Ideas On Liberty' August 1999 Vol. 49, No.8

8 Train Wreck by Gregory Bresiger , 12 A College Fund on the Social Security Model by William B. Conerly 16 Freedom and Morality in the Plays of Tom Stoppard by Norman Barry 20 Friendship and the Free Society by Andrew I. Cohen 23 The Immorality of Antitrust Law by D. T. Armentano 27 Paranoia About Paranoia in American Politics by James Bovard 31 Socialized Medicine-One Size Fits None by Karen Selick 35 William H. Hutt: A Centenary Appreciation by Richard M Ebeling 39 Greens Against Greens by Raymond J Keating 43 Banned in Austin by George C. Leef 48 Protection for Bad Managers by Christopher Mayer , 51 Academic Freedom on Religious Campuses by James R. Otteson

4 THOUGHTS on FREEDOM-True False Consciousness by Donald J Boudreaux 14 IDEAS and CONSEQUENCES-James U. Blanchard III: Champion of Liberty and Sound Money by Lawrence W. Reed 25 POTOMAC PRINCIPLES-Voluntarism Should Be Voluntary by Doug Bandow 33 PERIPATETICS-May the Force Not Be With You by Sheldon Richman , 46 ECONOMIC NOTIONS-Conservation and Speculation by Dwight R. Lee 54 ECONOMICS on TRIAL-Say's Law Is Back by Mark Skousen 63 THE PURSUIT of HAPPINESS-An Open Letter to the California Legislature by Charles W. Baird

2 Perspective-Winners and Winners by Sheldon Richman 6 Markets Need a Hidden Fist? It Just Ain't So! by Andrew P. Morriss 56 Book Reviews The Choctaw Revolution by Peter 1. Ferrara, reviewed by George C. Leef; The Great Depression: An International Disaster of Perverse Economic Policies by Thomas E. Hall and 1. David Ferguson, reviewed by Michael R. Adamson; The Noblest Triumph: Property and Prosperity Through the Ages: by Tom Bethell, reviewed by William R. Allen; Two Lucky People by Milton and Rose D. Friedman, reviewed by Bill Field; Global Greens: Inside the International Environmental Establishment by James M. Sheehan, reviewed by Jane S. Shaw. THE FI\EEMAN Ideas 0/1 Liberty Winners and Winners Published by The Foundation for Economic Education Books and articles by the dozen bemoan the Irvington-on-Hudson, NY 10533 gap between "winners and losers" in today's Phone (914) 591-7230 FAX (914) 591-8910 E-mail: [email protected] economic boom. Even writers not associated FEE Home Page: http://www.fee.org with socialism have joined the moaners' cho­ President: Donald J. Boudreaux rus. For example, conservative Edward Editor: Sheldon Richman Luttwak writes in his new book, trendily titled Managing Editor: Beth A. Hoffman Turbo-Capitalism: Winners and Losers in the Editor Emeritus Global Economy, "living in a country that so Paul L. Poirot greatly respects and admires high-earning Book Review Editor winners, losers find it hard to preserve their George C. Leef self-esteem." Editorial Assistant Mary Ann Murphy Let's ignore the psychobabble and look at Columnists this idea ofwinners and losers. In games, the Charles W. Baird object is to win, which means to fulfill some Doug Bandow arbitrary conditions defined by the rules ofthe Dwight R. Lee game. Because one player or team wins, the Lawrence W. Reed Russell Roberts other loses. The victory and loss are not inde­ Mark Skousen pendent events. That's why we say the Yankees Thomas Szasz beat the Padres in the World Series. Walter Williams Writers who describe the economic process Contributing Editors in terms ofwinners and losers indicate, inten­ Peter J. Boettke Clarence B. Carson tionally or not, that the same zero-sum princi­ Thomas 1. DiLorenzo pIe applies: namely, that people who make Burton W. Folsom, Jr. high incomes are responsible for others' mak­ Joseph S. Fulda ing low incomes. But how can that be? Is Bill Bettina Bien Greaves Gates the reason that some people earn only Robert Higgs John Hospers the minimum wage? Does anyone live in Raymond 1. Keating poverty because Sam Walton got rich? Daniel B. Klein That's not only untrue, it's worse than Wendy McElroy untrue. The fortunes of Gates, Walton, and Tibor R. Machan anyone who earns a high income are the con­ Andrew P. Morriss Ronald Nash sequences of their having enriched a multi­ Edmund A. Opitz tude ofpeople considerably less wealthy than James L. Payne themselves. You have to produce things people William H. Peterson want ifyou intend to get rich (unless you find Jane S. Shaw a way to milk the taxpayers). Market activity Richard H. Timberlake is a positive-sum, or win-win, process. In a Lawrence H. White free (or free-ish) economy, the rich get richer The Freeman is the monthly publication of The Foundation for Eco­ nomic Education, Inc., Irvington-on-Hudson, NY 10533. FEE, by making the "poor" richer. If you don't established in 1946 by Leonard E. Read, is a non-political, educational champion of private property, the free market, and limited government. believe it, ask yourself where would you FEE is classified as a 26 USC 50l(c)(3) tax-exempt organization. rather be "poor," here or in India? Copyright © 1999 by The Foundation for Economic Education. Per­ mission is granted to reprint any article in this issue, except "Socialized To be sure, people with acute entrepreneur­ Medicine," provided credit is given and two copies of the reprinted material are sent to FEE. ial alertness or valuable skills and knowledge The costs of Foundation projects and services are met through dona­ tions, which are invited in any amount. Donors of $30.00 or more will do spectacularly well. By comparison, the receive a subscription to The Freeman. For delivery outside the United people who lack those things will seem to be States: $45.00 to Canada; $55.00 to all other countries. Student sub­ scriptions are $10.00 for the nine-month academic year; $5.00 per losers. But they aren't. And since there is semester. Additional copies ofthis issue of The Freeman are $3.00 each. Bound volumes of The Freeman are available from The Foundation unlimited wealth yet to be created, anyone-if for calendar years 1972 to date. The Freeman is available in microform from University Microfilms, 300 N. Zeeb Rd., Ann Arbor, MI 48106. 2 Cover: Courtesy Thomas E. McMaster. free-can have his shot at being a "winner." This month marks the centenary of the Whatever is holding a particular person back, birth of the late W H. Hutt, an important we can be sure it isn't the people who have and prolific free-market economist. Richard already succeeded. Ebeling contributes an appreciation of Hutt's long career. *** Golf used to be a relaxing pastime. Then American collectivists have long wanted the environmentalists came along. Ray Keat­ the government to nationalize the railroads. ing explains. They finally got their wish in recent decades. Lawyers have long been jealous of their As Gregory Bresiger shows, they should have monopoly in the practice oflaw. George Leef been more careful about what they wished for. describes the lengths to which the profession What if family finances were run like the is willing to go to prevent people from obtain­ Social Security Trust Fund? William Conerly ing legal advice outside approved channels. describes his imaginative method offinancing Attempts by states to impede corporate his children's college education without hav­ takeovers are presented in humanitarian ing to give up anything. terms. But as Christopher Mayer explains, The Academy Award for the best movie in they are special-interest bids that undermine 1998 went to Shakespeare in Love. The script property rights. was co-written by Tom Stoppard, whose plays The clash between academic freedom and have a feature that sets him apart from most of freedom of association may seem irreconcil­ the arts world: anti-collectivism. Norman able-until a missing element is brought into Barry looks at the philosophy that underlies the debate. A controversy at the University of Stoppard's work. Notre Dame prompts James Otteson's dis­ The market order has been credited for course on rights real and imagined. many good things. Andrew Cohen finds one In the columns department, Donald more way it benefits us: it provides a founda­ Boudreaux distinguishes real false cons­ tion for friendship. ciousness from false false consciousness; Antitrust law's interference with business Lawrence Reed remembers hard-money man efficiency has long been documented by econ­ James Blanchard; Doug Bandow argues for omists and legal scholars. What gets far too voluntary voluntarism; Dwight Lee links con­ little attention is its immorality and injustice. servation to speculation; Mark Skousen D. T. Armentano demonstrates that the law reminds us of what Say really said; and fails the test ofethics too. Charles Baird reads the California legislature Ever since historian Richard Hofstadter the riot act about compulsory unionism wrote his book The Paranoid Tradition in for professors. Andrew Morriss wonders if American Politics, statists have had a conve­ a hidden fist is really necessary to protect nient way to smear any uncompromising the invisible hand and decides "It Just Ain't advocate of individual liberty and limited So!" government. James Bovard takes a close look Book reviews this month examine the fed­ at the book, the thesis, and the author. eral government's welfare state for Indians, Medical treatment presents many complex the Great Depression, the importance ofprop­ ethical issues. State intervention in health erty, the lives of two lucky people, and the care only makes difficult matters worse. global environmental movement. Karen Selick discusses a case from Canada. -SHELDON RICHMAN

3 e>n by Donald J. Boudreaux

True False Consciousness

few years ago I listened to a professor cept out ofhand. People, as economists inele­ Afrom a prestigious law school speak on gantly say, are rational. They're not so stupid the modern economy. This learned scholar as to be oblivious to being abused. was baffled that people voluntarily shop at But the more I reflect on the matter, the Wal-Mart and Home Depot. He asked: "Why more I realize that false consciousness is real. do so many people patronize large, imperson­ Contrary to statist claims, however, false con­ al retailers who destroy downtowns and sell sciousness arises only in politics and not in goods that destroy the human spirit? Why do the private sector. consumers and workers willingly permit When are you most likely to be adequately themselves to be oppressed by capitalism?" informed to make choices? When are you His answer was one that's given with most likely to put forth the mental effort nec­ appalling frequency by many statist scholars: essary to weigh all available information and false consciousness. This is the notion that then exercise the discipline required to make people act contrary to their true interests decisions that are best over the long haul? It's because they don't know what's good .for when you have a significant personal stake in them. Refusing to abandon juvenile notions the outcome and when your decision matters. about the horrors ofprivate property and free One of the great benefits of the rules of markets, radical leftists instead resort to private-property rights and freedom of con­ accusing the masses of collective stupidity. tract is that they oblige each decision-maker "Workers are falsely conscious," intoned the to bear the bulk ofthe costs-and permit each law professor. "Their participation in capital­ decision-maker to enjoy the bulk ofthe bene­ ist institutions and their refusal to revolt fits-of each of his decisions. Also, by con­ against them reflect only the awesome power centrating decision-making power in individ­ of capitalism to deceive its victims." uals rather than dispersing it among collec­ Good heavens! Not only does capitalism tives, private property gives each individual oppress the body and soul, it oppresses the genuine influence over the outcome ofevents. mind as well-so much so that its cruelly Private-property rights promote true, not abused victims remain oblivious to the injus­ false, consciousness. tices visited upon them. Consider, for example, a woman who vol­ untarily puts aside a professional career in favor of staying home to raise her children. The Economist's Reaction Many leftists explain this decision as evi­ My initial response to hearing allegations dence of false consciousness-as evidence of false consciousness is to dismiss the con- that the woman is hoodwinked by the capital­ ist patriarchy into thinking that raising chil­ Donald J. Boudreaux is president ofFEE. dren is at least as worthy as pursing a career 4 outside the home. exercising decisive influence. For example­ Nonsense. The stay-at-home mom makes and most notoriously-no voter determines her choice very carefully. After all, the woman the outcome of an election. Therefore, unlike herself bears a large portion of the benefits in private settings, Jones can vote for A and and costs of the decision, and her decision is get. B instead. This is so regardless of how decisive: it alone determines what she will do. passionately Jones desires A. Knowing that Ifshe chooses to pursue a career, she pursues his vote will not swing the election, why a career; if, instead, she chooses to become should Jones bother to become adequately a homemaker, she becomes a homemaker. informed about the relevant issues? These two features-bearing personal conse­ In addition, and again unlike in private set­ quences and exercising a decisive ability to tings, voters (and legislators and bureaucrats) choose which alternative to pursue-mean are permitted to help determine how other that the choice made by any woman in such a people will lead their lives. When the issue in situation should be presumed to be the prod­ an election is, say, whether or not Sunday uct of rational thought and of a mind cleared alcohol sales should be allowed, each voter is ofdistortions. given the opportunity to push the government Likewise for the other decisions that sta­ to override the private decisions of individu­ tists assert to be distorted by false conscious­ als, each ofwhom knows best whether buying ness: people's decisions to shop at Wal-Mart, alcohol on Sunday is best for him or her. workers' decisions to take jobs at non-union­ False consciousness, then, indeed is real. ized firms, consumers' decisions to smoke But it afflicts people as voters rather than peo­ cigarettes, and women's decisions to be ple as private decision-makers. Only in voting surrogate mothers. Each such decision has booths are people prone to act consistently direct consequences for each decision-maker, contrary to their true interests. Again, if the and each such decision is firmly in the hands outcome of an election is unaffected by how . ofthe person who makes it-no one else can you vote-and ifthe bulk ofthe consequences lawfully veto it. No other set of circum­ of electoral outcomes fall on people other stances is as likely to prompt humans to be than you-you gain nothing by casting an rational, competent, and clear-headed deci­ informed and prudent ballot. Your vote, like sion-makers. everyone else's, will be uninformed and ill­ considered. Political False Consciousness Statists have it backwards. Capitalism doesn't foster false consciousness; politics Compare the private decisions that statists does. The political process encourages igno­ so distrust to those decisions that statists rant and imprudent decisions that often run applaud, namely, political decisions. Unlike counter to the best interests ofthe very voters private decisions, people make political deci­ who cast their ballots in support ofsuch deci­ sions with no incentive to choose wisely. sions. One of the many splendid benefits of While private decisions are individualized private property and free markets is that these (that is, no person must share decision­ institutions give each person an unambiguous making authority), political decisions typical­ incentive to make wise decisions-that is, not ly are made collectively, with no individual to suffer false consciousness. D

5 Markets Need a Hidden Fist? ization will be sustainable only ifit is democ­ ratized, in both the economic and the political sense," and the Let-Them-Eat-Cakers, who want to let the poor fend for themselves. Bill Clinton, along with Friedman, is a Social-. It Just Ain't Sol Safety-Netter/Integrationist while Ross Perot is a Let-Them-Eat-Caker/Separatist. You get the picture. hen I want to jump-start my Sunday by For all his experience in exotic foreign W kicking up my blood pressure a few lands and hobnobbing with his big-shot points, I head down the driveway for the Sun­ friends, Friedman's problem is that he doesn't day New York Times. Some weeks it is the really grasp what a market is. Friedman front page that does the trick, other weeks the understands that markets "generate the op-ed page. Few Sundays have given me a incomes and absorb the technologies needed more eye-popping, artery-clearing boost, to keep standards of living rising." What he however, than March 28, 1999. doesn't seem to have a clue about is how mar­ To mark the publication of The Lexus and kets do that. Friedman misses two key points. the Olive Tree, his new book on globalization, First, markets are a means to solve what Times foreign affairs columnist Thomas L. F. A. Hayek called the knowledge problem. Friedman wrote an extraordinary cover story Almost anywhere I go, I find an incredible for that week's New York Times Magazine. The array of goods from virtually every comer of magazine was graced with a large photograph the world. To take just one example, on my of a fist painted with an American flag and daughter's last Girl Scout camp-out we did a emblazoned with the headline: "What the global product hunt and found goods from World Needs Now." every continent except Antarctica among the The fist symbolizes Friedman's message (relatively) small amount of stuff we took that what the world needs is for the United with us. That all those things get here without States not to "be afraid to act like the almighty our being aware of the alternative uses for superpower that it is." Military strikes against those goods elsewhere in the world would be Afghanistan, Iraq, Sudan, andYugoslavia dur­ miraculous ifit weren't so commonplace. The ing the last 12 months suggest one might rea­ result is prosperity. sonably at least quibble with the notion that Second, markets create a sphere for human any significant level of fear prevents America freedom that would justify their existence from acting like an almighty superpower. even ifthey didn't create prosperity. For many Friedman is in no mood to quibble, however. reasons societies that rely on markets are freer "From supercharged financial markets to than societies that don't. Markets offer the Osama bin Laden, the emerging global order potential for anonymous transactions that free demands an enforcer. That's America's new us from accounting to the government for our burden." purchases. Markets also offer us a wider vari­ The world according to Thomas Friedman ety ofmeans to pursue our own ends than any divides along two dimensions. One stretches alternative form ofsocial organization. between the Separatists and the Integra­ tionists, those who want to wall America away No Force or Fraud from the world and those who want to plunge in. The other dimension stretches between the To do those things, markets require remark­ Social-Safety-Netters, who "believe global- ably little. In the absence of force and fraud, 6 7 markets facilitate voluntary transactions that Douglas, the builder of the F-15. And the create wealth. IfI sell you one ofmy widgets, hidden fist that keeps the world safe for as long as I don't misrepresent what the wid­ Silicon Valley's technologies is called the get does or hold a gun to your head, we're United States Army, Air Force, Navy and both better off. I've got your money, you've Marine Corps." In other words, if it weren't got my widget. Thus all a market really needs for America the Global Policeman, we to function is protection against force and wouldn't have all those foreign markets for fraud. Many institutions can be used to stop our goods. force and fraud, and government is one (but Our armed forces certainly playa major only one) ofthe potential solutions. role in the world today-although an impor­ Governments create problems as well as tant part of their role is subsidizing other solve them (something Friedman never men­ nations by freeing them from the burden of tions), and we might hesitate to employ gov­ providing for their own defense. It may even ernment solutions when we think the prob­ be that McDonald's gains new markets by our lems outweigh the benefits. Reasonable peo­ stationing of troops around the world. From ple can differ about just where the balance Indonesia to Zaire/Congo and other countries tips, but Friedman wants nothing to do with a where American support has propped up klep­ comparative analysis ofinstitutional strengths tocracies for decades, the hidden fist is a not­ and weaknesses. so-hidden dead-weight loss that impoverishes According to him, markets need supple­ both the people ofthose countries and Amer­ menting for two reasons. First, we need to ican taxpayers. "democratize" globalization by compensating The fundamental premise of Friedman's the losers from increased trade, because ifwe argument is wrong: McDonald's and Intel, don't "the have-nots, know-nots, and turtles Microsoft and Ford-all are successful or not ... will eventually produce a backlash that overseas for the same reasons they succeed or will choke off your country from the world." fail at home: because people around the world In other words, we need to bribe those who either want their products or do not. To the have benefited from stifling tariffs and other extent American companies' success depends special-interest rules to relax their grips on on the flexing of our fist to coerce others into our throats. As a matter of practical politics buying their products, it is the United States this may carry some weight; as a matter of that is engaged in undermining markets, not principle it is repulsive. other countries. IfAmericans heed the call of Second, Friedman thinks we need to worry people like Thomas Friedman to start swing­ about those pesky foreigners who don't ing our red, white, and blue fists, we are like­ understand the benefits ofglobalization quite ly to find that among the first casualties are as well as he does. His basic idea boils down our freedom and our prosperity. to this: "The hidden hand of the market will -ANDREW ~ MORRISS never work without a hidden fist-McDon­ ([email protected]) ald's cannot flourish without McDonnell Case Western Reserve University Train Wreck by Gregory Bresiger

"The power to tax involves the power to struction of highways-especially the inter­ destroy," Supreme Court Chief Justice state highway system that was sparked in part John Marshall said. So does the power to reg­ by national security concerns-and were hos­ ulate. tile to railroads. Highways, almost all ofthem In the decades after World War II, many owned by governments, were given many American railroads fought a losing battle for advantages. They had dedicated sources of survival.! Railroad executives had been lulled revenues that kept them modern and well by strong performances during the war into maintained. They were untaxed, while rail­ thinking that good times were back. However, roads paid crushing taxes.4 These costs for the the regulatory and legislative measures were railroads inevitably discouraged service in place in the 1940s and '50s that would improvements and triggered a vicious circle. destroy dozens of private lines and result in When service declined, passengers and the bankruptcy of the biggest survivor, Penn freight customers blamed the railroads, not Central. the lawmakers or regulators. When customer Critical elements in the decline ofrailroads numbers declined, service deteriorated fur­ were regulators' saddling them with money­ ther. The process was irreversible as long as losing operations as well as preventing them the railroad industry was heavily regulated. from pursuing new profitable ventures.2 The struggling railroad industry was unable Another important factor was the tax financ­ to maneuver. In a free market, businesses ing of competitors. Those politically adept expand or contract services based on where rivals that persuaded lawmakers to fund them managers see profitable opportunities. Nim­ included the aircraft, truck, and auto indus­ ble entrepreneurs move quickly to add or drop tries. Labor unions, backed by the govern­ operations. In their fight for survival in the ment, also insisted on continuing uneconomic 1940s and '50s, private railroads wanted to practices, such as overstaffed train crews and fall back on freight service and quickly scut­ outdated pay scales. Unions also stopped tle many passenger runs because in America modernization) They exerted political power freight had traditionally subsidized passenger and had a say in whether some railroad con­ service. Railroad executives wanted to raise solidations took place, such as the Pennsylva­ some prices and cut others, trying to find a nia and the New York Central merger. new formula for success. But they were often Governments in this era were committed to blocked by the regulators. the airplane, the car, and the massive con- "Railroad management," writes historian Stephen Salsbury, "found their hands tied." Gregory Bresiger is a senior writer with Financial He notes that most other American business­ Planning Magazine. es in peacetime had the ability to set their own 8 9 rates and determine "the nature of their ser­ czar with almost unchecked power for 40 vice."5 Railroads didn't have the freedoms of years in New York City. By the late 1950s other businesses. If allowed to concentrate Congress finally noticed what decades of on freight service, many roads that died in oppressive regulations had accomplished. the postwar era would have had a better There was no doubt that the railroads were chance to survive. Rate deregulation and the in disrepair. "A mighty industry has come freedom to concentrate on more profitable upon sick and precarious times," said Senator lines were surely the keys for ailing rail­ George Smathers in congressional hearings in roads. However, state and federal lawmakers, 1957. 6 The chairman ofthe New York Central, feeling political pressures, generally blocked Robert R. Young, after a concerted but futile these survival efforts. It would take the sud­ effort to turn the railroad around, shot him­ den destruction of some of the biggest lines self.? The chairman ofthe Pennsylvania Rail­ to awaken lawmakers and regulators to road, after detailing the road's skimpy 1956 their mistakes, which had been repeated over profits of only $41 million on close to $1 bil­ generations. lion in revenues, said government subsidies might soon be needed and that a government The Death of an Industry takeover was a possibility.8 The experience of the once mighty Penn­ By the late 1950s the regulatory and leg­ sylvania, a railroad that even in the midst of islative disasters had come to fruition. Con­ the Great Depression never missed a divi­ gress had pushed ahead with the Federal dend, was typical of a sick, over-regulated Highway Act of 1956 and established a high­ industry, most ofwhose leaders just wanted to way trust fund. With up to 90 percent of a discontinue money-losing lines in favor of superhighway financed with federal money, operations with the prospect of earnings. state officials jumped on the bandwagon and Freight service was hurt by rate regulation, happily paid the rest of the bill. Highways but passenger service was a disaster many elected lots of politicians and also blinded railroad executives pleaded for permission to many Americans to the drawbacks of high­ discontinue. ways, a point detailed by Robert Caro in his According to the Interstate Commerce masterful biography of Robert Moses, Power Commission, American railroads lost huge Broker, a book about an unelected highway amounts ofmoney in passenger service every

The debacle ofthe railroads is a stark reminder ofwhat happens when government intervenes in the economy. 10 THE FREEMAN/IDEAS ON LIBERTY • AUGUST 1999 year from 1945 to 1970. The industry-wide deficits reached $500 million to $600 million. Only freight and outside investments delayed the death of some railroads. Highways, airlines, and even pork-barrel waterway projects were the favorites offeder­ allawmakers. Railroads were the ugly duck­ ling. For instance, in 1958 some $10.3 billion was spent on the national highway program­ expenditures that years later led to complaints that cities were drowning in automobile traf­ fic. By contrast, in the same year, railroads paid $180 million in taxes to all levels of government.9 A takeover of the railroads, especially the unwanted passenger lines, was discussed at the 1957 hearings. In the 1950s and '60s the problem continued to fester. By the 1970s, the massive train wreck finally happened. Dozens of railroads failed, mostly in the east, where they were more dependent on passenger ser­ vice. The biggest failure was Penn Central, W. J. Bryan (1860-1925) but others included the Reading; Central of New Jersey, New York, New Haven & Hart­ nationalization ofthe railroads, but argued for ford; Erie Lackawanna; Boston & Maine; gradual government takeover, with the indus­ Lehigh Valley; and the New York, Ontario & try slowly accepting a greater role for govern­ Western. ment management. Croly expected railroad entrepreneurs to dig their own graves; a vari­ The Promise of ant of Lenin's prediction that the capitalist Government Railroads would sell the rope to his murderers. "In return, for instance, for the benefit ofgovern­ Government railroads had been the dream ment credit, granted under properly regulated ofAmerican progressives and socialists going conditions," Croly wrote, "the railroads might back to the early part of the century. Writer submit to the operation of some gradual sys­ Frank Norris had planned a series ofnovels to tem of appropriation, which would operate depict the predatory nature of railroads but only in the course of several generations, and never completed the "Trilogy ofWheat" saga. the money for which could be obtained by the American socialist parties had consistently taxation ofrailroad eamings."12 advocated nationalization, as did parts of the This was an amazing scenario, given that in "progressive" wing of the Republican and 1909 railroads were one ofthe more profitable Democratic parties. Economic populist parts of the American economy. Still, Croly William Jennings Bryan advocated govern­ could figure a way to nationalize them. A sys­ ment ownership in the 1890s after a visit to tem of "gradual" appropriation would come Czarist Russia, where the railroads were through intense regulation that turned owned by the state. lO During World War I the investors, passengers, and business customers government took over the railroads and away from railroads. Another destructive approved huge new costs that were imposed form ofregulation, a set ofoutdated account­ on the owners when the roads were handed ing standards, had been imposed by the ICC. back after the war. 11 Those standards made it difficult for railroads In The Promise ofAmerican Life (1909), to correctly price services. "I.C.C. account­ progressive Herbert Croly opposed outright ing," complained one railroad executive, "was TRAIN WRECK 11

not only obsolete, but actually impossible to tees saved those poorly run corporations. In utilize effectively in controlling costS."13 the Penn Central crisis, there were no loan guarantees. With the birth ofAmtrak in 1971, "Be Careful What You the railroads have become a plaything of Wish For" politicians, with routes shaped to fit the pres­ sures applied by key congressmen. I7 Red ink When the "promise" of government rail­ exploded. roads was achieved in the early 1970s, with It was once inconceivable that the·govern­ the bankruptcy of the Penn Central and the ment would own and operate America's rail­ takeover of service by a government corpora­ roads; they were at the foundation ofindustri­ tion, socialists and other friends of govern­ alization and so profitable they were a big part ment ownership would find they had achieved of the early Dow Jones Industrial Average. a Pyrrhic victory. Although Croly and Bryan, The debacle of the railroads is a stark among others, had argued that government reminder of what happens when government would bring coordination and better service to intervenes in the economy. The power to reg­ the rails, Americans today, after more·than ulate is the power to control. It may not be the two decades ofAmtrak, are not impressed. quickest method, but it is probably the surest Government ownership of railroads did way to socialism and then to ruin. D nothing to reverse generations ofdisgust with 1. See Ernest W. Williams, The Regulation ofRail-Motor Rate passenger railroads. Amtrak, which inherited Competition (New York: McGraw Hill, 1958). this shaky edifice of regulated railroads, 2. The Interstate Commerce Commission, in decisions in the 1930s, '40s, and '50s repeatedly prevented railroads from moving found it was committed to featherbedding into other forms of transport such as air and water. See Donald M. practices and lines that could not be discon­ Itzkoff, Offthe Track: The Decline ofthe Intercity Passenger Train 14 in the United States (Westport, Conn.: Greenwood Press, 1985), tinued because of political pressure. Fre­ p.49. quent promises to run the trains on a self­ 3. John F. Stover, The Life and the Decline ofthe American Rail­ road (New York: Oxford University Press, 1970), p. 217. sustaining basis never were kept. 4. See Clarence B. Carson, Throttling the Railroads (Irvington­ Amtrak subsidies, which tend to benefit the on-Hudson, N.Y.: Foundation for Economic Education, 1971), pp. 90-91. rich because the ridership is overwhelmingly 5. Stephen Salsbury, No Way to Run a Railroad: The Untold high income, have totaled some $13 billion Story ofthe Penn Central Crisis (New York: McGraw Hill, 1982), 15 p.49. . between 1972 and 1997. Despite all the 6. Itzkoff, p. 44. marketing efforts and government "invest­ 7. Salsbury, p. 83. 8. Itzkoff, pA5. ment," only a tiny minority ofAmericans use 9. Robert Sobel, The Fallen Colossus (New York: Weybright and the government railroad. An Amtrak presi­ Talley, 1977), p. 222. dent, Roger Williams, conceded that the 10. Charles Morrow Wilson, The Commoner: William Jennings Bryan (Garden City, N.Y.: Doubleday), pp. 289-303. road's pathetic ridership numbers constitute 11. Merle Fainsod, Government and the American Economy no more "than a drop in the bucket" in the (New York: Norton, 1959), pp. 163-64. Also see Walker Hines, The War History ofAmerican Railroads (New Haven: Yale University nation's transportation system. 16 Government Press, 1928). Hines says private railroads suffered low profits after ownership and frequent promotion and mar­ they were handed back to private control and many managers ofpri­ vate roads "were intensely dissatisfied with the labor situation" (pp. keting of Amtrak had done nothing to per­ 226-30). suade people to use trains again. 12. Herbert Croly, The Promise of American Life, Arthur Schlesinger Jr., ed. (Cambridge, Mass.: Belknap Press, 1965 [1909]), The problem, in a word, was politics. p.377. Unlike their transportation rivals, private rail­ 13. Salsbury, p. 151. 14. Rodger Bradley, Amtrak: The US. National Railroad Passen­ road executives had never been good political ger Corporation (Dorset, Mass.: Blandford Press, 1985), pp. 123-24. players. For instance, in the 1970s and '80s, 15. Stephen Moore, "Amtrak Subsidies: This Is No Way to Run a Railroad," "This Just In," May 22, 1997, Cato Institute Web site, aircraft and automobile lobbyists effectively www.cato.org. argued that Lockheed and Chrysler could not 16. Itzkoff, p. 3. 17. George W. Hilton, Amtrak (Washington, D.C.: American be allowed to fail. Government loan guaran- Enterprise Institute, 1980), especially pp. 19-30. 'Economics

A College Fund on the Social Security Model by William B. Conerly

hanks to Social Security, my wife and I the children pointed out that the games are an Thave discovered how to guarantee our investment in the future, because both boys children's college education without any sac­ expect one day to make millions as game rifice on our family's part. No, we aren't so designers, or at least thousands as profession­ old that our retirement checks will go directly al game testers. Who can be against invest­ to the university. We have an even better ments in education and technology? Thus, we method: our family has adopted the Social just couldn't cut the current budget, despite Security model for a college trust fund. the looming college crunch. It began when our 10- and 12-year-old chil­ dren started asking us what college is like. After we described the wonders of exciting A Great Idea lectures, late night bull sessions, and the new­ The great idea came when I studied the found freedom for parents, our older son Social Security Trust Fund. I called a family asked if it cost money to go to college. What meeting to announce the establishment ofthe an ugly question! Conerly College Trust Fund. Later that evening my wife and I agreed that "Where will the money come from?" my we ought to start saving some money for the wife asked. I assured her that we would put kids' college education. But how to save? As money into the fund, but not have to cut our we walked around the house, we saw the crum­ current spending. bling infrastructure. Well, not really crumbling, "How will the trust fund be invested?" but the house is in need ofsome fresh paint and asked my older son, who has a budding inter­ a decent lawn irrigation system. est in the stock market. Then there were the pressing social needs. "The fund will buy Conerly Bonds," I The spring-break ski week helps to bring us explained, waiting for cries of understanding together as a family, and the evenings out with and adulation. The family fell silent, so I my wife are vital to maintaining a solid mar­ explained: "We're following the Social Secu­ riage. What more pressing social needs could rity model here. The Social Security Trust there be? Fund buys bonds issued by the u.S. govern­ My wife proposed cutting back spending ment. So, the Conerly College Trust Fund will on computer games, to which I agreed. But buy bonds issued by the Conerly Family." Still no response. "You see, a bond is just a loan. The trust fund will lend the family the William Conerly is president ofConerly Whelan Inc., a Portland, Oregon, investment management firm, money we need to continue spending on our and a consultant to Control Your Future, a non­ infrastructure needs, social needs, and profit organization focused on Social Security. investments in the future. That way the fam- 12 13 ily continues to spend as ever before, while to pay for our college without the trust fund, the trust fund grows to a nice fat sum. I just how will the family be able to payoff the hope that you kids can get into a college bonds when we turn 18? I don't get it." expensive enough to use up all of our big "Don't worry, son," I told him, "there are trust fund." some things that Daddyjust can't explain. But My younger son, who had been silent up to I'm sure you'll be able to understand it after now, didn't understand. "But l}.ow will we pay you've gone to college. I suggest you study offthe Conerly Bonds? Ifthe family isn't able economics." D

Classic Satires

Every age has its witty fable exposing the reigning fallacies, from Jonathan Swift's Gulliver's Travels to George Orwell's Animal Farm. In 1990, Princess Navina Visits Malvolia joined this list. With its captivating diagnosis of modern political woes, it describes a strange land where politicians are duty-bound to cause harm. Hence, they devise policies to provoke social unrest, encourage idleness, and frustrate entrepreneurs. Since that ftrst volume, political scientist Jim Payne (who writes these tales under the pseudonym Count Nef) has produced two sequels: - Princess Navina Visits Mandaat tells of a country where government tries to fIX every problem - yet somehow nothing seems to work. - Princess Navina Visits Nueva Malvolia (just published) is about a country where politicians are duty-bound to harm people and stay popular in order to win"elections. So they follow the "strategy of good intentions," presenting their vexing schemes as compassionate programs to ensure fairness, guarantee jobs, and protect children.

Price for each book $9.95 All three books (save over 15%) $24.95 Add $3.50 shipping &: handling

To order coI/1-800-326-0996, code: NV4. Or send check to lytton Publishing Company • Box 1212, Sandpoint, ID 83864 Ideas and Consequences by Lawrence W. Reed

James U. Blanchard III: Champion of Liberty and Sound Money

reat movements are marked by the dedi­ killed in a tragic automobile accident at the G cation and accomplishments ofsteadfast age of 17 and was unable thereafter to walk. individuals who make the most of every But if anything, his handicap only spurred moment, every opportunity, and every avail­ him on. able resource. When those great men and Not once did I hear Jim Blanchard bemoan women pass from the scene, they leave behind his physical plight. Ifhe talked about it at all, untold numbers of friends and followers who it was to relate how sitting in a wheelchair derive comfort from their memory and inspi­ gave him time to read. In his 20s he read vora­ ration from their deeds. ciously. Introduced to the writings of Ayn Such a man was James U. Blanchard III, Rand by a medical student friend, he became who died on March 20, 1999, at the age of55. an unabashed defender of laissez-faire capi­ The causes to which he devoted ceaseless talism. Rand's influence on Jim is perhaps energy and for which his name will always be best exemplified by the name he gave his old­ associated are liberty and sound money. Jim est son: Anthem. Jim also became a devoted knew that neither one is long safe without the reader of The Freeman and books by FEE's other, and few American businessmen in the founder, Leonard Read. second half of the twentieth century did as In 1974, Gerald Ford signed a bill that much as he to promote them both. The open­ restored the right ofAmericans to own gold. ing sentence of his family's formal notice of The real hero of that moment was Jim Blan­ his passing summed him up well: "James U. chard, who had formed the National Commit­ Blanchard III was a man who accomplished tee to Legalize Gold in 1971 and spearheaded much against great odds, and changed more a nationwide grassroots campaign. He knew people's lives than he ever knew." that governments don't like gold because they I was privileged to know Jim Blanchard for can't print it. He saw gold ownership as a fun­ the last 15 years of his life. For two years I damental human right, a hedge against gov­ served as an economist for his finn. I spoke at ernment mismanagement of money, and the many of his conferences. I traveled with him first essential step down the long road to mon­ to Brazil, Nicaragua, and Kenya. Though etary integrity. many others knew him better, it didn't take True to his spirit, some ofJim's efforts were much acquaintance with him for anyone to dramatic and unconventional. He arranged for marvel at what a man in a wheelchair can get a biplane to tow a "Legalize Gold" banner done ifhe puts his mind to it. Jim was nearly over President Nixon's 1973 inauguration. He also held press conferences around the coun­ Lawrence Reed is president ofthe Mackinac Center of for Public Policy (www.mackinac.org), afree market try at which he would brandish illegal bars research and educational organization in Midland, gold and publicly defy federal officials to Michigan, and chairman ofFEE's Board ofTrustees. throw him in jail. These and many other sto- 14 15 ties about Jim's colorful career can be found in his 1990 autobiography, Confessions ofa Gold Bug. Once gold became legal, he held his first annual investment conference in New Orleans. Expecting 250 attendees, he was stunned to see 750 show up. Now in its 26th consecutive year, Blanchard's New Orleans Investment Conference has drawn tens of thousands of individuals from all 50 states and 35 nations. Investment advice comprised most of the 25 programs Jim assembled, but he always made sure that attendees were pro­ vided a hefty dose of sound-money and free­ market ideas. His speakers included Milton Friedman, F. A. Hayek, Robert Bleiberg, Wal­ ter Williams, and many other great econo­ mists. Ayn Rand's last public appearance was at a Blanchard conference. In the meantime, Jim's original $50 invest­ ment to begin a coin business in the 1970s blossomed into a giant within the industry. When he sold the business 15 years later, it James U. Blanchard III was a $115-million-a-year precious-metals and rare-coin company. In 1993, he launched freedom literature himself when he visited a second such firm, Jefferson Coin & Bullion, communist countries. Inc.; it's already one ofthe largest in the Unit­ One of Jim Blanchard's favorite foreign ed States. Other business ventures he helped projects was assisting anti-communist rebel start were notably successful, including the forces inside war-torn Mozambique in the Blanchard Group of Funds, which held as 1980s and early 1990s. He once sent a col­ much as $1.7 billion under management league and me on a clandestine journey inside before being sold in July 1995. He cofounded the country to live for two weeks with the Industry Council for Tangible Assets to the rebels in the bush and help spread a pro­ combat unscrupulous business practices in freedom message. Once the war was over and the coin and bullion industry, and he helped Mozambique adopted policies friendly to pri­ reverse several burdensome laws and regula­ vate property and free markets, Jim pitched in tions that afflicted American investors. to assist in reconstruction. Through Blanchard Jim's adventurous instincts and love of lib­ Mozambique Enterprises, he obtained a con­ erty combined to put him on the front lines of cession to rejuvenate 580,000 acres and create important struggles around the world. On my the largest privatized game reserve in the return in 1986 from visiting with activists in world. His plans for the development of the anti-communist underground in Poland, I lodges and resort facilities within the reserve went to Jim with a request. I advised him that will go forward and will in turn support the for $5,000, pro-freedom forces in Warsaw wide-scale reintroduction and protection of a could translate Milton Friedman's Free to number ofbig game animals. Choose into Polish and then print and distrib­ Jim Blanchard overcame personal tragedy ute hundreds of copies throughout the coun­ to become a powerful figure for liberty and try. He wrote that check on the spot, and many sound money. His indomitable spirit lives on others for similar causes behind the Iron Cur­ in all those who know that the noble causes to tain. Not content only to fund these worthy which he devoted his life require both hard endeavors, he often transported illicit, pro- work and eternal vigilance. D Freedom and Morality in the Plays ofTom Stoppard

by Norman Barry

ost people who were dazzled by the ver­ especially Jumpers (1972). All these works, M bal dexterity and comic genius revealed and many others, reveal a deep commitment in Tom Stoppard's Oscar-winning movie, to morality and an intellectually, as well as Shakespeare in Love (his co-writer, Marc theatrically, coherent rej ection of that rela­ Norman, provided the idea but every line of tivism which logical positivism and sterile dialogue is quintessentially Stoppard's) do not linguistic philosophy have spawned. Above realize that behind this extravagant frivolity is all there is a confident exposure of the dehu­ a serious, indeed political, playwright. Unusu­ manizing aspects ofMarxism and its relativis­ al for a British writer, Stoppard is not a man tic anti-ethics. ofthe left; not since Noel Coward has Britain had an artist so unashamedly "right-wing." He once famously said: "1 bum with no causes. 1 Philosophy and Morality cannot say that 1 write with any social obj ec­ Undergirding what Stoppard calls his con­ tives. One writes because one loves writing." servatism in politics ("1 am a conservative in He displayed a welcome hedonistic approach politics, literature, education and theatre") is a to life with his reply to a question on his first deep and uncompromising view ofthe moral­ play, Rosencrantz and Guildenstern Are Dead ity offreedom; a conception that could almost . (1966). "What is it all about?" he was asked. be called natural law. It enjoins the universal "It is about to make me a lot of money," he precepts of human liberty and a commitment said. One can't imagine Harold Pinter or to a minimalist equality. Equally important is Arthur Miller saying that: they are far too the idea that ultimately morality is individual­ "serious" and morally pompous. ist; our fundamental values cannot be sub­ But all this is a little disingenuous, for merged in a collectivist enterprise and per­ Stoppard is actually much more politically sonal responsibility ought not to be diluted by acute than Pinter and Miller, and he is cer­ the ersatz ethics of nationalism, ideology, or tainly more morally mature and intelligent. an overpowering sense of religion (though He has written at length on political themes, this is not to say that he has no beliefin God). notably in his anti-communist plays Profes­ As he said in an interview: "However inflexi­ sional Foul (1977) and Every Good Boy ble our ... beliefs ... they owe their existence Deserves Favour (1977) and in his memo­ to individual acts between individuals, which rable dramatizations of modern philosophy, themselves are derived from an individual's intuitive sense of what is right and wrong." Norman Barry is professor of social and political Correct values are simple and immediate in theory at the University ofBuckingham in the UK. He their appeal. As Chetwyn says in Professional is the author afBusiness Ethics (Macmillan, 1998). Foul: "A good rule, 1 find, is to try them out 16 17 on men much less clever than us. I often ask Marxism is in the extraordinarily adroit Trav­ my son what he thinks." esties (1975). Three famous people, James The intellectuals have made morality Joyce, Tristan Tzara (the founder ofthe anar­ socially untenable, and in Jumpers Stoppard chic artistic movement, Dadaism), and Lenin mercilessly and comically exposes the aridity are all in Zurich at the same time (1917) and and ethically subversive nature oflogical pos­ are involved with a British civil servant, itivism ("truth is an interim judgment," says a Henry Carr, in a production of The Impor­ leading character). Set in a university, the play tance ofBeing Earnest. Here one of the tar­ features yellow-clad gymnasts who reproduce gets is Lenin's materialism ("people were a physically the verbal agility ofthe positivists sensational kind of material object") and his ("I have seen the future and it is yellow"). dehumanizing theory of art and revolution. They are opposed by a believer in old-fash­ Lenin almost sobs with admiration at hearing ioned moral absolutes, Professor George Beethoven's "Appassionata," but quickly Moore, who points out that the acrobatic team relapses into an ideological harangue against consists ofa "mixture ofthe more philosoph­ Western capitalism, for example, a free press ical members of the university gymnastics will be "free from bourgeois anarchist indi­ team and the more gymnastic members ofthe vidualism." For him art's only role is to be the Philosophy School." They are mainly posi­ servant of the class war. This small speech tivists' empiricists, Benthamites, behav­ constitutes an instructive vignette on the iourists, even lapsed Kantians, and they all depredations ofideology. make fantastic leaps ofthe imagination along As it turns out, Carr is the real hero ofTrav­ with their gymnastic flights ofphysical fancy. esties. He may have somewhat jejune old­ Their political wing, the Radical Liberals, world British characteristics and an odd dress have just won an· election but the positivists' sense, but he does espouse· Stoppard's own victory is spoiled by the murder oftheir most beliefs in genuine artistic freedom, civilliber­ prominent member, McFee. They soon dis­ ties, and a modest patriotism. And the impor­ cover that there are absolute values; a circum­ tant point is that these values are not nego­ stance the logical positivists normally find tiable; they are the universal standards by difficult to accommodate. which we assess the secondary claims of art Even worse, McFee had already defected and politics. before his death, having himself witnessed a murder on TV George cannot handle the The Political Plays slickness of the positivists and never makes the final lecture that would restore intellectu­ Stoppard was originally criticized for his al respectability to his absolutist beliefs or alleged indifference to contemporary social secure them in a plausible notion of God. issues; compared to the tedious moralizing George's metaphysical meanderings seem as and posturing offashionable left-wing theatri­ inconsequential as his zany wife Dotty's badly cal ranters, his retreat into cleverness, sheer rhymed rendition of classic musical comedy verbal wizardry, and literary adroitness were a numbers ("I want to spoon to my honey I'll welcome relief. But two important plays in croon love's June or July"). Both seem out of 1977-ProfessionalFoul (written for TV) and touch with modernity. The positivists, in their Every Good Boy Deserves Favour (with sanitized belligerent way, are as much respon­ music by Andre Previn)-firmly established sible for the misery in the world as are the him as an anti-communistic and pro-West overt totalitarians. As Stoppard said, in a fine writer. Stoppard had long been involved with refutation ofmoral equivalence: "The point is Czech dissident movements (he was born in not to compare one ruthless regime against Czechoslovakia in 1937 but his family moved another-it is to set up one against a moral two years later) and his political views were standard ... and at least my poor professor in not unknown-but he had not let them inter­ Jumpers got that right." fere with his professional work in the theatre. Stoppard's first theatrical onslaught against Professional Foul nicely blends philosophy 18 THE FREEMAN/IDEAS ON LIBERTY • AUGUST 1999 and politics. Anderson is an orthodox analyt­ child, Alexander's nine-year-old son Sacha ic philosopher who believes that ethics are ("Papa doesn't lie"). mere conventions and not really worthy of The ending of the play, in which a' KGB intense speculation apart from the linguistic official appears to confuse the two Alexanders puzzles they might generate. He is on his way so that both are released, caused some contro­ to Prague to pursue his real interest, football versy at the time it was produced. It was said (soccer). There is a game on during a philos­ that Stoppard had concocted a bureaucratic ophy conference to which he has been invited bungling to effect a tame happy ending. But to give a paper. His smug equanimity is dis­ this was not so; it was a genuine decision by turbed by his meeting a former student, Pavel the regime. It did not want the embarrassment Hollar, who has been reduced to a cleaner's ofcontinuing to persecute a famous dissident. job because ofhis political views: he wants to That was the only relief available from the have his thesis smuggled into the West. horrors of communism, but as Stoppard well Anderson's complacent detachment is counter­ knows, it was a poor consolation for the thou­ poised by the moral absolutist, Chetwyn, and sands ofunknown victims oftyranny. the conceited, amoral Marxist, McKendrick. Both plays reflect Stoppard's concern to But circumstances, mainly the arrest of stress the dependency ofpolitics on morality. Hollar and the threat to his son, compel As he said: "All political acts'have a moral Anderson to engage in substantive moral basis to them and are meaningless without it." issues. He changes the subject of his paper This basis is objective, and Stoppard is' dis­ from a tame analytic enquiry about nothing gusted by those people in comfortable situa­ important into a ringing declaration ofhuman tions in the West who think otherwise: Marx­ rights and a strident denunciation of commu­ ism and relativism "are now the quite fa,miliar ' nist tyranny. Against the subjectivism that had teachings of well-educated men and women previously dominated his metaphysics he now holding responsible positions in respectable says that "there is a sense ofright and wrong universities, and the thing to say about such that precedes utterance" and, in a neat para­ teaching is not that it is "radical" but thftt it is phrase of a famous aphorism of Wittgen­ not true. ... It is silly. Daft. Not very bright. stein's, maintains that "whereof we cannot Moreover, it is wicked." He knows, and has speak, thereof we are by no means silent." articulated very well, the absurdity ofMarxist Anderson discovers that ethics are not club economics and sociology. But what he thinks rules w~ can change at will; and at some risk has not been expressed strongly enough is its to himself, as well as at the cost ofmissing the bankrupt and dehumanizing non-morality. football game, he manages to get the thesis Stoppard, of course, has had the ines­ out of Czechoslovakia. In a gesture of timable advantage of not going to university, supreme irony, Stoppard arranges for it to be yet he is undoubtedly thinking of those con­ placed in the luggage of McKendrick. There temptible fellow travelers in Soviet Studies at is redemption for philosophy after all. Ivy League universities who were defending In Every Good Boy Deserves Favour, Stop­ communist regimes as late as 1990. . pard mercilessly parodies, with deadly intent, Soviet psychiatry. Mental hospitals are really Chaos and Order prisonsf'your opinions are your symptons") and the dissident Alexander finds himself In addition to the political implications of alongside a genuinely mentally disturbed his objective ethics, Stoppard is also interest­ patient, also named Alexander, who thinks he ed in some more general philosophical is conducting an orchestra. Indeed, an aber­ themes. An abiding concern is his sometimes rant triangle functions as a discordant element comic exploration ofthe relationship between in the' grisly order of communism, as well as order and chaos and the possible unreliability allowing Stoppard to make some complex of conventional scientific truths. His plays wordplay on geometrical configurations. themselves are often constructed out ofseem­ Again, correct morality is presented through a ingly bizarre concatenations of events. There FREEDOM AND MORALITY IN THE PLAYS OF TOM STOPPARD 19

is· an order out there, but it often has to be Stoppard himself veers toward an under­ imagined, and although he is conservative standing of the world in terms of a kind of about science, as in everything else, he is very order, though he clearly appreciates the dra­ much aware of the inadequacy of simple lin­ matic power that chaos can create: "iterated ear theories. It explains his recent excursion algorithms" and other paraphernalia of mod­ into chaos theory in his much-acclaimed play em mathematics adorn the play. The only Arcadia (1993). But some ofthe themes here philosophical omission in all this is the are presaged in his first stage success, later absence of any consideration of what the made into a movie, Rosencrantz and Guilden­ debate might imply for freedom. But the stern Are Dead. implication from his other work is that in pol­ One recalls the opening scene where the itics he is an indeterminist; after all, his fierce two hapless Shakespearean courtiers from anti-collectivism reveals a deep commitment Hamlet keep spinning a coin, which keeps to liberty and personal responsibility. coming up heads. As well as effecting a mild But Arcadia itself is wonderfully complex. redistribution of income this phenomenon Stoppard manages to work in a purported obviously breaches the laws of probability explanation of the mysterious disappearance and introduces us to what was to become a of Lord Byron after a duel in 1809 alongside familiar Stoppard theme: uncertainty even the pyrotechnics. The order/chaos dichotomy about our most firmly held and apparently is further explored with the description ofthe well-established convictions. The play itselfis changes in English social life as evinced by Hamlet seen from the wrong end of a tele­ the transformation of the garden from classi­ scope: characters come in and out of the cal symmetry through to "picturesque" disor­ action, they do unexpected things, and yet der. It also contains some of Stoppard's some semblance of order (though indescrib­ delightfully witty comments on sex, which able) is maintained. People die as they should, rival those in Shakespeare in Love: "Is sexual if not quite in the place and at the time that congress like love?" Thomasina asks her tutor Shakespeare originally intended. Moviegoers innocently. "Oh no, it is much nicer than will notice how Stoppard uses a similar tech­ that," he replies knowingly. nique in Shakespeare in Love; the Romeo and Juliet theme is a convenient peg on which to Freedom and Literature hang his invented relationship between Will Shakespeare and Viola. It is doubtful that the success of Stoppard The theme of order out of chaos is much will lead to a renaissance of "conservatism" more fully explored in Arcadia in which, at the in English literature. Already Shakespeare is beginning ofthe nineteenth century, a 13-year­ being subtly removed from many courses (he old but precocious schoolgirl, Thomasina, dis­ was, of course, a racist and a sexist), so what covers chaos theory while doing her math chance does an avowed Thatcherite have of homework. What is described is a non-linear getting on the syllabuses of left-dominated world that is also further exemplified by a mod­ schools? The class war and communism may em character's study ofthe breeding ofgrouse: be over in the regimes Stoppard has so bril­ the play is set in two different time periods, liantly, and poignantly, pilloried, but they go nineteenth-century England and the present on in their enervating ways amongst the day. The world may not be Newtonian but it is British intelligentsia, especially in the arts. orderly, a theme that Stoppard directly borrows But none ofthis matters. Stoppard does not from James Gleick's book Chaos. But in his work in the subsidized theatre. Nobody who own imaginative reconstruction of the theory, has lived parasitically offthe state could ven­ Thomasina shows how simple rules and equa­ erate freedom as much as he does. He would tions, which contain apparently no random ele­ dazzle us with his verbal dexterity and the­ ments, can generate extraordinary complexity. atrical innovations even ifthere were no polit­ Also, they have much greater explanatory ical problems to worry about. And that, I am power than conventional scientific theory. sure, would be his own Arcadia. 0 Friendship and the Free Society by Andrew I. Cohen

rivate property and limited government friendships, each friend respects the other P are unrivaled in promoting personalliber­ person, not as a means to his own ends, but as ty and material abundance. These institutions an end in himself. of a free society also beat the competition in A free society is uniquely qualified to pro­ promoting another vital personal and social mote the most complete friendships because it good, namely, friendship. provides the institutional framework most Beneath our differences, people understand favorable to them. that self-respect, some wealth, a sense ofper­ sonal efficacy, and maybe even a dash ofluck by are among the essential ingredients of a suc­ Freedom Degrees cessful life. These values would still seem Bya "free society," we can speak ofa social shallow or pointless without friendship. As and political framework with three key fea­ Aristotle observed, "No one would choose to tures: (1) private property is protected as invi­ live without friends even if he had all the olable, (2) government's role, at most, is to other goods." Our achievements would be prevent and punish the violation ofindividual emptier and our failures more unbearable rights, and (3) all human relationships are vol­ without friends by our side. If friendship is untary. Free societies can exist in degrees. then not the supreme good, it is certainly an While the United States now is more free essential one. Some of us are admittedly less than, say, the Soviet Union under Stalin, the social than others. The companionship that United States is not a completely free society. comes in meaningful friendships nevertheless To the extent that a society counts as free, it seems to be a key part ofthe good life. will provide the best opportunities to nurture There are of course many sorts of friend­ and sustain deep friendships. ships. Some persons are friends out ofconve­ Consider what is necessary for friendships. nience. Perhaps our typical "acquaintances" Two persons must share some form of good fall into such a category. There are also will. There needs to be a certain authenticity friendships based merely on what two people to any such mutual affection. This sincere find mutually pleasing. Both ofthese types of good will helps to nurture a sense oftrust and relationships help amplify our lives in various healthy interdependence. Trust is certainly ways, but the best sorts of friendships are key to building and maintaining any meaning­ those where each friend cares deeply and sin­ ful relationship, particularly in complete cerely about the other. In such complete friendships where friends have a special respect for each other. But suppose you find Andrew Cohen teaches philosophy at the University yourselfin an institutional environment where ofOklahoma, Norman. you have no choice but to interact with some- 20 21

one else. Such a stilted setting will tend to end in himself. People usually do not just fall restrict the development of any friendship. into friendships. They develop their relation­ While you may still come to be friends with ships, often starting out on the fragile and fleet­ the other person, it is much more difficult for ing bases ofmutual pleasure or mutual conve­ you to do so under such circumstances. First nience. The trust that comes from freedom of you must overcome some understandable choice can only help foster the good will that mutual suspicion, but then you must fight the gets started in such rudimentary relationships. worry that the other merely likes you as a The enhanced freedom ofchoice characteristic means to some private end. of free societies also removes several impedi­ In all political economies, individuals will ments to the deepening ofthese relationships. sometimes find themselves having to deal To say that the institutions of a free society with persons somewhat involuntarily. Even in best facilitate friendship does not mean that a nearly free society, we may find ourselves people didn't have good friends in, say, working for, going to school with, or just sit­ Maoist China. (Perhaps genuine friends were ting beside persons with whom we would especially valuable there.) But it is far more rather have no contact. difficult to discover, nurture, and sustain good Consider just one example. Most municipal­ friendships when human relationships are not ities have tightly regulated local telephone entirely voluntary. What a free society does is monopolies. To a great extent we have no enhance our range of freedom of choice. We choice but to deal with our telephone repair­ have more options to select or reject. When man. His incentive to engage in gestures of you find yourself interacting with persons in good will, and our reason to show him some this wider range of choice, you have better sincere regard, are both constrained. The repair­ reason to believe that another's interest in you man's "have a nice day" rings hollow when we is genuine. You also have better reason to know that we have no choice but to get our tele­ know that your own interest is genuine. The phone service from that one company. comer baker is more apt to take an interest in What a free society does is minimize the your life when he knows quite well that you extent to which human relationships are could just as well go across the street to a involuntary. When we have no choice but to competitor or bake your own muffins. You deal with someone, sincere good will is often may also be more likely to feel a· mutual good hard to muster. But when individuals are free will toward the baker when you know that you • to come and go as they please and they never­ are free not to patronize him. theless continue to interact with one another, they can be more certain ofone another. They Private Property might then foster the trust and mutuality nec­ essary for genuine friendships. Another characteristic of a free society Take a lower-level friendship, such as one even more important and powerful for of mere convenience. We have such friend­ advancing friendships is private property. ships with many persons, such as with the What good is wealth, Aristotle asks rhetor­ family doctor, the comer florist, or (if we are ically, unless we have people we care about lucky) with car mechanics, plumbers, and car­ with whom to share it? Ambiguously defined penters. Our good will toward such persons is property rights and property that is not private mostly based on what they can offer us. Gen:' notoriously promote waste and neglect. What uine good will·is an ingredient in any whole­ matters here, however, is that when property some friendship. To the extent our displays of is not private, or when it is otherwise not fully good will are sincere, it is because we recog­ protected as private, individuals have dimin­ nize both the value such persons represent to ished opportunities to cultivate the benevo­ us and their freedom to do as they wish. lence characteristic ofgenuine friendships. These low-level friendships are often step­ There is a certain sort of kindness that pingstones toward the more complete friend­ helps to nurture and sustain friendships. This ships where each friend regards the other as an is the kindness manifested by freely sharing 22 THE FREEMAN/IDEAS ON LIBERTY • AUGUST 1999 one's belongings with others. Unless one olable whatever property rights individuals owns property, however, it is difficult if not enjoy. A free society thereby promotes impossible to show benevolence toward authentic friendships by giving people added another. With what would one be benevolent? opportunities to engage in meaningful shar­ It is not benevolence if you grant another ing. If resources move from one person to access to some good to which you do not have another when they do not have to, the recipi­ an exclusive, protected claim. ent is better able to gauge the motives of the Benevolence is still a vital ingredient in gesture. Indeed, the one who gave the proper­ bringing a relationship to a higher level, one ty away is better able to be sure of his own where you spontaneously and willingly con­ motives. A free society does well in clearing tribute to a friend's well-being. What property the air in this fashion. Relationships are vol­ does is give individuals a protected sphere of untary, and property is exchanged and redis­ control over some range ofaction and materi­ tributed only through free consent. Such ges­ al goods. It sets up a divide between what is tures lay the groundwork for the most mean­ "mine" (and not yours) and what is not ingful sorts offriendships. "mine" (but someone else's). "Property" here Friendships are possible in a variety ofcir­ is not just a material thing but also includes cumstances, including in the most repressive one's freedom, one's time, and one's body. of dictatorships. What a free society does is Even the materially poor man can be benevo­ make the discovery, development, and suste­ lent toward another; the poor man still owns nance of friendships of all types-particular­ himselfand his time. The authentically benev­ ly the most meaningful sort-easier. When olent man then freely waives his rights to free, individuals have a diminished need to exclude others from his goods. In doing so, he second-guess the motives of others (and builds trust and helps to enhance his friend's themselves) and they are better in a position welfare. Such gestures lay the groundwork for to be generous. The freedom not to do what later reciprocal gestures that, in a complete others may want us to do is a valuable liberty. friendship, come freely and without any Besides providing a sense of autonomy, that thought to some payoff. freedom is an important ingredient in expand­ A free society enhances the quantity of ing the opportunities for the friendships that property individuals own and protects as invi- characterize a successful human life. D

We are helping FEE sell books over the Internet May We Help You? 3D RESEARCH http://[email protected] (724)-776-7384 The Immorality of Antitrust Law by D. T. Armentano

he economic inefficiencies associated man Act, Clayton Act, Federal Trade Com­ Twith antitrust law enforcement are now mission Act) regulate or prohibit purely vol­ generally acknowledged. The regulation of untary or consensual business activity. For mergers and acquisitions hampers the effi­ example, free-market monopolization implies cient reallocation of corporate assets. The that consumers choose freely to support only antitrust regulation of product prices and one supplier ofsome product or service. Free­ innovation (as in the recent Microsoft case) market prices-whether they are described as protects less-efficient business competitors discriminatory, or predatory, or collusive­ and harms consumers. A century of antitrust are all determined through voluntary agree­ litigation-both public and private-eonfirms ment and exchange. Mergers involve volun­ that the laws restrain the competitive process tary acquisitions ofstock or assets. Tying con­ and make economic activity less efficient. tracts or exclusive dealing agreements are Economic issues aside, the antitrust laws voluntary arrangements to purchase one good also interfere with commonsense notions of and forgo the purchase of another. Since lib­ liberty and justice, as Adam Smith remarked erty (in a business context) implies the natur­ in The Wealth ofNations. Pro-antitrust econo­ al right to make any agreement to trade legit­ mists never tire ofciting Smith's famous con­ imately owned property on any terms mutual­ demnation ofprice fixers: "people ofthe same ly acceptable, then antitrust law must interfere trade seldom meet together ... but the con­ with liberty. versation ends in a conspiracy against the public, or in some contrivance to raise prices." Microsoft Case But those same economists rarely acknowl­ edge that Smith immediately went on to assert Consider the recent Microsoft antitrust that "it is impossible, indeed, to prevent such case. The software company clearly has a meetings, by any law which either could be property right to its software. It has a proper­ executed, or would be consistent with liberty ty right to license (or not license) its software and justice." Smith, a professor ofmoral phi­ to any PC manufacturers on any terms mutu­ losophy, was opposed to antitrust law on prac­ ally agreeable. It has a property right to inte­ tical and ethical grounds. grate its Web browser, Internet Explorer, into How do antitrust laws interfere with liber­ its Windows 98 operating system. And it has ty? All the important antitrust statutes (Sher- a property right to prohibit any licensee's deleting any part of its Windows operating D. T. Armentano is professor emeritus in economics at the University of Hartford and the author of code. The federal government's and the states' Antitrust: The Case for Repeal (Mises Institute, attempts to regulate all these peaceful activi­ 1999). ties (and more) are not only irrational but 23 24 THE FREEMAN/IDEAS ON LIBERTY • AUGUST 1999 clearly invasive of liberty and property rights that expression with any precision-nor could as well. they. Corporations and businesspeople indict­ The antitrust suit against Microsoft is also ed under antitrust regulation can only discov­ absurdly unjust. Microsoft is the world's pre­ er after the fact ifthey have violated antitrust mier software corporation. It earned its mar­ law. This legal subjectivity is the major reason ket position by innovating a user-friendly why those accused of antitrust violations set­ operating system at minimal cost to the con­ tle their cases pretrial or with a consent sumer. And rather than "restrain" trade, it has decree. licensed its operating system to hundreds of The laws are also inherently discriminatory. PC manufacturers here and abroad. That it In the Microsoft case, for example, the com­ competed vigorously for market share cannot pany was accused of entering into exclusive be doubted; but more important, it committed dealing agreements with PC manufacturers; it neither force nor fraud in its commercial was also accused of.refusing to allow. PC activities. Yet for all this, it was rewarded with manufacturers to delete the Web browser from massive competitor envy and a decade of Windows 98. Yet many of Microsoft's com­ legal harassment from both the Federal Trade petitors employ similar exclusive agreements Commission and the Antitrust Division ofthe with manufacturers, and many refuse to allow Justice Department. a licensee to delete any part of their propri­ etary software code. Ifthe court rules against Antitrust and the Rule of Law Microsoft, the company will have to change those practices-but its competitors will not. Substantive abuses of liberty and justice They will be perfectly free to engage in the occur with antitrust enforcement because very activity explicitly forbidden to owners ofproperty (or trustees standing in for Microsoft. If you think that this is unfair (as owners) are prevented from engaging in you should), remember that this is antitrust. peaceful trade and exchange. But there are As the judge in the 1953 United Shoe also "procedural" difficulties with antitrust Machinery case put it: it was morally accept­ regulation. For example, antitrust case law is able for the court to impose discriminatory so inconsistent that it is almost impossible to requirements on the defendant, United Shoe know from one case to the next which busi­ Machinery Corporation, and not on its com­ ness practices are illegal and which are not. petitors since United's unique efficiency "Predatory prices" are illegal, but how low already put it in a class by itself. must prices go (and for how long) before they Over 100 years ofexperience with antitrust become predatory? In a "monopoly" case, regulation confirms Adam Smith's predic­ how will the relevant market share be deter­ tion that the laws are inherently abusive of mined and what percentage of the relevant liberty and justice. When our legislators market will the court determine is monopoly? gain the moral courage to repeal the vast Mergers and tying agreements are illegal if antitrust apparatus, both economic perfor­ they "substantially reduce competition," but mance and individual liberty will be expand­ no Congress or court has ever clearly defined ed greatly. D

The apple icon , identifies Freeman articles that are appropriate for teaching stu­ dents several 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. Potomac Principles by Doug Bandow

Voluntarism Should Be Voluntary

ervice is good, so government-provided vice as inherently better than private service. S. service must be better. That appears to be Many early AmeriCorps participants were the motto of the Clinton administration. And assigned to federal agencies. the GOP Congress seems to agree. The Corporation has turned service into a Shortly after taking office, President Clin­ job that, counting the educational tuition ton proposed a multimillion-dollar program to voucher that participants receive, pays more hire volunteers: AmeriCorps. As with so than other entry-level employment. Although many programs, it seemed to be animated by some participants undoubtedly think ofthem­ the best ofintentions. selves as "volunteers," others admit that they Service has a long and honorable history in chose AmeriCorps as a good job option to the United States. Americans' willingness to help them get through college-which is pre­ help their neighbors was noted by Alexis de cisely how Bill Clinton pitched the program. Tocqueville 150 years ago in his classic, In this case, "serving" people through Ameri­ Democracy in America. Corps is no different from flipping burgers And so it continues today. Three-fourths of at McDonald's, only it's done at taxpayer American families donate money to charity. expense. Some 90 million adults volunteer. The Inde­ There is also the practical question of pendent Sector estimates the value of their whether taxpayers get good value for the "ser­ time to approach $200 billion. vice" they pay for. Supporters cite impressive But Clinton has never been satisfied with statistics about trees planted and beaches leaving people alone, so in 1993 he suggested restored, but even the government finds it putting tens of thousands of "volunteers" on hard to spend billions ofdollars without doing the federal payroll. The prospect ofthe feder­ some good. Moreover, the true price of such al government's becoming a national volun­ jobs, however attractive they sound, is the teer coordinator caused some hesitation even opportunity cost, or the value of other activi­ in the Democratic Congress, forcing the ties forgone. administration to scale back its proposal to "Public service" has a nice ring to it, but win passage. there is no reason to believe that a dollar Since then, entirely predictable problems going to it will yield more benefits than an have beset the growing program, just as crit­ additional dollar spent on pharmaceutical ics warned. For instance, the federal Corpora­ research, technological innovation, business tion for National Service treats "public" ser- investment, or any number of other private purposes. Indeed, the political process almost Doug Bandow, a nationally syndicated columnist, is a senior fellow at the Cato Institute and the author guarantees that money will be wasted. An and editor of several books, including Tripwire: AmeriCorps employee who is shelving books Korea and U.S. Foreign Policy in a Changed World. in a public library is doing no more than 25 26 THE FREEMAN/IDEAS ON LIBERTY • AUGUST 1999 someone shelving books in a private book­ Scott Bullock, an attorney with the Institute store. Nor is it necessarily a good deal to for Justice, says that lack of popular support have, say, a potential doctor spend a year sur­ compounded by administrative problems has veying residents, handling paperwork, or slowed their spread. replacing light bulbs, all tasks performed by Compulsory compassion is a contradiction Corporation-funded volunteers. in terms. There's even increasing evidence A more subtle problem is the likely long­ that it backfires. A study by Arthur Stukas term effect of federal funding on real volun­ (University of Northern Colorado), Mark teer groups and their supporters. It might Snyder (University ofMinnesota), and E. Gil seem simpler to have the IRS empty people's Clary (College ofSt. Catherine), published in pockets and hand money to the Corporation, Psychological Science, found that it makes which in tum gives it to charity. But it's better people less likely to volunteer later in life. The for individuals to send their money directly to authors observe that "limiting an individual's deserving groups. freedom to act may lead to desires to reestab­ The availability of government support is lish that freedom, which canbe accomplished likely to skew the activities ofeligible organi­ by derogating the forced activity and by refus­ zations in an effort to obtain more aid. More­ ing to perform it once the mandate has been over, turning the job offunding private groups lifted." This is not a new view. A 1991 study over to the state encourages people to further found that people who were first forced to abdicate their civic responsibilities. Thought­ donate blood were less likely to do so in the fully choosing which charities to support, and future. monitoring their activities, are themselves Stukas, Snyder, and Clary came to a similar important forms of voluntarism. But govern­ conclusion about broader service mandates. ment-funded service, though implemented in In a review of the effects of one mandatory the name ofvoluntarism, makes it less neces­ school program, they found that such a sary for people to volunteer time and money requirement "may reduce interest in an activ­ in this fashion. ity." Ironically, the effect was "strongest for Is it realistic to expect people to volunteer participants with greater prior experience as more time and money? They won't ifthey feel volunteers." no pressure to do so, and they will feel less Another study examined the service incli­ pressure if the government not only provides nations of students who both faced and did public welfare programs but also funds chari­ not face a requirement. While mandates had table groups. More fundamentally, people little effect on students eager to serve, the should not be forced to underwrite charities in less-than-eager who were under a mandate which they do not believe. were even less inclined to serve in the future Most Republicans initially opposed Ameri­ than those whose service was voluntary. Thus Corps, and they have controlled Congress for compulsion drives away the very people it is more than four years. What has the GOP done supposed to attract. with AmeriCorps? Hiked its budget two years Stukas, Snyder, and Clary suggest "stu­ in a row. Now the administration is proposing dents [be given] a sense of freedom and an increase of $113 million for next year, up autonomy in meeting the requirements." But to $585 million. that misses the point. Government should end At least participation in AmeriCorps, all such requirements. though not the funding, is voluntary. But there There may be no better evidence of the are some who would make service mandatory. imperialist tendencies ofpoliticians than their The state of Maryland, along with as many attempt to take the voluntary out of volun­ as 1,200 school districts nationwide, now tarism. People should serve those around require that students "serve" in order to grad­ them. But they should do so because they uate from high school. Although constitution­ believe it to be right, not because the govern­ al challenges to such programs have failed, ment pays or forces them. D Paranoia About Paranoia in American Politics by James Bovard

ince the 1960s modem "liberals" have signed the Non-Aggression Pact with Nazi Soften sought to stigmatize those who dis­ Germany.) trust government as paranoid. This "diagno­ Hofstadter's book quickly became sancti­ sis" was first popularized by Columbia fied by the academic and political establish­ University professor Richard Hofstadter ment. He acknowledged that "the term 'para­ (1916-1970). His widely read book The Para­ noid style' is pejorative, and it is meant to be; noidStyle in American Politics, first published the paranoid style has a greater affinity for in 1965, presented a thesis that is routinely bad causes than good."3 Hofstadter wrote, invoked to delegitimize any criticism of gov­ "What interests me here is the possibility of ernment that goes beyond whining about the using political rhetoric to get at political price the Pentagon pays for toilet seats. 1 It has pathology." And in his view, distrust of gov­ been the perfect formula to dismiss and deride ernment was among the worst political those who wish to limit government power pathologies imaginable. and expand the sphere ofindividual liberty. Hofstadter's opinion of the opponents of One of the twentieth century's most big government-whom he called "pseudo­ respected American historians, Hofstadter is conservatives"-was unmistakable: "Pseudo­ an unrecognized early advocate of politically conservativism is among other things a disor­ correct thought. His writing on political para­ der in relation to authority, characterized by noia-inspired in part by the 1964 presiden­ an inability to find other modes for human tial campaign of conservative Barry Goldwa­ relationship. than those of more or less com­ ter (who had been "diagnosed" from afar as plete domination or submission."4 (Emphasis mentally ill by a group ofpsychiatrists)-has added.) He seems to be saying that wishing encouraged people ever since to equate aver­ not to be oppressed by government proves sion to government intervention with patholo­ that advocates ofa limited state actually want gy. Hofstadter had no such aversion: he was a to tyrannize their fellow citizens. The logic former member of the Communist Party. was Orwellian, but it played well in academia When he joined the party in 1938, he wrote to and in the media. a friend: "My fundamental reason for joining Hofstadter observed, "The pseudo-conser­ is that I don't like capitalism and want to get vative is a man who, in the name ofupholding rid of it. I am tired of talking."2 (Hofstadter traditional American values and institutions left the party in 1939, after the Soviet Union and defending them against more or lessficti­ tious dangers, consciously or unconsciously James Bovard is the author ofFreedom in Chains: aims at their abolition."5 (Emphasis added.) The Rise of the State and the Demise of the Citizen Hofstadter believed that since the threat of (St. Martin's Press, 1999). government power is "fictitious," everyone 27 28 THE FREEMAN/IDEAS ON LIBERTY • AUGUST 1999 who fears government is, by definition, men­ appeared to be evidence for their beliefs, that tally ill. But this diagnosis derived largely was simply further proof of their mental ill­ from Hofstadter's presumption that people ness. Once a professor officially attaches the had nothing to fear from government. "paranoid" label to a group, no amount ofevi­ dence can remove it. And any consideration of Government Spying the evidence proffered is unnecessary, since the people offering the evidence are known to

The pseudo-conservative, It according to fie crazy. Hofstadter, "believes himselfto be living in a Some ofHofstadter's criticisms ofGoldwa­ world in which he is spied upon, plotted ter as the archetype paranoid are amusing in against, betrayed, and very likely destined for hindsight. Hofstadter plinked at Goldwater total ruin. He feels that his liberties have been for his call for the "prompt and final termina­ arbitrarily and outrageously invaded."6At the tion ofthe farm subsidy program."15 It is dif­ time ofHofstadter's first article on this thesis, ficult to understand why opposition to farm in Harper smagazine, the Federal Communi­ subsidies would be evidence ofmental illness, cations Commission was striving to torpedo since even wheat farmers decisively rejected "right-wing" radio.7A few years earlier, Pres­ federal supply controls on their farms in a ident John Kennedy's assistant secretary of national referendum in 1963. 16 Perhaps Hof­ commerce, Bill Ruder, had declared: "Our stadter assumed that the wheat growers who massive strategy was to use the Fairness Doc­ did not want Washington micromanaging trine to challenge and harass right-wing their farms were also crazy. broadcasters and hope that the challenges Hofstadter believed that no one could rea­ would be so costly to them that they would be sonably suspect that government would con­ inhibited and decide it was too expensive to tinue to grow to dangerous proportions, continue."8 regardless of how rapidly it was currently Also, the Internal Revenue Service had expanding. Deriding some of the Goldwa­ been carrying out the Ideological Organiza­ terites' fears, Hofstadter remarked: "It tions Audit Project to harass and destroy con­ reminds me of the people who, because they servative organizations-both nonprofit and found several close parallels between the otherwise.9 And it wasn't only "right-wingers" NRA [Franklin Roosevelt's National RecQv­ who were the targets of government. 1. Edgar ery Administration] and Mussolini's corpo­ Hoover's FBI sought to subvert the civil rights rate state, were once deeply troubled at the movement by smearing and trying to black­ thought that the NRA was the beginning of mail Martin Luther King, Jr. lO In 1962, the American fascism."!7 Yet some ofFDR's own Kennedy administration sent FBI officials to Brain Trusters openly admired Mussolini's do late-night "interviews" with steel company economic program. executives who raised steel prices higher than Hofstadter's doctrine rested on his near­ Kennedy approved. 11 The FBI also carried out boundless faith in the wisdom and benevo­ an extensive surveillance operation at the lence ofthe ruling class: "American politics is 1964 Democratic National Convention of a run mainly by professionals who have devel­ civil rights challenge that President Lyndon oped over a long span oftime an ethos oftheir Johnson feared would embarrass him. 12 And own, a kind ofprofessional code ... [which] in 1965, the FBI did background checks on for all its limitations, is an American institu­ dozens of people who had sent Johnson tion embodying the practical wisdom of gen­ telegrams opposing his Vietnam policy. 13 erations ofpoliticians."18 He offered no proof Hofstadter even ridiculed the tendency of of the wisdom of politicians; instead, it was big-government critics to heavily document treated as self-evident. For Hofstadter, fear of their charges. "The entire right-wing move­ losing one's liberty was proof of mental ill­ ment ofour time is a parade ofexperts, study ness-while blind trust in politicians was groups, monographs, footnotes and bibliogra­ merely common sense. phies," he wrote. 14 If"paranoids" offered what Hofstadter also mocked the role of guns in PARANOIA ABOUT PARANOIA IN AMERICAN POLITICS 29

American life. In one of his last published declared: "There is no moral equivalency essays, he wrote, "Every Walter Mitty has had between the disgusting acts which took place his moment when he is Gary Cooper, stalking inside that compound in Waco and the efforts the streets in 'High Noon' with his gun at the that law enforcement officers made to enforce ready." 19 the law and protect the lives ofinnocent peo­ Ironically, Hofstadter's article in Harpers ple." 22 Clinton sought to frame the issue so appeared just two months after the Gulf of that no one could criticize what he and the Tonkin incident, which led to the congres­ FBI did at Waco-including the gassing of sional resolution authorizing President Lyn­ dozens of adults and children-without don Johnson to fight a war in Vietnam. But appearing to favor child abuse. there has long been suspicion that the attack When Hofstadter's essay was published, never occurred and that an earlier attack had three-quarters of the public trusted the feder­ been provoked, contrary to the government's al government to do the right thing most, if claim. (U.S. ships had been conducting espi­ not all, ofthe time. Now only about a quarter onage in the Gulf.) Hofstadter ridiculed those ofAmericans have such trust in government.23 who distrusted government, but the Johnson According to Hofstadter's analysis, distrust of administration's lies and misrepresentations government has grown from the illness of a led directly to the deaths of over 58,000 radical fringe to a mass psychosis of modem Americans. IfAmericans of that era had not Americans. It's regrettable that some people been so credulous, the Johnson administration believe things about the government that are could not have railroaded the nation into a not true (the existence of U.N. black heli­ futile war. As Army Major H. R. McMaster, copters in the United States, for example). author of the 1997 book Dereliction ofDuty, But it's almost understandable, considering argued, the failed Vietnam war strategy "was the routine property violations and deception not due just to overconfidence, not due just to that have come to light. arrogance, this was due to deliberate decep­ Yet much of the academic establishment tion of the American public and Congress continues to be mystified by public distrust of based on the president's short-term political government. In 1997 Harvard University goals."20 Press published Why People Don't Trust Gov­ ernment, in which political scientists strug­ gled to discover why so many citizens signifi­ Deadly Obsession cantly underestimated the benevolence and Although Hofstadter inspired intellectuals trustworthiness ofgovernment. The book con­ and political leaders to view fear of govern­ tained no references to Waco or Ruby Ridge. ment as a dangerous pathology, it is the gov­ For statist academics, paranoia is every­ ernment's obsession over alleged paranoia where. At a 1997 American Society ofCrimi­ that can be deadly. This is no better illustrated nology conference, one professor argued that than by the Ruby Ridge and Waco cases, among the signs of"hate group ideology" are where government agents provoked and later "discussion of the Bill of Rights, especially killed civilians who were seen as threats but the Second Amendment or the Federalist who had not initially committed violence. Papers," "discussion of military oppression, These cases were custom-made to create in the U.S. or elsewhere," and "discussion of greater fear of the federal government.21 Yet the Framers ofour Government."24 political leaders, including President Clinton, The Hofstadterian disdain for opponents of use these incidents, as well as the inexcusable big government leads to the Catch-22 ofmod­ bombing ofthe federal building in Oklahoma em statism: anyone who fears government by City, to smear and dismiss all principled crit­ definition becomes unfit to judge government. ics of government intervention. For example, Thus, the more people who fear government, in a 1995 speech to a group of federal law the more power government needs because enforcement officials after the Waco disaster the populace is manifestly unsuited for self­ involving the Branch Davidians, Clinton government. Hofstadter's view of tho~e who 30 THE FREEMAN/IDEAS ON LIBERTY • AUGUST 1999 distrust government was shared by the KGB, "Great White Father" in Washington and dis­ which locked up Soviet dissidents in mental regarding picayune details about the Chero­ hospitals in the 1970s and 1980s. kees' Trail of Tears and the massacre at This "fear of government-equals-insanity" Wounded Knee. doctrine is naturally popular among acade­ For many statists, distrust ofgovernment is mics and others who prefer not to notice the the worst conceivable political offense. They screws, levers, threats, and pressure valves are far more skeptical ofcitizens who distrust that government officials use to force compti­ government than of government itself. They ance with their decrees. The notion that peo­ are willing to forget government lies, but pie's attitudes toward government are more never willing to forget or forgive citizen important than whatever government actu­ incredulity. For statists, the highest civic ally does is the triumph of the intellectualist virtue apparently is a bad memory. D perspective on history. According to this view, history consists merely ofideas-some 1. The book was republished recently. See Richard Hofstadter, The Paranoid Style in American Politics and Other Essays (Cam­ elegant, some trashy-or rather, a series of bridge, Mass.: Harvard University Press, 1996). 2. Eric Foner, "The Education of Richard Hofstadter," Nation, intellectual poses-some respectable, some May 4, 1992, p. 597. gauche.25 3. Hofstadter, p. 5. 4. Ibid., p. 58. 5. Ibid., p. 44. 6. Ibid., p. 45. The Founding Fathers Paranoid? 7. Adrian Cronauer, "The Transformation of Television News; the Fairness Doctrine: A Solution in Search of a Problem," Federal The easy diagnosis that Hofstadter champi­ Communications Law Journal, October 1994, p. 54. 0ned is now embraced by historians who wish 8. Thomas W. Hazlett, "The Fairness Doctrine was Never Quite Fair," Los Angeles Times, October 4, 1987. to vindicate King George III. Michael Kazin 9. Tom Rhodes, "Kennedys Put Tax Squeeze on Foes," London declared in 1997, "In the 1760s, colonists Times, January 29, 1997. 10. Michael J. Sniffen, "Reno Awaits King Family Reaction to along the Eastern seaboard were convinced Limited Review ofAssassination," Associated Press, July 30, 1998. that King George III and his ministers meant 11. "FBI's 'Political Abuses'; Full Text ofOfficial Report," U.S. News & World Report, December 15, 1975, p. 61. to abolish their liberties and yoke their econ­ 12. Ibid. omy to the venal desires ofthe imperial court. 13. Ibid. 14. Hofstadter, p. 37. The Founding Fathers made a revolution to 15. Ibid., p. 98. thwart the wicked plot, one contemporary his­ 16. John Strohm, "The Farmers Vote for Freedom," Reader's Digest, September 1963, p. 95. torians agree never existed."26 Kazin's state­ 17. Hofstadter, p. 65. 18. Ibid., p. 102. ment illustrates how contemporary statist lib­ 19. Quoted in Donald Baer, Ted Gest, and Lynn Anderson Carle, erals are intent not only on whitewashing "Guns," u.s. News & World Report, May 8,1989, p. 20. today's Leviathans-but governments through­ 20. Quoted in John Berlau, "War Planners Carried Out Strategy ofLies, Deception," Insight, June 9, 1997, p. 14. out history as well. That the British were seiz­ 21. See Alan Bock, Ambush at Ruby Ridge: How Government ing the colonists' firearms, forcibly searching Agents Set Up Randy Weaver and Took His Family Down (New York: Berkley Books, 1996) and David Kopel and Paul Blackman, their homes, revoking the rights oflocal gov­ No More Wacos: What's Wrong with Federal Law Enforcement and ernments, dragooning Americans to England How to Change It (Buffalo: Prometheus Books, 1997). 22. "Remarks to Federal Law Enforcement Officials," Public to stand trial, prohibiting them from expand­ Papers ofthe Presidents, July 20, 1995, p. 1278. ing to the West were, in Kazin's view, no evi­ 23. Paul Weyrich, "Who Do Americans Trust?" Washington Times, May 21,1997. dence whatsoever of an attempt to destroy 24. Quoted by Joyce Lee Malcolm during an interview with the author, August 5, 1998. American liberties. Perhaps academics should 25. When I dedicated my 1995 book, Shakedown, "to the Victims also rewrite the history of the nineteenth­ ofthe State," Entertainment Weekly (owned by Time Inc.), Septem­ century clashes with Indian tribes, focusing ber 15, 1995, ridiculed the dedication as a "paranoid conclusion." 26. Michael Kazin, "America's Paranoid Streak," Pittsburgh myopically on how Indians distrusted the Post-Gazette, June 8, 1997. Socialized Medicine---­ One Size Fits None

by Karen Selick

NTARIO, CANADA-Andrew Sawatzky, an The Sawatzkys, if they want heroic and O. elderly Manitoba man whose wife went possibly futile measures taken, have the right to court to fight the "Do Not Resuscitate" to try and procure such services. But they order' placed on his hospital chart, is don't have a right to force any particular doc­ probably part of a fairly small minority. His tor, using the court as their big stick, to render wife says he wants resuscitation if those services. If their current doctors and he has another stroke, even though the hospital genuinely believe it's unethical to attempt might fail or leave him permanently provide them, all the Sawatzkys can do is look unconscious. for someone who believes otherwise. I discuss these life-and-death issues fre­ The doctors and the hospital, on the other quently with clients when preparing powers of hand, have no right to impose their will by attorney. The vast majority recoil from the force on Mr. Sawatzky. For example, they thought of becoming brain-dead husks on can't refuse to let him leave if he finds an permanent life support. Most say that if their alternative treatment center that is willing to doctors pronounce further treatment futile, comply with his wishes. they would rather accept the verdict and "die with dignity." The Money Issue But what's right or wrong in cases like this can't be determined by public opinion poll. It But there's a good chance he won't be able doesn't matter what 99 people would choose, to find one. Now the secret, unmentionable ifthe 100th person wants something different. side ofthe problem must finally be broached: The· question remains: what should be done money. about· Mr.. Sawatzky? The hospital couched its objections to fur­ To me, the ethical principles that should be ther treatment in humanitarian terms, but they applied are simple. Everyone should be free rang hollow to me. So what if resuscitation to conduct his life however he pleases, so long attempts might fail? Why not just try and see? as he leaves others free to do the same. It's And how can it be "cruel" to treat someone wrong to use force-including the force when he understands the risks and still wants behind our court system-to bend someone to the treatment? People make decisions to your will, except to enforce a contract the undergo risky medical procedures every day, other person previously agreed to. and hospitals don't overrule them because the operation might fail or the outcome might be Karen Selick is an attorney in Ontario and a colum­ tragic. nist for Canadian Lawyer. Copyright © 1999 by Iflife-support machines grew on trees, and Karen Selick. an infinite amount of money earmarked for 31 32 THE FREEMAN/IDEAS ON LIBERTY • AUGUST 1999 paying doctors' salaries and hospital expenses choose death for themselves in comparable fell like manna from heaven, we would not be circumstances, be forced to? having this debate. Under those conditions, If people had a choice about what medical who would deny Mr. Sawatzky his resuscita­ care they wished to buy or insure against, dif­ tion request? Why not give him every conceiv­ ferent people would choose different plans. able chance of survival if he and his wife are Some might purchase the deluxe package­ willing to risk the possible negative conse­ heroic measures and full life support to the quences? No one else would be harmed by it. bitter end. Others would buy just the basics­ It's only because medical equipment and painkillers and a quick death. Neither choice human labor are scarce resources that hospi­ is wrong, but the price tags would be very talsmust make choices about when to use different. them. And it's the albatross ofsocialized med­ Ironically, those who choose the basic icine around our necks that makes us insist on package might end up living just as long as a one-size-fits-all solution. If we give Mr. those who choose the deluxe. The money Sawatzky an unlimited amount of futile med­ saved on health insurance would allow them ical treatment, how can we ever deny it to any­ to take more leisure, or improve other aspects one else? of their daily lives, or relieve some of their Suppose Canadian law permitted the hospi­ stress, all ofwhich might let them live longer tal to say to the Sawatzkys, "Okay, we'll fur­ and healthier lives. nish heroic measures, provided you pay all the This is not a choice the state should be costs-including the cost ofall the extra years making on our behalf. But socialized medi­ of hospitalization if he enters a permanent cine takes our choices away-both as to how vegetative state." This might well make the much we wish to spend, and how much we Sawatzkys change their minds. Mrs. Sawatzky wish to receive. might not be willing to risk being destitute for There is no moral solution to the Sawatzky the remainder ofher life. Her husband proba­ case, because we've been dragooned into a bly wouldn't wish to see her sacrifice herself system where moral behavior-free, volun­ this way. But ifthe Sawatzkys themselves, the tary trade-has been outlawed. The remedy only people who would derive any benefit is not to make further bad law in each from the procedure, were unwilling to pay, new case-it's to scrap the whole, immoral why should strangers, many of whom would system. D

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A great way to introduce friends and relatives to the wonders of freedom! Peripatetics by Sheldon Richman

May the Force Not Be With You

'm just back from seeing Star Wars: launch the Jedi career ofAnakin Skywalker, I Episode L The Phantom Menace with my who will grow up to be Darth Vader. (Whose II-year-old son, Ben. The space adventure, idea was it to train that kid anyway?) full ofeye-popping special effects, lives up to But militaristic traders? It's oxymoronic. expectations. Traders tend to be peaceful. It's hard to con­ But, alas, I must report on an aspect that duct business in the midst of combat. will be disappointing to readers of The Free­ Napoleon dismissed capitalist England as a man. The conflict that is the focus of· the "nation ofshopkeepers." Tocqueville and oth­ movie has to do with trade, and the traders are ers feared that commercial virtues would the bad guys. The opening scroll tells the drive out martial virtues. Some early Ameri­ audience that the Galactic Republic has cans shared this view. imposed a tax on trade routes to the outer star The history of trade is a history of peace systems, but "the greedy Trade Federation" is and cooperation. In the late eleventh and disputing the tax. twelfth centuries, traders rebuilt world com­ The Trade Federation is an organization of merce and developed the transnational "law merchants so powerful that it has a seat in the merchant," the sophisticated, pacific commer­ Galactic Senate. To challenge the Republic's cial code that plays a role in governing trade jurisdiction over the trade routes, the Federa­ to this day. Under that code, traders from dif­ tion blockades the peaceful planet Naboo, ferent cultures and legal systems resolved ruled by the teen-aged Queen Amidala. It then their disputes peacefully, swiftly, and effi­ invades Naboo, rounds up resisters, and puts ciently in the merchant-run courts. Form fol­ them in camps. The Federation seeks to impose lowed function, the function being the facili­ a treaty on the planet to legitimate the invasion tating ofcommerce. and persuade the Senate to keep hands off. The Legal scholar Harold Berman, in Law and Federation's objective is to demonstrate that it Revolution, calls the mercantile law "capital­ controls trade in the outer star systems. The ist law par excellence." He notes that "reci­ queen refuses to capitulate, and the oppressed procity ofrights" was a key feature ofthe law. inhabitants suffer and starve. That principle refers to "the element ofequal­ Admittedly, this is a small part ofthe story. ity ofburdens or benefits as between the par­ The trade dispute is barely mentioned again. ties to the transaction-the element, that is, of It's simply Lucas's way ofgetting the story off fairness ofthe exchange." the ground: the subjugated Naboo must be The law was not the product of govern­ liberated-ajob for the Jedi Knights and their ment. Gerard Malynes wrote in 1622 that "it Gungan allies. Lucas's ultimate purpose is to is customary law approved by the authority of all kingdoms and commonwealths, and not a Sheldon Richman is editor ofThe Freeman. law established by the sovereignty of any 33 34 THE FREEMAN/IDEAS ON LIBERTY • AUGUST 1999 prince." Berman says that "the initial develop­ ca's foreign trade deficit. I recall a day when ment of mercantile law was left largely, the front page of my newspaper declared in though not entirely, to the merchants them­ dark tones a record trade deficit, while the selves, who organized international fairs and business page ofthe same newspaper pointed markets, formed mercantile courts, and estab­ out in an upbeat story that since the U.S. lished mercantile offices in the new urban economy was doing better than foreign communities that were springing up through­ economies, Americans were importing more out western Europe." than foreigners were. Was the trade deficit I can't imagine these merchants imposing good or bad news? an aggressive blockade on peaceful people. In fact, the United States has run both trade They'd have found other ways to dispute a tax surpluses and deficits in good times, but usu­ on trade. Maybe someone should send George ally surpluses in deep recessions and depres­ Lucas a copy ofLaw and Revolution. sions. More fundamentally, the presence of a I don't wish to single out Lucas. Trade is deficit or surplus is a sign that one is not look­ often misunderstood. While merchants were ing at a full accounting of economic activity. accused of being pacifists with no loyalty to The trade deficit refers to the merchandise their nations, they were also suspected ofpur­ account. We Americans buy more goods from suing base and dishonest work. Zero-sum foreigners than they buy from us. But mer­ thinking has led people to believe that if a chandise is not the entirety ofeconomic activ­ merchant makes a profit, the buyer must lose. ity. Foreigners also buy services from us, and Sometimes the image oftrade is ridiculous. they invest here. There's no reason to worry Ifyou've ever been to the Federal Trade Com­ that one account doesn't balance. Foreign mission in Washington, D.C., you may have merchants have a limited number of ways to noticed two statues each depicting a man dispose of the dollars they earn from sales struggling to hold back a wild horse. The here. They can buy American merchandise, Soviet-style statues are titled "Man Tames services, or investments. Ifthey don't want to Trade." You won't be surprised to learn that do any of those things, they can trade their they were the winning entry in a sculpting dollars for their own currency. But then the contest during the New Deal. (The winner new holder ofdollars faces the same choices. was the brother of Walter Lantz, creator of However you slice it, there's nothing to worry Woody Woodpecker.) about. Deconstructing the statues is enlightening. If everything is counted, the books must The man represents collective Man. The wild balance. It's an accounting imperative. Some­ horse represents trade. Trade is an activity of one once attempted to do a worldwide individual human beings. Thus, the statue accounting ofall economic activity. He found symbolizes collective Man restraining indi­ that the world was running a deficit in the viduals. This puts a new spin on the work of hundreds ofbillions ofdollars. Who was run­ art. Since trade is consensual and occurs only ning the surplus? Naboo? Or were the trade when both parties expect to get more than statistics deficient? they give-making the wild horse a poor While the national trade accounts must bal­ choice of symbol-we're left with what ance, that still gives a misleading picture. should have been an ominous (and accurate) Nations don't trade. Individuals do, and indi­ message from the government: the Federal viduals don't trade in an effort to break even. Trade Commission exists to restrain free They trade to come out ahead. And barring exchange for mutual advantage. error, they do just that. The misunderstanding oftrade is on display Forget the Force. May peace and freedom every time the newspapers announce Ameri- be with you. 0 William H. Hutt: A Centenary Appreciation by Richard M. Ebeling

n the mid-1980s I had the good fortune to Hutt was born in London to a middle-class I be teaching at the University ofDallas with family. He joined the Royal Flying Corps in Professor William H. Hutt as a colleague. By 1916, during the First World War. He would that time he was already in his mid-80s and reminisce that he had mastered the art oftak­ held the title of "emeritus." Though stricken ing off, but he couldn't quite get the hang of with an increasingly debilitating case of landing; he said his superiors accused him of arthritis, Professor Hutt would be in his office crashing more planes than the Germans were most days ofthe week working on some arti­ shooting down. cle or reading the latest literature on econom­ After the war he enrolled at the University ic theory and policy. of London and studied with the famous Eng­ I would ask him to deliver one or two guest lish economist Edwin Cannan. Lionel Rob­ lectures in some ofmy classes each semester, bins, who also studied with Cannan during the and he almost always graciously consented. In same years, recalled that "Cannan was a great one class I recall Hurt's starting his remarks, teacher. He was a fine economist; he gave one in a slightly stammering voice, "Most econo­ a sense ofthe sweep and the power ofthe sub­ mists have their works forgotten after they're ject and its relevance to human happiness.... dead. I've the unique distinction in having had I do not know anyone who sat under Cannan all my works forgotten while I'm still alive." in those years who was not powerfully affect­ When Professor Hutt passed away on June ed by his teaching."2 What Cannan instilled in 19, 1988, at the age of 88 he left behind a Hutt and others who studied with him. was a legacy of a dozen books and more than 50 deep appreciation ofthe miracle ofthe market articles.! During an academic writing career economy, which integrated a multitude of that began in 1926 he had been a courageous global participants in a spontaneous process voice for free-market economics at a time ofcoordination. when Keynesian economics and intervention­ ist policies dominated both the economics profession and the arena ofpublic policy. On to Cape Town August 3, 1999, marks the 100th birthday of After graduating he worked for four years William Harold Hurt, and it seems an appro­ for Sir Ernest Henn, one ofthe leading British priate occasion for an appreciation ofsome of advocates of laissez-faire economics in the his contributions to twentieth-century eco­ first halfofthe twentieth century and operator nomic thought. ofthe Benn publishing house. For part ofthis Richard Ebeling is the Ludwig von Mises Professor time Hutt served as manager of Benn's Indi­ ofEconomics and chairman ofthe economics depart­ vidualist Book Club. In 1928 Hutt received a ment at Hillsdale College. teaching appointment at the University of 35 36 THE FREEMAN/IDEAS ON LIBERTY • AUGUST 1999

Cape Town in South Africa, a position he held Although trade unions threaten to (and do) until the 1970s, when he moved to the United shut down enterprises through strikes to States, holding visiting positions at several force employers to acquiesce in their wage prestigious institutions of higher learning demands, wages pushed above market­ until his appointment at the University of clearing levels cause some workers who Dallas. would have found employment to be priced His first published work was an essay on out of the market. "The Factory System ofthe Early Nineteenth Union apologists have often argued that Century," which appeared in Economica through collective bargaining and strike (March 1926) and was later reprinted in Cap­ threats, organized labor can capture a greater italism and the Historians, edited by F. A. portion of the total revenues earned in an Hayek.3 He argued that the standard interpre­ industry at the expense of employers. Hutt tations ofearly factory life in England during demonstrated that at most this tactic can only the industrial revolution had often been mis­ work in the short run. In the longer run, as representations or exaggerations. He demon­ profits in an industry fall owing to union wage strated that work in the developing manufac­ increases, entrepreneurs will shift to indus­ turing centers of England had created rising tries where profits are higher. Thus fewer standards of living and improved opportuni­ employers will remain in union-dominated ties for children and women compared to ear­ industries, potentially reducing total employ­ lier rural life. ment opportunities there. His first major contribution was the 1930 This led Hutt to make the useful distinction book The Theory of Collective Bargaining. between what he called "natural" and "con­ Hutt challenged one ofthe most fundamental trived" scarcities.4 The fundamental problem assumptions underlying interventionist theo­ in society is that means are scarcer than ends. ry: that the individual worker was at an inher­ This scarcity is "natural"-an inescapable ent disadvantage in labor negotiations, a dis­ part of the human condition. The task of the advantage that could be redressed only market, through the competitive forces of through collective bargaining over wages. It supply and demand, is to determine how the was a theme he came back to four decades scarce means of production (including labor) later in his 1973 work, The Strike-Threat Sys­ are to be allocated among their alternative tem: The Economic Consequences ofCollec­ productive uses. Scarcities become "con­ tive Bargaining. He explained that supply and trived," however, when owners of means demand set wages in the marketplace just as attempt to withhold part of their supply by they set all other prices. Wages formed on an politically restricting entry and competition. open, competitive market assure that no work­ A special-interest group might do this to er is or can be exploited. What determines any boost its income. worker's worth is the training, experience, and Contrived scarcities frustrate what Hutt productive capabilities he brings to the mar­ was the first to call "consumers' sovereign­ ketplace and the value that prospective ty."5 In a free market the demands of con­ employers see in those talents and abilities. sumers determine what gets produced and No employer will offer the worker more than therefore, indirectly, the allocation ofnatural­ the extra value he is expected to bring to the ly scarce resources among their competing enterprise. And competition among employ­ uses. When the allocation of resources ers assures that the wage reflects the most reflects consumer demand, they can be said highly valued use ofhis abilities. to have been fully and properly applied to serve the interests of consumers. The wishes of consumers have been made "sovereign." Coercive Bargaining Politically contrived scarcities frustrate con­ Collective bargaining, Hutt argued, can sumers either by withholding some of a force wages above market-determined lev­ resource or by allocating it to a less highly els only through the use of coercion. valued use. WILLIAM H. HUTT: A CENTENARY ApPRECIATION 37 Colliding with Keynes as "The Significance of Price Flexibility,"6 and in several books, Keynesianism: Retro­ Hutt's criticisms of collective bargaining, spect and Prospect (1963), A Rehabilitation strike threats, and the dangers from contrived of Say's Law (1974), and The Keynesian scarcities meant that beginning in the 1930s Episode: A Reassessment (1979), he attacked he was on a collision course with the emerg­ the fundamental premises of the Keynesian ing Keynesian Revolution in economic think­ approach. ing. In 1936, Cambridge economist John He argued that Keynes was wrong when Maynard Keynes published The General The­ he asserted that the classical and free­ ory ofEmployment, Interest and Money. He market economists who preceded him had argued that the Great Depression had demon­ no theory to explain massive and prolonged strated that the market economy could not unemployment. Hutt said that the econo­ always employ everyone willing to work at mists before Keynes had never claimed that prevailing wages because aggregate demand unemployment was impossible ,or unex­ could be too low. Government would have to plainable. They clearly understood that the fill the gap by increasing its own demand for selling of goods and labor depended on what the economy produced. prices that would find willing buyers. He Hutt's first challenge to Keynes came with quoted his old teacher, Edwin Cannan, who his 1939 book, The Theory ofIdle Resources, had pointed out in 1933 that "General in which he asked the most obvious ques­ unemployment appears when asking too tion: why would a resource or a worker be much is a general phenomenon."7 unemployed? He responded that workers This led Hutt to restate and defend Say's might be unemployed when: (a) no one has Law. He argued that Keynes's definition, any use for their services; (b) employment "supply creates its own demand,"8 is a distor­ opportunities are seasonal and it pays for tion of its actual meaning. Jean-Baptiste Say workers to be idle part ofthe year; (c) work­ and other nineteenth-century classical econo­ ers won't move to where jobs are, or won't mists pointed out that people produce only accept the prevailing wages for their skills, because they wish to consume. What they or prefer leisure, or have their idleness sub­ don't consume they trade for what others have sidized; (d) a union pushes wages above produced. Every offer of supply therefore market levels and a barrier or incentive pre­ indicates a demand. Goods ofcourse are typ­ vents the unemployed workers from moving ically bought with and sold for money. Unless to other jobs; or (e) workers withhold their individuals offer their goods at prices that oth­ labor because they are unwilling to accept ers are willing to pay and that earn the money pay cuts when the demand for their services they desire, they will be unable to demand has fallen. what others are selling. The crux of the unemployment problem Seen from this angle, Hurt argued that the during the Great Depression, Hutt argued, massive unemployment of the 1930s was not was labor unions' often aggressive resistance the result of "aggregate' demand" being too to pay cuts in the face ofdeclining demand for low, but of prices for goods and labor being various goods and services. The massive too high. Furthermore, these prices created unemployment of the 1930s, therefore, was conditions for a cumulative contraction of the result of "contrived" scarcities created by production and employment. Whenever government and special-interest groups. "inappropriate pricing" results in unsold sup­ Despite criticisms such as Hurt's, Keynes­ plies, Hutt said, the owners ofthose supplies ian economics dominated both economic are less able to demand goods from others. If theory and policy for the four decades after this second group ofsuppliers also keeps their the Second World War. Yet even during the prices and wages too high, they also will zenith ofKeynesianism, William Hutt contin­ experience unemployment. The process will ued to challenge what was then known as the repeat itself, widening the circle of unsold "New Economics." In a series ofarticles, such goods and unemployed workers. 38 THE FREEMAN/IDEAS ON LIBERTY • AUGUST 1999 Flexible Prices and Wages is no longer viewed as sacrosanct, apartheid has ended in South Africa, and there has been At the same time, Hutt explained, any low­ a renewed appreciation and understanding of ering of these prices and wages helps release the free market. To no small extent this has withheld supplies and bring workers back to been due to the ideas and principled stance of their jobs. The re-employed. workers could William H. Hutt. For those ofus who had the then demand goods on the market. Thus flex­ privilege to know him, his greatest influence ible prices and wages, adjusting to changing was through the wit and humor with which.he market conditions, would always tend to made his case. Students loved him. In his last assure full employment in the economy. years he had to get around the University of Written during the high watermark of Dallas campus in a wheelchair. Some of my Keynesian economics, Hutt's arguments were students then came up with the following rid­ often either ignored or rejected as being polit­ dle: Why does Professor Hurt always use a ically out of step with the times. Yet, this wheelchair? Because he hates Keynes. never dissuaded him from defending what he When told this, Hurt smiled and nodded his considered to be logically sound and true. In approval. D 1936 Hutt published a book titled Economists and the Public, in which he insisted that only I. See Richard M. Ebeling, "William H. Hutt, 1899-1988," The Freeman, October 1988, pp. 400-401. by ignoring the politically fashionable and 2. Lionel Robbins, Autobiography ofan Economist (New York: expedient could an economist claim to speak St. Martin's Press, 1971), pp. 85-86. Also see my review ofCollect­ ed Works ofEdwin Cannan in Freedom Daily, August 1998, pp. with objectivity. The economist's task was to 41-44. explain the workings of the market process 3. F. A. Hayek, ed., Capitalism and the Historians (Chicago: University of Chicago Press, 1954), pp. 160-188; see also W. H. and the consequences that would result from Hutt, "The Poor Who Were with Us," Encounter, November 1972, intervention, regulation, and control. Politi­ pp.84-90. 4. W. H. Hutt,"Natural and Contrived Scarcities," South African cians may have to compromise, but not econ­ Journal ofEconomics, September 1935, pp. 345-353. omists. The laws of supply and demand oper­ 5. W. H. Hutt, "Economic Method and the Concept ofCompeti­ tion," South African Journal ofEconomics March 1934, pp. 3-23; ate regardless ofideological whims and wish­ Economists and the Public: A Study of Competition and Opinion es. He defend~d this position again in (London: Jonathan Cape, 1936), pp. 257-72; "The Concept of Con­ sumers' Sovereignty," Economic Journal, March 1940, pp. 66-77. Politically Impossible . ..? (1971). 6. W. H. Hutt, "The Significance of Price Flexibility" (1954), As ifto illustrate this principle ofintegrity, reprinted in Svetozar Pejovich and David Klingaman, eds., Individ­ ual Freedom: Selected Works ofWilliam H. Hutt (Westport, Conn.: in 1964 Hutt published The Economics ofthe Greenwood Press, 1975), pp. 130-46. Colour Bar, a pro-capitalist challenge to 7. Edwin Cannan, Economic Scares (1933), reprinted in Alan . apartheid in South Africa.9 He showed that Ebenstein, ed., Collected Works ofEdwin Cannan, vol. VII (London: Routledge/Thoemmes Press, 1997), p. 38. race-based' government intervention in the 8. John Maynard Keynes, The General Theory ofEmployment, Interest and Money (New York: Macmillan, 1973 [1936]), p. 18. For economy was bad for both blacks and whites. a detailed criticism of Keynes's misunderstanding of Say's Law in The book caused a firestorm of controversy the context of what the classical economists really said, see Steven Kates, Say's Law and the Keynesian Revolution: How Macroeco­ and even threatened Hutt's position in South nomic Theory Lost Its Way (Northhampton, Mass.: Edward Elgar, Africa for a time. 1998). Also see Mark Skousen's column in this issue of The Free­ man. Since his death in 1988, traditional Keynes­ 9. The book is available once again through the Free Market ian economics has been eclipsed, union power Foundation, Johannesburg, South Africa. Greens Against Greens by Raymond 1. Keating

laying golf on Long Island can be a glori­ stretch out to more than six hours. At such Pous experience. On this sliver ofland in the times, even the most passionate lovers of the Atlantic Ocean, golfers are treated to various game become annoyed, with the glory of types of golf, from playing often windswept Long Island golf decaying into one of those layouts along the north and south shores, to headaches usually reserved for errant drives more inland, wooded, and hilly courses. and three-putts. Long Island also has a fairly impressive Of course, slow play and long lines are history of professional golf. In addition to market signals to build more golf courses. hosting an annual Senior PGA Tour stop-the And some golf entrepreneurs are trying to do Lightpath (formerly Northville) Long Island just that on Long Island. However, in addition Classic at the Meadow Brook Club-Long to onerous property taxes, they face hazards Island courses have hosted six U. S. Opens and from local environmentalists and NIMBY five PGA Championships. Most recently the (not-in-my-backyard) types who possess U.S. Open stopped at Shinnecock Hills Golf absolutely no respect for private property. Club in 1985 and 1996. The Open will return Even though these crusaders are relatively to Long Island in 2002 on the Black Course at small in numbers, they are hyperactive and Bethpage State Park, and possibly again at hold considerable sway over lazy, easily Shinnecock in 2004. frightened politicians. The stories of their Naturally, Long Island is overflowing with assaults on property owners-including those amateur golfers, from occasional duffers to trying to build golfcourses-are numerous. the more serious players. However, all is not serene on Long Island's From Racing to Golf greens. Courses are crammed with folks hooking and slicing down the fairway. Wait­ For example, the Bridgehampton Race Cir­ ing times to tee offcan run into the hours any cuit had served as a home to big-time auto day of the week, and many facilities have racing for decades. However, as homes start­ reservation systems, which means that the ed to spring up around the racetrack where spur-of-the-moment round of golf virtually drivers like Mario Andretti competed, com­ has become a blessing ofthe past. plaints about noise increased. Town officials Other than at private membership clubs, it ignored the obvious fact that the raceway was is not unusual for a weekend round ofgolfto there first and tightened government noise restrictions to the point where the racing left Raymond Keating is chiefeconomist with the Small Long Island. Business Survival Committee, a columnist with The track owner, Robert M. Rubin, then Newsday, and a contributing editor ofThe Freeman. decided to build a golf course and 20 estate 39 40 . THE FREEMAN/IDEAS ON LIBERTY • AUGUST 1999 homes, even agreeing to' set aside some 150 pIe, Long Island's leading environmental acres as open space. For greedy environmen­ activist, Richard Amper, head of the Long talists that wa~ not enough. They wanted it all, Island Pine Barrens Society, claimed in a and they tried to force state and local taxpay­ 1998 Newsday op-ed that the course would ers to buy the land even though the landown­ destroy a rare dwarfbeech forest. But as fam­ er declared he had no intention of selling. ily spokesman Bill Talmage and I walked and After years ofbattling, the golf-course project climbed his land, he showed me that the golf seems to be moving ahead-an increasingly course will never disturb this thicket. Indeed, rare victory for property rights on Long he and his family would never want to ruin the Island. beautiful spot where land meets sea. The Tal­ Brother and sister Barry Bistrian and Bon­ mage family is rooted in a deep respect for nie Krupinski in tony East Hampton saw their their land. They clearly want to do the right dream of a golf course finally coming to thing for the local environment and economy. fruition in 1999. Their environmental battle They are active members oftheir community with local officials and activists lasted over who have no plans of moving. Bill Talmage two decades. says he wants his grandchildren to be able to Bill Coore and two-time Masters champi­ say that Grandpa Bill was pretty smart to on Ben Crenshaw are the course designers build this beautiful golf resort, in which the of the East Hampton Golf Club. Small hills family is a partner. mark the front nine, with more of a links To build the rhetorical case against the golf style on the back nine. Krupinski notes that project, Amper classified the area as the the course 'was laid out with environmental "Grandifolia Sandhills," saying this was "one concerns in mind, using native grass, limit­ of Long Island's most environmentally sensi­ ing high-maintenance grass mostly to tees tive areas." While the name of some of the and greens, and building with minimal earth beech trees is in fact "fagus grandifolia," Tal­ movement. As for other benefits to the com­ mage says that the "Grandifolia Sandhills" munity, C.l McDaniels of Crenshaw Golf, classification is a "complete fabrication." I which will manage the course, notes that a asked folks at the National Wilderness Insti­ caddie program for local kids is being estab­ tute: they never heard ofit. And I couldn't find lished. any reference to it when I did various litera­ The family did not. originally plan for a ture searches. members-only club, but were forced to go that In addition, the project's opponents said route pecause local zoning does not allow the golf courses would ruin rare migrating courses open to the public in residential areas. sand dunes. In fact, as Talmage points out, After all, the local NIMBY crowd couldn't beyond the normal changes that nature have golf riffr~ff from other parts of Long brings, old trees and massive boulders on the Island invading the very exclusive East land clearly show that the area is anything but Hampton area. The family just wasn't up to a migrating. battle on that zoning issue. Normally, local command-and-control Meanwhile, in Baiting Hollow, Long environmentalists and NIMBYists would Island, the lI1-year-old Talmage family farm steamroll the land owner and get him to has grown so efficient in recent years that land acquiesce. However, Talmage is in the horti­ was freed up for a 36-hole golf reson also to culture business himself, cultivating native, be designed by Coore & Crenshaw. The wetland, and erosion-control plants, and is courses would be located in a breathtaking knowledgeable about the issues at hand. He spot overlooking the Long Island Sound. has easily debunked the numerous charges As news got out about the proposal, local made by his opponents. environmentalists sprang into action. They Tragically, though, the pseudo-science of hurled all sorts of irresponsible accusations Long Island enviro-politics captured many about environmental catastrophe at the pro­ easily duped local politicians, and as a result ject, with little regard for the truth. For exam- the resort plan probably will give way to one GREENS AGAINST GREENS 41 golf course, some residential homes, and discovered they cannot back up their. more greenhouses. Talmage says this accom­ grandiose statements. plishes nothing for the local environment, and Amper's hyperbole is contradicted by more winds up being less of a benefit for the local sober assessments. A few years ago hydrolo­ economy. gist Robert LaMonica told the local county legislature, "There is no reason ever to use Big-Government Reactionaries water supply as a zonjng tool or a restriction on economic development." And several other But that does not matter to these local local experts note that golf courses are no activists. For the most part, these folks cloak more polluting than homes or agriculture. their opposition to change in a concern for the In addition, the protectors ofthe Long Island environment. More accurately, they can be pine barrens-essentially large, rather ugly categorized as big-government reactionaries. tracts of land made up of little, scruffy pine They don't like economic change. One of trees-assert that these areas must be protect­ their costly schemes is to have state and local ed because that is where Long Island gets its government buy the development rights of drinking water. This notion has been the main farms on Long Island's east end, so that the driving force behind draconian restrictions on land will always stay agricultural-even as land use and the millions of taxpayer dollars the cost of farming on Long Island becomes spent to buy acres and acres ofland. However, more and more prohibitive. The landowners knowledgeable experts disagree. Donald Mid­ actually have little choice in the end; once dleton, an environmental consultant and a for­ their land is placed in the cross hairs of local mer regional director of the New York State environmentalists and politicians, it becomes Department of Environmental Conservation, costly to do anything else with it. was even quoted as saying: "The Long Island The local· reactionaries want to be Long aquifer system is not one continuous and inter­ Island's feudal lords, deciding what can and connecting underground reservoir. Contamina­ cannot be done with the land. And golfcours­ tion in one part does not extend throughout the es are decreed not to be an option. Indeed, entire system. ... Long Islanders do. not get Amper has condemned golf courses as "the their drinking water from the pine barrens and biggest drinking-water polluters on Long they never will." Island." Groundwater serves as the primary excuse to oppose almost all golf courses, especially on the east end of the island. (The Why Worry? same reason is used to oppose houses, build­ A mid-1980s scientific study ofgolfcours­ ings, and most everything else you can think es atop sandy, permeable soil in Cape Cod­ of linked to mankind and civilization.) similar to what you might find on Long Indeed, "groundwater protection" has been Island-reported "little cause for concern invoked by opponents of golf course projects about use of currently registered pesticides." in Bridgehampton, East Hampton, and Bait­ As reported in the September-October 1993 ing Hollow. issue of Audubon, the study examined four The environmental activists say that as mature golf courses and looked for about 17 much land as possible must be left in or revert different pesticides in soil and groundwater to a wild state. This demand conveniently ties samples. For good measure, many golf-course into their desire to have no more people move managers are choosing organic management, into the area and to preserve their way oflife. minimizing the use ofchemicals, and working When I asked about the science undergird­ to preserve local flora and fauna. The United ing his claim about golf courses and pollu­ States Golf Association also does research tion, Amper briefly mentioned pesticides, but and offers advice on sound environmental then referred me to others for explanation. golf practices. One might expect local envi­ Speaking with and listening to many ofLong ronmentalists to work with golf course own­ Island's leading environmentalists, I quickly ers, but too often that simply is not the case. 42 THE FREEMAN/IDEAS ON LIBERTY • AUGUST 1999

Long Island'sShinnecock Hills early in this century.

About those opposing his golf plans, the property owners come out victorious in the owner ofthe Bridgehampton land, Robert M. end, the costs in time and resources are Rubin, told the New York Times last year, tremendous. "These people are the lunatic fringe." He con­ What does this all mean for Long Island tinued, "Nobody is more worried about the golfers such as myself? Naturally, if golf water than I am. I've spent six figures analyz­ entrepreneurs are stymied, golfers will suf­ ing the situation, and I'm comfortable with fer. Limited tee times, long lines, and slow it." The Times also reported that a professor of play will remain an aggravating part of the turf grass science and a hydrogeological con­ game. sulting firm hired by the town to evaluate Under these conditions, how am I supposed Rubin's plans "deemed the golfproposal plan to get my game in gear for the Senior PGA to be basically in compliance with the various Tour by the time I tum 50 in about a decade restrictions on the site." and a half? My wife says I'm dreaming, and Undaunted by facts and private property she's probably right. But as a golfer ready to rights, the warriors against golf courses con­ fork over greens fees, at least I could have my tinue to wage their battle on Long Island, dreams shattered by my own abysmal putting, aided by politicians unwilling to do the hard rather than by a bunch ofreactionary environ­ work ofdiscovering the truth. And even when mentalists and NIMBYists. D Banned in Austin by George C. Leef

eople love competition. It is wonderful to the other hand, many lawyers fear that they Phave others trying to outdo rivals in find­ will begin to lose "their" clients to those ing new and better ways to serve you, giving awful books and CD-ROMs. Time for you more alternatives at lower prices. But action-but how do you keep books and soft­ people also hate competition. How annoying ware off the market in a nation ostensibly it is to have others trying to take away "your" committed to a free press? customers just so they can make money. What nerve! A Suit Is Pressed In our statist era, people have frequently turned to government seeking to hinder or People always look for the least costly way even eliminate the competition they don't of accomplishing their objectives-and that like. Those who are adept at manipulating the includes nefarious objectives like stifling political system often succeed, getting competition. For lawyers, the least costly way statutes or regulations that take from others ofstopping competition is to do what they do the freedom to compete. Not surprisingly, the best. They file a lawsuit. legal profession is particularly good at work­ In 1998 the State Bar of Texas instituted ing the system. Competition-suppressing suits against Nolo Press, a Berkeley, Califor­ measures have given licensed attorneys a cor­ nia, firm that publishes an array of self-help ner on the legal-services market for decades. books and computer programs, and Parsons But one of the legal profession's most recent Technology, an Iowa-based firm that sells attacks against competition is especially note­ computer software including several legal worthy because it involves nothing less than self-help titles. The ground for the suits? The the First Amendment. State Bar argued that the firms had violated The high cost ofhiring a lawyer has led to the Texas statute prohibiting "unauthorized a growing industry in self-help legal books practice of law (UPL)." This law, some ver­ and software. Companies now market books sion ofwhich is in effect in every state except and computer programs that enable anyone to Arizona, restricts "the practice of law" to get answers to legal questions and create legal licensed attorneys. It is the equivalent of a documents at a price far lower than contract­ "No Trespassing" sign around the entire field ing for the services of a lawyer. Non-lawyers oflegal services. welcome self-help publications because such Individuals have the right to do their own materials increase the range of options open legal work, whether it's drafting their will or to them when they need legal assistance. On defending against criminal charges in court. Publications that merely inform people about George Leefis book review editor ofThe Freeman. the law are legally unobjectionable-law 43 44 THE FREEMAN/IDEAS ON LIBERTY • AUGUST 1999

libraries are, after all, open to the public-but preparation and lack of harm are no defense. they are also less beneficial to laymen than Parsons Technology is not licensed to practice books or software that actually help them nav­ law in Texas (only individuals who graduate igate through the shoals of the law. Because from law school and pass the bar exam can the Nolo and Parsons products stepped over be), and that settles it. the line by actually helping individuals, the Second, Judge Sanders brushed off the unauthorized-practice watchdogs argued that company's First Amendment arguments. The they had broken the law. First Amendment prohibits Congress from To briefly recapitulate the argument against enacting any law that abridges freedom ofthe UPL prohibitions, they are neither necessary press, and decades ago the Supreme Court nor sufficient to protect consumers against ruled that this restraint on government power incompetent or dishonest legal practitioners. also applies to the states and their instrumen­ A free market backed by the possibility of talities. In First Amendment cases, the deci­ legal remedies for fraud, negligence, or sion almost always turns on the "level of breach of contract is the optimal system for scrutiny" the court will apply. If the judge deterring harm to consumers. It has no need decides that the case merits "strict scrutiny," for coercive legal action against any peaceful then the government's restriction will be individual or First Amendment-weakening struck down unless the state can show that its lawsuits such as the Texas Bar Association's. action is the least intrusive possible means of But those considerations don't matter when accomplishing some "compelling state inter­ the objective is something as vital as preserv- est." (Never mind that the First Amendment .ing billable hours. The UPL Committee's case does not read: "Congress shall make no law against Nolo was argued before the Texas abridging freedom of the press unless. .. .") • Supreme Court in October 1998 and at the Statutes and regulations that are given "strict time ofthis writing no decision had been ren­ scrutiny" almost never survive. On the other dered. However, the suit against Parsons hand, if the court decides that the case does ended in victory when in January 1999, fed­ not warrant "strict scrutiny," then all the eral district Judge Barefoot Sanders granted government needs to do to prevail is to show the bar's motion for summary judgment. That that there is some rational basis for thinking means he saw no need for a trial; on the facts that the law furthers some "important" (or as presented, Parsons must necessarily lose. similar adjective) state interest. (Again, never Judge Sanders followed up that ruling with a mind that the Constitution draws no such ban against the sale of Parsons "Quicken distinctions.) Family Lawyer" software within the state. What is frightening about this ruling (which may, of course, be reversed on Content Neutrality appeal-or stand as a precedent for future Judge Sanders stated that strict scrutiny attacks against the freedom to produce and would not apply because the restriction sell informational products) is that it under­ sought by the Texas State Bar on freedom of mines one of the cornerstones of a free soci­ the press was "content neutral." That is, the ety. Let's analyze the decision. state was not trying to suppress knowledge or First, there was no showing of any specific ideas, but merely limiting who was allowed to . flaw in the software that had or even might convey particular knowledge and ideas. In cause a user to make a legal error and suffer First Amendment jurisprudence, "content some detriment. Quicken Family Lawyer was neutrality" renders restrictions on freedom of written by attorneys who specialize in the speech or press constitutionally trivial, so the areas of law covered, and checked for state­ government needs only to meet the easy to-state variations. Parsons does not want "rational basis" test in order to prevail. Judge either a bad reputation or a lawsuit from an Sanders concluded that the state's "substantial individual who made some legal blunder interest" in "eradicating unauthorized practice because he followed its software. But care in oflaw" was justification enough. BANNED IN AUSTIN 45

The notion that "the state," an abstract enti­ of accomplishing whatever legitimate con­ ty, can have any interests at all is worthy of cerns the State Bar might have, a point that debate, but that is a question for another time. Judge Sanders did not bother with because of Let us ask whether there is in fact some "sub­ his conclusion that the UPL statute was con­ stantial" public benefit to be achieved in erad­ tent neutral. (Is it? Texas lawyers evidently icating UPL. Is it something heinous that have no interest in publishing legal self-help belongs in the same league as, say, lynching materials, so in saying that only they are or typhoid fever? Certainly not. What the bar allowed to publish something they don't want calls "unauthorized" practice is simply a vol­ to publish, the state is in effect suppressing untary market transaction. Transactions the transmission of knowledge and ideas.) between consumers and legal practitioners Rather than seeking an authoritarian ban, why deemed unauthorized by the state tum out sat­ couldn't the Texas Bar carefully analyze isfactorily as frequently as do transactions Quicken Family Lawyer for problems and between consumers and licensed attorneys. then bring them to the attention of Parsons? That is one lesson from the free market in Or lawyers could find QFL users with genuine legal services that exists in Arizona. The pub­ reasons to complain about its quality and then lic interest is no more served by eradicating sue. There is no justification for banning this UPL (assuming that the law could do so) than (or any) product from the market and depriv­ it would be in eradicating, say, unauthorized ing many people ofits benefits just because it lawn mowing. might not be perfect for everyone. Ifthe state has an interest in the market for Perhaps Parsons will win a reversal on legal services at all, it is to maximize access appeal. We should hope so. As it stands, the to competent, affordable assistance. That is decision to ban self-help legal software in done not by placing arbitrary restraints on Texas is a stab wound to the First Amend­ entry into the market, but by establishing the ment, a blow to consumers (especially poorer conditions that allow the market to function ones for whom low-cost alternatives are a unhampered. Sadly, public policy is usually great boon), and an encouragement to bar made by people who have little or no under­ associations and other special-interest groups standing ofeconomics. to tum to government whenever they see com­ Note also that there are noncoercive means petition they want to eradicate. 0 Economic Notions by Dwight R. Lee 'Economies

Conservation and Speculation

often ask my students, "How many of you future (after considering the cost of holding I are in favor of conservation?" Except for it-including the opportunity cost offorgoing those who are asleep, every hand goes up. I interest), I will conserve it for future use or then ask, "How many of you are in favor of sale. Similarly, even ifI don't own a resource, speculators?" and almost no one raises his but I believe its value is going to increase, I hand. The students see conservation as a will buy it at today's price in order to conserve noble activity that prevents people from (hoard) it and then sell it at the expected high­ squandering resources now to insure that ade­ er price later. quate quantities will be available in the future. But why should we depend on private prop­ On the other hand, they see speculation as the erty and greed to conserve valuable greedy hoarding ofvaluable resources now in resources? Why not have the government order to gouge those who will need those determine how much of a resource should be resources later. I attempt to explain that if conserved and then limit its current use they are serious about conservation, they accordingly? Relying on government to should also applaud speculation. The specula­ enforce conservation would be foolish even if tion that results from private property and the the right amount ofconservation were known. desire for profits is the most powerful force Ifgovernment has enough power to allocate a for beneficial conservation. resource over time, it has enough power to allocate its use to competing alternatives at The Right Amount each point in time. This much power guaran­ tees waste, as special-interest influence of Conservation replaces the cooperation of market exchange Without private property rights there could in determining how and where resources are be no speculation for personal profit and no used. meaningful conservation. As discussed last But even if the public interest, rather than month, animal species that are not privately special interests, motivated government deci­ owned are the ones at risk ofextinction. With­ sions (dream on), the authorities could never out private property no one has an incentive to determine the right amount ofconservation as conserve a resource, since no one can benefit accurately as speculators subject to the disci­ from doing so. But if I own a resource and pline of the marketplace. There can be too believe its value is going to be greater in the much as well as too little conservation. Just as we don't want to use resources today that will be worth a lot more in the future, neither do Dwight Lee is Ramsey Professor at the Terry College ofBusiness, University of Georgia, and an adjunct we want to sacrifice consumption today to fellow at the Center for Study ofAmerican Business conserve resources that will be worth less in at Washington University. the future. 46 47

Speculators Do It Better ~ect, y~u can ~ake yourselfa fortune by keep­ Ing qUIet, whl1e providing a valuable public Even if government authorities were not service at the same time. Ifthe public is being subject to special-interest influence, they would have less motivation to conserve wise­ harmed by speculative buying, it is because ly than speculators do. If bureaucrats make coffee is being taken offthe market now when it is worth more than it will be later. Ifthis is wasteful decisions, their salaries aren't reduced. Indeed, their failures often result in so, you would be right to criticize speculators larger budgets, supposedly so they can do a for harmful price increases. But this is a problem you can help correct. better job. In sharp contrast, speculators make money only if they conserve wisely-pur­ Simply call your broker and sell coffee short. Selling short means borrowing a quantity of chasing resources (holding them off the mar­ coffee (from a speculator) and selling it at the ket) when they are less valuable and. selling them (making them available) when they are currently high price. When the price falls later, you can buy the quantity borrowed, more valuable. If speculators don't conserve enough they pass up profitable opportunities repay the speculator, and pocket the differ­ to buy low and sell high, and ifthey conserve ence between the two prices. (You will have sold high and bought low.) Ifyou were correct too much they lose money by buying high and selling low. As opposed to bureaucrats, who about market conditions, you will have made the coffee available to consumers now and can survive despite their mistakes, the specu­ made a profit. Why you should keep your crit­ lator who consistently makes mistakes is soon icism of speculators secret is obvious. If oth­ relieved of the money necessary to continue speculating. ers believe you, they will sell coffee short themselves, which will drive down the current Speculators can also act much more quickly price .and increase the future price, thereby than any government agency. For example, at the first indication that next year's Brazilian redUCIng your profit opportunities. coffee crop will be devastated by a frost, spec­ ulators will immediately purchase raw coffee Too Important to Leave to beans to store them until next year. Consumers the "Experts" will still see plenty of ground coffee in the Why don't we hear fewer people complain­ stores, but suddenly the prices will be higher. What consumers don't see is that coffee prices ing about speculators and see more people sell­ ing short? The answer has to be that most peo­ will be lower next year than they otherwise ple find complaining easier than understanding would have been because they are higher what they are complaining about. But the today, and that their reduced consumption today will be more than compensated by their objective here is not to criticize. The important point is that anyone who believes he has better greater consumption later. The complaint will information on the future value ofresources or be that greedy speculators have unnecessarily commodities than is reflected in market prices driven up prices. Interestingly, the universal can both profit personally and benefit society complaint against speculators that they cause by acting on that current prices to be too high is really a com­ information-if he is right. So when conservation is left to speculators, far plaint that.they conserve too much. more relevant information from far more peo­ ple with far more at stake is acted on than if Don't Complain Out Loud conservation is left to government. I find it fascinating that people who believe Conservation is important, much too that speculators are responsible for prices important. to leave to government "experts." being too high complain about it out loud. There is no better way of achieving sensible The last thing you should do if you are con­ conservation than through the concern for the vinced that speculators are harming the public future that is motivated by private property, by driving up the prices of important ma~ket exchange, and speculators putting resources is to let others know. Ifyou are cor- theIr own money on the line. 0 Protection for Bad Managers by Christopher Mayer

y home state of Maryland is consider­ In the interest of full disclosure, I should M ing adopting anti-takeover legislation to say that I work for a bank with headquarters protect the small number of major corpora­ in Maryland and I might benefit from such a tions with headquarters in the state. The legis­ law. However, I have denounced this legisla­ lation would allow the directors of Maryland tion at every opportunity. I believe it is a vio­ corporations to adopt defenses against lation ofshareholders' property rights. takeovers without the consent of sharehold­ ers. Thus the legislation would legally permit Why Maximize company managers to consider interests other than those ofthe owners-say, the employees, Shareholder Value? suppliers, customers, the managers them­ In the United States it is an accepted fact of selves-in deciding whether to reject a corporate life that a firm's mission is to takeover bid. Managers would be relieved of increase shareholder value. Failure to do so their legal responsibility to report such bids to results in pressure from the board ofdirectors, their employers, the shareholders. activist shareholders, and corporate raiders. There is simply no economic benefit to be The result might be a takeover-the purchase derived from this legislation, which would put by one person or small group ofa controlling Maryland near the bottom ofthe list ofstates share of stock-and the firing of the man­ with regard to takeover rules. It is the product agers. That's what provides an incentive for ofparochial state interests and a fundamental managers to perform well. misunderstanding ofthe economic role ofthe The role ofthe corporate raider is therefore corporate raider. It is also another weapon in essential. Yet the media portray raiders (and the emerging economic war between the those, such as Michael Milken, who finance states, along with direct subsidies and tax them) as shortsighted menaces. This makes benefits. Such an attempt to prevent takeovers for lurid journalism and sensationalist story­ will be self-defeating because consideration telling. Recall the bestseller Barbarians at the of interests other than shareholder interests Gate by Bryan Burrough, which chronicled will result in lower productivity, lower output, the battle for RJR Nabisco. and lower living standards. (The federal gov­ However, as G. Bennett Stewart III asks in ernment already has built obstacles to his book The Quest for Value, uDid the takeovers.) 'raiders,' as the pejorative label suggests, pil­ lage companies solely for their personal Christopher Mayer, a commercial loan officer, is enrichment leaving a weakened economy in studyingfor his MBA at the University ofMaryland. their wake, or did they instead promote Contact him at [email protected]. improvements in corporate performance and 48 49 increases in market values for all to share?"! not come at the expense ofother stakeholders. In his book, Stewart outlines his compre­ Quite the opposite."3 Research has shown that hensive research on nearly 300 financial there is a close link between maximizing restructuring transactions completed in the shareholder value (which requires an open 1980s. In a vast majority ofcases the restruc­ market for corporate control) and higher liv­ turing led to significant increases in market ing standards and greater productivity. Maxi­ values and operating performance. The mizing shareholder value is especially impor­ restructuring is one reason for the sustained tant in the increasingly global economy, economic growth the American economy has where capital is generally free to seek the experienced. highest returns. Societies that do not adopt The media home in on the job losses that such a corporate ethic will find it hard to often occur after takeovers. However, jobs are attract and retain investment capital. constantly being created as well as destroyed Beyond this, there is the ethical matter of in a market economy. This is a mark ofhealth, property rights. Corporate managers should since workers are constantly moving to where do what is in the best interest of shareholders they do more to satisfy consumers.2 because the shareholders own the corpora­ Takeovers are generally a threat only to man­ tion. Managers work for them. To make a law agers whose companies are performing below that weakens this responsibility is to under­ their potential. Raiders buy stock only from mine the property rights of the shareholders. willing shareholders, who surely don't regard When you hire an attorney or an accountant, the transactions as hostile. The managers whose you expect him to act in your best interests jobs are at risk understandably see a takeover as within the framework ofthe rules. Legislation hostile to their interests. But they work for the that permitted your attorney or accountant to owners. Why are they more deserving of sym­ consider something other than your interests pathy than stockholders? (Stockholders are not would be met with derision and disbelief. So all rich, of course, and managers make well should anti-takeover legislation. above the minimum wage.) The potential for a takeover is therefore a In the Interests of State strong incentive for management to pursue projects and strategies that maximize share­ Why is the state pursuing this legislation? holder value. Remove the threat of a takeover Richard Lewin, the secretary of business and and you remove one of the shareholders' economic development and a prime advocate most effective means of policing manage­ ofthe bill, says, "We have very few headquar­ ment. (It is curious that some ofthe same peo­ ters companies in this state. They're very ple who decry takeovers also, on occasion, important to us. I don't want to lose a Black decry the lack of accountability of corporate and Decker or a Mercantile Bank."4 Thus, managers.) stockholders are to be sacrificed to the parochial interests of the state government (and incumbent managers). Unfortunately, the Foreign Differences bill's supporters seem to outnumber the In other parts ofthe world, this incentive of detractors. Supporters include the Maryland managers to maximize stock value is not pres­ Chamber of Commerce, the Maryland ent. In Germany and Japan managers are Bankers Association, and the Maryland Bar expected to consider a more intricate web of Association. stakeholders in the corporation, such as cus­ Lewin adds that hostile bidders are "doing tomers, suppliers, government, employees, it for sheer greed."5 When badly performing and even society at large. Maximizing share­ managers try to cling to their jobs at the holder value is seen as inefficient, shortsight­ expense ofstockholders, it is never character­ ed, or downright selfish and antisocial. How­ ized as "greedy." ever, as authors Copeland, Koller, and Murrin Dan Abramowitz, president of the invest­ point out, "Shareholder wealth creation does ment fund Hillson Partners states, "I don't 50 THE FREEMAN/IDEAS ON LIBERTY • AUGUST 1999 consider this anti-takeover legislation. I con­ state and on the probability of new corporate sider it anti-shareholder legislation. I'm a headquarters coming to Maryland. Behold the money manager, this is my home state. But if practical implications of ignoring Frederic [the bill] passes, I would be far more hesitant Bastiat's great lesson about disregarding the to invest in a Maryland company because of unseen. D the risk that my hands would be tied if some­ 1. G. Bennett Stewart III, The Quest for Value: The EVA Man­ thing went wrong."6 The legislation would agement Guide (New York: Harperbusiness, 1991), p. 477. further re-enforce Maryland's reputation as 2. See Charles Baird, "Recycling Labor," The Freeman, April 1999. pro-regulation and hostile to business. 3. Tom Copeland, Tim Koller, and Jack Murrin, Valuation: Mea­ suring & Managing the Value ofCompanies (John Wiley & Sons, By adopting this legislation with the intent 1995), p. 3. ofpreserving existing Maryland corporations, 4. Peter Behr, "Maryland's Hostile Takeover Defense," Wash­ ington Post, February 25, 1999. the state ignores the long-term dampening 5. Ibid. affect it will have on new investment in the 6. Ibid.

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Academic Freedo.m on Religious Campuses

by James R. Otteson

n a free society adults should be able to they want; on the other hand, the new mem­ I associate, establish institutions, and order ber, it would seem, also has the right to their lives without interference, provided that express himself as he sees fit. May the other in doing so they initiate no violence against members rightfully expel the newcomer-or others. That indeed is the definition of an does the newcomer have a right to stay and act open, peaceful society. according to his beliefs? It seems that we can­ One thing in particular that adults are able not have it both ways. to do in such a society is establish formal associations and groups. People who share certain views may want to ally themselves to Notre Dame Case promote and provide a safe haven for their This is precisely the situation in which views or just create a place in which like­ many religiously oriented colleges and uni­ minded people may gather. Most religious versities find themselves. They were founded orders, for example, are ofthat nature: people and organized to conduct educational activi­ sharing (some) common interests who estab­ ties from within a specific religious frame­ lish an association in which they can pursue work. They have traditionally appointed pres­ those interests together. Of course there is idents and trustees, hired faculty and staff, nothing wrong with people doing this-in and admitted students on the basis of their fact, I would suggest that this habit of form­ commitment to or at least their tolerance for ing associations, which has been part of the school's religious framework. human nature for all ofrecorded history, is an The University of Notre Dame, for exam­ essential element in leading a flourishing, ple, has only had Catholic priests ofthe Holy happy life. People need associations and close Cross order as presidents, and it makes ties to others to provide them the psychologi­ explicit its commitment to the Catholic tradi­ cal well-being necessary for being happy. tion. But Notre Dame now finds itselfin a dif­ But trouble can arise in this paradise. What ficult position. It recently hired a faculty happens, for example, when someone joins an member who, it turns out, is not only not a established association and then decides to Catholic, but is a Marxist atheist and an open subvert it? Here we would seem to have a con­ lesbian. To make matters worse for Notre flict of rights that free people enjoy. On the Dame, she is public and militant about her one hand, the people in the association have beliefs and practices, and is quite candid the right to maintain whatever kind of group about her intention to subvert, as she sees it, the sexist, patriarchal, homophobic tradition James Otteson teaches in the department ofphiloso­ ofthe Catholic church generally and ofNotre phy at the University ofAlabama. Dame in particular. And she has further put 51 52 THE FREEMAN/IDEAS ON LIBERTY • AUGUST 1999

Notre Dame on notice that ifit tries to get rid that be construed as, or even be relevant to, ofher, it will be sued before it can say a Hail the Congress's making a law abridging Mary. speech? Even if we grant the substantial What to do? Notre Dame asserts its right extension of the First Amendment's scope to maintain its Catholic character, which allowed by various twentieth-century court entails, presumably, the right to exclude peo­ decisions and the "incorporation" clause of ple who are antithetical to that character. The the Fourteenth Amendment, it seems plain professor asserts her right to academic free­ that the First Amendment does not address dom, which is guaranteed, she claims, not private entities. (The emphasis on "private" is only by the First Amendment but also by crucial. If the entity in question is publicly moral principle. funded, the picture changes dramatically­ The notion of academic freedom (free and to the extent that Notre Dame accepts speech for professors) was developed and governmental funding, its claim to private pressed by-who else?-academics who autonomy is commensurately weakened.!) It were looking for protection from political seems clear that the First Amendment does persecution. They argued that they should not not even address this professor's case, let be punished for the views they hold, even if alone provide her a protection. But let us not those views are politically controversial. be content to argue about the constitutionality Moreover, the long-term health of our civi­ of Notre Dame's proposed action-for in the lization requires the uninhibited exchange of words ofthe first ChiefJustice ofthe Supreme ideas in the search for truth. Colleges and uni­ Court, John Jay, "anything in the Constitution versities were conceived as safe houses in can be made to mean anything." which even the most outrageous and subver­ Let us focus, then, on the moral issue sive ideas could be tried and tested. If they involved. Would it be a violation of the pro­ were no good, the marketplace ofideas would fessor's rights to fire her? And would Notre eventually weed them out; but under no cir­ Dame therefore be acting immorally if it did cumstances should ideas be forced out-or so? The answer to both questions is no. worse, not allowed to join the debate in the Like everyone else, the professor has a first place-because they were politically right to express herself without restriction inexpedient or unfashionable. Ideas are just from others. But this right does not entail that too important to suffer those kind of restric­ someone else must listen: included in the tions, and professors, whose main currency is right to freely associate is the right to choose ideas, therefore deserve special protection on not to associate with the professor and thus campuses. not to listen to her. This seems to leave us at an impasse, a pur­ To go a step further, although each person ported case ofrights clashing: the university's has the right to speak freely, no one has a right right to self-determination and the professor's to demand that someone else provide a forum, right to free speech. There is, however, a way for that would violate the other person's right out that simultaneously protects the rights­ to freely associate. Speech, after all, is mere­ properly understood-ofboth parties. We can ly an expression of belief; speech has been eat our cake and have it too. protected throughout the centuries in order to protect the sanctity of conscience. There is Misconstruing the nothing special about words (or other sounds) First Amendment in themselves that warrants protection. Like­ wise, the freedom to associate is a manifesta­ The constitutional argument that the rene­ tion of private belief. Thus both the right to gade professor marshals in her defense does speak freely and the right to associate freely not hold water. The First Amendment says protect the right to believe what one wants to that "Congress shall make no law ... abridg­ believe-and, by extension, to act peacefully ing the freedom ofspeech...." IfNotre Dame on those beliefs. fires the professor for her beliefs, how can An example will illustrate my point. Sup- ACADEMIC FREEDOM ON RELIGIOUS CAMPUSES 53 pose you hire a painter to paint your living Reconciling the room and halfway through you. notice that he Notre Dame Dispute has painted it all black enamel, though you had told him you wanted a light periwinkle. The upshot is that Notre Dame can fire the Suppose, then, you quite understandably fire subversive professor and respect her right to the painter, at which point he claims that you speak freely. By firing her it is acting entirely had no right to fire him because that would within its rights to associate freely. On the abridge his freedom of artistic expression. other hand, it has not interfered with her right You would undoubtedly inform him not to let to speak freely. She can continue her mission the door hit him on the way out. He does to subvert the Catholic church and to con­ indeed have a right to freedom of expression, vince people that Christianity is a supersti­ but that does not mean he has the right to tion. All Notre Dame would be saying is that express himself in your living room. So your it chooses not to provide her a forum. She can firing him does not infringe his rights; it say what she wants, just not. on Notre Dame's merely asserts yours. It is your house, and you nickel. get to say what goes on in it. The painter may As a university professor myself, I can express himself elsewhere-in his own living assure you this issue is ofno little moment for room, perhaps. me. I would love to have someone else guar­ The principle can be generalized to all pri­ antee a lifelong forum in which I could vate associations. Any group of adults may espouse whatever opinions. I wanted. But I, unite under any consensual conditions they like my colleagues, have no right to force oth­ please and they may include or exclude others ers to provide me with such a forum. If that as they see fit. Now there is an important means that Marxist atheist lesbian professors restriction: ifthe group entered into a contract cannot get jobs at Catholic universities, then I with a new member, it is bound to honor the think that is the price we pay for living in a contract even ifthe group later regrets the deci­ free society. D sion. But that has nothing to do with the right 1. For an excellent summary ofcourt decisions and other impor­ to free speech. (The standard pre-tenure uni­ tant historical events regarding academic freedom and the scope of versity contract permits the dismissal ofa pro­ the First Amendment, see Alan C. Kors and Harvey A. Si1verg1ate, The Shadow University: The Betrayal ofLiberty on America's Cam­ fessor at the end ofan academic year.) puses (New York: Free Press, 1998), chapters 1-3.

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

We will print the most interesting and provocative letters we receive regarding Freeman articles and the issues they raise. Brevity is encouraged; longer letters may be edited because of space limita­ tions. Address your letters to: The Freeman, FEE, 30 S. Broadway, Irvington-on-Hudson, New York 10533; e-mail: [email protected]; fax (914) 591-8910. Economics on Trial by Mark Skousen

AUGUST 1999

Say's Law Is Back

"Keynes ... misunderstood and misrepresented Say's Law.... This is Keynes's most enduring legacy and it is a legacy which has disfigured economic theory to this day." -STEVEN KATESl

n researching my forthcoming book, The ... by the doctrines associated with the name I Story of Modern Economics (to be pub­ ofI-B. Say. It is true that his 'law ofmarkets' lished by M. E. Sharpe next year), 1 came has long been abandoned by most econo­ across a remarkable new work by Australian mists; but they have not extricated themselves economist Steven Kates, Say s Law and the from his basic assumptions and particularly Keynesian Revolution. According to Kates, from his fallacy that demand is created by John Maynard Keynes created a straw man in supply. ... Yet a theory so based is clearly order to produce a revolution in economics. incompetent to tackle the problems ofunem­ The straw man was Jean-Baptiste Say and his ployment and ofthe trade cycle." famous law of markets. Steven Kates calls Unfortunately, Keynes failed to understand The General Theory "a book-length attempt to Say's Law. By incorrectly stating it as "supply refute Say's Law." creates its own demand," he proposed, in But to refute Say's Law, Keynes gravely effect, that Say meant that everything pro­ distorted it. As Kates states, "Keynes was duced is automatically bought. Hence, Say's wrong in his interpretation of Say's Law and, Law cannot explain the business cycle. 3 more importantly, he was wrong about its eco­ Keynes went on to say that the classical nomic implications."2 And Kates is sympa­ model under Say's Law "assumes full thetic to Keynesian economics! employment." Other Keynesians have contin­ ued to make this point, but nothing could be How Keynes Got It Wrong further from the truth. Conditions of unem­ ployment do not prohibit production and sales In the introduction to the 1939 French edi­ from taking place that form the basis of new tion of The General Theory, Keynes focused income and new demand. on Say's Law as the central issue of macro­ Moreover, Say's Law specifically formed economics. "1 believe that economics every­ the basis of a classical theory ofthe business where up to recent times has been dominated cycle and unemployment. As Kates states, "The classical position was that involuntary Mark Skousen (http://www.mskousen.com; mskousen @aol.com) is an economist atRollins College, Depart­ unemployment was not only possible, but ment ofEconomics, Winter Park, FL 32789, a Forbes occurred often, and with serious conse­ columnist, and editor ofForecasts & Strategies. quences for the unemployed."4 54 55

Production and Consumption commerce; for the difficulty lies in supplying the means, not in stimulating the desire of Exactly what is Say's Law? Chapter 15 of c.onsumption; and we have seen that produc­ Say's A Treatise on Political Economy tIon alone, furnishes those means." Then Say desc~ibes his famous law ofmarkets: "A prod­ added, "Thus, it is the aim of good govern­ uct IS no sooner created, than it, from that ment to stimulate production, of bad govern­ instant, affords a market for other products to ment to encourage consumption."7 the full extent ofits own value."5 When a sell­ er produces and sells a product, the seller ~nstantly becomes a buyer who has spendable The Cause of the Income. To buy, one must first sell. In other Business Cycle ~ords, p~oduction is the cause of consump­ Say's Law states that recessions are not tIon, and Increased output leads to higher con­ sumer spending. caused by failure of demand (Keynes's thesis), but by failure in the structure of sup­ In short, Say's Law is this: The supply ply and demand. Recession is precipitated by (sale) of X creates the demand for (purchase of)Y. producers miscalculating what consumers wish to buy, thus causing unsold goods to pile Say illustrated his law with the case of a up, production to be cut back, income to fall, good harvest by a farmer. "The greater the crop, the larger are the purchases ofthe grow­ and finally consumer spending to drop. As ers. A bad harvest, on the contrary, hurts the Kates elucidates, "Classical theory explained recessions by showing how errors in produc­ sale ofcommodities at large."6 tion might arise during cyclical upturns which Say has a point. According to business­ would cause some goods. to remain unsold at cycle statistics, when a downturn starts, pro­ cost-covering prices." The classical model duction is the first to decline, ahead of con­ was a "high-sophisticated theory of recession sumption. And when the economy begins to recover, it's because production starts up, fol­ and unemployment" that with one fell swoop by the illustrious Keynes was "obliterated."8 lowed by consumption. Economic growth In his broad-based book, Kates highlights begins with an increase in productivity, new other classical economists, including David products, and new markets. Hence, produc­ Ricardo, James Mill, Robert Torrens, Henry tion spending is always ahead ofconsumption Clay, Frederick Lavington, and Wilhelm spending. Ropke, who extended Say's Law. Many classi­ We can see why this is the case on an indi­ ~al vidual basis. The key to a higher standard of e.conomists focused on how monetary InflatIon exacerbated the business cycle. They living is, first, an increase in your income that . ' were precursors of the Austrians Ludwig von IS, your productivity, either by getting a raise, Mises and EA. Hayek. ~hanging jobs, going back to school, or start­ Free-market economists, such as W H. Hutt Ing a money-making business. It would be and Thomas Sowell, have tried to rehabilitate foolish to achieve a higher standard of living by spending savings or going into debt to buy Say's Law, but none carries the punch of Steven Kates. D ~ bigger house or new automobile before you Increase your productivity. You may be able to 1. Steven Kates, Say's Law and the Keynesian Revolution live high on the hog for a while, but eventual­ (Northampton, Mass.: Edward Elgar, 1998), p. 1 2. Ibid., p. 212. ly you will have to pay the piper ... or the 3. John Maynard Keynes, The General Theory ofEmployment, credit card bill. Interest and Money (London: Macmillan, 1936), pp. 25-26. 4. Kates, p. 18. According to Say, the same principle 5. Jean-Baptiste Say, A Treatise on Political Economy (Augustus applies to nations. The creation of new and M. Kelley, 1971 [1832]), p. 134. 6. Ibid., p. 135. better products opens up new markets and 7. Ibid., p. 139. increases consumption. Hence, "the encour­ 8. Kates, pp. 18, 19,20. agement ofmere consumption is no benefit to 56

Affairs (BIA) bureaucrats for education, health care, housing, roads, law enforcement, BOOKS and more. Ferrara quotes ChiefPhillip Martin on the situation they faced: "The government could give us the bare essentials to survive, The Choctaw Revolution but ifwe wanted more, we would have to earn by Peter 1. Ferrara it ourselves." That was easier said than done. Americans for Tax Reform Foundation. 1998 Seeing that the federal government was • 191 pages • $20.00 doing a pathetic job of providing the Choctaws with the essentials, Martin decided Reviewed by George C. Leef that it was time to stop relying on the BIA and to start contracting for services directly. This he u.s. government's treatment ofAmer­ is a right recognized for Indian tribes under T ican Indians was despicable. Everyone the Indian Self-Determination and Assistance knows that, at least in a general way. The Act, but as the Indians should have known forced resettlement ofthe Choctaws, ofwhich from history, having a right on paper and the "Trail of Tears" is the most infamous being able to exercise it are two different episode, is undoubtedly among the sorriest things. instances of governmental duplicity, venality, Martin found the BIA bureaucrats fighting and incompetence in our abundant history his efforts to contract for services at every thereof. point. That the Choctaws would have been We have become accustomed to "oppressed better off without the bureaucrats was irrele­ minority groups," with grievances far more vant. Ferrara writes, "Instead ofpursuing the imagined than real, demanding compensation broad public interest as they are supposed to at the expense of people who had nothing to do, they pursue their own narrow parochial do with the alleged injustices, or preferential interest in their own turf, power, funding and treatment that necessitates abandoning equal­ jobs." The BIA repeatedly withheld informa­ ity before the law. So it is shocking to read of tion and technical assistance, arbitrarily an instance where a "victim group" has cho­ imposed onerous requirements, delayed sen a different path. That is precisely the sub­ approving Choctaw initiatives, and even ject of Peter Ferrara's The Choctaw Revolu­ threatened retaliation against them for trying tion. to exercise their rights. Eventually, after years Ferrara relates the intriguing story of how of perseverance, the Choctaws were success­ the Choctaw tribe of Mississippi improved ful in contracting the BIA almost completely their lives not through political coercion, but off their reservation, but it was a nasty, by freeing themselves from paternalistic, unseemly battle for freedom. Ferrara quotes enervating federal policy. It is a story that one honest BIA official on the results oftheir might just open the eyes ofthose who always fight to run their own affairs: "The tribe is proclaim their compassion for the oppressed, doing an exemplary job. They're a more pro­ yet clamor for more government intervention fessional outfit than we ever were." to help them. Another typical political fight the Choctaws Ferrara is a well-known Washington policy (and other tribes) have had to wage is the analyst who has made his name mainly by avoidance of federal taxation of gambling exposing Social Security as doomed. Now he casino proceeds. The profits from casinos go has given us a detailed look at federal Indian to fund improved housing, roads, education, policy, an area as fraught with interventionist and other things for Indian tribes. They also nonsense as Social Security is. represent marginal competition for the big Through repeated treaty violations and land gambling interests in Las Vegas and Atlantic grabs, the government turned the Choctaws City. Nevada and New Jersey congressmen (and most other Indian tribes) into wards of have introduced bills to subject Indian casinos the state, dependent on Bureau of Indian to federal regulation and taxation, claiming BOOKS 57 without any evidence that they are "riddled the Depression, they demonstrate the limits of with corruption." Donald Trump, quite will­ macroeconomics alone in analyzing and ing to use politics to further his interests, lob­ explaining historical events. bied personally for the bills. So far, however, Nonetheless, The Great Depression is a the Indians have defended successfully valuable book. It is well written and the against this attack. authors carefully explain many obscure prac­ Ferrara closes with a list of useful sugges­ tices of the interwar financial world, such as tions for improving government policy toward the Federal Reserve's real bills doctrine. Indian· tribes. He argues that "tribes should Moreover, they ably marshal the secondary have the freedom to run their own lands" literature in economics to answer such ques­ and advocates treating Indian reservations as tions as: why the depression was so severe, enterprise zones free from capital gains why it lasted so long, and why it was a global taxes and regulations on both Indian and non­ phenomenon. Indian business enterprises. Their answers to those questions reflect a Of course, the entire country should be monetarist consensus that synthesizes the given that treatment, but if we must proceed work ofMilton Friedman and Anna Schwartz, in small steps, beginning with Indian reserva­ which focuses on the domestic sources ofthe tions is sensible. Why not allow some of the depression found in Fed policy, and that of poorest Americans the freedom to prosper, as Peter Temin and Barry Eichengreen, whose the Choctaws have begun to? It would be a work indicts the pursuit of the interwar gold wonderful demonstration of the benefits of standard for making the depression an inter­ liberty. D national phenomenon. Although the authors George Leef is book review editor ofThe Freeman do not include the analysis ofAustrian econo­ and director ofthe Pope Centerfor Higher Education mists, they rightly point to the role of the Policy. Hoover and Roosevelt administrations in per­ petuating the Depression. Indeed, the authors reach the conclusion ofMurray Rothbard and The Great Depression: An International other Austrians: government intervention Disaster of Perverse Economic Policies made conditions worse. In applying macroeconomic criteria as the by Thomas E. Hall and test of policy outcomes, the authors also J. David Ferguson applaud several federal policies that constitut­ University ofMichigan Press • 1998 • 216 pages ed unprecedented economic intervention. • $42.50 cloth; $19.95 paperback Accepting the idea that a central role of the government in monetary policy is essential, Reviewed by Michael R. Adamson they approve of the banking and financial laws of the 1930s that established federal homas Hall and 1. David Ferguson state deposit insurance, and strengthened the power T two purposes in writing this book. Their ofthe Fed. Similarly, given Fed failures, they first is to apply macroeconomic theory to an view the Reconstruction Finance Corporation actual event, "the greatest macroeconomic as a useful alternative lending institution. disaster in U. S. history." Their second aim is They also endorse the questionable idea that historical. They seek to tell the story of how heavy federal defense spending ended the powerful officials in several countries "com­ Depression. As Robert Higgs has argued, the mitted an incredible sequence ofpolicy errors war masked the Depression by putting people that generated a cataclysmic event reaching back to work, but did not end it in terms of around the entire globe." The authors succeed restoring material well-being. admirably in their first objective, but do less The book also fails to demonstrate the well in their second. As economists relying on authors' main contention that it was policy macroeconomics to explain the decision-mak­ errors of well-intentioned officials who were ing processes that culminated in and sustained "grossly ignorant about the goals, tools, and 58 THE FREEMAN/IDEAS ON LIBERTY • AUGUST 1999 impact of economic policy" that caused the The Noblest Triumph: Property and Depression. They suggest that had policymak­ ers just known better, they wouldn't have Prosperity Through the Ages enacted the series of misguided policies that by Tom Bethell created "an absolute disaster." The historical St. Martin's Press • 1998 • 378 pages • $29.95 literature leads to a rather different conclu­ sion. For instance, as Herbert Stein has Reviewed by William R. Allen shown, New Deal officials were cognizant of monetary policy as a tool, but simply regard­ roperty is a multifaceted and fundamental ed it as ineffective. Holding dim views of topic. Tom Bethell here gives us a broad financiers and bankers as a class and eager to P survey, dealing with economic, political, and demonstrate the capability ofthe federal gov­ legal theory; episodes of economic and polit­ ernment in restoring prosperity, they instead ical activity; and assessments of institutional developed fiscal policy as a tool to manage constraints and procedures from ancient the economy. The problem was not so much one ofignorance as ofthe mindset ofthe New Greece to virtually the day before yesterday. Dealers. Since the fiasco in the Garden ofEden, we Economic ignorance alone does not ade­ have lived in a world of scarcity. The quately explain historically how the series of ineluctable state of limits implies not only misguided policies that caused and sustained frustration but also conflict. But there are the Depression came to be. What may seem many ways to compete, and communities dif­ today to be misguided policies were not nec­ fer enormously in how the economic/social/ essarily obvious at the time. During the political game is played. 1930s, few private or public leaders in Amer­ How we survey our possibilities and for­ ica other than a small number of economists, mulate our strategies, how we interact with Wall Street bankers, and Fed officials pointed each other and coordinate our efforts, is deter­ to monetary policy as a primary cause of the mined largely by the rules ofthe game. Those contraction. Ultimately, The Great Depres­ rules basically are subsumed under "rights to sion fails to clarify for the reader precisely use ofproperty." The right to use property we what the authors believe should have been "own" is necessarily limited-I cannot use obvious to contemporary policymakers, my hammer to break your window-but what enabling them to avoid the calamity. are those limits, how are they determined, and On the whole, the main macroeconomic by whom? Property rights go far to define the conclusions ofthe book are sound: that policy nature of the community, providing con­ mistakes of the 1920s and 1930s were the straints, opportunities, and incentives with most important factors in causing the Great respect to what we do and how we do it and Depression; that the severity of the 1929­ determining how we adapt to our niggardly 1933 contraction in America was due to bank circumstances. Some systems of property failures that resulted from Fed inaction; and rights are much more conducive than others to that the duration of the Depression owed to living together productively and civilly. the lack of pro-active Fed policy after 1933 The implications ofwho has what property and the economic incoherence of the subse­ rights include subtle aspects of political and quent New Deal program. social philosophy. "The Western concept of This book, while limited in some respects human rights presupposes individualism," in its explanatory power, helps to refute the Bethell writes, and individualism finds much still-popular notion that the Depression was of its operational manifestation in private caused by an inherent flaw in the market rights in property. Equality before the law and economy, inexplicably causing economic freedom of contract are antecedent to a free­ collapse. D market economy. Michael R. Adamson is a Ph.D. candidate in history All this is pursued, elaborated, and illustrat­ at the University ofCalifornia-Santa Barbara. ed by Bethell with references to a mass ofvar- BOOKS 59 ied literature, from ancient to modern. He is ofproperty" and "rights ofmen." centrally concerned with "the legal and polit­ Seminal work on the implications of prop­ ical foundations that are essential to econom­ erty rights is to be applauded, but I fear that ic growth." In an individualistic open market such interest is not likely to be sustained. with well-defined property rights, options can Today's younger economists may not con­ be discovered; opportunities can be identified; sciously defame private property, but most do negotiations and exchanges can be conducted; little to defend it. division of labor and coordination can be At any rate, innovative academic scribblers effectuated; long-range plans can be confi­ can use felicitous help from writers who can dently formulated; and credit can be obtained. reach a wide, non-specialist audience. Mr. Moreover, good stewardship ofassets is ratio­ Bethell, with a style that is typically graceful nal. Bethell persuasively argues that "private but.withjournalistic assurance, has played his property is a necessary (but not a sufficient) expository role well. D condition" for a society to enjoy the "four William Allen is emeritus professor ofeconomics at great blessings" of"liberty, justice, peace and UCLA. prosperity." Some origins ofprivate property are found in Roman law, but our heritage comes mainly Two Lucky People from long-developing English common law. Perhaps the operational high point of private by Milton and Rose D. Friedman property is seen in mid-eighteenth-century University ofChicago Press • 1998 • 655 pages Britain. Unfortunately, intellectuals of the • $35.00 eighteenth and nineteenth centuries-includ­ ing the classical economists-did not ade­ Reviewed by Bill Field quately spell out the significance of property relations for a flourishing society. still remember, after more than 30 years, Here, I believe, Bethell is excessively impa­ I my mounting excitement as I read Capital­ tient with and ungenerous toward writers of a ism and Freedom for the first time and dis­ century or two ago who did not foresee the covered the wondrous moral and economic insight ofa handful ofanalysts ofour own gen­ benefits ofbeing "free to choose." Reading it eration. The way was left open for much social­ changed my professional life. Here was solid istic silliness in both advocacy and action dur­ economic reasoning, but economics with a ing the last two centuries, but he is too harsh on heart, and-unbelievably-economics that good economists for not being better. was exciting. All my subsequent economic The author recounts much of the utopi­ thinking has been driven by this experience. anism provided, before and during modern While I eventually wandered offthe Friedman times, by the Jamestown, Plymouth, and New reservation, I still have a warm feeling for the Harmony experiments; by Sir Thomas More, book and author who started it all for me. Jean Jacques Rousseau, William Godwin, Two Lucky People, the memoirs of Milton Robert Owen, and Karl Marx; by the fiasco of and Rose Friedman, is not a work primarily the twentieth-century communism; and by the focused on economic theory or policy. The misdirection and mismanagement of modem book assumes that readers are familiar with "emerging Third World economies." He the Friedmans' economic ideas, although it accounts for the rise and fall of the Ottoman does provide summaries and defenses of Empire and the Irish famine ofthe 1840s and many of their positions. Rather, Two Lucky tries to explain intricacies oftoday's "intellec­ People is an easygoing narrative ofthe expe­ tual property" within a framework of proper­ riences of a happily married couple, with ty rights. And he devastatingly quotes the some sections written by each individually naivete of agitators, politicians, jurists, and and others by the two combined. economists: see especially Theodore Roo­ The Friedmans clearly qualify as a tradi­ sevelt's insidious distinction between "rights tional family unit, with Milton the primary 60 THE FREEMAN/IDEAS ON LIBERTY • AUGUST 1999 breadwinner and Rose focusing on homemak­ faced. For many years the Duke University ing. Milton, despite his obvious affection for library carried none of Milton Friedman's his wife and family, is drawn back time after books because offaculty hostility to his ideas. time in his account to his professional experi­ At the same time, the library had a complete ences and economic ideas. Rose, despite her collection of the works of Karl Marx. When obvious competence and interest in econom­ Capitalism and Freedom was published in ics, is drawn back to the family and its expe­ 1962, it was reviewed in almost no general riences. It is heartwarming to see a couple of publications-even though it was obviously such extraordinary intellectual ability experi­ aimed at a broad audience and Milton was encing the ups and downs ofdaily life. already known internationally. As Rose and Milton carry us through their Rose and Milton present all this informa­ lives and careers, they provide us with tion about their lives with a minimum ofmal­ glimpses of many of the greatest and not so ice. The dominant tones ofthe book are opti­ great economists of the twentieth century. mism and pride. A sense ofvindication is evi­ Their reminiscences demonstrate that person­ dent: the free market is winning the battle of al foibles and prejudices exist among the ideas and ultimately will win the battle over intellectual elite as surely as in the general policy. As Milton stresses, advocates of the population. Some instances are touching; oth­ free market are inherently patient, long-term ers produce a sense ofrevulsion. thinkers. He is perfectly willing to be judged Examples of the latter include the anti­ by the economics profession and others 25 to Semitism encountered by the Friedmans in 50 years in the future. He is confident, and academia in general, faculty cliquishness that surely with good reason, that his work in pos­ escalates into personal animosities, and the itive and normative economics will stand the incredible close-mindedness of leftists to the test oftime. D failures of socialism. Bill Field is a professor of economics at Nicholls Milton also provides us with interesting State University. portraits ofthe presidents he advised. Noone should be surprised at the picture of Richard Nixon as having a powerful intellect and vast Global Greens: Inside the International knowledge, but often carrying out policies he . Environmental Establishment knew were socially undesirable in pursuit of short-run political advantage. Friedman's by James M. Sheehan admiring portrait of Ronald Reagan shows Capital Research Center • 1998 • 213 pages much more respect for his intellect than most • $25.00 Washington commentators. Ofinterest is the section devoted to the evo­ Reviewed by Jane S. Shaw lution of the "Free to Choose" television series, especially the resistance encountered nly a policy wonk could love this book, from leftists within the public television Obut its contents are vital for understand­ establishment. While pressure from sponsors ing a major change underway in environmen­ and other sympathizers eventually forced tal and foreign policy. Ahead of many others, almost all public stations to show the series, James Sheehan has recognized the growing there was much opposition, as exemplified by power of the international environmental the decision ofthe NewYork station to run the movement. Sheehan, who directs internation­ show's initial program opposite the Super al policy activities for the Competitive Enter­ Bowl. prise Institute, describes the exercise of this Today, when the Friedmans' ideas are power in Global Greens. almost mainstream intellectually (if unfortu­ The book centers on "NGOs" (non-govern­ nately not in policy), it is hard for many ofus mental organizations) that emphasize envi­ to remember (and for younger people to have ronmental issues. To a person concerned any notion of) the long-term resistance they about freedom, the term "non-governmental BOOKS 61 organization" may sound benign, but most The international noose is tightening. NGOs are not friendly to liberty at all. They In 1992, the Rio Summit (the U.N. Conven­ are ideologically committed to greater gov­ tion on Environment and Development) took ernment control to address environmental center stage. This meeting launched a prolif­ problems, and they perceive international eration of activities and agreements, includ­ pressure as the way to achieve that control. ing a global-warming treaty (signed by Presi- According to Sheehan, about 4,000 NGOs _dent Clinton, but not ratified by the Senate); a are actively involved in environmental issues. U.N. commission on sustainable develop­ These include large environmental organiza­ ment; conferences on such topics as women, tions such as Greenpeace and the World housing, and population; and the World Wildlife Fund, but also an array of others, Bank's Global Environment Facility (which including labor unions, so-called consumer Sheehan calls a "$2 billion slush fund for groups, and women's organizations. In gener­ Third World environmental projects"). al, their goals are to force changes in people's Sheehan describes in detail several impor­ lives, especially in the industrial countries, tant international treaty negotiations ofrecent supposedly to protect the planet from human­ years, including the 1994 International Con­ caused harm. ference on Population and Development, the The prominence of NGOs reflects the rise 1996 World Food Summit, and the 1997 of international treaties as a way of dealing Kyoto Protocol on global warming. He with environmental issues. For reasons that observes that NGOs did not always achieve aren't fully clear, the governments of the their goals at such meetings. However, as time United States and other industrialized coun­ goes on, they have become increasingly adept tries now allow international treaties to shape at influencing treaties in the direction they important parts of their environmental poli­ want, a fact that bodes ill for our freedom and cies. According to Sheehan, the momentum prosperity. began in 1972, with the first United Nations Sheehan's reporting of each event is thor­ Conference on the Human Environment. It ough and well-footnoted. In some of the slowed during the Reagan administration, negotiations he discusses, he was a firsthand when President Reagan withdrew from nego­ observer. His book is clearly written and has tiations over the Law of the Sea Treaty, but no visible gaffes. It includes lists of promi­ picked up again with the Clinton administra­ nent NGOs (including information about their tion. Today, many NGOs are official partici­ funding) and other reference material. pant-observers at United Nations confer­ Why then is it not more exciting? The rea­ ences, summits, and functions. As the U.N.'s son is probably that it deals mostly with influence grows, so does theirs. facts-a lot of facts-rather than with ideas. As a result, an ever-growing collection of Sheehan provides extensive details that illus­ summits, conventions, treaties, and frame­ trate his theme: the growth of international works undergird environmental policy in the environmental organizations. He doesn't United States. During the 1980s, Sheehan explore the reasons behind this growth or reports, 250 environmental treaties or conven­ speculate on its future directions. Such discus­ tions were enacted. Treaties, to cite just a few sion would have added interest. examples, limit the use of chemicals that are Still, Sheehan has provided a valuable ser­ believed (by many) to deplete stratospheric vice in marshaling so much information about ozone, ban trading in certain animal species, the network of environmental NGOs. His and have begun to influence the use of fossil descriptions of the Greens in action around fuels. Forty-seven places in the United States the world throw light on activities that have to are now designated U.N. Biosphere Reserves date escaped widespread scrutiny, and pro­ (including the Everglades) and 19 are World vides material that I and others will draw on Heritage Sites (including Yellowstone Nation­ in the future. 0 al Park). These give the green NGOs leverage Jane Shaw is a senior associate ofPERC in Bozeman, to control land use in and around those places. Montana. What's wrong with libertarianism...... And how to fix it

"An exciting corner in the nlarketplace ofcOlllpeting ideas...stilllulatillg and provocative." -Israel M. Kirzner :m:::;;:lili!!!i1~~~!~~~!!~~~1~:~1j!~lj!j!!j1jj~~ll~~~i:l\!i,\(i,(1j1~111i,:i1tiJi;.j:::.:~: It looks like the era ofbig governlllent isn't over after all. Politicians who favor new governlllent prograllls and higher nuninlUll1 wages are as popular as ever. Nor have libertarian ideas lllade real progress in the universities. Why? In this special issue of CRITICAL REVIEW, libertarian plulosophy is put through a conlplete overhaul and tune-up. Every lllajor version of libertarianisnl­ self-ownership, Objectivisnl, Aristotelianislll, and free-lllarket econonlics- is subjected to rigorous scrutiny, and the evolution ofnlodern libertarianislll is exalluned to see why it has not fulfilled its potential. A lllust­ read for anyone who takes libertarianislll seriously. Also available: a new special issue devoted to F. A. Hayek.

Single issues. $10. I-year (4-issue) subscriptions: $29 U.S., $35 foreign, $15 students with copy ofID; add $15 for foreign air lllail. Check/lll.o.lVisa or MC no. and expo date to CRITICAL REVIEW, P.O. Box 10, Dept. 308L, Newtown, CT 0647°; fax (203) 270-8105; enlail [email protected]; www.sevenbridgespress.colll The Pursuit of Happiness by Charles W. Baird

An Open Letter to the California Legislature

s a student of public choice theory, I Workplace Democracy A understand why you support SB 1241, a mandatory agency-shop bill for California Now, you are probably thinking that exclu­ State University (CSU) faculty. After all, in sive representation is simply majority rule in the words of Ambrose Bierce, "politics is a the workplace. It is economic democracy. strife ofinterests masquerading as a contest of After all, as I have heard many of my debate principles." The California Faculty Associa­ opponents say, we elect members ofthe legis­ tion (CFA) supports you in the political mar­ lature by majority vote. A winning candidate ketplace, so it is quite natural for you to give represents all eligible voters in his or her dis­ them the power to extract more dues money trict notwithstanding that many voted for from faculty. If they have more dues money, another candidate and many more didn't vote they can give more to you. I imagine from at all. That is what democracy is all about. The your perspective this is a virtuous circle. majority rules. Ifit is good in politics, it must I have written extensively on the issue of be good in unionism too. But that conclusion so-called union security. I know you under­ is a non sequitur. stand the main argument in favor of union Government is a natural monopoly. It has a security-the so-called free-rider problem­ monopoly on the legal use offorce. There can but I would like to give you the other side of be only one government at a time. Like all the story. monopolists, governments have a tendency to First, there could be no free-rider problem abuse their monopoly power. Historically, if it were not for the principle of exclusive democracy evolved as a way for the governed representation. If we had a system of mem­ to have some ability to protect themselves bers-only bargaining (sometimes called pro­ againstgovernmentalabuse.I>emocracy-the portional representation), the CFA would not mandatory submission of minorities to the have to bargain on my behalf. I could not will ofmajorities on all matters that are with­ receive any ofthe alleged benefits oftheir rep­ in the constitutional scope of governmental resentation services, because I would be authority-was never intended to be imposed responsible for bargaining for myself or for in the private sphere of human action. There, selecting some other representative to bargain individual autonomy and free choice are the for me. In other words, the union's free-rider proper rules. Private persons are free individ­ problem is an artifact of the law. It is not a ually to associate with private groups that use problem inherent in collective bargaining. majority rule to make decisions, but they are also free not to do so. Charles Baird is a professor of economics and the Unions are not governments. They are pri­ director of the Smith Center for Private Enterprise vate associations. (The last time I checked, Studies at California State University at Hayward. civilian employees of government were still 63 64 THE FREEMAN/IDEAS ON LIBERTY • AUGUST 1999 private citizens.) To impose mandatory sub­ share fees." In economics a forced rider is a mission of minorities to the will of majorities person who suffers net harms from some col­ in private affairs by statute is to breach the lective action and is forced to pay for them. constitutional wall ofseparation between gov­ There may be free riders, but there are also ernment powers and individual rights. On this forced riders. Don't you, as elected officials, reading therefore, exclusive representation is have a moral responsibility to protect the illicit. (You cannot take refuge in the U.S. rights offorced riders? We are citizens too. Supreme Court's 1937 ruling in the Jones & It is telling that SB 1241 doesn't even make Laughlin Steel Co. case, which upheld the the agency shop a subject of bargaining National Labor Relations Act. We all know between the CFA and CSU. Instead, it impos­ that decision was made possible by the switch es the agency shop burden by force ofstatute. ofvotes by ChiefJustice Charles Evans Hugh­ I guess you don't have much confidence in the es and Associate Justice Owen 1. Roberts in an CFA's bargaining abilities. The CFA has never effort to avoid Roosevelt's court-packing plan. been able to accomplish anything without This was the switch in time that saved nine.) you, their political patrons, giving it special Do you realize that the United States and privileges under the law. That is why I have Canada are the only two countries in the always called the CFA the Cabal of Feckless world with exclusive representation union­ Academics. ism? I have given lectures all over the world Finally, as soon as you empower the CFA to on this issue. From South Africa to New steal money from my paycheck, I and several Zealand to Austria to England, audiences are like-minded colleagues on many CSU cam­ appalled that America, supposedly the most puses will, with pro bono representation, ini­ free country in the world, denies to individual tiate legal proceedings based on the following workers the right to designate workplace rep­ Supreme Court decisions: Abood v. Detroit resentatives oftheir own individual choosing. Board ofEducation (1977), Chicago Teachers Union v. Hudson (1986), and Lehnert v. Fer­ Forced Riders ris Faculty Association (1991). These public­ sector rulings guarantee that no agency fees The second reason the free-rider argument extracted from public employees can be used is false is the problem of the forced rider. for any purpose other than collective bargain­ Unions claim to confer net benefits on all ing, contract administration, and grievance workers whom they represent. That is nothing processing. In Lehnert, for example, your but a big lie. For example, the CFA does not favorite type of union expenditure-lobby­ confer net benefits on me. To the contrary, I ing-was declared to be an impermissible use am much worse offhaving the CFA represent offorced union fees. In that same case 90 per­ me than I otherwise would be. Just the psy­ cent of union expenditures were held to be chic cost ofbeing forced to have people with impermissible uses of such fees. You'd better whom I have profound educational and philo­ tell your union partners to keep good books. sophical differences speak for me far out­ The measly 15 to 20 percent difference weighs any monetary benefits they claim to between union dues and agency fees you wish have secured on my behalf. (Incidentally, I to write into the law will not stand up in court. deny that the CFA has secured any monetary And I, for one, am going to enjoy proving it. benefits for me.) So I suffer net harms from the CFA, and now you want to force me to pay Sincerely, for those net harms through so-called "fair Charles W. Baird