wrongheaded hide, you shouldn't object to the police look­ for two reasons. ing around. That is the attitude of oppressive First, they are the ones who decide what is regimes everywhere, but should not be the illegal. Right now, dealing in heroin is illegal. guiding principle oflaw enforcement in a free It wasn't that long ago that beer was illegal society. We have the right to be secure in our also. It is well within the realm ofthe possible persons, houses, papers, and effects against that they might decide that e-mail about liber­ unreasonable searches. This surely includes tarianism is illegal. After all, in the govern­ our e-mail messages and Web activity. This ment's eyes, anyone writing angry messages new plan is a dangerous threat to individual about Waco might be the next Tim McVeigh. liberty and should not be taken lightly, nor Second, the very notion that only criminals dismissed as hacker paranoia. This affects should be worried about surveillance is con- nearly all ofus now. 0

Cliche5 of Politic5 Mark Spangler, editor

re you tired of hearing people tell you Athat "We need government to -Ax this"? If so, we've got just what you need: Cliches of Politics, now in its -Afth printing. Edited by Mark Spangler, this book is a powerful antidote to statist claims that more government is better. Cliches is also a great resource for students addressing policy issues in research papers or in debate. Counter big-government bombast with Clichesl ~ 324 pages, paperback on eale for $6.95

Please send check or money order to: FEE, 30 South Broadway, Irvington-on-Hudson, NY 10533 Credit card orders: 1-800-452-3518 Just a Cigar by Jacob Sullum

n July the Federal Trade Commission rec­ anti-smoking activists, the mainstream press is I ommended that Congress require warning starting to acknowledge something that med­ labels on cigars. One ofthe warnings suggest­ ical studies have been finding for decades: ed by the FTC nicely illustrates the artful eva­ Although cigars are not a safe alternative to siveness ofpublic health officials who seek to cigarettes, they are a safer alternative. shape people's behavior rather than inform This fact was clear from the data compiled them: "Cigars are not a safe alternative to by the National Cancer Institute (NCI) in its cigarettes." 1998 monograph on cigars. Overall, the NCI By denying a claim that no one has made, reported, daily cigar smokers get oral and this admonition avoids the question of just esophageal cancers almost as often as ciga­ how risky cigars are. Public health officials rette smokers. But they face much lower risks who are alarmed by the recent increase in of lung cancer, coronary heart disease, and cigar consumption prefer to avoid that ques­ chronic obstructive lung disease-the three tion, because the evidence clearly shows that main smoking-related causes of death. The the typical cigar smoker faces hazards far less upshot can be seen in mortality figures. In a serious than the typical cigarette smoker does. 1985 American Cancer Society study cited by In their campaign to scare people away from the NCI, men who smoked a cigar or two a cigars, tobacco's opponents have deliberately day were only 2 percent more likely to die obfuscated that point, with consequences that during a 12-year period than nonsmokers, a can be seen in press coverage ofthis issue. difference that was not statistically signifi­ Two years ago, the New York Times claimed cant. By contrast, the mortality rate was 69 that cigars pose "higher risks" than cigarettes. percent higher for men who smoked a pack of Last year it reported that "smoking cigars can cigarettes a day. be just as deadly as smoking cigarettes." In The only really bad news for cigar smokers June it said "the disease risks are not as high in the Ncr report applied to a small minority. as they are for cigarette smokers because The NCI emphasized that the risk from cigars cigar smokers usually do not inhale the increases with the frequency of smoking and smoke." the degree of inhalation. Cigar smokers who Are cigars getting safer? No, but reporters inhale deeply face measurably higher risks of may be getting smarter. Once easily misled by heart disease and emphysema (though still not the scare tactics of public health officials and as high as those faced by cigarette smokers), and the risk of lung cancer for a five-cigar-a­ Jacob Sullum is a syndicated columnist, a senior editor at Reason, and the author o/For Your Own day smoker who inhales approaches the risk Good: The Anti-Smoking Crusade and the Tyranny for a pack-a-day cigarette smoker. That sort of ofPublic Health (The Free Press). cigar smoker is quite unusual, however. "As 35 36 THE FREEMAN/IDEAS ON LIBERTY • NOVEMBER 1999 many as three-quarters of cigar smokers Shopland told USA Today, "You're smoking a smoke only occasionally," the NCI noted, and whole pack of cigarettes" when you smoke a "the majority ofcigar smokers do not inhale." cigar. That same month, the addiction special­ Since the available data apply only to people ist Jack Henningfield, who contributed to the who smoke at least one cigar a day, "the NCI report, told The Wall Street Journal "it health risks of occasional cigar smokers ... will help explode some of the myths about are not known." cigars," including the idea "that they are rela­ tively safe." Around the time the monograph No Measurable Risk came out, the California Department of Health Services started running a TV spot In other words, there is no evidence that likening one cigar to 70 cigarettes. smoking cigars in moderation-with modera­ The press may be starting to see through tion defined by the way most cigar smokers such misleading comparisons. The clear dif­ actually behave-poses a measurable health ference in risk between cigars and cigarettes risk. But this point was lost on most reporters. was confirmed once again in a study pub­ Indeed, many news organizations erroneously lished by The New England Journal ofMedi­ reported that the NCI had debunked the cine in June. But this time, reporters paid "myth" that cigars are safer than cigarettes. closer attention. The headline in the San Francisco Chronicle In the study, researchers led by Carlos read, "Cancer Institute's Warning on Cigars: Iribarren, an epidemiologist with the Kaiser Just As Bad As Cigarettes." An Associated Permanente Medical Care Program in Cali­ Press story said the NCI report was "intended fornia, tracked about 18,000 men-l,546 to equate dangers posed by the two products." cigar smokers and 16,228 nonsmokers-from The article began, "Smoking cigars can be 1971 through 1995. Overall, the cigar smok­ just as deadly as smoking cigarettes." This is ers were about twice as likely to develop can­ like saying that riding a bicycle "can be just as cers of the mouth, throat, and lungs; 45 per­ deadly" as riding a motorcycle. It's true in the cent more likely to develop chronic obstruc­ sense that both activities can result in fatal tive lung disease; and 27 percent more likely accidents. But that does not mean they are to develop coronary heart disease. equally dangerous. As Iribarren and his colleagues noted, these Still, it's easy to see how journalists got the risks are modest compared to those seen in wrong impression. Calling the increase in cigarette smokers. Depending upon the study, cigar smoking since 1993 "disturbing" and cigarette smokers are four to 12 times as like­ "alarming," the NCI report downplayed the ly as nonsmokers to develop mouth and throat differences between cigars and cigarettes. cancers; eight to 24 times as likely to develop "Cigars are not safe alternatives to cigarettes," lung cancer; nine to 25 times as likely to said NCI Director Richard Klausner. The develop chronic obstructive lung disease; and issue, of course, was not whether smoking 1.5 to three times as likely to develop coro­ cigars is completely risk-free but whether, on nary heart disease. average, it is less risky than smoking ciga­ Furthermore, smoking-related diseases rettes-something no reasonable person were concentrated among the heaviest cigar could deny after looking at the evidence. smokers in the Kaiser Permanente study. For Before the NCI report came out, reporters those smoking fewer than five cigars a day­ were primed to expect that it would show cig­ 76 percent ofthe sample-only the difference ars are as dangerous as cigarettes, ifnot more in heart disease risk (20 percent) was statisti­ so. Consider how Michael Eriksen, director of cally significant. Iribarren et al. did not ask the Office on Smoking and Health at the U.S. the subjects about inhalation, which has been Centers for Disease Control and Prevention, linked to higher risks in other studies, and described the hazards ofcigars in a May 1997 they did not consider men who smoke a few New York Times story: "Tobacco is tobacco is cigars a month-the typical pattern, accord­ tobacco." In February 1998, the NCI's Donald ing to the NCI report-as a separate category. JUST A CIGAR 37 More Accurate Coverage Some reporters still don't get it. "New find­ ings give more weight to warnings that cigars Given the news media's track record in this can be at least as hazardous as cigarettes," area, I expected reporters to hype the hazards United Press International declared. If UPI's found by the Kaiser Permanente study and science correspondent often leaps to such ignore the differences between cigars and conclusions, she might do well in the long cigarettes. But for the most part, the coverage jump, but not in reading comprehension. was much more accurate and responsible Unlike the UPI reporter, FTC Chairman (though less conspicuous) than the stories Robert Pitofsky, who wants Congress to ban that followed the NCI report, probably broadcast ads for cigars as well as require because the researchers themselves made it warning labels, seems to have taken a second, clear that cigars are not nearly so hazardous more careful look at last year's NCI report. In as cigarettes. an April 1998 comment to the Washington The Associated Press, whose story was Post, he misinterpreted the monograph as say­ picked up by several major newspapers, put ing that "regular cigar smoking is roughly as the hazards of cigars in perspective, noting dangerous as cigarette smoking." By contrast, that "the risks aren't as high as they are for when the FTC issued its recommendations in cigarette smokers." The Washington Post, July 1999, he said, "We now know, based on which only last year said it was "probably a the findings of the National Cancer Institute, misconception" that "cigars are healthier than that cigars, like other tobacco products, pose cigarettes because smoke is not inhaled to the serious health risks." same degree," this time correctly cited that The significance ofPitofsky's backpedaling factor as the most likely explanation for the did not register with everyone. According to comparatively low risks found among cigar the lead of an AP story on the FTC's recom­ smokers. mendations, "Federal regulators say they want My favorite story ran in The Hartford to correct misperceptions that cigars are less Courant under the appropriately reassuring dangerous than cigarettes." headline, "Cigars' Dangers Relatively Low/ To be fair, it's not surprising that reporters Moderate Users Face Only Slightly More continue to make such mistakes, since public Health Risks Than Nonsmokers." The article health officials are still pushing the false quoted a local cardiologist who said: "If equation between cigars and cigarettes. Sur­ someone tells me they're smoking one cigar a geon General David Satcher says the absence day, it would be hard for me to jump up and of federal warning labels (almost all cigars down and say you're killing yourself and be already carry California health warnings) intellectually honest. You are increasing your "implies cigars are different and don't carry risk a little bit." the same risk." They are, and they don't. D

Come to f[[ on November 8 and hear columnist ~ark 5kousen explain ... "Why'lt Took ~e 20 Years to Write economic Logic" Here's your chance to get an insider's view of the making of Mark's brand-new textbook! Join us at 7:00 p.m. for a lec­ ture and light refreshments. There's no charge for this event, but please call Janette Brown at 914-591-7230 for a reserva­ tion-and for directions to Irvington-an-Hudson. The Therapeutic State by Thomas Szasz

Is Mental Illness a Disease?

"You can know the name ofa bird in all the languages ofthe world, but when you're finished, you'll know absolutely nothing whatever about the bird.... So let's look at the bird and see what it's doing­ that's what counts. I learned very early the difference between knowing the name ofsomething and knowing something." -RICHARD FEYNMAN

ipper Gore says that "One of the most certain behaviors, and what concerns Mrs. T widely believed and most damaging Gore, NAMI, and others is not the theoretical myths is that mental illness is not a physical question of what counts as a disease, but the disease. Nothing could be further from the practical problems posed by these behaviors. truth." Similarly, the National Alliance for the In fact, whether a person who has a disease Mentally III (NAMI), the most influential feels well or ill, accepts or denies that he is ill, mental health lobby in the nation, states: consults a doctor or not, benefits from or is "Mental diseases are brain disorders." Are harmed by drugs are all issues important to these assertions true? And if they are, what the practice ofmedicine but not to the defini­ are their logical and practical implications? tion of disease. Likewise, whether a person I say that "mental illnesses" are not dis­ obeys or breaks the law is irrelevant to the eases, despite the fact that medical and legal definition of disease. Disease is a physical authorities call them "diseases," that they are concept and verifiable phenomenon. Accord­ treated with drugs, that those receiving these ingly, gastroenterologists study the abnormal drugs are called "patients," and that the pro­ states of the digestive system-not gluttony. fessionals treating them are called "physi­ Urologists study the abnormal states of the cians." Why do I say this? Because the estab­ genito-urinary system-not prostitution. lished scientific criterion for disease is a Neurologists study the abnormal states ofthe derangement in the structure or function of brain and nervous system-not murder or sui­ cells, tissues, and organs-a criterion mental cide. illnesses fail to meet, as they can be neither What do psychiatrists study? Do they, as detected nor diagnosed by examining cells, Nancy Andreasen, professor of psychiatry at tissues, or organs. the University of Iowa, puts it, study "the Rather, mental illnesses are identified by brain rather than the mind, ... molecules and chemical transmitters rather than drives and Thomas Szasz, M.D., is the author ofThe Myth of fantasies"? Or do they, as Shakespeare put it, Mental Illness. He wishes to thank Alice Michtom, study the persons who suffer "the slings and M.D., for help in the preparation ofthis column. arrows of outrageous fortune"? This is the 38 39 crucial distinction masked by equating brain Mind Is Not Brain with mind. If "mental illness" means brain disease, then it is not a disease of the mind Treating the metaphor as the thing itself­ and psychiatry would be absorbed into neu­ the metaphorization of disease, in our case­ rology and disappear. But this is patently not has led to the confusion of production with the case. Psychiatrists regularly occupy them­ product, person with body, and mind with selves with personal conduct of social inter­ brain. Note that unlike the term "brain," the est, such as homosexuality, aggression, term "mind" implies agency, intentionality, racism, suicide, and murder. and motivation. Accordingly, behavior per se that may result in disease is often categorized as a mental disease, but is never categorized Expanding "Disease" as a medical disease. For example, excessive It is an elementary principle of logic that drinking is considered a mental disease, not a one cannot prove a negative. One cannot gastrointestinal disease-though cirrhosis of prove the nonexistence of mental illnesses, the liver is. A competent speaker of English just as one cannot prove the nonexistence of may thus assert that schizophrenia has caused ghosts. One can only point out that a beliefin a person to kill an innocent bystander and mental illness as a disease of the brain is a excuse him of his deed, but he would never negation ofthe distinction between persons as say that diabetes has either caused such law­ social beings and bodies as physical objects, less behavior or excuses it. Herein lies one of in the same way that a belief in ghosts is the the most important philosophical-political negation of the distinction between life as consequences of the concept of mental ill­ activity and death as the cessation ofit. What ness: it removes, with one fell swoop, motiva­ happens when we negate the distinction tion from action, encompasses it within ill­ between social beings and physical objects is ness, and thus destroys the very possibility of that the concept ofdisease ceases to be limit­ separating disease from non-disease, since it ed to the dysfunction of cells, tissues, and offers the possibility that any intentionality or organs and is expanded to include "dysfunc­ motivation is a potential "disease." tional" conduct, especially behavior people in In 1924, the great Eugen Bleuler (1857­ authority find troublesome. 1939), the inventor of schizophrenia, Interestingly, the pioneers of psychiatry declared: "Those who simulate insanity with understood this distinction, accepted that the some cleverness are nearly all psychopaths scientific concept of disease was restricted to and some are actually insane." The idea that the malfunction of the body, and acknowl­ pretending to be ill is, itself, an illness became edged that the term "mental illness" was a fig­ socially acceptable during World War II and ure ofspeech. In 1845, the Viennese psychia­ has since become psychiatric dogma. Kurt trist Ernst von Feuchtersleben (1806-1849) Eissler (1908-1999), a world-famous psycho­ wrote: "The maladies ofthe spirit (Geist) ... analyst and psychiatrist, framed the doctrine can be called diseases of the mind only per thus: "It can be rightly claimed that malinger­ analogiam. They come not within the juris­ ing is always the sign ofa disease." diction of the physician, but that of the Behavior is not-and cannot be-a disease, teacher or clergyman, who again are called except in psychiatry. Controlling behavior, physicians of the mind only per analogiam." with or without a person's consent is not­ And in his classic, Lectures on Clinical Psy­ and cannot be-a treatment, except in psychi­ chiatry (1901), Emil Kraepelin (1856-1926) atry. And faking illness is not-and cannot -who created the first modem classification be-an illness, except in psychiatry. ofmental diseases-acknowledged: "It is true Paradoxically, the intellectual bankruptcy that, in the strictest terms, we cannot speak of of the idea of mental illness is the pillar on the mind as becoming diseased." In short, a which modem psychiatry-and the therapeu­ sick mind, like a sick economy, is a metaphor. tic state-rest. Credo quia absurdum est. D The Growing Abundance of Fossil Fuels by Robert L. Bradley, Jr.

nly two decades ago nearly all acade­ (hence, more expensive) in the future, other Omics, businessmen, oilmen, and policy­ fossil fuels may still be the best substitutes makers agreed that the age ofenergy scarcity before synthetic substitutes come into play. was upon us and that the depletion of fossil fuels was imminent. While some observers still cling to that view today, the intellectual Orimulsion tide has turned against doom and gloom on The most promising unconventional fossil the energy front. Nearly all resource econo­ fuel today is orimulsion, a tarlike substance that mists believe that fossil fuels will remain can be burned to make electricity or refined into affordable in any reasonably foreseeable petroleum. Orimulsion became the "fourth ~os­ future. sil fuel" in the mid-1980s when technologIcal Indeed, these fuels have become more improvements made Venezuela's reserves com­ abundant even in the face ofrecord consump­ mercially exploitable. Venezuela's reserve tion. World oil reserves today are more than equivalent of 1.2 trillion barrels of oil exceeds 15 times greater than they were when record the world's known reserves of crude oil, and keeping began in 1948; world gas reserves are other countries' more modest supplies of the almost four times greater than they were 30 natural bitumen add to the total. years ago; world coal reserves have risen 75 With economic and environmental (post­ percent in the last 20 years. Proven world scrubbing) characteristics superior to those reserves of oil, gas, and coal are officially of fuel oil and coal when used for electric­ estimated to be 45, 63, and 230 years of cur­ ity generation, orimulsion is an attractive rent consumption, respectively. Probable conversion opportunity for facilities located resources of oil, gas, and coal are officially near waterways with convenient access to forecast to be 114, 200, and 1,884 years of Venezuelan shipping. While political opposi­ present usage, respectively. tion (in Florida, in particular) has slowed the Moreover, an array of unconventional introduction of orimulsion in the United fossil-fuel sources promises that, when crude States, it has already penetrated markets in oil, natural gas, and coal become scarcer Denmark and Lithuania and, to a lesser Robert Bradley, Jr., is president ofthe Institute for extent, Germany and Italy. India could soon Energy Research in Houston, Texas, and an adjunct join that list. Marketing issues aside, this scholar ofthe Cato Institute. This is part ofa longer here-and-now fuel source represents an abun­ analysis, "The Increasing Sustainability ofConven­ tional Energy, " published by the Cato Institute and dant backstop fuel at worst and a significant available at www.cato.orglpubslpaslpa341es.html. extension ofthe petroleum age at best. 40 41 Synthetics and More Today's reserve and resource estimates should be considered a minimum, not a max­ The significance of orimulsion for the imum. By the end of the forecast period, electricity-generation market may be matched reserves could be the same or higher depend­ by technological breakthroughs commer­ ing on technological developments, capital cializing the conversion of natural gas to availability, public policies, and commodity synthetic-oil products. For remote gas fields, price levels. gas-to-liquids processing can replace the Technological advances continue to sub­ more expensive alternative ofliquefaction. In stantially improve finding rates and individual mature markets with air quality concerns, well productivity. Offshore drilling was once such as in California, natural gas could confined to fields several hundred feet below become a key feedstock from which to distill the ocean, for instance, but it now reaches the cleanest reformulated gasoline and refor­ depths of several thousand feet. Designs are mulated diesel fuel yet. being considered for drilling beyond 12,000 A half dozen competing technologies have feet. been developed, several by oil majors that Predictably, advances in production tech­ are committing substantial investments rela­ nology are driving down the cost of finding tive to government support. The widespread oil. In the early 1980s finding-costs for new adaptation of gas-to-oil technologies could crude oil reserves averaged between $11.50 commercialize up to 40 percent ofthe world's and $12.50 per barrel in the United States and natural gas fields that hitherto have been most areas of the world. In the mid-1990s uneconomic. they had fallen to around $7 per barrel despite In addition to orimulsion and synthesized 40 percent inflation in the interim. In the Unit­ natural gas, tar sand, shale oil, and various ed States alone, finding-costs dropped 40 per­ replenishable crops also have great promise, cent between 1992 and 1996. That is perhaps however uneconomic they now are, given the best indicator that oil is growing more today's technology and best practices. abundant, not scarcer. Michael Lynch of the Massachusetts Insti­ Finally, the amount of energy needed to tute of Technology estimates that more than produce a unit ofeconomic goods or services six trillion ·barrels of potentially recoverable has been declining more or less steadily. New conventional oil and another 15 trillion bar­ technologies and incremental gains in produc­ rels ofunconventional oil (excluding coalliq­ tion and consumption efficiency make the ser­ uefaction) are identifiable today, an estimate vices performed by energy cheaper even ifthe that moves the day ofreckoning for petroleum original resource has grown more (or less) centuries into the future. expensive in its own right. The gas resource base is similarly loaded with potential substitutions. Advances in coal­ bed methane and tight-sands gas technology Understanding Abundance show immediate potential, and synthetic sub­ How is the increasing abundance of fossil stitutes from oil crops have long-run promise. fuels squared with the obviously finite nature If crude oil and natural gas are retired from ofthose resources? the economic playing field, fossil fuels boast "To explain the price of oil, we must dis­ a strong bench ofclean and abundant alterna­ card all assumptions of a fixed stock and tives. Even the cautious Energy Information an inevitable long-run rise and rule out Administration of the U. S. Department of nothing a priori," says M. A. Adelman of Energy concedes that "as technology brings MIT. "Whether scarcity has been or is the cost of producing an unconventional bar­ increasing is a question of fact. Development rel of oil closer to that of a conventional bar­ cost and reserve values are both measures of rel, it becomes reasonable to view oil as a long-run scarcity. So is reserve value, which viable energy source well into the twenty­ is driven by future revenues."2 second century." 1 Natural-resource economists have been 42 THE FREEMAN/IDEAS ON LIBERTY. NOVEMBER 1999 unable to find a "depletion signal" in the data. however, the record of energy prices can be A comprehensive search in 1984 by two econ­ quite different. omists at Resources for the Future found There is no reason to believe that energy per "gaps among theory, methodology, and data" se (as opposed to particular energy sources) that prevented a clear delineation between will grow less abundant (more expensive) in depletion and the "noise" of technological our lifetimes or for future generations. "Ener­ change, regulatory change, and entrepreneur­ gy," as Paul Ballonoff has concluded, "is sim­ ial expectations.3 ply another technological product whose eco­ A more recent search for the depletion sig­ nomics are subject to the ordinary market nal by Richard O'Neill and colleagues con­ effects ofsupply and demand."6 cluded: "Care must be taken to avoid the Thus, a negative externality cannot be seductiveness of conventional wisdom and assigned to today's fossil-fuel consumption to wishful thinking. While the theory of account for intergenerational "depletion." A exhaustible resources is seductive, the better case can be made that a positive inter­ empirical evidence would be more like the generational externality is created, since bible story of the loaves and fishes. What today's base of knowledge and application matters is not exhaustible resource theories subsidizes tomorrow's resource base and (true but practically dull) but getting supply consumption. to market (logistics) without disruption The implication for business decision­ (geopolitics). While it is easy to see how making and public-policy analysis is that political events may disrupt supply, it is hard "depletable" is not an operative concept for to contrive an overall resource depletion the world oil market, as it might be for an effect on prices."4 individual well, field, or geographical section. The facts, however, are explainable. Says Like the economists' concept of "perfect Adelman: "What we observe is the net result competition," the concept of a nonrenewable of two contrary forces: diminishing returns, resource is a heuristic, pedagogical device­ as the industry moves from larger to smaller an ideal type-not a principle that entrepre­ deposits and from better to poorer quality, neurs can turn into profits and government versus increasing knowledge of science and officials can parlay into enlightened interven­ technology generally, and of local govern­ tion. The time horizon is too short, and tech­ ment structures. So far, knowledge has nological and economic change is too uncer­ won."5 tain, discontinuous, and open-ended. D Human ingenuity and financial wherewith­ al, two key ingredients in the supply brew, are 1. Energy Information Administration, "International Energy not finite but expansive. The most binding Outlook 1998," pp. 3, 38. 2. M. A. Adelman, The Genie Out a/the Bottle: World Oil Since resource constraint on fossil fuels is the 1970 (Cambridge, Mass.: MIT Press, 1995), p. 22. "petrotechnicals" needed to locate and extract 3. Douglas Bohi and Michael Toman, Analyzing Nonrenewable Resource Supply (Washington, D.C.: Resources for the Future, the energy. Congruent with Julian Simon's 1984), p. 139. 4. Richard O'Neill et aI., "Shibboleths, Loaves and Fishes: Some theory that the most scarce resource is human Updated Musings on Future Oil and Natural Gas Markets," U.s. Fed­ capital, wages in the energy industry can be eral Energy Regulatory Commission, Office of Economic Policy, discussion paper, December 31, 1996, p. 22. expected to increase over time, while real 5. M. A. Adelman, "Trends in the Price and Supply of Oil," in prices for energy can be expected to fall under The State ofHumanity, ed. Julian Simon (Cambridge, Mass.: Black­ well Publishers, 1995), p. 292. market conditions. Under political conditions 6. Paul Ballonoff, Energy: Ending the Never-Ending Crisis (Wash­ such as those that existed during the 1970s, ington, D.C.: Cato Institute, 1997), p. 21. Economic Notions by Dwight R. Lee

'Economics

Comparative Advantage Continued

he concept of comparative advantage, es, they often put this understanding on hold Twhich I began discussing last month, is a when accepting arguments against interna­ straightforward application of opportunity tional trade. For example, last month I cost and is almost embarrassingly simple. explained why the widely accepted argument Certainly people have no trouble understand­ that countries with low-paid workers will be ing and recognizing the importance of this able to outcompete us in all goods is wrong. concept in their own personal lives. For exam­ I shall now consider a related, and widely ple, ifyou were the best brain surgeon in town accepted, argument against free trade, and and also the best at shining shoes, you would explain the fallacy it contains by modifying not try to be both a brain surgeon and a shoe the example in last month's column. shiner. Compared to other shoe shiners, you would be at a tremendous disadvantage shin­ Being the Best May Not Be ing shoes because of the value of your time performing brain surgery. Good Enough People are very good at finding and pur­ A common complaint by domestic produc­ suing their comparative advantages. This ers is that foreign firms that suddenly begin doesn't mean that people are always good at outcompeting them must be selling below what they do. We have all seen people work­ cost. They can often support their case by ing at jobs they can't do well. It could be, of pointing out that the foreign firms were previ­ course, that they have made a mistake and 0usly uncompetitive and have not improved will quickly move on to something they do their efficiency one bit. So how can these better. But that clumsy waiter who keeps firms possibly be competitive now? It may spilling hot soup on his customers may have a seem strange that firms unable to compete comparative advantage at being a waiter. He earlier are suddenly able to without becoming could be even worse at everything else. So more productive. But it is not strange at all. just as you can be really good at something Foreign firms don't have to become more pro­ without having a comparative advantage in it, ductive to acquire a comparative advantage you can have a comparative advantage at over domestic firms. something you don't do very well. Consider the table on the next page, which While people seem to understand compara­ contains last month's example (ignore the tive advantage when making personal choic- number in parentheses for now). Americans have a comparative advantage only in car pro­ duction even though they are absolutely more Dwight Lee is Ramsey Professor at the Terry College ofBusiness, University of Georgia, and an adjunct productive than Brazilians at producing both fellow at the Center for the Study ofAmerican Busi­ cars and computers. The opportunity cost of ness at Washington University in St. Louis. producing 100 cars is 666 computers in the 43 44 THE FREEMAN/IDEAS ON LIBERTY. NOVEMBER 1999

United States and 1,000 computers in Brazil. productive than Brazilian car manufacturers. But the other side of this coin is that Ameri­ Obviously the Brazilians must be selling cans have a comparative disadvantage in pro­ below cost-dumping cars in America. But ducing computers, which means Brazilians Brazil does not have to sell cars below cost to have a comparative advantage in computer outcompete U.S. car producers. Americans production. While it costs 150 cars to produce may be twice as productive manufacturing 1,000 computers in the United States, it costs cars than Brazilians, but it is now 2.66 times only 100 cars in Brazil. more productive manufacturing computers. So, as explained last month, both countries So the opportunity cost of producing cars in are better off when Americans specialize in Brazil has become lower than in the United cars, Brazilians specialize in computers, and States. There is no legitimate complaint about they trade with each other. Free trade moves Brazilian competition. In fact, the real com­ resources into each country's comparative petition is not coming from Brazil at all, but advantage, thereby increasing total output. from other Americans. Brazil has done noth­ But assume that an entrepreneur develops a ing new in our example. The competition fac­ better way ofmanufacturing computers in the ing U. S. car producers is coming from the United States: it now requires only 1.5 units more productive opportunity the U.S. com­ of productive resources to produce 1,000 puter industry is offering workers and computers. U.S. car manufacturers are just as resource owners. Car producers simply can­ productive absolutely as before, and no pro­ not afford to pay workers (and resource own­ ductivity improvements are made in Brazil. ers) enough to cover their increased opportu­ But now, the comparative advantage in the nity cost given their comparative advantage in United States has shifted to computers, with producing computers. the absolute advantage in cars becoming a comparative disadvantage. It now costs 1,333 Self-Serving Claims computers to produce 100 cars in the United States as opposed to only 1,000 in Brazil. We can now see the self-serving silliness in Under free trade U.S. computer manufactur­ the claim by industries having to layoffwork­ ers are able to outcompete car manufacturers ers because of foreign imports that free trade for resources as consumers in both countries will cause massive unemployment. If this find it cheaper to buy computers from the were true, the opportunity cost of workers United States and cars from Brazil. Both would be reduced by trade and they could be countries are now better offthan before, since profitably re-employed at low cost by the trade allows the benefit from more efficient declining industry. The problem declining computer production to be fully realized. industries have with free trade is that trade increases employment opportunities, not that u.s. Brazil it diminishes them. 100 cars 2 units of resources 4 Our discussion of international trade has 1,000 computers 3 (1.5) 4 ignored many real-world complexities. For example, we observe countries producing and True, U.S. unemployment may increase importing the same product, as opposed to temporarily, as workers in the declining car our example where countries import only industry move to jobs in the expanding com­ what they don't produce. To explain how both puter industry. And U. S. car manufacturing producing and importing the same product is will lose money, an unmistakable incentive to consistent with pursuing one's comparative move resources to more productive uses. So advantage we will have to examine the con­ expect U.S. car manufacturers and their labor cept of marginalism, which will be done in a unions to complain that the competition subsequent column. But our discussion goes a putting them out of business cannot possibly long way to dispel common myths about the be fair because they are still two times more dangers offree trade. D Fist ofSteel by Dale R. DeBoer

ast year was bad for U.S. steel producers. Falling real output in Japan drives down the L Imports jumped to historic highs, and demand for steel. As the demand falls (fol­ domestic prices fell. Corporate steel profits lowing the logic of supply and demand) the collapsed, and almost six percent of steel­ price of steel in Japan begins to fall (by 5 to 7 workers lost their jobs. Crying foul, steel pro­ percent at the wholesale level). At the same ducers appealed for relief under U.S. interna­ time the exchange rate between the Japanese tional trade laws. The Clinton administration yen and the U.S. dollar begins to change­ initiated an anti-dumping investigation increasing to 140 yen per dollar. All this against several countries, including Japan, makes it much more attractive to Mitsu Steel Brazil, South Korea, and Russia. Early in to sell its product here, where it can earn 1999 Congress went further by pushing for 14,000 yen per unit of steel ($100 per unit quotas on steel imports. Together these efforts times 140 yen per dollar) rather than 11,977 appear to be reducing the threat to U.S. steel to 12,255 yen per unit in Japan (reflecting the interests: imports are falling. But at what cost fall in prices there). So Mitsu Steel increases to the U. S. economy as a whole? its sales to the United States, leading to the The influx of steel imports into the United situation described above. Steel Amalgam States is largely an outgrowth of the global sees the price here fall because of the economic turmoil of 1998. To understand this, increased supply from abroad-cutting prof­ consider the position of two fictional steel its. This forces Steel Amalgam to cut back on producers-Steel Amalgam in the United its current production, leading to layoffs. States and Mitsu Steel in Japan. In the early Essentially this is what happened in 1998. months of 1998 both plan their steel produc­ Since the turmoil of 1998 involved many tion, expecting a price of$100 per unit in the large steel-producing countries, the loss United States and 12,900 yen per unit in imposed on U.S. steel interests was large. Japan. At the going exchange rate of 129 yen Therefore, U.S. steel producers sought the per dollar the price in both countries is com­ protection offered by the trade laws. parable. Both producers begin making steel, incurring costs of $95 per unit here and 12,255 yen per unit in Japan ($95 per unit Anti-Dumping Laws times 129 yen per dollar). Under U.S. law, dumping occurs (1) when a Unfortunately, demand for steel in Japan product is sold in the U.S. market at a lower begins to decline because of its recession. price than in the producing country's market or (2) when a product is sold in the U.S. mar­ Dale DeBoer is an assistant professor ofeconomics ket at a price lower than the cost of produc­ at the University ofColorado, Colorado Springs. tion. For reliefto be granted, one ofthese con- 45 46 THE FREEMAN/IDEAS ON LIBERTY • NOVEMBER 1999 ditions must hold and it must be shown that But products that are dumped are different harm resulted from the dumping. From the because dumping is predatory! Predatory example, it should be clear how both types of behavior is directed at eliminating competi­ dumping occurred. The yen price ofsteel here tion. By doing so, a producer gains an oppor­ is 14,000 versus 12,000 in Japan. Further, tunity to earn long-term monopoly profits. Mitsu Steel incurred costs of 12,255 yen in Reality does not lend support to this claim. As producing the steel. At the time ofproduction, every first-year student of economics knows, this was equivalent to 95 dollars. When it sold monopoly power and profits arise only if a the steel the sales price in Japan had fallen to barrier to entry into the market exists. Since 87 dollars (12,255 yen divided by 140 yen per viable steel firms currently operate in the dollar), leaving the dollar sales price less than United States, no barrier exists. Even ifthese the dollar cost ofproduction. This satisfies the firms close, their factories and tools will still definition of dumping. Additionally, "harm" exist. The workers currently employed by was done to the United States. The expansion these firms will still possess their skills. Even of imports pushed steel prices down, damag­ if domestic production ends, the firm could ing the profit position of U.S. steel firms and easily reopen once a foreign firm began exer­ the employment of U.S. steelworkers. So the cising its monopoly power. The only force that behavior of the foreign producers is legally would prevent a reopening ofa domestic firm actionable under American law. is perpetual dumping. If the predation never Notice that the harm to the U.S. firms and ended, some other country would be perma­ workers is the same harm caused by any nently using its domestic resources to give the import-the only distinction in this case is United States steel cheaper than it can be that the influx ofimports was sudden, because domestically produced. Rather than com­ of rapidly changing conditions in foreign plaining we should be offering them thanks markets. The Japanese export of automobiles for the gift! to the United States reduces sales of U.S. automobiles, caps the price that can be Two More Tries charged by U.S. automakers, and lowers employment in the U.S. automobile industry. The defense ofanti-dumping laws does not Should we therefore conclude that all end with claims of predatory behavior. A imports harm the United States? Of course common plea invokes special circumstances, not; this discussion leaves out one important for example, that the industry affected is element: the benefit to the purchaser of an either an infant or senescent industry. An import. The benefits to the purchaser include infant industry is said to be one that has not getting an item at a lower price, being exposed developed to where it can withstand the full to greater variety, and because oflower prices, rigors ofinternational competition. Ifexposed being able to purchase more items. In the case to the wind of foreign competition it will die of steel, the beneficiaries are U.S. firms that like a sapling exposed to a hurricane. A senes­ use steel to make other products (cars, for cent industry is one currently in decline and example) and their consumers. saddled with old capital and dated technology. The benefits of imports most likely do not Like its infant relative, it cannot stand up to end with the consumers, however. Competition the forces of competition. Dumping would from abroad spurs a competitive response from presumably drive it out ofbusiness. U.S. producers, who must become more effi­ A claim that the affected industry is either cient ifthey wish to maintain their market posi­ infant or senescent is prone to a common tion. Ifthey fail to respond, they go out ofbusi­ weakness. If an industry is not capable of ness. This is the harsh reality ofa market econ­ competing in the international arena, granting omy. It is also a key to its great productivity. the industry protection does not guarantee its Advocates of anti-dumping laws have a survival or growth. An industry or a firm is ready rejoinder. Regular imports are accept­ not a biological entity that will grow and able and do offer the advantages enumerated. strengthen if provided proper nutrients and FIST OF STEEL 47 shelter. Rather an industry needs an induce­ war!"). Through creative argument nearly ment to improve. anything can be turned into a product with In the absence of competitive pressure strategic value ("We must protect television firms face no need to improve and are as like­ production because during times of war we ly to stagnate in their current noncompetitive will need the ability to produce screens for position as to evolve into more efficient pro­ weapon-imaging systems!"). Before legiti­ ducers. This logic is more binding on a senes­ mating this argument, one must be careful to cent industry than it is on an infant industry. determine that the item in question has sig­ A senescent industry has fallen from a com­ nificant strategic importance. petitive position to a noncompetitive position. Second, the strategic-interest argument This indicates that the industry does not only has force ifdomestic production is com­ possess the requisite competitive instinct pletely eliminated. This has not occurred with demanded by a market economy. Justifying any industry for which a clearly defined protection for such an industry requires mak­ strategic interest exists. Third, the industries ing a heroic assumption that given protection where anti-dumping actions are most com­ the firms in the industry will change their past monly taken (for example, textiles) clearly do inefficient behavior. Ifa firm has not respond­ not have significant strategic value. ed to competitive pressure in the past, it seems unlikely that it will become competi­ tive in the absence ofcompetition. Therefore, It's Not Just Us this line of reasoning likely only codifies the Anti-dumping laws in the United States protection ofinherently poor producers. appear to be a backdoor effort to gain protec­ Another special circumstance used to jus­ tion for industries that do not like the effects tify anti-dumping protection is that the of global competition. It is natural that they affected industry is a "strategic" industry. A do not like this competition; they must work strategic industry produces a product critical harder to make a profit and maintain market to the long-term health of the economy or share. But the gains to everyone else are great. society. For instance, the production of The excuse of dumping to promote protec­ weapons ofnational defense is often consid­ tionism attempts to justify disreputable poli­ ered strategic production. In times ofconflict cies. This is true not just for the United States the continued existence of the nation could but for foreign countries as well, though the be threatened if the United States relied on United States, with 294 anti-dumping orders importation of weaponry. This would be a in force, followed by the European Union very strong argument but for three concerns. with 135, is the greatest exploiter of this jus­ First, how is an item with strategic value to tification. By disguising U.S. protectionism be identified? The Japanese have relied on behind the veil of anti-dumping, America this argument for protection of their domes­ deprives itself of the short-term gains of for­ tic agricultural industry ("We don't want to eign products and long-term gains of greater rely on imported grains during times of efficiency. D

The apple icon I identifies articles that are appropriate for teaching students sever­ al major subjects-including economics, history, government, philosophy, and current Issues. We also provide sample lesson plans for these articles on our Web site www.fee.org and in written form. Professors, teachers, and homeschooling parents need only to visit our Web site or request written lesson plans to take advantage ofthis unique service. Germany and the "Third Way"

by Norman Barry

t least two things exercise political and successful economy in Europe. Her recovery Aeconomic commentators on Europe: the from the ruins of war was truly spectacular. meaning and policy significance ofthe "third The tragic irony is that just as countries in the way" and the current malaise in the German rest of Europe ignored the reasons for this economy. There is close connection between success so they will misunderstand the expla­ these two issues, though it is not quite the one nation of her current travails. For her early that modern statists have in mind. But it is economic record was the result ofthe deliber­ easy to show that the relative decline of the ate, almost planned, adoption ofa free-market German economic "miracle" is directly linked economy, which was completely against the to its adoption of economic and social poli­ trend ofthe times. There was no Wirtschaftswun­ cies that are recommended for a future social der (economic miracle), only the rigorous democratic Europe. implementation ofwell-tested economic poli­ Advocates of the third way in the United cies based on sound theory. Germany's prob­ States and the United Kingdom have similar, lems today stem from the retreat from this although watered down, things in mind. The over a 30-year period. European Union is itself suffering from the Germany is celebrating the 50th anniversary false promise of the latest modest anti­ of the founding of the Republic but the real capitalist medicine. Yet the German experience event to commemorate is the radical free­ provides an almost laboratory experiment of market economic program introduced by its the errors of "capitalism with a human face," postwar economics minister, and later chan­ the "social market economy," "social democ­ cellor, Ludwig Erhard, in 1948. At the time, racy," or any other version ofthe third way. It the agony of Germany's postwar attempted is not enough to condemn the third way's adjustment to economic reality was exacerbat­ political economy merely because President ed by the continuation of a ruinous system of Clinton supports it. There are much better wartime planning under the Allied Control intellectual reasons for rejecting this current­ Commission. Interventionists though the ly fashionable doctrine. advisers to West Germany were, they all agreed that there had to be currency reform; No Miracle the Reichsmark was worthless and little used for whatever exchange actually took place. For most ofthe postwar period (West) Ger­ But Erhard, chief official of the Administra­ many, outside of Switzerland, was the most tion for Economic Affairs for the British and American Occupation Zones, managed, by a Norman Barry is professor of social and political theory at the University ofBuckingham in the United superb piece ofpolitical chicanery, to engineer Kingdom. He is the author of Business Ethics a wholesale reduction of price controls under (Macmillan, 1998). the noses of his Keynesian advisers. An early 48 49 critic was John Kenneth Galbraith, who began that we can indulge our social consciences his long career of highly profitable private with welfarism and heavy economic regula­ punditry and catastrophic public economic tion without seriously corroding the market error in postwar Germany. He wrote an influ­ society. It is highly successful capitalist soci­ ential article that promised misery and pover­ eties that are peculiarly vulnerable to these ty if Erhard's policy were to be continued. He illusions; they have little resonance in Poland was, ofcourse, engaged in writing his book on or the Czech Republic. the theory ofprice control at the time. Their origins in Germany date back to the But Erhard pressed on with his economic foundation of the Erhard system. There were liberalization. There was probably not a two interconnected social visions that gov­ majority in favor of it, and a majority was erned political and economic life in postwar only narrowly achieved in the elections of West Germany: the idea ofOrdo-liberalism­ 1949, after the policy's prophylactic effects that is, the peculiarly German version were visible to all but the most blinkered of of classical liberalism-and die Soziale central planners. Marktwirtschaft (social market economy). Liberalization was not popular with the The values, policies, and personnel ofthe two political elites. Erhard was never very close to intellectual movements overlapped. All Ger­ the Christian Democrats, many of whom man market theorists had some doubts about remained wedded to a form of intervention­ unregulated capitalism. Most particularly ism and control derived from Roman Catholic they thought there was a tendency for free social teaching, and the Socialists remained contract to produce, quite spontaneously, a formally Marxist until 1959. Still, the reasons non-contract society through the emergence for Germany's success were too obvious to of monopolies and cartels. The German ignore (though Britain remained oblivious to skeptics were encouraged by their own expe­ them until 1979), and the country was quick­ rience; the German economy had been badly ly won round. The Catholics managed to com­ cartelized in the early decades ofthe twentieth bine the market with religion, and the Social­ century (which ultimately enabled Hitler to run ists became, albeit for a short time, even more a "non-socialist" command economy). The pro-capitalist than some of the Christian Ordo-liberals thought that mistaken legal deci­ Democrats. A prominent Social Democrat sions had produced this outcome. In their member of the coalition governments in the Wirtschaftsordnungspolitik, the legal and polit­ 1960s and 1970s, Karl Schiller, actually ical order of a free economy, the state was resigned over a free-market issue. The Social given the responsibility of preserving, artifi­ Democratic party has now slipped back to its cially, the foundational rules of a market soci­ old socialist ways, and these have been ety, though they ought to have realized that free reinforced by the usual contemporary fads, international trade is the most effective guaran­ notably environmentalism (the present gov­ tor of a noncartelized economy. The Germans ernment is a coalition of Social Democrats were very much influenced by American and Greens), anti-Americanism, and careful antitrust law. and diluted, but not completely rejected, anti­ Both "liberal" movements believed in some capitalism. state welfare but it was much more pro­ nounced in social market theory than in Ordo­ Seeds of Decline liberalism. Alfred Miiller-Armack, a member of Erhard's government, coined the deadly The seeds of German decline were planted phrase "social market economy," and he actu­ long ago. The intellectual error was by no ally believed in a new concept ofthe person­ means confined to the Social Democrats. All neither capitalist man nor socialist man-who major political movements have been infected would emerge from a properly and ethically with the virus of the third way, with its illu­ organized market society. Erhard himself sion that there is a morally appealing midway probably regarded the social market economy point between capitalism and socialism and as a morally convenient mask behind which 50 THE FREEMAN/IDEAS ON LIBERTY • NOVEMBER 1999 he could advance his genuine market reforms. German companies have never been con­ But at least the German liberals thought that cerned about delivering shareholder value. welfare policies should be marktkonform, that Indeed, they have traditionally financed their is, consistent with an efficient exchange sys­ investment by bank debt, giving the lie to tem; they should not encourage the emer­ American business ethicists who worry about gence ofa dependency culture. the immorality of corporate raiders loading However, as the German system developed, up American corporations with junk-bond it was the "social" element that began to pre­ debt. Those ethicists looked to Europe as an dominate over the "market," and throughout example of probity, but as it turned out, the the 1960s the country began to resemble a "greed-driven" Anglo-Saxon model ofcorpo­ Scandinavian welfare state, to which its liber­ rate governance proved highly flexible and al theorists had originally been vehemently innovative. opposed. Many reforms were quite debilitat­ What nobody realized in Europe was that ing. Unemployment pay was, and is, close to the predator breaks up companies, spins off the wage paid for work; sick leave is very unwanted parts, fires layers of redundant generous; and more or less free education can managers, and produces leaner and fitter last almost forever. And, as any traveler will enterprises. Such restructuring has been the tell you, most shops are closed on Saturday foundation of America's economic success afternoon. Given the reduced attractions of since the 1980s. But in Germany's much­ work (and German nonwage labor costs are vaunted consensus, the raider is subject to the highest in the world) is it any wonder that opprobrium and ostracism, especially ifhe is German unemployment is 11.5 percent? The a foreigner. With banks (which, unlike those original Bismarckian state pension scheme in the United States, hold substantial equity was foolishly extended and its unfunded foun­ stakes in German companies), trade unions, dations, in combination with a declining birth and local interests forming invincible coali­ rate, promise to present the country with a tions against change, German managers are horrific problem in about 20 years. Govern­ secure, as they were in 1997 when Krupp tried ment spending, which was kept below 30 per­ a reverse takeover ofThyssen in order to ratio­ cent of GDP under Erhard, is now above 50 nalize the steel industry. The stakeholder percent. groups got together and turned a hostile bid into a tame merger, with guarantees of no Social Consensus unemployment. Even Italy seems to be ahead in adopting Anglo-Saxon methods ofindustri­ One reason for West Germany's original al reorganization. The computer company success was its social consensus. There was Olivetti has just completed a spectacular $60 none of the confrontational attitude between billion takeover of Telecom Italia against a capital and labor that so disfigured Britain formidable array of stakeholders. The before Margaret Thatcher. Once trade unions takeover strategy, and motivation to maximize had accepted the market system, they were shareholder value, is now spreading to anxious to cooperate in what became a com­ Europe. But Germany is far behind. mon enterprise. But this benign industrial cul­ ture had its downside. It produced a certain Fear of Inflation insularity and a hostility to the takeover mech­ anism: nothing much should change, and Of the classical-liberal principles that nobody should lose his or her job. Fearing the undoubtedly inspired West Germany in the concentration of industry, the Ordo-liberals early postwar period, only a belief in sound themselves gave this attitude some intellectual money survived the onslaught of social justification. They and the postwar govern­ democracy. Of course, Germany's experience ment set up a cartel office, which sedulously of runaway inflation in the 1920s made the sought out any innovator who might get a frac­ country sociologically equipped to cope with tion more than the permitted market share. the occasional pains of monetary rigor. GERMANY AND THE "THIRD WAY" 51

Keynesian demand-management policies how that institution will survive a coalition were eschewed from the early days, for excel­ of Spanish, Italian, French, and other politi­ lent microeconomic reasons. An independent cians demanding inflationary employment central bank, the Bundesbank, resisted all policies. political pressures to relax what was basically With excessive social welfare and a sclerot­ Chicago-style monetarism ("just watch the ic industrial economy, Germany is no longer monetary aggregates"). the powerhouse it once was. An early Ordo­ But by the 1960s macroeconomics became liberal, Wilhelm Ropke, once said that "like fashionable, and successive governments pure democracy, undiluted capitalism is intol­ became obsessed with tinkering with the erable." He was a pioneer of the idea of the aggregates; committees were set up and sug­ third way, but even he would be distressed at gestions made by "wise men" for improving what has happened to his country.* Perhaps overall performance. But the Bundesbank the major problem with Ordo-liberalism was retained its virtue (and the people their pride its neglect ofpublic choice. Its adherents real­ in the German mark) right up to reunification, ly did believe that once people had experi­ when Helmut Kohl's government compelled enced the joys ofthe social market they would the Bundesbank, for overtly political reasons, have less reason to rely on the familiar human to sanction a catastrophic one-to-one curren­ motivations and on the historically validated cy swap, the East German mark for the legal and market constraints. Social-market Deutsche mark. The former was pretty much theorists had an "elevated" view of human worthless, and this arrangement, plus the nature: When politicians and public officials granting of partial West German welfare were imbued with a sense of community and "rights" to the former East, undoubtedly reinforced by the glue of solidarity, no one made the union ofthe two countries more dif­ need worry about things like antisocial rent­ ficult than it need have been. seeking; moral hazard would not be a problem German monetary chastity clearly could for enlightened people in a generous welfare not survive the seductive lure of reunifica­ system; and managers of industrial corpora­ tion. The next question on the macroeconom­ tions would be disciplined without stockhold­ ic agenda is whether the Euro, the new cur­ er pressure and the threat ofraiders. rency for the continent, will provide a satis­ But the more astute German commentators factory surrogate for the beloved mark. The learned early on that there is no feasible third Bundesbank had established a reputation for way. All economic proposals that run counter incorruptibility precisely because of its to the laws of economics are eventually proven probity: prior to reunification no defeated by these inexorable processes; they politician could compete with it in the pub­ may be a little slower to operate than those of lic's estimation. One of the first things the physics, but they are just as compelling. Ger­ controversial leftist Social Democrat Oskar many has breached just about everyone of Lafontaine did in his briefperiod as minister them in the last 30 years. As Vaclav Klaus, the offinance in the new Social Democratic gov­ former Czech premier, put it: "the third way is ernment was to put pressure on the European the third world." D Central Bank to relax its Bundesbank-type *Editor's note: See Richard Ebeling, "Wilhelm Ropke: A Cente­ monetary rigor. That failed, but one wonders nary Appreciation," The Freeman, October 1999. Economics on Trial by Mark Skousen

NOVEMBER 1999

A Private-Sector Solution to Poverty

"The able bodied poor don't want or need charity.... All they need is financial capital." -MUHAMMAD YUNUS

or years free-market economists have World by independent banks and institutions. F protested the waste and abuse of foreign The most famous ofthese micro-lenders is the aid programs, International Monetary Fund Grameen Bank, founded by Muhammad loans, and World Bank projects.! ~T. Bauer Yunus in Bangladesh, the world's poorest has been in the forefront as a dissenter against country, in 1983. Yunus is an economics pro­ government development programs. For the fessor at Chittagong University in Bangladesh. past 50 years, he has argued forcefully that When I say "small loans," I mean minus­ government assistance in developing nations cule. The Grameen Bank lends only $30 to only retards economic growth.2 $200 per borrower. Applicants don't have to But if IMF lending, foreign aid, and the read or write to qualify. No collateral or World Bank are abolished, what should be credit check is required. Amazingly, the done to alleviate poverty? Bauer and other Grameen Bank has made these micro loans to classical liberals advocate reducing trade bar­ millions of poverty-stricken people in riers; increasing foreign investment; estab­ Bangladesh, $2.5 billion so far. These loans lishing property rights, the rule of law, and a are not interest-free. The Grameen Bank is a stable monetary policy; and encouraging free for-profit private-sector self-help bank that markets and limited government domestically. charges 18 percent interest rates. The default rate? Less than 2 percent. This remarkable Private-Sector Micro Lending record is due to the requirement that borrow­ ers must join small support groups. If anyone Yet market advocates have been surpris­ in the group defaults, no one else can borrow ingly silent on a burgeoning private-sector more. success story known as "micro lending," the The bank lends to entrepreneurs, over­ lending ofextremely small amounts ofmoney whelmingly female, who need only a few dol­ to self-employed entrepreneurs in the Third lars to buy supplies and tools. Borrowers might be makers of bamboo chairs, sellers of goat's Mark Skousen (http://www.mskousen.com; mskousen milk, or drivers of rickshaws. By avoiding the @aol.com) is an economist at Rollins College, outrageous rates charged by other money­ Department ofEconomics, Winter Park, FL 32789, a Forbes columnist, and editor ofForecasts & Strate­ lenders (often 20 percent a month), these peo­ gies. His textbook, Economic Logic, is now available ple are finally able to break the cycle ofpover­ from FEE. ty. Their small businesses grow, and some use 52 53 their profits to build new homes or repair exist­ From Marxism to Marketism ing ones (often using a $300 Grameen house loan). Thousands of Grameen borrowers now Yunus's statements·· are all the more amaz­ own land, homes, and even cell phones. And ing given that he grew up under the influence they are no longer starving. Yunus has plans to of Marxist economics. But after getting a issue private stock and eventually go public Ph.D. in economics at Vanderbilt University with his antipoverty program. he saw firsthand "how the market [in the His bank has been so successful that other United States] liberates the individual" and micro-lending institutions have sprung up rejected socialism. "I do believe in the power throughout the world. The concept has gained of the global free-market economy and in credence everywhere, to the point that even using capitalist tools. ...I also believe that the World Bank and other government agen­ providing unemployment benefits is not the cies have gotten into the million-dollar micro­ best way to address poverty." Believing that loans business. "all human beings are potential entrepre­ neurs," Yunus is convinced that poverty can be eradicated by lending poor people the capital Saying No to the World Bank they need to engage in profitable businesses, But Yunus won't have anything to do with not by giving them a government handout or the World Bank. In his new autobiography, engaging in population control. Banker to the Poor (highly recommended), His former Marxist colleagues call it a cap­ Yunus decries the World Bank: "We at italist conspiracy. "What you are really the Grameen Bank have never wanted or doing," a communist professor told him, "is accepted World Bank funding because we do giving little bits of opium to the poor people. not like the way the bank conducts business." ... Their revolutionary zeal cools down. Nor does he much like foreign aid: "Most rich Therefore, Grameen is the enemy ofthe revo­ nations use their foreign aid budgets mainly lution."4 Precisely. 0 to employ their own people and to sell their 1. The latest examples are Paul Craig Roberts and Karen LaFol­ own goods, with poverty reduction as an lette Araujo, The Capitalist Revolution in Latin America (New York: Oxford University Press, 1997) and James A. Dorn, Steve H. Hanke, afterthought. ... Aid-funding projects create and Alan A. Walters, eds., The Revolution in Development Econom­ massive bureaucracies, which quickly ics (Washington, D.C.: Cato Institute, 1998). 2. See P. T. Bauer, The Development Frontier (Cambridge, become corrupt and inefficient, incurring Mass.: Harvard University Press, 1991), Equality, the Third World huge losses. ... Aid money still goes to and Economic Delusion (Cambridge, Mass.: Harvard University Press, 1981), and Dissent on Development (Cambridge, Mass.: Har­ expand government spending, often acting vard University Press, 1976). against the interests of the market economy. 3. Muhammad Yunus, Banker for the Poor (New York: Public­ Affairs, 1999), pp. 145--46. ... Foreign aid becomes a kind ofcharity for 4. Ibid., pp. 203-205. the powerful while the poor get poorer."3 Peter Bauer couldn't have said it better.

Professor Skousen's Economic Logic Now Available "Economic Logic is a first-rate and exciting introduction to economics. It's clear and accessible, uncommon among today's textbooks." -DON BOUDREAUX The first volume of Mark Skousen's breakthrough college textbook, Economic Logic has just. ~een published. This "micro" text covers supply and demand, monopoly vs. ' competition, entrepreneurship, wages, capital and interest, and the financial markets. Economic Logic is a no-compromise free-market college textbook, with a hands-on approach (it begins with a profit-and-Ioss income statement). Special price: $21.95 each. Send your order to: FEE, or call (800) 452-3518. Instructors should e-mail requests to [email protected] for a review copy. 54

tion was not an "entitlement," and wasn't "equal," but Coulson states that even the BOOKS poorest families were consumers in the edu­ cation market. Education was not static in Athens. "Each Market Education: step in the evolution ofAthenian society was The Unknown History matched by a corresponding change or expan­ by Andrew 1. Coulson sion in the offerings of educators," Coulson Transaction Publishers and the Social Philosophy writes. No government planning agency exist­ and Policy Center • 1999 • 430 pages ed to decide what subjects must be taught and • $54.95 cloth; $24.95 paperback who was permitted to teach them. The result of this laissez-faire approach was a civiliza­ Reviewed by George C. Leef tion that far surpassed any other in the ancient world. Athens was the intellectual center of he most pernicious ofall the widely held the Mediterranean, a wellspring of genius in Tmodem beliefs is that education must be science, mathematics, philosophy, literature, provided by the state. "Education is an enti­ and more. All those brilliant thinkers working tlement!" say nearly all politicians and mem­ in a culture that esteemed learning-and not a bers ofthe vast education establishment. Few government school to be found! challenge that assertion. The inseparability of In contrast, Sparta established a govern­ school and state is almost as much a given as ment education monopoly to ensure the the separation of church and state. preservation of the collectivist/militarist phi­ In this book Andrew Coulson takes dead losophy ofLycurgus and later rulers. Children aim at that belief. Coulson, senior research were regarded as property ofthe state, which associate at the Social Philosophy and Policy used its education monopoly to breed obedi­ Center, is a computer software engineer who ent, warlike people ready to sacrifice them­ developed a strong interest in educational his­ selves for the imagined glory of the state. tory and policy. Market Education: The Intellectual and artistic achievements of the Unknown History is the product of his Spartans? Virtually none, Coulson remarks, research. It's a strong case for letting the free "apart from being a beacon to those advocat­ market work in education. ing totalitarian systems of education." Coulson's historical overview ofeducation­ The author's investigation into the history al history is extremely beneficial. Govern­ of education, both market-driven and state­ ment education is so widely assumed to be the dominated, proceeds on through Rome, the only possibility that many will be surprised to Middle Ages, the Islamic world (which ini­ learn there have been places and times when tially followed the Athenian approach, with government kept out entirely. The author's similarly magnificent results), and eventually contrast between Athens and Sparta in ancient to the last several centuries in England, Greece is illustrative. France, Germany, and the United States. He In Athens, Coulson writes, "with the excep­ uniformly finds that beneficial consequences tion oftwo years ofmilitary training, the state have flowed from educational liberty and less played no role in schooling." That, of course, desirable if not downright disastrous conse­ did not mean an uneducated populace. Just as quences from state control. Athenians managed to feed, clothe, and house The largest part of the book is Coulson's themselves without any government action, so examination of the American educational did they educate themselves. Parents paid experience, and a fascinating study it is. We monthly tuition for the education oftheir chil­ learn of the struggle of black parents in dren at whichever of the numerous private Boston in the mid-1800s to escape from seg­ schools they preferred. Schools could survive regated public schools, only to lose in a court only by offering educational services parents decision that would become a precedent for found sufficiently valuable to pay for. Educa- the Supreme Court's infamous "separate but 55

equal" doctrine. We learn of the early advo­ emic affairs, reminded his listeners that "The cates of"public education," such as James G. continued success ofChina's journey to pros­ Carter, who argued that we should emulate perity ... will depend on whether [they] are Sparta's educational model. We learn of the willing to allow a true market system to various failed educational fads that our edu­ develop, in which individuals can hold secure cation "experts" have embraced with terrible title to their property and are held accountable results for the human guinea pigs subjected to for their mistakes, or whether China remains them. After reading Coulson's lengthy exposi­ a 'socialist market economy.' " tion, it is impossible to avoid the conclusion Edward Crane, Cato's president, made the that abandoning the education marketplace in connection with politics explicit. "There are favor of government schooling is one of our two fundamental ways to order society: Vol­ greatest national blunders. untarily, through the private interaction of The last part ofthe book turns to the many individuals, associations, religious organiza­ proposals for education reform that are on the tions, businesses, and so on ... or coercively, loose. Coulson is not very enthusiastic about through state mandates ... because it is in the any of the nostrums such as charter schools, nature of man to be free ... society is better vouchers, and private management. He does, off-not just economically but spiritually­ however, praise the idea of privately funded when politics plays as small a role as possible scholarships to enable children to escape from in societal affairs." the clutches ofthe public school system. The Chinese participants (who did not have Sometimes Coulson drops his scholarly the advantage ofholding either American cit­ tone in favor ofhyperbole, and sometimes he izenship or outbound plane tickets) were makes important assertions without apparent mostly silent. Professor Zhou Dun Ren stood support. The lapses in the book, however, are alone among those who pointed out the con­ microscopic compared to its powerful nection between economic and political free­ research and argumentation. If restoration of dom, suggesting that China needed more of the free market in education is a matter of both. "The pointer on the roadmap ofthe 21 st importance to you-and it should be-this is century is for China to go down the road ofa a book you don't want to be without. D true market economy. The more developed George Leefis director ofthe Pope Center for High­ China is economically, following the free­ er Education Policy at the John Locke Foundation market model, the more freedom and democ­ and book review editor ofThe Freeman. racy will advance." Perhaps it is not surprising that Professor Zhou is the former deputy director of the Center for American Studies. China in the New Millennium: In China, libertarian sentiments do not go Market Reforms and Social Development unpunished. The conference proceedings, published edited by James A. Dorn here, offer abundant evidence that China's Cato Institute • 1998 • 416 pages • $24.95 cloth; steps away from rigid central planning and $15.95 paperback toward the free market have generated spec­ tacular economic growth over the past 20 Reviewed by Steven W. Mosher years. Per capita income has increased four­ fold; exports have skyrocketed. Hundreds of n June 1997 the Cato Institute sponsored an millions of Chinese have been lifted out of I academic conference in Shanghai, along dire poverty. with Fudan University's Center for American At the same time, China's increased mater­ Studies. The government signed off on the ial prosperity has had no discernible effect event and, for the most part, the Chinese par­ on the political system, which remains a self­ ticipants carefully avoided sensitive political perpetuating one-party dictatorship. Despite topics. Not so the irrepressible Cato crowd. participant Mao Yushi's claim that "China's James Dorn, Cato's vice president for acad- economic reforms and opening to the outside 56 THE FREEMAN/IDEAS ON LIBERTY • NOVEMBER 1999 world have advanced both material progress leaders have chosen-long ago-to organize and civil society," evidence of the latter on the principle of coercion. And there is no remains scanty. evidence I can see that they are wavering in Kate Xiao Zhou argues that women in rural this choice. Indeed, they seem convinced that China have experienced a revolutionary a continuation ofthe present "socialist market change in their lives as their participation in economy" is their road to national power and the market has increased their personal auton­ personal wealth. omy and freedom. In "Market Development For all the talk about China's "nascent civil and the Rural Women's Revolution in Con­ society," the People's Republic is at present temporary China," she writes that rural governed by a single class. This kleptocracy women by the millions "have participated in uses its power-combined with the strength the development of markets, the rise of rural of Chinese family ties-to engage in a mas­ industry, and migration." sive accumulation of wealth. Non-relatives­ China's economic changes have weakened the vast majority ofthe Chinese people-can social controls for women, but it has gained expect to be cheated. them nothing in terms ofpolitical rights from Cato is to be congratulated for going to the state. And the weakening ofthe mediating China and sounding a libertarian call to arms. institutions of family and village, as the one­ The conference volume·that resulted is worth child policy demonstrates, may in some ways reading. But there is no force in China today render women even more vulnerable to state capable of taking the field against the vast exploitation. Zhou regrets that this "contem­ Communist kleptocracy. D porary rural women's revolution," as she calls Steven Mosher is the president of the Population it, "has no organization, no leader, and no ide­ Research Institute and the author ofthe forthcoming ology," but it could hardly be otherwise. If it Hegemon: China's Plan to Dominate Asia and the did, the Party would see it as a threat. It would World. be either co-opted or crushed, as the China Democracy Party was recently crushed. Minxin Pei, assistant professor ofpolitics at The Shadow University: The Betrayal of Princeton University, draws a connection Liberty on America's Campuses between the economic liberalization and the thousands of semi-official associations that by Alan Charles Kors and have sprung up over the past 15 years. Pei sees Harvey A. Silverglate these associations, which include groups of The Free Press. 1998 • 415 pages • $27.50 private entrepreneurs, consumers, and village and township enterprises, as a nascent civil Reviewed by Daniel Shapiro society. This may be too optimistic a reading. Many of these organizations represent pre­ any books have discussed political existing Party and government organizations M indoctrination on American campuses, (the village and township organizations, for but none is as thorough and damning as this instance), and all are required to register their one. Alan Kors, a history professor at the Uni­ membership and goals with the government. versity of Pennsylvania, and Harvey Silver­ Moreover, a recent government edict forbids glate, a criminal defense attorney and civil the formation ofnew groups. liberties litigator, present overwhelming evi­ What is one to make ofthis increasing gap dence that the loss of liberty on campuses is between China's material prosperity and the far greater than most people realize. Speech retro behavior of the Chinese Communist codes, which punish students and faculty for Party? Crane suggests that China is "at a offensive or "harassing" speech, are ubiqui­ crossroads, and that it must choose between tous. Due process is the exception rather than political society and civil society-that is, the rule: secret judicial proceedings routinely between coercion and freedom as society's deny accused faculty and students the right to organizing principle." I believe that China's be represented by legal counsel, to confront or BOOKS 57 call witnesses, and to have an impartial judge lege requires everyone to gather in a dark and appeals process. Most chilling of all, auditorium where insults are hurled at them "sensitivity training," a.k.a. thought reform, from all directions; a professor at Cornell tells students what to believe and labels them University is found guilty of sexual harass­ as "in denial" or as "oppressors" unless they ment at a hearing that he is forbidden to profess the politically correct orthodoxy attend or call witnesses, and where the head about race, gender, and so on. ofthe investigating committee says "we have Most people, even critics of political cor­ to make the rules as we go along." rectness, are unaware of this system because How did this arise? Bad ideology plus much of it happens outside the classroom. To careerist administrators, answer the authors. see the destruction of liberty on American The bad ideology is New Left theorist Herbert campuses one must also examine offices of Marcuse's argument in his 1965 essay student life, residential advisers, judicial sys­ "Repressive Tolerance," that the marketplace tems, deans, freshmen orientation, and the of ideas masks repression of "progressive" promulgation of rules and regulations. These ideas. To prevent the silencing ofthese ideas, aspects of the university are inescapable for "reactionary" ideas must be censored. This students (and increasingly for faculty), and zero-sum view of freedom is followed by punishment for violating its rules occurs today's defenders of speech codes and other behind closed doors. Hence the book's title: assaults on liberty. (However, the authors give The Shadow University. no evidence that today's censors were influ­ Kors and Silverglate rip the veil off this enced by Marcuse.) As for administrators, system, revealing far more cases than have they perform their jobs in hopes ofmoving on hitherto been reported. Besides providing to a more prestigious position, often at a new compelling narratives of various assaults on campus. To move on, their reign must be rela­ liberty, the authors also cogently explain the tively untroubled, which means they aim to basic moral and constitutional principles of appease groups who can cause trouble: mili­ free speech and academic freedom, due tant feminists, blacks, and gays. Sacrifice of process, and freedom of conscience, which other people's freedom doesn't matter. are routinely violated throughout academia. A I wish the authors had dug deeper on the hallmark oftheir violation is the double stan­ careerism issue. They remark that colleges dard: provocative speech (such as "born again and universities have taken on many of the bigot," "Uncle Tom") by the politically cor­ trappings of large corporations, minus the rect is protected, but those who appear to crit­ accountability, but they do not discuss icize feminism, affirmative action, or other whether re-establishing accountability requires reigning orthodoxies may be censored and/or that colleges become proprietary institutions. re-educated. Kors and Silverglate suggest two strategies I'll sketch only a few of the incredible for restoring liberty. First, litigate. Court chal­ cases: a (white) student at the University of lenges to university oppression frequently Pennsylvania calls noisy (black) students succeed. State universities are bound by the "water buffaloes" and is charged with racial First Amendment and the requirements ofdue harassment; a professor at Dallas Baptist Uni­ process; private universities are contractually versity criticizes feminist arguments, is bound to keep their promises of free inquiry charged with defamation, and is then fired, and procedural fairness. Second, publicize along with the dean who defended him; a stu­ oppression: Universities hate publicity. Pub­ dent at Sarah Lawrence is sentenced to sensi­ licity can shame the university into change, tivity training for "homophobia" for laughing and/or arouse freedom-minded colleagues to at a remark made about a gay student; a revolt. Catholic residential adviser at Carnegie Mel­ This is a great book, and that's not hyper­ lon University is fired for refusing to wear a bole. It is not an enjoyable topic, but one symbol in support of gay and lesbian stu­ indispensable for anyone concerned with lib­ dents; freshmen orientation at Williams Col- erty in academia. I am in awe of the authors. 58 THE FREEMAN/IDEAS ON LIBERTY. NOVEMBER 1999

It must have taken enormous energy, intellec­ That reconciliation constitutes the broad tual focus, and a burning passion for justice to mission ofthis book by Professor Richard A. uncover this massive oppression on American Epstein of the University of Chicago Law campuses. All lovers of liberty are in their School. Epstein is a constitutionalist, one who debt. D upholds natural law for its utilitarian value Daniel Shapiro is an associate professor ofphiloso­ and asks for a return to our limited govern­ phy at West Virginia University. ment roots. He is a meticulous thinker who approaches his job here by analyzing scores of law cases. His philosophy can be seen in Principles for a Free Society: his endorsement of this quotation from the Reconciling Individual Liberty with Edinburgh Review in 1843: "Be assured that the Common Good freedom of trade, freedom of thought, free­ dom ofspeech, and freedom ofaction, are but by Richard A. Epstein modifications ofone great fundamental truth, Perseus Books • 1998 • 372 pages • $30.00 and that all must be maintained or all risked; they stand and fall together." _Reviewed by William H. Peterson Epstein believes that private property rights are vital in the quest for the common good aw and economics were once openly tied, and registers his approval of recent Supreme L as witness the title of John Stuart Mill's Court decisions that have moved in the direc­ 1848 work, Principles ofPolitical Economy. tion ofgreater protection for property owners Or consider that Ludwig von Mises and F. A. against the grabbiness of government. For Hayek both held doctorates from the Univer­ example, in Dolan v. City ofTigard (1994), sity of Vienna not in economics but in the city had maintained that it had the right to jurisprudence. compel Mrs. Florence Dolan, the owner of a Economics came into its own as a "pure" plumbing-supply store, to dedicate land for a science, however, with the establishment of bicycle path without any compensation. The the American Economic Association (AEA) Supreme Court disagreed, with Chief Justice in 1885 and publication of Alfred Marshall's William Rehnquist writing, "We see no rea­ Principles of Economics in 1890. Has its son why the takings clause of the Fifth independence been for the better? Economics Amendment, as much a part of the Bill of has since become increasingly uncertain, Rights as the First Amendment or Fourth mathematical, and state-oriented. But the Amendment, should be relegated to the status relationship between state and society at ofa poor relation." home and abroad in the stormy twentieth cen­ Epstein is also skeptical ofgovernment reg­ tury has been anything but calm and stable. ulation that is supposed to improve the work­ The welfare state has arrived, and liberty ing of the market for consumers. He takes a retreats far more often than it advances. dim view of the antitrust suit against As AEA cofounder and first president Microsoft, arguing that while it may be bene­ Richard T. Ely contended, a "new world is ficial to Microsoft's competitors, it ill-serves coming into existence," and "we must have a the legions ofInternet consumers who contin­ new economics to go along with it." The state ue to enjoy the competition and downward should no longer be only an umpire, said Ely, drift in prices. Epstein fears that use of state but should become an agency "whose positive coercion to compel Microsoft to vary its prod­ assistance is one of the indispensable condi­ uct offerings along government-acceptable tions ofhuman progress." (that is, competitor-acceptable) lines mocks What is the proper role ofthe state? Was Ely true competition and risks stifling the sort of correct in advocating a highly interventionist innovations that sparked the Information Rev­ state? Or is it possible to reconcile laissez olution in the first place. faire, private property, individual choice, and On the whole, the book offers a splendid minimal government with the common good? defense oflaissez faire, but Epstein's Chicago BOOKS 59

School utilitarianism sometimes leads him The author refutes all the key anti-automobile into questionable positions. He accepts, for arguments. For example, in response to the example, some "forced exchanges" such as claim that General Motors conspired to drive public highways and utilities. In granting the the streetcar out ofbusiness, Dunn points out state some right to coerce in selected prag­ that streetcars went out ofbusiness around the matic cases, Epstein seems to open windows globe, not by any nefarious deeds of General ofopportunity for both inefficiency and polit­ Motors, but by the superior performance of ical hanky-panky. Debates between Epstein the automobile. In Los Angeles the auto was and the Rothbardian free marketers over the embraced as a means ofescape from the "cor­ advisability of permitting government to rupt" streetcar monopoly. make people participate in forced exchanges In response to the argument that the Inter­ would be intellectual events to savor. state Highway Act and Highway Trust Fund But do not allow this reservation to deter gave autos an unfair advantage, Dunn points you from reading Principles for a Free Soci­ out that the federal highway trust fund is self­ ety. Epstein's focus is on the need to preserve sustaining from taxes and fees levied on high­ and indeed to expand freedom, not on the rare way users. This stands in contrast to federal instances where he concludes that govern­ aid to transit in which users pay a minor share ment coercion is justified. His strong argu­ of the costs. Dunn compares transit's and ment that freedom and the common good can autos' shares of passenger travel (1 and 99 be reconciled is one that we must make again percent respectively) with their shares ofgov­ and again. D ernment expenditures (25 and 75 percent). William Peterson is adjunct scholar with the Her­ Transit would seem to have the unfair advan­ itage Foundation in Washington and Distinguished tage. Lundy Professor Emeritus ofBusiness Philosophy at In response to the argument that American Campbell University in North Carolina. cities should imitate European cities, Dunn asserts that Europe is imitating America. Despite heavy gasoline taxes, huge subsidies Driving Forces: The Automobile, Its for public transit, and more densely developed Enemies, and the Politics of Mobility urban. land use, auto ownership has been growing faster in Europe than in the United by James Dunn States. Brookings Institution. 1998 • $44.95 cloth; Public transit has been declining for very $18.95 paperback good reasons. Foremost among them is that public transit's attractiveness is inversely cor­ Reviewed by John Semmens related to personal income. When people are poor, public transit may be the best trans­ ver the last two generations a battle portation they can get. As people prosper, Obetween the automobile and its enemies they want to move up to a higher quality of has raged in most urban regions. Aligned transportation. It is economic growth that against the automobile is an elite composed of dooms public transit to a dwindling share of self-appointed visionaries who believe they urban travel. Short of driving the majority of have the answer to how urbanized man should urban populations into poverty, there is no live. On the other side we have the masses of public policy that is likely to revive public common people and the commercial interests transit. that have catered to man's preference for the Dunn acknowledges that traffic congestion automobile. and air pollution are serious negative byprod­ The battle is over. The auto has won. ucts of the automobile. The cure, though, is Because it empowers the individual to go not to waste billions of dollars on attempts to where he wants to go when he wants to go, the resuscitate moribund public transit systems in auto provides a freedom and quality of ser­ the vain hope that this will provide some vice that public transit systems cannot match. relief. Instead, he recommends that public 60 THE FREEMAN/IDEAS ON LIBERTY • NOVEMBER 1999 policy focus on more cost-effective solutions. regarded as a national disgrace." He calls his program "Auto Plus." The key Frank Scaturro, an attorney with a strong is to make auto transportation work more interest in this subject, comes forth in Presi­ effectively and with fewer negative social dent Grant Reconsidered to make the case impacts. Along those lines, he suggests elec­ that Grant was a much better president than tronic road pricing, technological fixes for historians say. He contends that modern histo­ vehicle emissions, and vouchers for the tran­ rians have taken their cue on Grant from his sit dependent. Transit agencies, rather than intellectual contemporaries, who often jealously protecting faltering bus and train despised him because he wouldn't appoint monopolies, should become "mobility man­ them to office. Henry Adams, for example, agers," says Dunn. As such, transit officials wrote that Grant "had no right to exist. He would promote rather than suppress competi­ should have been extinct for ages. ... The tion from "jitney vans." And instead of progress of evolution from President Wash­ attempting to hold on to the urban poor as a ington to President Grant was alone evidence captive clientele, they would be supportive of enough to upset Darwin." ways to help the poor obtain cars. Scaturro challenges this hyperbole and There is one aspect of Dunn's prescription argues that Grant's presidency (1869-1877) that may cause some consternation among was a positive one in U.S. history. He sees highway advocates. He recommends ending Grant as a forceful and honest president, who the "trust fund" concept. In fact, he goes even said, "I don't lie myself, and I won't have any further by suggesting that higher taxes on cars one lie for me." He used the veto 93 times­ and trucks could be a productive source of more than any ofhis predecessors-and sup­ revenue for general government purposes. ported vigorously the rights of newly freed Let's not tum efficient transportation into a blacks. Frederick Douglass wrote, "To cash cow for federal boondoggles elsewhere. [Grant] more than to any other man the Whether one agrees with Dunn's prescribed [N]egro owes his enfranchisement and the remedies or not, his emphasis on hardheaded Indian a humane policy. In the matter of the realism is a better foundation for policy protection of the freedman from violence his debate than the notions ofthose who wish that moral courage surpassed that ofhis party." things were different, that people could be Scaturro argues that the amount of corrup­ induced to give up their prized mobility, or tion in Grant's administration is greatly over­ that the clock could be turned back to a time stated. Of Grant's 25 cabinet appointments, when life was "simpler." D only one, Secretary ofWar William Belknap, John Semmens is an economist with the Laissez Faire left in disgrace. A few others had charges Institute in Chandler, Arizona. made against them, but none was proven. The spoils system operated under Grant, as it had with previous presidents, but Scaturro President Grant Reconsidered observes that Grant introduced improvements in the civil service system. In the case of the by Frank 1. Scaturro New York customs house, the author insists University Press ofAmerica. 1998 • 152 pages that it operated more honestly under Grant $34.50 cloth; $16.95 paperback than under previous presidents. Finally, Scaturro maintains that Grant's handling of Reviewed by Burton Folsom Reconstruction was competent. The major arguments that Scaturro makes n almost all polls of U.S. presidents, are useful, but he is a strong partisan and I Ulysses S. Grant ranks near the bottom. sometimes overstates his case. For example, Professor Thomas Bailey of Stanford, in a he says it is unfair to blame Grant for the typical evaluation, writes, "Grant was an Whiskey Ring and the Credit Mobilier scan­ ignorant and confused President, and his eight dals because they started before he became long years in blunderland are generally president. Those are valid points. But then he BOOKS 61 wants to give full credit to Grant for resolving presidency, as well as afterward, he supported the Alabama claims with England, when in the system of federal subsidies for the Union fact those negotiations also began before Pacific and Northern Pacific Railroads. The Grant became president. (The United States resulting corruption led to the Credit Mobili­ had claimed damages from England caused er scandal and increased government regula­ by Confederate cruisers built and aided by tion. Grant also tried to annex Santo Domin­ British interests.) England's eventual agree­ go and expand the American empire abroad. ment to pay damages stemmed from the Ger­ Scaturro's book helps offset the traditional man victory in the Franco-Prussian War-it historical bias against Grant. From a classical­ did not want to risk an alliance between the liberal standpoint, it exaggerates Grant's United States and Germany. Grant's adminis­ achievements, but it is still a useful corrective. tration had almost nothing to do with it. In some ways, Grant's low ratings in presi­ Scaturro also omits some points favorable dential polls are inevitable, the result ofprej­ to Grant that should have been included. udices held by many historians. As historian Grant reduced the national debt during his Ari Hoogenboom once noted, "The historian presidency and ended the federal income tax. is usually liberal, more often than not a He also favored a sound currency. Within two Democrat. ... The post-Civil War era stands weeks after Grant became president, he for all the historian opposes." If Grant had signed the Public Credit Act, which pushed unveiled a huge program of land and income the United States to redeem its greenbacks in redistribution, he might have won over the coin as soon as possible. Five years later, he historians, but that would have destroyed our vetoed an inflationary bill that would have heritage ofliberty and sent us reeling on a sta­ increased the greenback supply by more than tist course long before the "great" presidents 10 percent. ofthe twentieth century did so. D Grant was far from a consistent advocate of Burton Folsom is historian in residence at the Center limited government. Before he assumed the for the American Idea in Houston, Texas.

Inspired? Shocked? Delighted? AlarDled? Let us l~now.

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The AFL-CIO: Renaissance or Irrelevance?

o hear the AFL-CIO tell it, the union petition have significantly increased those ,T movement has reversed its decline and is alternatives in both dimensions. In this envi­ at the dawn of a renaissance. But among all ronment most workers think the costs of the puffery, three reported claims are espe­ unionization-union-imposed initiation fees, cially suspect: (1) employers routinely harass fines, assessments and dues, increased strife workers who want to organize; (2) in 1998 the between workers and management, lost pro­ number of union members increased by ductivity, and lost working time due to 101,000; and (3) on average workers repre­ strikes-far outweigh the benefits. sented by unions now make 34 percent more The unions' claim that employers prevent than union-free workers. Perhaps most trou­ unionization by harassment ofworkers simply bling of all are reports that clergy and civic doesn't make sense. First, such practices are leaders have announced coalitions with already illegal; and second, intense competi­ unions to promote improved living standards tion for qualified workers prevents employers and a heightened "sense of community." from mistreating workers. In a 1998 study of the reasons for the continuing decline of unions in the private sector, the Employment Worker Harassment Policy Foundation found that only 0.35 per­ In reality, the decline of the union move­ cent ofthe decline could be attributed to man­ ment in the private sector continues unabated, agerial opposition activities involving "unfair and it has nothing to do with employers labor practices" as defined in the National harassing workers who want to unionize. The Labor Relations Act. Astute private-sector principal reason for the unions' plight is that employers are less likely to harass workers fewer and fewer workers are interested in than to try to avoid the burdens of unioniza­ organizing. In a recent paper for the National tion by treating their employees well. Bureau of Economic Research, Henry Farber and Alan Krueger concluded that the demand for unionization among private-sector work­ New Members ers has declined and continues to decline. The 101,000 additional dues payers cap­ Workers' bargaining power in employment tured by unions in 1998 were all in the gov­ contracts depends on the quantity and quality ernment sector. In 1998 government employ­ of alternative employment alternatives they ee membership increased by 158,000 while have. Deregulation and globalization of com- private employee membership fell by 57,000. The unions' market share in government Charles Baird is a professor of economics and the employment rose from 37.2 to 37.5 percent, director of the Smith Center for Private Enterprise while in the private sector it fell from 9.7 to Studies at California State University at Hayward. 9.4 percent. In terms ofmarket share, govern- 63 64 THE FREEMAN/IDEAS ON LIBERTY. NOVEMBER 1999 ment employment has provided the unions workers versus wages those same workers with the only good news they have had since would have received without union represen­ 1953. tation. Of course that comparison cannot be This is easy to explain. Government made. As a second best, wages paid to union­ employers don't resist unionization. In fact represented workers are compared to wages they encourage it. They and the unions sit on paid to comparable union-free workers. But the same side of the bargaining table. Both this comparison always involves what econo­ seek to pick the pockets of taxpayers. The mists call a spillover effect. Unions are able to much ballyhooed February 23 win by the Ser­ get above-market wages for workers they rep­ vice Employees International Union of the resent only by restricting the supply ofwork­ right to represent 74,000 home-care health ers on those jobs. When the workers who are workers in Los Angeles is a case in point. shut out ofthose jobs seek employment else­ Those workers are employees ofLos Angeles where, they spill into the union-free market, County, and any union-imposed increases in depressing wages. costs will simply be passed forward to the Unio~s argue that statistics are just as like­ county's hapless taxpayers. In the competitive ly to understate their effects on wages because private sector, union-imposed cost increases ofwhat they call the threat effect. Employers cannot be passed forward because customers may raise union-free wages just to avoid go elsewhere. unionization-a form of preventive labor relations. However, there is an upper limit to Union Wage Premium what an employer is willing to pay for labor. That limit, called a demand price, is based on The unions' claim ofa 34 percent wage pre­ labor productivity and the prices that cus­ mium over union-free workers is overblown. tomers are willing to pay for the goods and According to the Bureau of Labor Statistics, services produced with those labor services. in 1998 the median weekly wage paid to In a competitive labor market any margins union-free private-sector workers was 79.6 between demand prices and wages actually percent of that paid to comparable workers paid will be very slim. There will be little who were represented by unions. That figure room for threat-based wage increases. compares wages only. When total compensa­ tion packages are taken into account the Justice? union~free to union ratio is 85 percent. More­ over, union representation is not the sole Clergy and civic leaders ought to pause source of the apparent union advantage. The before they sign on to the unions' agenda. BLS explains that "The difference reflects a Unions cannot raise living standards for any­ variety of influences in addition to coverage one except their members. The workers who by a collective bargaining agreement, includ­ end up with lower wages because of the ing variations in the distributions of union spillover effect certainly will not have higher members and nonunion employees by occu­ living standards. pation, industry, firm size, or geographic Clergy and civic leaders also ought to con­ region." In services, union-free wages were sider the unions' well-documented history of 90.1 percent of wages paid to workers repre­ getting their way through violence and intim­ sented by unions. In finance, insurance, and idation before they blindly accept the notion real estate the figure was 104.3 percent. that unions foster a "sense of community." Moreover, the ratio of union-free wages to Organizations whose survival depends on union wages has been steadily increasing. government-granted rights of coercion rather This is another reason for the decline in the than their ability to engage others on the basis demand for unionization. of voluntary exchange are bereft of merit. Statistics will usually overstate the effect of They deserve the scorn of everyone who unions on wages. The comparison that should seeks genuine justice for all rather than spe­ be made is wages paid union-represented cial privileges for a few. D