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VOLUME 59, NO 9 NOVEMBER 2009 Features 8 Health Care’s Muddled Incentives by Arnold Kling 12 Government Motors by Michael Heberling 16 The “I Hate the Poor” Act of 2009 by Christopher Westley 20 The Mystique of Hedge Funds by Warren C. Gibson 23 Old, Bold Futility by William R.Allen and William Dickneider 27 The Great Writ Then and Now by Wendy McElroy 32 Stealth Expansion of Government Power by Murray Weidenbaum Page 27 35 Art Needs No State Subsidies by Bruce Edward Walker Columns 4 Ideas and Consequences ~ Child Labor and the British Industrial Revolution by Lawrence W.Reed 18 Thoughts on Freedom ~ Science Fiction and Economic Fiction by Donald J. Boudreaux 25 Our Economic Past ~ Rutherford B. Hayes and the Financing of American Prosperity by Burton Folsom, Jr. 39 Give Me a Break! ~ Competition by John Stossel 47 The Pursuit of Happiness ~ Rule of Law versus Legislative Orders by Walter E.Williams Page 18 Departments 2 Perspective ~ Two Decades Since the Fall by Sheldon Richman 6 World War II Ended the Great Depression? It Just Ain’t So! by Richard W.Fulmer Book Reviews 41 How Much Money Does an Economy Need? Solving the Central Economic Puzzle of Money, Prices, and Jobs by Hunter Lewis Reviewed by Lawrence H.White 42 Forgotten Founder, Drunken Prophet: The Life of Luther Martin by Bill Kauffman Reviewed by Joseph R. Stromberg 43 Montessori, Dewey, and Capitalism: Educational Theory for a Free Market in Education by Jerry Kirkpatrick Reviewed by Terry Stoops 45 The Left, The Right, and The State Page 41 by Llewellyn Rockwell Reviewed by George C. Leef Perspective Two Decades Since Published by the Fall The Foundation for Economic Education Irvington-on-Hudson, NY 10533 n November 9, 1989, the Berlin Wall effec- Phone: (914) 591-7230; E-mail: [email protected] tively ceased to exist. Remember the www.fee.org sequence: Communist Hungary started letting President Lawrence W.Reed O people pass into Austria and to freedom. Captives of the Editor Sheldon Richman Managing Editor Michael Nolan Soviet bloc left in droves. East Germans, too—thousands Book Review Editor George C. Leef of them.The Hungarian government tried to stanch the Columnists flow, but the dam had been breached.With one dictator Charles Baird David R. Henderson having resigned, a panicky East German regime began Donald J. Boudreaux Robert Higgs making concessions, hoping to mollify the people.They Stephen Davies John Stossel would not be placated. Thousands—and in one case, a Burton W.Folsom, Jr. Thomas Szasz Walter E.Williams million—took to the streets, shouting, “We want out!” Things were getting out of hand. So, on November 9, Contributing Editors Peter J. Boettke Dwight R. Lee the government fumblingly announced it would lift James Bovard Wendy McElroy travel restrictions to West Berlin and West Germany. It Thomas J. DiLorenzo Tibor Machan was all over but the demolition. Joseph S. Fulda Andrew P.Morriss Bettina Bien Greaves James L. Payne I don’t know why it seems so much longer ago that Steven Horwitz William H. Peterson we saw those inspiring celebrations, when East Berlin- John Hospers Jane S. Shaw ers, joined by their countrymen from the western side, Raymond J. Keating Richard H.Timberlake Daniel B. Klein Lawrence H.White danced on the wall while others whacked at it with axes and sledge hammers.The crowds, the singing, the joyful Foundation for Economic Education cries of “Freedom!”, the sections of wall toppling—I Board of Trustees, 2008–2009 remember watching the scenes on television with my Wayne Olson, Chairman then-six-year-old, Jennifer. If you can watch them on Lloyd Buchanan Walter LeCroy William Dunn Frayda Levy YouTube today without tearing up, I don’t know what Jeff Giesea Kris Mauren to say. Ethelmae Humphreys Roger Ream It’s hard to believe that today’s 19-year-olds were Edward M. Kopko Donald Smith born into a world without a Berlin Wall and 17-year- The Foundation for Economic Education (FEE) is a olds were born into a world without the Soviet Union. nonpolitical, nonprofit educational champion of When my generation was growing up, the Iron Curtain individual liberty, private property, the free market, and constitutionally limited government. and USSR seemed like permanent fixtures of life. The Freeman is published monthly, except for combined Yes, we really did have air-raid drills in school. (Looking January-February and July-August issues. Views expressed by back, I can see they were insidious, ridiculous prop- the authors do not necessarily reflect those of FEE’s officers aganda stunts.) Some of us wished, at most, for what and trustees. To receive a sample copy, or to have The Freeman come regularly to your door, call 800-960-4333, or e-mail was called peaceful coexistence. Others thought “we” [email protected]. could roll “them” back. War—which a few, amazingly, The Freeman is available on microfilm from University Microfilm actually welcomed—would have been catastrophic International, 300 North Zeeb Road,Ann Arbor, MI 48106. Copyright © 2009 Foundation for Economic Education, beyond imagination.We dared not hope for a bloodless except for graphics material licensed under Creative Commons dissolution of totalitarianism. Yet that, more or less, is Agreement. Permission granted to reprint any article from what we got. this issue, with appropriate credit, except “Competition.” Those of us who believe in full individual liberty Cover: Post office photo by Daniel Case, used under Creative Commons Attribution ShareAlike 3.0. have been dismayed to learn that revulsion with dicta- THE FREEMAN: Ideas on Liberty 2 PERSPECTIVE: Two Decades Since the Fall torship does not equate to a wholehearted embrace of our problems are caused by government’s creation of freedom. None of the former Soviet-bloc countries has perverse incentives up and down the line. thoroughly foresworn state-capitalist welfarism, and The government owns large shares of Chrysler and some have traveled only a short distance along the road General Motors, which is a sign of how things are from serfdom. Central planning is dead as an ideal, but going these days. Michael Heberling analyzes this ven- the regulatory state lives, as does what Thomas Szasz ture into socialist ownership of the means of produc- calls the Therapeutic State.This is disappointing, but it tion. Christopher Westley follows up with the story of would be difficult for a resident of the United States to Cash for Clunkers, or how the government won friends criticize others for failing to resist overbearing govern- by sticking it to the poor. ment. The longing for security, combined with the Most people—and politicians—have no idea what absurd notion that only ignorant and force-wielding hedge funds do, but they are sure the government bureaucrats can provide it, dies hard. should control them.Warren Gibson guides us through The fall of the Iron Curtain has been heralded as the the thick of high finance. failure of socialism, but this is a more complicated mat- So you think the government can create jobs? Then ter. Strictly speaking, there has been much less socialism Houdini must have been able to exit a locked trunk in the world than it might appear since Lenin gave it up without trickery. William Allen and William Dicknei- for the New Economic Policy in 1921. Remember, der have their doubts. Marx envisioned the abolition of the market, including If the government could shut you away without money and exchange.The economy was to be centrally having to justify its conduct, no enumerated right planned—literally. But when the Bolsheviks tried it, would be worth a thing. That’s why habeas corpus is they ended up, as Trotsky said, “staring into the abyss.” called the Great Writ, as Wendy McElroy explains. Lenin was savvy enough to back away from oblivion Government was big on January 19, but it’s growing and reintroduce aspects of the market, including a gold bigger still—in ways most people don’t even realize. ruble. What followed for the next seven decades was a Murray Weidenbaum is keeping score. heavily bureaucratized, de facto quasi-market economy, Composer Quincy Jones thinks there should be a existing in a world of prices in which The Plan was cabinet department to promote the arts. Don’t bet adjusted ex post to reflect reality and black-market against it. Bruce Edward Walker discusses this urgent “corruption” kept things going. Ludwig von Mises “necessity.” could not have been surprised. Our columnists have found some interesting things Such an economy was doomed to fail, but perhaps to tell you about. Lawrence Reed traces the end of with a little less intervention and a dollop of political child labor in Britain. Donald Boudreaux thinks about freedom, it might have muddled through a bit longer. Star Trek. Burton Folsom pays some attention to Presi- The market can put up with a lot of harassment, which dent Rutherford B. Hayes. John Stossel shows health- means people can resourcefully get around a lot of care “reform” won’t produce competition. Walter government obstacles when they want to. Look at the Williams explores the rule of law.And Richard Fulmer, U.S. economy. incessantly running into the assertion that World War II ended the Great Depression, retorts,“It Just Ain’t So!” * * * Reviewers assay volumes on money, a neglected The late summer and early fall were dominated by Antifederalist, education, and libertarian political what is prejudicially called healthcare “reform.” Statist philosophy. analysts dominated the public discussion. A rare excep- —Sheldon Richman tion was Arnold Kling, who in this issue explains that [email protected] 3 NOVEMBER 2009 Ideas and Consequences Child Labor and the British Industrial Revolution BY LAWRENCE W.

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