Peace and Prosperity

December Book Sale

"Capitalism in the advanced countries has already . . . conquered mass poverty, as that was known throughout human history and almost everywhere.... Capitalism will continue to eliminate mass poverty in more and more places and to an increas­ ingly marked extent if it is merely permitted to do so." -Henry Hazlitt

From the FEE Bookstore

Anything That's Peaceful by Leonard E. Read In this timely classic FEE's founding president explains the miracle of the free market and the wonders of peaceful cooperation of individuals in a free society. This work captures the philosophy of freedom that FEE strives to advance. 242 pages, paperback $7.00

The Mainspring of Human Progress by Henry Grady Weaver This classic work takes the reader on a fascinating journey through history to trace the successes and failures of different civilizations. Weaver explains that the engines behind unprecedented economic growth and human flourishing in the West are individual liberty, private property, and the rule of law. A perennial FEE bestseller! 253 pages, paperback $8.00

The Industrial Revolution and Free Trade edited by Burton W. Folsom, Jr. The Industrial Revolution is one of the most misrepresented and demonized periods in history. This volume tells the true story. T he advent of mass production and the rise of free trade made more goods available to more people less expensively than ever before. In spite of long hours and hard conditions, factory workers increased their wealth, lengthened their lives, and improved their standard of living. The anthology contains 22 articles by Ludwig von Mises, F. A. Hayek, Henry Hazlitt, Murray Rothbard, Hans Sennholz, Lawrence Reed, and others. 178 pages $10.00

The Law by Frederic Bastiat ( 4 copies!) A masterpiece of style, brevity, and common sense, The Law concisely presents the classic moral case for liberty and limited government. Here is the timeless message of immutable principle--in the immortal words of one of history's most courageous thinkers and brilliant writers. Introduction by Richard M . Ebeling, foreword by Walter E. Williams, and afterword by Sheldon Richman. Single copy price: $4.00. With this special 4-for-$10 offer, you can keep one copy for yourself and share the other three with friends or family. 112 pages, paperback $10.00

Buy All for $25.00 (a total of 7 books)

O ffer ends January 31, 2007. Standard postage and handling for this special: Please add S4 per order of $25 or less; $6 per order of $26- $50. Sorry, this special offer is not available through our online store. Send order, with accompanying check or money order, to FEE, 30 South Broadway, Irvington-on-Hudson, NY 10533. Credit-card orders also welcome: (800) 960- 4333; fax (914) 591-8910. FREEMAN IDEAS ON LIBERTY VOLUME 56, NO 10 DECEMBER 2006

From the President 2 Milton Friedman and the Chicago School of Economics by Richard M. Ebeli11g

Columns 4 Perspective - Economists Against Economics by Sheldon Richman 6 The Trade Deficit Is Debt? It Just Ain't So! by Donald]. Bo11drea 11x 12 Ideas and Consequences -Two Who Made a Difference by Lawrence W Reed 19 The Therapeutic State - Psychiatry: A Branch of the Law by Thomas Szasz

27 Our Economic Past - From the Armistice to the Great Depression by Robert H~f!gS 40 The Pursuit of Happiness - Hayek on the Rule of Law and Unions by Charles W Baird Page 2 Features 8 Your Money and Your Life: The Price of "Universal Health Care" by Jmre M. Orient 14 Was Dickens Really a Socialist? by William E. Pike 17 A Government Program for All by Pa11l Cl11ik 21 John Kenneth Galbraith: A Criticism-and an Appreciation by David R. Henderson 29 The Peace Principle by Jinr Pero11 31 Milton Friedman (1912-2006) by Richard M. Ebeling and Sheldon Rich111an 42 Index 2006 Page 14

Book Reviews 34 The Ethics of the Market by John Meadowcroft Rcvie11'ed by Richard M. Ebeling 35 Peddling Panaceas: Popular Economists in the New Deal Era by Gary Dean Best Revie11'ed by B11rton Fo/so111,)r. 36 Philosophers of Capitalism: Menger, Mises, Rand, and Beyond edited by Edward W. Younkins Reviewed by Aeon). Skoblc 38 Winning the Race: Beyond the Crisis in Black America

by John McWhorter R evic111Cd by Ceo~(!e C. Leif Page 34 From the President Milton Friedman and the Chicago School of Economics

BY RICHARD M. EBELING

ilton Friedman, who passed away on Novem­ and a growmg number of followers in the profession ber 16 at age 94, once commented that there exposed as erroneous the Keynesian presumption that M is no such thing as different schools of eco­ markets are inherently unstable and prone to monopoly. nomics; there is only good economics and bad econom­ Friedman and many ofhis Chicago colleagues shared ics. While he may have sincerely believed this, Friedman a deep and determined allegiance to human liberty. Free was nonetheless the twentieth century's most outstand­ markets, they explained, are the institutional guarantor ing contributor to w hat has become known as the of choice, opportunity, and limits on government con­ C hicago school of economics. trol over people's lives. In Capitalism and Freedom (1962), T he U niversity of Chicago's economics department for example, Friedman pointed out that when Holly­ was founded in 1892 with the appointment of]. Lau­ wood actors, writers, and directors were blacklisted in rence Laughlin as the head professor. An uncompromis­ the 1950s after being accused of communist affiliations, ing advocate oflaissez faire and free trade, Laughlin may they were not doomed to starvation or imprisonment in be said to have set the tone for much of the department the Gulag. Whether or not the blacklist was proper, those for the next hundred years. individuals could find alternative jobs in the marketplace In the period between the two world wars the mar­ because the government did not control or dominate ket-oriented approach of the department continued the economy. with the writings and teaching of such leading scholars "The fundamental protection was the existence of a as Frank H. Knight, Jacob Viner, and Henry Simons. private-market economy in which they could earn a liv­ W hile they cannot be said to have been as staunchly free ing," Friedman pointed out. Government denunciation market as Laughlin or many of the Chicago economists did not mean literal destruction, as it did under the com­ who followed them, they forcefully emphasized the munism with which some of the blacklisted actually superiority of competitive markets and the price system, sympathized. and the inherent problems that arise from intrusive and Friedman more generally expressed this idea in his discretionary governmental power. widely acclaimed Free to Choose (1980): T he C hicago school blossomed into one of the most influential schools of thought after Friedman joined the Economic freedom is an essential requisite for polit­ economics faculty in 1946 and then was joined by his ical freedom. By enabling people to cooperate with long-time friend George]. Stigler in 1958. one another without coercion or central direction, it Friedman revolutionized macroeconomics, while reduces the area over which political power is exer­ Stigler helped to do the same in microeconomics. cised. In addition, by dispersing power, the free mar­ Friedman challenged the dominance of Keynesian eco­ ket provides an offset to whatever concentration of nomics in the postwar period, and Stigler's writings political power may arise. The combination of eco­ undermined many of the rationales for government reg­ nomic and political power in the same hands is a sure ulation of business . recipe for tyranny. Their common method of analysis, which became a near hallmark of the Chicago school, was rigorous math­ Throughout the twentieth century the Chicago ematical modeling combined with statistical research to school's rival in the defense of the market order and the demonstrate the empirical validity or falsity of an eco­ nomic theory or policy prescription. They, their students, Richard Ebeli11g ([email protected]) is the president of FEE.

THE FREEMAN : Ide a s on Liberty 2 M i lton Friedman and the Chicago School of Economics free society has been the Austrian school, led by Ludwig atively high correlation between some measurement of von Mises and F. A. Hayek. The Austrians have also the money supply and national income, has become a forcefully demonstrated the superiority of the free mar­ hotly debated issue in macroeconomics again, as the def­ ket and the hazards from all forms of socialist planning inition of the money supply has become more uncertain and government intervention. And they too have and the correlations have become more unstable. emphasized the uniqueness of the individual and the Furthermore, by insisting on a primarily statistical value of liberty. analysis of macroeconomic events, the data available have But their starting points have been radically different tended to be highly aggregated, with the focus on such in reaching their pro-market conclusions. In his famous things as output and employment as a whole and the essay on "The Methodology of Positive Economics" general price level. This means the supply-and-demand (1953), Friedman argued that the goal of science was details and the interconnections between various prices, successful quantitative prediction and that any hypothe­ which represent the actual causal relationships in the sis, no matter how unrealistic its assumptions, was good economy, are lost beneath the macro-aggregate surface. if it resulted in better predictions. Thus, as one critic Yet these microeconomic relationships, and how pointed out, if a strong correlation was found between changes in the money supply influence and potentially the anchovy catch off the coast of Peru and business­ distort them, have been the very essence of the alterna­ cycle fluctuations in the United States, this would be tive Austrian approach to understanding inflationary considered a good predictive theory, regardless of any processes that end in recessions and depressions. Thus, real causality between these two measured events. for example, when Friedman looked at Federal Reserve policy in the 1920s and saw that the general price level Causal Relationships had remained relatively stable, he concluded that Fed ustrians also believe that science should try to "pre­ policy had done nothing wrong. The only error by the A dict," if by prediction we mean understanding the Fed was in the early 1930s, when it did not print more causal relationships in society and the market. But Aus­ money to counteract the price deflation that was occur­ trians emphasize that the unique characteristic of social ring at that time. and market phenomena is man's purposefulness (an The Austrians, on the other hand, looking below the approach, by the way, that was also strongly defended by stable price level, concluded that Fed monetary policy one of the older Chicago economists, Frank Knight). had actually been highly "activist" and had generated Making sense of the market requires looking beneath imbalances between available savings and investment statistical relationships. What is a consumer good or a that finally resulted in the economic downturn of the capital good? When is a transaction "voluntary" and 1930s. Whereas the Chicago economists of that time, when is it "coerced"? What is a "competitive" market and Friedman later, believed that the Fed should have situation and when is a situation "monopolistic"? When " reflated" the price level through monetary expansion is a "profit" earned and when is a "loss" suffered? What in these years, the Austrians reasoned that the distortions is it that entrepreneurs do and how do they and others caused by the earlier inflation would only be made in the market form expectations about the future? worse through any new round of inflation. Once the These concepts and relationships are dependent on relative price and production relationships had been dis­ how individuals assign meanings to their own actions torted by the earlier inflation, the only way to return to and to the objects and actions of other human beings stability was through an adjustment of prices, wages, and around them. They are not reducible to measurable cat­ production reflecting the new post- boom reality. egories to which statistical methods of correlation may Nevertheless, in the face of Keynesian domination be applied. after 1945, Milton Friedman, with courage, determina­ In addition, the future is not as quantitatively pre­ tion, and intellectual integrity, went against the tide and, dictable as too many Chicago economists have liked to along with only a few others, succeeded in stopping the believe. Indeed, one hypothesis for which Friedman was advance toward ever-increasing government control of most famous in the 1960s and 1970s, that there is a rel- society. @)

3 DECEMBER 2006 Perspective ------FREEMAN Economists Against 11.11 N •i Mil I I iii Economics Published by The Foundation for Economic Education ive economists who either won the Nobel Prize in Irvington-on-Hudson, NY 10533 economics or who served as president of the Phone: (914) 591-7230; E-mail: [email protected] www.fee.org FAmerican Economic Association-and three who did both-recently joined over 600 other economists in President Richard M. Ebeling urging the federal government to increase the minimum Editor Sheldon Richman wage. The signatures were gathered by the union-backed Managing Editor Beth A. Hoffman Book Review Editor George C. Leef Economic Policy Institute (EPI), which unsurprisingly supports substantial government intervention in the Columnists economy. Charles Baird David R. Henderson Donald]. Boudreaux Robert Higgs I guess this is supposed to make us think more of the Stephen Davies Lawrence W. Reed minimum wage. Instead, it makes me think less of the Richard M. Ebeling Thomas Szasz Nobel Prize in economics and the American Economic Burton W. Folsom, Jr. Walter E. Williams Association. Contributing Editors The economists claim the m1mmum wage "is based Norman Barry Dwight R. Lee on the principle of valuing work by establishing an Peter J. Boettke Wendy McElroy hourly wage floor beneath which employers cannot pay James Bovard Tibor Machan their workers." Thomas J. DiLorenzo Andrew P Morriss Joseph S. Fulda James L. Payne That's gibberish. Legislating a wage floor is not a prin­ Bettina Bien Greaves William H. Peterson ciple of valuing work. We value work according to the John Hospers JaneS. Shaw utility it produces. No law can change that. All the min­ Raymond J. Keating Richard H. Timberlake Daniel B. Klein Lawrence H. White imum wage does is decree: lf you are going to buy labor services (a big if), you can't pay less than the law man­ Foundation for Economic Education dates. Board of Trustees, 2006-2007 In a free market a wage is agreed on through bargain­ Dan Grossman, Chairman ing between an employer, who wants to pay as little as he Sally von Behren Wayne Olson must to obtain the labor's expected value, and a potential Lloyd Buchanan Tom G. Palmer employee, who wants to be paid as much as he can get Edward M. Kopko Roger Ream Walter LeCroy Donald Smith for his services. What they are willing to offer and accept Frayda Levin Guillermo M.Yeatts depends on their expectations and other options. An Paige K. Moore unskilled worker's options can be expanded through the

The Foundation for Economic Education (FEE) is a acquisition of skills, but also through competition for his non-political, non-profit educational champion of indi­ present services. vidual liberty, private property, the free market, and Ultimately, an employer's ability to pay the wage constitutionally limited government. depends on consumers' willingness to buy the good that The Freeman is published monthly, except for com­ bined January-February and July-August issues . To receive a sam­ emerges from the production process at a price that cov­ ple copy, or to have The Freema11 come regularly to your door, call ers the (opportunity) costs of making it. If the n1.arket 800-960-4333, or e-mail [email protected]. price of the good doesn't cover all the costs, no wages T11e Freema11 is available on m.icrofilm from University Microfilm will be paid for long. International, 300 North Zeeb Road, Ann Arbor, Ml 48106. A wage, then, is the result of a transaction. If compe­ Copyright © 2006 Foundation for Economic Education. All rights reserved. Reproduction or use, without perm.ission, of tition is free of political impediments, wages tend to editorial or graphic content is prohibited. reveal the discounted marginal value of particular labor services in the market. Indeed, competitive bidding is the

THE FREEMAN : Id eas o n liberty 4 PERSPECTIVE : Economists Agains t Eco n o m i cs only way to discover that value, which has meaning only consulted whether to establish a Nobel Prize in eco­ through the market process. There is no external stan­ nomics, I should have decidedly advised against it.... dard against which a market-set wage can be judged. [T]he Nobel Prize confers on an individual an authori­ Moreover, if the parties are (politically) free-that is, the ty which in economics no man ought to possess .. .. system is void of physical force-the outcome satisfies There is no reason why a man who has made a distinc­ the criteria of justi ce and fairness. tive contribution to economic science should be omni­ True, we don't have a fully free market, but the prop­ competent on all problems of society-as the press tends er response should be to repeal the subsidies, taxes, reg­ to treat him till in the end he may himself be persuaded ulations, and other privileges that suppress competition, to believe." capital investment, and hence the demand for labor. Replacing the rotten school system with a competitive *** education market would also help. Tinkering with the Universal health care is all the rage, but could it mean minimum wage distracts us from the real task at hand. that only the healthy will get care? Jane Orient takes a The economists also say "the minimum wage helps to close look. equalize the imbalance in bargaining power that low­ A Christmas Carol is routinely held up to illustrate wage workers face in the labor market." Charles Dickens's animosity to business. Not so fast, says But it doesn't do that for workers w ho are dismissed William Pike. because their productivity is perceived to be below the So much good could be done at such a small cost per mandated wage. For the same reason, the minimum person if only government would put the money in the wage cannot be, as the statement claims, "an important right place. Paul Cwik has a modest proposal. tool in fighting poverty." Economic theory demon­ One of the best-known public economists, John strates-and endless studies illustrate-that if you raise Kenneth Galbraith, died this year. No friend of the free the price of something, other things equal, less of it will market, Galbraith, yet David Henderson finds some be bought. When anti-smoking advocates want people things worth saying about him. to buy fewer cigarettes, they call for higher taxes so Many people have peace on their minds this time of tobacco will cost more. How can demand curves slope year, and for Jim Peron the freedom philosophy is ulti­ downward for everything but unskilled labor? mately about peace. The economists go on to state, "We believe that a Milton Friedman died in November, a great loss modest increase in the minimum wage would improve to the freedom movement. Richard Ebeling and I pay the well-being oflow-wage workers and would not have tribute. the adverse effects that critics have claimed." Here's what's in the column department: Richard The adverse effects referred to are job losses by Ebeling assesses Milton Friedman's work. Lawrence Reed unskilled workers and less entry-level job creation. describes some heroes. Thomas Szasz discusses psychia­ Other adverse effects are possible. A firm may cut other try as a branch oflaw. Robert Higgs retraces the journey costs in order to pay the higher minimum, but that cost­ from Armistice to Depression. Charles Baird looks at cutting may make things less pleasant for workers. For F. A. Hayek's views on unions. And Donald Boudreaux, example, hours may be cut back or on-the-job-training hearing for the umpteenth time that the trade deficit is could be ca nceled. The 650 economists might think the debt, responds, " It Just Ain't So!" costs are worth the benefits, but should they be making Our book reviewers consider works on the moral that decision?What will they do personally to help those basis of freedom, economics during the New Deal, cap­ who actually bear the costs? italist philosophers, and race. The economists' statement illustrates a problem iden­ Being December, the issue wraps up with the 2006 tified by F. A. Hayek. At the banquet held the night index, prepared by managing editor Beth Hoffi11an. before he was presented the 197 4 Nobel Prize in eco­ -She/do11 Richma11 nomics, Hayek said: " I must confess that if I had been srichma11@jee. o~~

5 DECEMBE R 2006 The Trade Deficit Is Debt? It Just Ain't So!

BY DONALD J. BOUDREAUX

riting in the October 4 New York Times, tiona! flows of interest, dividends, and unilateral transfer Nobel laureate economist Joseph Stiglitz payments (such as foreign aid). W worries about "global imbalances." Stiglitz's We can simplifY by ignoring all but exports and concerns are revealed in his opening paragraph: "The imports. If the dollar value of exports during the year International Monetary Fund meeting in Singapore last exceeds the dollar value of imports, that country runs a month came at a time of increasing worry about the sus­ current-account surplus. If the dollar value of imports tainability of global financial imbalances: For how long exceeds that of exports, the result is a current-account can the global economy endure deficit. America's enormous trade deficits­ If we applaud when Suppose Americans this year spend the United States borrows close to $3 $900 billion on imports and sell $200 billion a day-or China's growing citizens of Wisconsin billion in exports. That means we run trade surplus of almost $500 million a save and invest in a $700 billion current-account deficit; day?" we imported $700 billion more than Borrowing $3 billion each day software firms in we exported. But why? Why would means that the United States would foreigners ship us $900 billion worth annually accumulate debt of approxi­ C alifornia or orange of things they sweated to produce and mately $1.1 trillion. groves in Florida, demand in return only $200 billion While Stiglitz gives no source for worth of things from us? The answer his figure, it's likely an estimate of the w hy should we not is that they want to spend the $700 sum of Uncle Sam's projected budget be equally pleased billion on things other than Amer­ deficit for this fiscal year ($290 billion) ican-made goods and services: Amer­ and the projected 2006 U.S. current­ w hen citizens of ican assets. They want to invest it in account ("trade") deficit ($864 bil­ Shanghai save and America. lion). If so, Stiglitz's claim is misleading Like Americans, foreigners can on two counts. invest in these same invest their dollars in American corpo­ First, he double-counts. Whenever rations or in American real estate, or a foreigner sells a product to an Amer­ American firms? they can simply hold dollars as cash. ican and then invests the dollars he They can also lend the dollars to Amer­ earns from this sale in newly issued U.S. Treasury secu­ icans. A typical way of doing so is to buy U.S. Treasury rities, the U.S. current-account deficit increases as does Notes from Uncle Sam. These Notes are IOUs the gov­ Uncle Sam's indebtedness. But it's not two debts; it's one. ernn"lent issues to get money that allows it to spend To see why, we first need a brief primer on the mean­ more than it receives in taxes. ing of the current account. This account measures the dollar value of goods and services exported and import­ Donald Boudreaux ([email protected]) is chairman of the departmmt of ed during some period (say, a year), along with interna- economics at Ge01;ge Mason University.

THE FREEMAN: Ideas on Liberty 6 IT JUST AIN ' T SO!: The Trade Defic it Is Debt?

Now we can see Stiglitz's double-counting. across political borders, national economies lose much of Suppose that all $290 billion of the debt that Uncle their relevance. The relevant economy becomes larger Sam accumulates this year is bought by foreigners. Inso­ than that of any one country. This development is ben­ far as they purchase this debt with new earnings from eficial, for it means (among other things) that failure to the sale of goods and services to Americans, these pur­ save and invest can be made up by foreigners doing so. chases increase the U.S. current-account deficit. Likewise, failure of any one country to provide ample But does the additional debt that Americans accu­ enough investment opportunities for domestic savers mulate this year equal $580 billion- the sum of the can be made up by access to investment opportunities in $290 billion of additional debt that U.S. taxpayers owe other countries. to Uncle Sam's creditors and the $290 billion addition to China's average daily trade surplus of $500 million the U.S. current-account deficit? No. Americans are in means that the Chinese now annually save about $182.5 debt by only (!) an additional $290 billion. billion that they then invest outside of China. Why American taxpayers owe an additional $290 billion to is that a problem for the United States? If we applaud Uncle Sam's creditors who, in this example, happen this when citizens ofWisconsin save and invest in software year all to be foreigners. The fact that this purchase of firms in California or orange groves in Florida, why Uncle Sam's debt by foreigners also is counted as an should we not be equally pleased when citizens of increase in the U.S. current-account deficit doesn't mean Shanghai save and invest in these same American firms? that any debt in addition to Uncle Sam's budget deficit One response-the only one with any merit-is that is created. much of China's savings is done by the Chinese govern­ To add the $290 billion current-account deficit to ment, which then invests these savings abroad. Unlike the $290 billion borrowed is to double-count. private citizens, governments' motives for saving and There's a second and more fundamental error-one investing are influenced heavily by political rather than that exists even if Stiglitz's figure of"close to $3 billion purely economic considerations. This situation does pose a day" refers only to the projected U.S. current-account a potential threat, for the Chinese government might for deficit for 2006. The current-account dificit is not synony­ political reasons suddenly dump its holdings of foreign mous with debt. If Mr. Sony uses the $2,000 he receives assets and severely disrupt credit markets. But this threat from selling computers to Americans to buy $2,000 comes from an economically harmful decision the Chi­ worth of equity in Exxon, the U.S. current-account nese state might make, not from the mere fact that deficit rises by $2,000, but no real indebtedness is creat­ China now runs a significant trade surplus . It's careless­ ed. No American owes Mr. Sony anything. ness, at best, for a Nobel economist to suggest in the Confusion is caused by calling "debt" that significant New York Times that a country's trade surplus is itself a portion of the U.S. current-account deficit that does not problem for the global economy. entail obligations by Americans to repay money to for­ And even the threat posed by large Chinese govern­ eigners. And no such obligations exist for foreign hold­ ment holdings of foreign assets isn't great. No credible ings of dollar balances, of American real-estate, or of argument suggests that Beijing is hoarding such assets equity in American corporations. It just ain't so that the simply to dump them all at once. Indeed, if a sudden dis­ so-called trade deficit is debt! gorging of assets by Beijing were likely, asset traders Alas, though, problems with Stiglitz's analysis go fur­ would respond today by selling dollars and other non­ ther. Also unwarranted is his concern with China's trade Chinese assets "short." Such short-selling, however, isn't surplus. occurring. Of course, asset traders might be myopic or ill-informed. But for my money, I trust the expressed Balance of Payments judgments of private market participants far more than I nderstanding why this concern is misplaced takes do those of an academic economist whose reputation is U us to the heart of problems with the so-called based on his ability to describe all sorts of market fail­ "balance of payments." To the extent that people trade ures that, while possible, are rarely plausible. @

7 DECEMBER 2006 Your Money and Your Life: The Price of "Universal Health Care"

JANE M. ORIENT

lthough often recognized as sacred, human life democracy." The overarching (stated) goal is to "maxi­ has not been considered the top priority in the mize the health of the population." A hierarchy of values. Human beings have willing­ What could be wrong with the popular, noble­ ly sacrificed life to preserve honor or virtue, to defend sounding goals of maximum health or universal health? the faith or the nation, or to protect family or the fam­ There's ample evidence that Americans don't care ily's livelihood (property). Civilized nations have, how­ very much about their health. They grouse about copay­ ever, generally recognized the right to life-meaning the ments at the doctor's office or pharmacy and may leave right not to be unjustly killed and to defend one's life by an office in high dudgeon if expected to pay a reason­ force. able bill not "covered" by their insurance. They often Today many clamor to place an additional value refuse to buy medical insurance even if they can afford above life itself. "Without your health, who are you?" is it. Aside from a subpopulation of health fanatics, many a popular question. "Without your health, you really Americans constantly defY the grandmotherly advice have nothing," Internet sites tell us. "Without your that is the proven basis for effective health maintenance. health, the rest is pointless .... Nothing else matters." They smoke, drink, take drugs, engage in casual sex, Surely something so important as health should be a and/ or overeat. They do not exercise, eat their vegeta­ right, especially in such an affiuent nation, shouldn't it? bles, or conscientiously wash their hands. They may be American medicine is often criticized for placing willing to take lots of pills, but appear to be allergic to too much emphasis on curing disease and not enough anything that interferes with instant gratification or on maintaining health. All we need to do is to prevent requires self-discipline. people from getting sick, or treat them when they are Fortunately, Americans still have the right to practice only slightly ill, to prevent costly hospitalizations later­ good health habits-according to their own views, not or so it is claimed. "Health care" supposedly heads off necessarily the American Medical Association's. They "sickness care," saving enorn1ous "resources" and mak­ also have the right to liberty or to refuse to take care of ing all of society better and happier. Presumably it their health, and many exercise it. Kitzhaber and his fel­ also increases life expectancy- overall. (There is little low reformers plan to do something about that. Being evidence for these assertions, and substantial evidence healthy is not just a right but a duty! to contradict them, but that's the subject of another However recalcitrant they may be about unhealthy article.) lifestyles, Americans do care about life when facing a real Stillmore important, health is the very "cornerstone and present danger of death as opposed to a hypotheti­ of a democratic society," according to the crusading cal future health problem. At that point they usually reformer John Kitzhaber, M.D., the former governor of want to spare no expense- especially if it is somebody Oregon who once practiced emergency medicine. In )a11c Orie11t, M.D. [email protected]) is the exewtive director of the what he dubs the Archimedes Movement, he plans to A ssociatio11 ofA111 erican Physicia11s a11d S11~!ZCOIIS a11d editor <~f its use health as the lever to move the earth and "reboot IICII'Sietter. She is a .for111er FEE tr11stee.

TH E FRE EMAN : Ideas on Lib e r t y 8 Your Money and Your life : The Price of "Universal Health Care " else's expense. And here's where human instincts will gram is entrenched and accepted. Thus w hile cost con­ collide head on with health reformers' abstractions. Peo­ tainment is important, it can wait. First there's the Vision ple naturally tend to place life above health; after all, of how reformers can use the perceived health-care cri­ witho_ut life, health is meaningless. As long as there's life, sis to " heal [sic] the divisions within our society"-as it there's hope for improvement. For reformers like is "the great leveler." The budget should be used not to Kitzhaber, however, the priority is reversed. Collective "cheat death" but to put bioethics into practice and to health is more important than individual lives. The impli­ "distribute shortfalls equitably." There will, undoubted­ cations are profound. ly, be shortfalls. It ought to be obvious that there is an unbridgeable Clearly, in Kitzhaber's view, "health" trumps life. And chasm between life and death. Nevertheless, the discon­ "health" is not mere physical health but the well-being tinuity apparently escapes those w ho set up relative value of society-as manifested by social justice, egalitarian scales based on "quality-adjusted life-years" (QALYs). distribution of goods and services, and proper ethics. The unstated assumption is that at some point on the QALY scale, visible to experts, the value of a life Choice Constrained becomes negative-even less than the value of death. roponents of"universal health coverage" are gener­ While the old-fashioned meaning of"a fate worse than Pally dedicated to bioethics- w hich seems largely death" has been mostly forgotten, the concept has taken concerned with choosing death for oneself or others on a w hole new and very broad definition. purportedly because an unhealthy life or severe dis­ How can this be? ability is unendurable. But most other choices are to be We don't like to use the term lebensunwertes Leben constrained. (life unworthy oflife) because of its historical association A "living will is actually a dying will," explains James with the embodiment of evil (National Socialism). Pendleton, M.D., a Pennsylvania psychiatrist and a past Instead, the emphasis is placed on optimizing the use of president of the Association of American Physicians and resources. As the Vision Statement of the Archimedes Surgeons. The British government holds the view that a Movement explains, the goal of maximal population living will may not insist that an incapacitated person be health is to be achieved by "creating a sustainable system kept alive; this view was recently confirmed by the which reallocates the public resources spent on health European Court of Appeals. In the United States hospi­ care that ensures universal access to a defined set of tals are generally not required to continue care that effective health services"; that is, "care that is effective in they consider "futile." Families who disagree with a hos­ producing health." Care that simply relieves pain, pital's decision may be given ten days to try to find reduces disability, or postpones death might not qualify another source of care for a patienr. " Futile" care is (and, unlike " health care," is certainly not a right, as is Newspeak for care that is actually effective at keeping operationally demonstrated wherever nationalized med­ the patient alive, although not at restoring mental capac­ icine has been tried). ity or health-otherwise, death of the patient would Kitzhaber is the architect of the Oregon H ealth Plan, moot the questions. which prioritizes services and cuts off public funding for If the taxpayers are involved, then there is a question all those that fall below a line set by the legislature. It is of whether it is justifiable to seize money from one probably not coincidental that Oregon is the first state person to pay for benefits to another, whatever the effi­ to permit physician-assisted suicide. The health plan was cacy of the treatment. But w hat if private funds are to be supposed to increase access to "basic health care" with­ used? out increasing costs. Although by 2003, costs were four The question of whether a Canadian has the right to times as high as at the plan 's inception, Kitzhaber's use his own money to purchase medical care that is sup­ enthusiasm is not dampened: Expenditures are not the posed to be covered under the national health plan, but only concern. is unavailable, was recently taken to the Canadian Spending can always be ratcheted down once a pro- Supreme Court by Jacques Chaoulli, M.D. Chaoulli had

9 D ECE MB ER 200 6 Jane M . Orient been forced to abandon his emergency house-call prac­ ingly, patients enrolled in managed-care plans have also tice because of the mounting government penalties for forfeited their rights, but are generally unaware of it accepting private payment. The case was brought, at because severe rationing is not yet in effect. Chaoulli's personal expense of around $600,000 (and The key is the "hold harmless" clause that forbids risk of having to pay the government's legal costs if he physicians contracted with a managed-care plan to lost) on behalf of a patient who had to wait a year for a charge subscribers privately or to "balance bill" (charge hip replacement. more than the plan allows, even if the payment is a dol­ In a decision that some fear could destroy the gov­ lar or less). The only thing subscribers have the right to ernment's system, the Court ruled that "access to a wait­ purchase for themselves from a contracted provider is ing list is not access to health care." The decision was cosmetic or experimental treatments. The Lobb family stayed for a year to permit the system to adjust to the discovered this when Sandra Lobb was refused admission threat of competition. While it applies only to Quebec, to an alcohol-rehabilitation program, although her the effects are expected to reverberate across Canada. physician recommended it and her family was willing to "How can you imagine that Quebeckers may live," pay. By contract the physician was not allowed to cir­ asks Chaoulli, "and the English Canadian has to die?" cumvent the plan's utilization-review program. Mrs. Would Americans be allowed to buy private care if Lobb died. compulsory public insurance becomes law? Advocates of Insurance companies do not make their subscribers universal coverage usually don't address this question. aware of this limitation. Only by remarkable persistence But Kitzhaber says he would permit people to purchase was one small business owner, of Cameron's Hardware & extra medical care, using "discretionary income"-that Supply in Oxford, Pennsylvania, able to get the insur­ which is left after taxes. ance carrier to admit to the implications of the "hold Taxes are also a great leveler. For the same miserable harmless" clause, which is probably required by state law. public "health insurance" Canadians pay from $305 to $27,000 in taxes each year, depending on income brack­ A Collision of Rights et. "The end game is that people with money no longer ights are enforceable. The only way to enforce a want to pay the taxes required to provide quality health R right to an economic good such as medical treat­ care to everybody," states Michael McBane, national ment is through taxation: in other words, to give some a coordinator of the Canadian Health Coalition, which license to steal resources from productive persons to pay opposes privatization. for benefits to others. Because of taxation a person has no right to use his earnings to support his own life until Assumed Right he has first "contributed" to societal health. As demands mericans tend to assume that they have the consti­ inevitably mount, rationing becomes increasingly strin­ A tutional right to spend their own money to extend gent. Only those with sufficient means to pay twice for or enhance their own lives. How to get around that medical care have a way to escape. If legally prohibited obstacle to universal rationing was addressed by the from purchasing extra care in their own country, they Clinton Task Force on Health Care Reform. The pub­ may be forced to go abroad, as many affiuent Canadians lic-private partnership is a promising method, as the do. Constitution does not apply to private entities. In fact, Despite the professed benevolent intentions of"uni­ most Americans have already lost the ability to buy pri­ versal health care" advocates, they are turning a license vate medical care in this way. to steal into a license to kill those who are not suffi­ Medicare patients who are enrolled in Part B may ciently healthy by depriving them first of medical care not use their money to buy "covered" services outside and then of the sustenance that all living things require. the system, unless they see one of the relatively few The term "health care" is well chosen: it cares for health, physicians who have opted out completely, because and discriminates against the sick. physicians are forbidden to accept the payment. Shock- There are great campaigns underway to coerce peo-

THE FREEMAN: Ideas on Liberty 10 Your Money and Your Life: The Price of "Universal Health Care " ple into being fully vaccinated and aggressively moni­ Exploiting human fears of sickness and death is a tored and treated for diabetes, mild hypertension, favorite tactic for politicians and rent-seekers. Promising nonoptimal blood lipids, and signs of incipient "mental health while being fully aware of the dark side-prema­ illness." At the same time, people are urged to accept ture death, the ultimate leveler-is the supreme nontreatment plus terminal sedation and dehydration hypocrisy. for conditions such as stroke or degenerative neurologic Persons who want to be in charge of their own life­ diseases. and- death decisions need to be aware of the price tag on There are many stakeholders to be placated in the compulsory insurance. Endlessly escalating demands on political process. There are those with crushing liabili­ your money are guaranteed. But worse, you must trade ties, including governments and business enterprises your right to life-and to the liberty and property with underfunded pension plans, as well as family mem­ required to sustain it-for an obligation to measure up bers who don't want their inheritances to be consumed. to the official standard for health. Or else. Having There are those with the potential to profit from admin­ assumed responsibility for your treatment, the govern­ istering small-claims payments, churning well patients ment must assure your worthiness. through a clinic while diverting the sick ones, providing It is worthwhile to remember that the world's pre­ blockbuster drugs and vaccines to a large proportion mier health nuts were members of the National Social­ of the population, garnering votes for reelection, or ist party. And while the talk is about health, that's merely writing the guidelines and protocols for approved treat­ a lever. The unstated overarching goal is totalitarian ments. control. ®

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11 DECEMBER 2006 Ideas and Consequences

Two Who Made a Difference

BY LAWRENCE W. REED

n 20 years of traveling to 67 countries I've come war clouds gathered across Europe in 1938-39. A friend across some pretty nasty governments and some convinced him to forgo a Christmas vacation in I darn good people. To be fair I should acknowledge Switzerland and come to Czechoslovakia instead. Near that I've also encountered some rotten people and a Prague in December 1938 he was shocked to see Jewish half-decent government or two. The ghastliest of all refugees freezing in makeshift camps. Most had been worlds is when you have rotten people running nasty driven from their homes by Nazi occupation of the governments, a combination that is not by any means in Sudetenland, the part of Czechoslovakia handed over to short supply. Hitler at Munich the previous September. Indeed, as Nobel laureate and Austrian economist Winton could have resumed his Swiss vacation, step­ FA. Hayek famously explained in TI1e Road to Seifdom, the ping back into the comfortable life he left behind. What worst tend to rise to the top of all regimes-yet anoth­ could a lone foreigner do to assist so many trapped fam­ er reason to keep government small in the first place, as ilies? Despite the talk of "peace in our time," Winton if we needed another reason. "The unscrupulous and knew that Europe was sliding toward war and time was uninhibited," wrote Hayek, "are likely to be more suc­ running out for these desperate people. The next steps cessful" in any society in which government dominates he took ultimately saved 669 children from death in life and the economy. That's precisely Nazi camps. the kind of circumstance that elevates Victims of a socialist government's power over persuasion, force over persecution being helped by a stockbro­ cooperation, arrogance over humility. ker. Sort of makes mincemeat of Marx's So I take special note when I "class consciousness," doesn't it? encounter instances of good people The parents were anxious to get their working around, in spite of, in opposi­ children to safety, even though it would tion to, or simply without a helping Sir Nicholas Winton in July 2006 mean sending them off alone. Getting Credtt Lawrence Reed hand from government of any kind. the children to a country that would Some might say this betrays an unwarranted bias. But in accept them seemed an impossible challenge. Nicholas today's dominant culture as represented by media elites, Winton didn't waste a minute. He wrote to govern­ university bon vivants, and public-school mandarins, it is ments around the world, pleading for an open door, only not government that gets shortchanged. By their think­ to be rejected by every one but two: Sweden and Great ing, the capacity of government to meet our needs is Britain. He assembled a small group of volunteers to virtually limitless. It's private initiative that gets the shaft. assist with the effort. Even his mother pitched in. It's the nonpolitician that is deemed unreliably compas­ With 5,000 children on his list, Winton searched for sionate, incorrigibly greedy, or hopelessly unorganized. foster homes across Britain. British newspapers pub­ I offer here two stories of very good people I've met lished his advertisements to highlight the urgent need on opposite corners of the earth. If either story kindles for foster parents. When enough homes could be found anyone's faith in what private initiative can accomplish, it'll make my day as well as my point. Lawreuce Reed ([email protected]) is presiderrr cif rlre Mackirrac CCIIter A man named Nicholas Winton is the centerpiece of for Public Policy (www.mackirrac.o~e), a free -marker research arrd the first story. H e was a young London stockbroker as cd rrcatio11al orgarrizatio11 irz Midlarrd, Micl11garr .

THE FREEMAN: Ideas on Liberty 12 ------1/ Two Who Made a D i fference for a group of children, he submitted the necessary Rouge communists and resettled in my town of Mid­ paperwork to the Home Office and assisted his team of land, Michigan. The fam.ilies had moved on to other volunteers in organizing the rail and ship transportation locations in the United States but stayed in touch with needed to get the children to Britain. He took the lead the woman who called me and other friends they had in raising the funds to pay for the operation. made in Midland. The first 20 of "Winton's children" left Prague on The caller said she had told her Cambodian friends March 14, 1939. Hitler's troops devoured all of Czecho­ about my pending visit. Each family asked if I would slovakia the very next day, but Winton's team kept work­ take letters with cash enclosed to their desperately poor ing, sometimes forging documents to slip the children relatives in Cambodia. I said yes. Three of the families past the Germans. By the time World War II broke out were in Phnom Penh and easy to find, but one was many on September 1 the rescue effort had taken 669 children miles away in Battambang. That would involve a train out of the country in eight separate groups by rail. The ride, some personal risk, and a lot of time it turned out last batch of 250 would have been the largest of all, but I didn't have. Ifi couldn't locate any of the families, I was war prompted the Nazis to stop all departures. Sadly, to give the cash to any needy Cambodian I could find. none of those children lived to see the Allied victory less When I realized I wasn't going to make it to Bat­ than six years later. Pitifully few of the parents did either. tambang, I approached a man in tattered clothes in the Why did Nicholas Winton take on a challenge hotel lobby. I had seen him there a few times before. He ignored by almost everyone else? My colleague Ben always smiled and said hello, and spoke enough English Stafford and I asked him that very question at his home to carry on some short conversations. I told h.im I had in Maidenhead, England, this past July. He's now 97, but an envelope with a letter and $200 in it, intended for a looks and speaks with the vigor of someone years family in Battambang. I asked him if he could get it to younger. "Because it was the thing to do and I thought them. "Keep $50 of it if you find them," I instructed. We I could help," he told us. Today, the "Winton children" said goodbye. I assumed I would never hear anything of plus their children and grandchildren number about what had become of either him or the money. 5,000 people. You can learn more about Winton at Several months later I got an excited call from the www.mackinac.org/7872. woman who had originally called me about taking those letters. She said she had just received a letter from the Good Samaritan Cambodians in Virginia whose family in Battambang do not have a name for the person who figures at the that envelope was intended for. A line in the letter read, I center of my second story. I met him in war-ravaged "Thank you for the two hundred dollars!" Cambodia in August 1989. That poor man found his way to Battambang all In advance of my trip to southeast Asia, considerable right. And he not only didn't keep the $50 I offered, he local press attention focused on area doctors who donat­ somehow found a way to pay for the $10 train ride rum­ ed medical supplies for me to take to a hospital in the self. I doubt that he applied for a federal grant. Cambodian capital, Phnom Penh. A woman from a The next time somebody tells me we can put our local church who saw the news stories called and faith in politicians who spend other people's money, I explained that a few years before, her church had helped will tell them about what these two people did with Cambodian families who had escaped from the Khmer their own. (f)

13 DECEMBER 2006 Was Dickens Really a Socialist?

BY WILLIAM E. PIKE

have been an avid fan of Charles Dickens's works readers with the full range of English society, including since before entering high school. I have also many of its most downtrodden. We should not draw I adhered to the freedom philosophy for about as political conclusions from the fact that Dickens had a long. heart-that he painted vivid pictures of those suffering Therefore, as the years passed and I read more and poverty, disability, abuse, and homelessness. That he more commentators lauding Dickens as a catalyst for would try to win his readers' hearts to the likes of these collectivist economics and state-centered social pro­ says nothing about his views on how they should be grams, I grew discouraged and disquieted. I have helped. Such inferences are made today by self­ come to find, however, that by and large serving ideologues eager to enlist an ever- these commentators were not interpreting popular writer into their ranks. Dickens at face value, but were in effect Dickens presented his readers with putting words into his mouth. some of literature's most touching Did Dickens stand up for the characters: Tiny Tim, whose handicap poor? Yes. Did Dickens speak out on would doom him to a youthful death the conditions in his time? Yes. Was without costly treatment; Oliver he anti-capitalist? Were his views Twist, the orphan forced to endure socialist? Did he advocate for gov­ hunger, cruelty, and childhood labor; ernment welfare programs? No. Mr. Micawber, the genial debtor Compared to most great novel­ tragically forced into prison; Little ists, Dickens has inspired an inordi­ Nell and Jo, who would die well nate mass of biographies, and interest before their time. In presenting such in his life, apart from his works, has characters Dickens meant to force us to been unceasingly strong. One reason for face the plight of society's least members, this is simply that Dickens lived life fully. but he did not prescribe a collectivist solu­ He traveled abroad often and made many tion to ending their miseries. public appearances. He was an oft-seen Charles Dickens Nor does he blame their plight on the figure (though many times anonymous) still-evolving capitalist economy of his day. in the streets of London, exploring the city and meeting We are used to thinking of Dickens as an enemy of people of all backgrounds and walks of life. He was capitalism largely because of his timeless lampooning of comfortable among England's highest society and certain men ofbusiness.What he was really doing, how­ among its lowest classes. His understanding of the ever, was attacking the vice of greed. In Our Mutual human condition, therefore, was comprehensive. It is no surprise, then, that in both his fiction and his William Pike (williamedwardpike@_(!nrail. com) works at D ePauw nonfiction Dickens went to great lengths to present his University in I11dia11a.

THE FREEMAN: Ideas on Liberty 14 ------11 Was Dickens Rea 1/y a Socia I is t?

Friend he blasts the Lammles, who marry each other society as an effective businessman. The argument is also solely for money (only to find out that neither has any). made that in lampooning Scrooge's personality, Dickens In the same novel he forced the " mercenary" Bella Wil­ also distorts the realities of the labor market. Michael fer to undergo a transformation before finding happi­ Levin has written: ness. In Martin Clzuzzlewit relatives of the title character are ridiculed for their scheming at inheritance. Let's look without preconceptions at Scrooge's And then there is the prototype of the heartless cap­ allegedly underpaid clerk, Bob Cratchit. The fact is, if italist-Ebenezer Scrooge. But as with other characters, C ratchit's skills were worth more to anyone than the Dickens does not attack Scrooge as a capitalist but as a fifteen shillings Scrooge pays him weekly, there would miser. As Daniel T. Oliver put it in The Freeman (Decem­ be someone glad to offer it to him. Since no one has, ber 1999): and since Cratchit's profit-maximizing boss is hardly a man to pay for nothing, Cratchit must be worth Scrooge's character defect is not so much greed as exactly his present wages. miserliness. H e hoards his money even at the expense of per­ Both arguments have merit­ SO IJal comfort. While many Scrooge, like your local banker or remember the single lump of financier, benefits society through coal that burns in the cold office his business. And yes, Dickens does of his assistant Bob C ratchit, the not express, and most likely did fire in Scrooge's own office is not fully comprehend, the realities described as "very small.". . . of the labor market. But the tale of Dickens gives us no reason to Scrooge is of personal redemption. believe that Scrooge has ever It is not particularly realistic nor been dishonest in his business well-versed in economics. Dickens dealings. He is thrifty, disci­ is not attempting to argue against plined, and hard-working. What capitalism, nor is he arguing against Dickens makes clear is that these a free market for labor. H e is argu­ virtues are not enough. ing against personal callousness and against misanthropy. Though the protagonist through­ In chapter 33 of Socialism Lud­ out A Christmas Carol might be wig von Mises lamented Dickens's Bob Cratchit, there are sympathet­ Mr. Fezziw ig's Ball characterizations of utilitarianism ic characters who are in fact capi- and of true liberalism. However, if talists. Fezziwig, a man of business, nevertheless treats his Dickens's words were later co-opted to promote a employees like family. And then there are the easily over­ socialist agenda, that is hardly his fa ult. Utilitarianism can looked " portly gentlemen, pleasant to behold," collect­ be the basis of a solid capitalist economy. It can also be ing money to "buy the Poor some meat and drink, and mutated into a communist state. Dickens might not have 1neans of warmth." understood that, but he did know that utilitarianism Indeed, Scrooge himself, on that transformative without reasonable judgment can turn society- and the C hristmas morning, does not renounce capitalism. state-into something monstrous. Instead he promises to be a better man. H e will live a fuller life and share his good fortune with those close to Private Philanthropy, Not Public Welfare him. Christmas Carol exemplifies, on a personal level, Many libertarians and other supporters of the free A w hat Dickens was really arguing for. H e was not market will intetject that Scrooge is already benefiting calling for state intervention, nor for economic regula-

15 DECEMBER 2006 W i lliam E. Pi ke tions. Instead, he argued on behalf of personal philan­ instance, chastises Scrooge for relying on such institu­ thropy. In the end, Scrooge helps Tiny Tim not because tions rather than being philanthropic himself. Using of socialist ideals, but because his humanity is reawak­ Scrooge's own words he mocks him: "Are there no pris­ ened, causing him to care for this child. Quite frankly, he ons? Are there no workhouses?" does the right thing. Among Dickens's most moving writings is a nonfic­ In fact, a survey of Dickens's novels shows that his tion article called "A Walk in a Workhouse." In a few protagonists and his happy endings often have some­ short pages he describes the pathetic scene of a state­ thing in common- a person with means helps persons sponsored parish workhouse, Victorian England's solu­ of limited or no means out of the goodness of his heart. tion to almost every social burden-orphans, abandoned Oliver Twist is adopted by Mr. Brownlow. In Our Mutu­ children, the sick, the aged, the infirm, the insane. The al Friend the Boffins relinquish their fortune to the problem of course was that the workhouse took away rightful heir. Martin Chuzzlewit provides for his long­ both a person's liberty and dignity-not to mention his neglected grandchild and his true love. Mr. Pickwick future. forgives dishonest friends and helps them to establish a new life. And Sydney Carton gives up his very life for In all these Long Walks of aged and infirm, some old a pair of lovers in A Tale cifTwo Cities. people were bedridden, and had been for a long time; One can search in vain through Dickens's works for some were sitting on their beds half-naked; some calls for government control of the economy or social­ dying in their beds; some out of bed, and sitting at a welfare structures. As Lauren M. E. Goodland writes in table near the fire. A sullen or lethargic indifference Victorian Literature and the Victorian State regarding Dick­ to what was asked, a blunted sensibility to everything ens's treatment of sanitation in Bleak House: but warmth and food, a moody absence of complaint as being of no use, a dogged silence and resentful Here sanitary reform becomes fundamentally neces­ desire to be left alone again, I thought were general­ sary to the nation's moral and physical well-being. ly apparent. Yet it would be a mistake to infer from such remarks that Dickens had become a staunch proponent of Such was how Dickens viewed the state's involve­ the state's duty to intervene in the lives of individuals ment in society's welfare. He took great pains to laud the and communities. Bleak House memorably dramatiz­ nurses of the workhouse, who cared deeply about their es the need for pastorship in a society of allegedly wards. But the place itself- the institution-was an self-reliant individuals. But it by no means clearly abomination. endorses state tutelage, nor, indeed, any other form of So don't believe the English professors and the liter­ institutionalized authority. ary theorists. Charles Dickens was not a socialist at heart. Far from being an early proponent of the welfare state, In reality Dickens often criticized state-sponsored he was sounding alarms for all of us. Let us finally heed institutions. The Ghost of Christmas Present, for his warning. I

THE FREEMAN : Ideas on Liberty 16 A Government Program for All

BY PAUL CWIK

y economics students often ask why, if the There simply isn't enough good in the world. That is economic theory I present is correct, there is why I am proposing that we create a new program called M so much intervention in the economy. It the PCGDF The PCGDF is, of course, the Paul Cwik reminds me of an observation made by H enry Hazlitt in Good Deeds Fund. Before you dismiss this out of hand, Economics in 011e Lesson.: please hear me out. The PCGDF would collect one dollar from each It is often sadly remarked that the bad economists person in the United States each year. That would be present their errors to the public better than the good approximately $300 million. No one would protest the economists present their truths. The reason is that the loss of a measly dollar over the course of a year. What demagogues and bad economists are presenting half­ would they do;> Travel to Washington, D.C.; get a hotel truths.The answer consists in supplementing and cor­ room; create signs; and march in protest all over a single recting the half-truth with the other half. But to dollar per year? Not even the students who don't like consider all the chief effects of a proposed course on my classes would ever do that! Would they organize everybody often requires a long, complicated, and against you and support your politi cal opponents? Hard­ dull chain of reasoning. Most of the audience finds ly! The loss of a dollar wouldn't motivate anyone to do the chain of reasoning difficult to follow and soon anything. becomes bored and inattentive. On the other hand (a phrase we economists are very fond of), think of all the benefits that could be created Frederic Basti at has shown that an effective weapon with $300 million. I would start slowly by simply com­ against boredom and bad economics is humor and satire. mitting random acts of kindness and then build up to It is in this spirit that I present my own letter to a con­ doing great works. Since the expense of the PCGDF gressman full of half- truths and partially correct analyses. would be spread out over a large group of people, no I invite the reader to try to catch them all. one (at least no one worth worrying about) would notice or get upse t. Since the goodies would be My Dearest Congressman, bestowed on a small but highly visible group, they I, a humble economics professor, congratulate you on would capture the headlines and please the recipients. becoming our newest and youngest member of Con­ We economists call this dispersed costs and concen­ gress. There are many important problems that need to trated benefits. be addressed, and it is your idealism to which I wish to When we concentrate these benefits we will improve appeal. I submit to you a proposal that should benefit us the economy in ways that we are not normally able to. both and develop our society to heights not yet imag­ Let me explain it this way: if there is a light, diffused rain, ined. It is a proposal for a government program that will allow us to achieve those goals that have eluded us. For Pc111l C!Fik (pCIFik @JIIoc.edu) is au assisrallt professor of ccouo111 ics ar too long we have been laboring for only ourselves. .'vlOIIIII Olive Co llfZ~C in .\/orrh Carolina .

17 D ECEMBE R 2006 Paul Cwik it's nice, especially during the hot summer months. definitely use a (large) portion of the funds to support However, if a heavy rain is concentrated in a central the supporters of the PCGDF. That means I could fund location we can see its power. The same is true with your PACs, reelection campaign, and the think tanks and money and good deeds. When money is diffused nice the "527" committees that support your interests. things may arise, but it is only when it is concentrated that great things can be achieved. Do you think that the Majority Rule? pyramids were created by small-mindedness? By pooling orne may argue that only those programs that the $300 million, great works can be done. Shelters can be Smajority supports should be adopted-that politi­ built. Large-scale construction projects can be undertak­ cians are public servants and should follow the will of en. Many jobs can be created, and poverty can be dra­ the people. Naturally, I fully agree and would never matically reduced. Only by concentrating wealth and advocate against this principle. Yet think of all the pub­ resources can we build things to last the ages. lic good you could do if you are able to be reelected. An additional benefit must be considered: the impact Your seniority would increase; your status as a statesman this concentration of spending will have on the national would flourish; and your committee assignments will be income through the multiplier. When a person spends a closer to the center of power. In fact, I could use a por­ dollar in a shop it becomes someone's income. The shop­ tion of the PCGDF to spread the word that you're such keeper will spend that money, which will become some­ an effective congressman. one else's income. The spending is multiplied throughout Perhaps you are worried that others may attempt to the economy. It is better for organizations such as the form their own Good Deeds Funds. But not all good PCGDF to spend tax money, because the fund will not deeds are noble, kind, or generous enough to be associ­ set any of it aside. In contrast to the PCGDF, most peo­ ated with your name and reputation. You of course ple don't spend all their money-they save some of it. should carefully consider each request. Determine This precautionary act is reasonable from the individual's whether the deeds to be done are meritorious. Thus the point of view, however from a macroeconomic point applicants would have to explain the details to you and of view this unspent money is a brake on our ability to your colleagues. However, one can only listen to so grow. Spending money is why we see GDP increase many proposals in a committee hearing room before after a hurricane and why Germany and Japan grew so becoming numb to the whole process. Perhaps the quickly after the devastation ofWorld War II. Imagine if applicants could explain the details in more comfortable money were spent as if there were an emergency but settings-like over dinner or maybe, if the proposal is without all the destruction. Imagine how much better off large enough, at a fashionable resort over the weekend. we could become from only a dollar a year. Since your time is limited (and there are only so many As you know, economics is a value-free science. It weekends that you can get away) they would have to does not tell people how to behave. It can only serve as compete for your attention. They would have to send a guide to good policies. Economic science clearly you gifts. Who could refuse to talk to those who donate shows us the power of multiplying spending. It would be such generous gifts to you and your charitable causes? silly to ignore this potential. Furthermore, do you really Please consider this proposal carefully. The cost is want the random chaos of the market to guide progress only a single dollar per taxpayer per year, yet the good or would it not be better instead to have sensible and deeds that could be achieved are enormous! The rational planning? PCGDF is only the beginning of a glorious future. @ As the PCGDF begins its mission of good deeds, it will of course have to recognize the generosity of its cre­ Yours truly, ators and benefactors. In addition to all the direct bene­ Paul Cwik fits the PCGDF would bestow on the needy, I would A humble economics professor

T H E FREE M AN: I d eas on Liberty 18 T he T herapeutic State

Psychiatry: A Branch of the Law

BY THOMAS SZASZ

edicine and law are independent but inti­ treatment for the imprisoned individuals. In fact, the mately interacting social institutions. M edi­ assertion of this claim-as medical "fact"-was the very M cine guards its autonomy jealously and relates first resolution enacted in 1844 by the newly formed to the legal system as an equal partner. Psychiatry, in American Psychiatric Association (APA; then more contrast, submits slavishly to being dominated by the law descriptively named the Association of Medical Super­ and obediently meets its demands. Herewith some intendents of American Institutions for the Insane): examples. "R esolved, that it is the unanimous sense of this con­ On July 3, 2006, Orin Guidry, M .D., president of the vention that the attempt to abandon entirely the use of American Society of Anesthesiologists, appealed to his all means of personal restraint is not sanctioned by the colleagues to refuse to assist the states in carrying out a true interests of the insane." death sentence by means of lethal injection. "Lethal Ever since, psychiatrists have clung to their privilege injection," Guidry reminded anesthesiologists, "was not to imprison innocent persons like drowning men cling anesthesiology's idea. American society decided to have to life-preservers. capital punishment as part of our legal system and to Indeed, psychiatrists never tire of asserting and carry it out with lethal injection. The fact that problems reasserting their right to deprive people of liberty. In are surfacing is not our dilemma. The legal system has 2005 Steven S. Sharfstein, president of the APA, reiterat­ painted itself into this corner and it is not our obligation ed his and his profession 's commitment to coercion: "We to get it out." must balance individual rights and freedom with policies The American Medical Association's code of ethics, aimed at caring coercion." The term "caring coercion" Guidry continued, declares: "A physician, as a member would have fit perfectly into the N azi lexicon, along of a profession dedicated to preserving life when there is with Arbeit macht frei ("labor liberates") and Cnadetot hope of doing so, should not be a participant in a legal­ ("mercy death"). ly authorized execution." Guidry urged the Association's Because the ideas about psychiatry I have been pre­ 37,000 members "not to attend executions of death sen­ senting in these columns differ radically from what peo­ tences by lethal injection, even if called to do so by ple read in the newspapers or see on television, I always a court. The court cannot modifY physicians' ethical present the evidence fo r my view. The reader is free to principles to meet its needs" (www.asahq.org/ news/ judge the information and come to his own conclusion. asanews063006.htm). In support of my contention that psychiatrists have an Evidently many, perhaps most, American anesthesiol­ unappeasable appetite for assisting the legal system in ogists reject rescuing the criminal justice system from imprisoning individuals who irritate and upset society, I the consequences of its decision to deprive certain per­ offer the following evidence. sons of life. D epriving persons of liberty is only one The history of mental-health laws and of standard rung down the ladder of harms that the state may legal­ psychiatric practices illustrates that psychiatric confine­ ly inflict on certain individuals. N evertheless, most ment has nothing to do with psychiatric treatment. American psychiatrists feel it is their professional privi­ lege to assist the justice system in depriving certain indi­ Thomas Sz asz ([email protected]) is professor of psychiatry e111 erit11s at viduals of liberty; indeed, they insist that loss of liberty SUNY Upstate Medical U11iversity in Syrawse. His forthcoming book is under psychiatric auspices constitutes a form of medical Coercion as Cure: A Critical History of Psychiatry (Tra11sactiort) .

19 DECEMBE R 2 00 6 I Thomas Szasz

In 1851 an Illinois statute specified that "married vices to push the envelope of the state's existing invol­ women . .. may be received and detained at the hospital untary commitment law because he couldn't wait any on the request of the husband of the woman ... with­ longer for the Assembly leadership to bring his legisla­ out the evidence of insanity or distraction required in tion to the floor for a vote . ... The state has begun to other cases." identifY 'appropriate models for treatment' and to hire Today the desire to psychiatrically incarcerate persons staff to treat these patients.... To date, 16 states and the who are not committable by the lawyers' and psychia­ District of Columbia have enacted laws to allow author­ trists' own criteria looms large in connection with the ities to confine violent sexual offenders in psychiatric popular pressure and political need to keep so-called sex hospitals after their prison terms." offenders confined after they have served their sentences. In 1997 the U.S. Supreme Court declared this practice to Mental Hospitals as Prisons be constitutional. In Kansas v. Leroy H endricks the Court t is important to note here that as far back as in 1988 declared: "States have a right to use psychiatric hospitals I the APA's Council of Psychiatry and Law explicitly to confine certain sex offenders once they have com­ approved the use of mental hospitals as prisons. In a doc­ pleted their prison terms, even if those offenders do not ument dated November 11-13, 1988, the Council m.eet mental illness com.mitment criteria." declared: " Psych iatric patients who 110 longer require active In November 2005 New York Governor George psychiatric treatment or who are untreatable ca n still be best Pataki made the headlines when he initiated "an admin­ managed in a psychiatric setting . . . . Acquittees who are IIIla hie istrative program to commit sexual predators to public to be dischm;ged to outpatient status should remain under psy­ psychiatric hospitals indefinitely." Pataki's order pulls chiatric care in a hospital enviromnent." Note that the psy­ back the curtain. The state's mental-health system is like chiatric prisoner longing for freedom is treated as if he an army. The governor is the general. The foot soldiers, has power over his own discharge but is "unable" to the psychiatrists, are expected to follow the orders of exercise it: he is termed "unable to be discharged." Not their superiors. "As citizens, most of us would be com­ surprisingly, psychiatrists resent being considered jailers. fortable seeing people properly incarcerated if these are Confronted with the reality that the mental hospital is a considered crimes," said Barry Perlman, M.D., president prison and that the psychiatrist w ho works there is a jail­ of the NewYork State Psychiatric Association (NYSPA). er, they deceive themselves, no less than they deceive the "What we are concerned about is using the mental public, with a rhetoric of "care." health system to solve a problem that seems to spill over It is obvious that as long as law, psychiatry, and soci­ to it because the criminal justice system cannot ade­ ety define destructive and self-destructive behaviors as quately handle it." mental diseases and assign the duty to control persons Perlman acts as if he had just discovered that the who display such behaviors to psychiatrists, w ho eager­ mental-health system is an arm of the criminal justice ly embrace that responsibility, "seclusion and restraint" system. But even after discovering it, he does not suggest -in plain English, psychiatric coercion-will remain a that psychiatrists, individually or as a group, defY the characteristic feature of psychiatric practice. governor's orders. The definition of psychiatry as a medical specialty Politicians have no illusions about psychiatry; they concerned with the diagnosis and treatment of mental know that it is an extension of the state's law-enforce­ diseases is a monumental falsehood. Psychiatry is a ment apparatus and use it as such. According to one branch of the law, combining features of criminal, civil, report, "The governor [PatakiJ directed the Office of and family law: its primary function is to promote and M ental Health and the D epartment of Correctional Ser- ensure domestic tranquili ty. @

THE FREEMAN : Ideas on Liberty 20 John Kenneth Galbraith: A Criticism- and an Appreciation

BY DAVID R. HENDERSON

ast April John Kenneth Galbraith di ed at the age Galbraith strongly believed in government power to off­ of 97. Galbraith was one of America's most set the role of corporations in the economy and to sub­ L fa mous economists and a self-proclaimed liberal sidize various activities, such as the arts, that he favo red. (in the American sense of "statist" rather than in the Indeed, in his 1973 book, Economics aud the Public Pur­ European sense of "believer in freedom"). His fame pose, Galbraith claimed that "a new socialism" had came not from his technical accomplishments in aca­ become "urgent" in maj or sectors of the economy. demic economics but from his awesome w riting ability, Friedman , by contrast, was a strong believer in econom­ evidenced in 33 books and many more articles. He ic freedom. The second maj or difference between the wrote almost all his books- certainly the ones that made two was with respect to influ ence. Whereas Friedman him famous-for a general audience. affected not only popular thinking but H e honed his writing skills w hile on Galbraith recognized also the thinking of economists, Gal­ the board of editors of Fortune maga­ braith affected only the former. zine fro m 1943 to 1948. After that, he his lack of influence Galbraith recognized his lack of never stopped. on economists and influence on economists and often M ost free- market economists, claimed it was due to his having chal­ including me, have had little use for often claimed it was lenged the " conventional w isdom" (a the vast bulk of Galbraith's writing due to his having phrase he coined). H e once remarked, and thinking. T his is understandable, " In the choice between changing given that the mai n work by which he challenged the one's mind and proving there's no was judged, and by which he appeared need to do so, most people get busy on to want to be judged, was weak, both ''conventional the proof." In recalling critical com­ theoretically and empirically. But a wisdom" (a phrase ments that David McC ord Wright and more-complete assessment of Gal­ George Stigler had made on a paper braith's writing leads me to conclude he coined). he presented at the American Eco­ that we free marketers have been nomic Association (AEA) meetings, somewhat uncharitable to Galbraith. H e had remarkable Galbraith w rote, " N either approved new thought, how­ insights, especially about government bureaucracy and ever plausible." But Wright's and Stigler's views on new war, insights that would not have surprised a Ludwig thought are irrelevant. By dismissing Wright and Sti gler von Mises, an EA. H ayek, or a R obert Higgs. Moreover, that way, Galbraith avoided dealing with their criticisms. in his opposition to war and his attempts to stop it, Gal­ braith showed some real courage. David Hc11dcrsoll (drhm d@JIIbay. Hct) is a rescarchfc!loJ II with the HooJJer Galbraith competes with Milton Friedman as the lnstitlltio11 a11d au ecouomics prcifessor at the Naval Postgraduate School's Graduate School if Business and Public Policy. He is author of T he Joy most famous American twentieth-century economist, of Freedom: An Economist's O dyssey aud coauthor with Charles L. but with two maj or differences . One was ideological. Hooper of Making Great Decisions in Business and Life.

21 DECEMBER 2006 David R. Hende r so n

Other mainstream economists, such as Scott Gordon trades, coal mining, printing, clothing, and musicians­ and Robert Solow, also pointed out fundamental prob­ there were many small firms rather than, as Galbraith's lems with his conclusions-problems Galbraith never theory would have predicted, a few large ones. More­ seriously grappled with. Instead he focused on the witty over, noted Stigler, even if large firms did have monop­ epigram. As one critic pointed out, Galbraith's main oly power and even if powerful labor unions did have form of argument for key assumptions in his model of countervailing power, how would this assure that con­ the economy was "vigorous assertion." It's not hard to sumers would be helped? Wasn't it more plausible that see why. In his autobiography, A Life in Our Times, Gal­ not only the firms but also the unions would have a braith wrote that he learned a deep skepticism about sta­ desire to limit output and keep prices high and would tistics from a Harvard colleague, statistician William L. simply be fighting over the monopoly rents? Crum. Galbraith wrote: "In my adult life I have occa­ Certainly, there are many examples of that having sionally been criticized for inadequacy in statistical or happened in industries that the U.S. government did econometric method. Crum is responsible; from him I cartelize. Between 1938, when the Civil Aeronautics early formed the impression that no figure and no cal­ Board began to regulate the U.S. airline industry, and culation was really valid and that it was foolish to expose 1978, when it began to deregulate, the CAB allowed no one's self by citing one." new airlines. Not surprisingly, fares were kept high and What an incredible overconclusion. No figure or cal­ the main beneficiaries of this cartel pricing were unions culation was really valid? How would he know, except of airline employees, not airline stockholders. "Counter­ by presenting contrary figures or corrections in calcula­ vailing power" by the unions did no favors for American tions? And if he judged the invalidity based on these travelers. contrary figures or calculations, wouldn't he be accept­ ing their validity? Indeed, Galbraith backed up his skep­ Starved Public Sector ticism with a follow-up example: an incorrect n The A.ffluent Society Galbraith contrasted the aillu­ data-based prediction of an Alf Landon landslide over I ence of the private sector with the "squalor" of the Roosevelt in the 1936 presidential election. Of course, public sector, writing, "our houses are generally clean Roosevelt won, a fact that Galbraith acknowledges­ and our streets generally filthy." Galbraith attributed this which means that Galbraith must have trusted, within a to our failure to give the government enough of our certain margin, the actual data on presidential voting. resources to do its job. In none of his books and articles Galbraith's three most important books, measured by could one find the more-straightforward explanation for sales and influence on popular thinking, were American dirty streets-one that is based on incentives. Govern­ Capitalism: The Concept if Countervailing Power (1952), ment streets are an example of"the tragedy of the com­ The A.ffluent Society (1958), and The New Industrial State mons": No one owns then1 and, therefore, no one has an (1967). In American Capitalism Galbraith argued that incentive to take care of them. By contrast the privately giant firms had replaced small ones to the point where owned streets at Disneyland are amazingly clean. the "perfectly competitive" model no longer applied to Many people liked The A.fj7uwt Society because of much of the American economy. But not to worry, he their view that Galbraith, like Thorstein Veblen before argued. The power oflarge firms was offset by the coun­ him, attacked production that was geared to "conspicu­ tervailing power of large unions, so that competing cen­ ous consumption." But Galbraith himself was adamant ters of power protected consumers. The late Nobel that that was not his argument. Galbraith conceded that laureate George Stigler gave a pointed empirical and "an admirable case can still be made" for satisfYing even theoretical criticism at the aforementioned AEA meet­ consumer wants that "have bizarre, frivolous or even ings. Stigler noted that before Franklin Roosevelt's car­ immoral origins." His argument against satisfYing all tel-forming National Recovery Administration gave consumer demands was more subtle than Veblen's. Gal­ monopoly power to large businesses, in five of the six braith wrote: "If the individual's wants are to be urgent, industries with the most powerful unions-building they must be original with himself. They cannot be

T HE FREEMAN : Id ea s o n Li b e rty 22 John Kenneth Galbraith : A Criticism and an Appreciation urgent if they must be contrived for him. And above all, What is left of Galbraith's argument? Only the tired they must not be contrived by the process of production paternalist-authoritarian argument for government by which they are satisfi ed.... One cannot defend pro­ spending that was always lurking between the lines: peo­ duction as satisfYing wants if that production creates the ple don't want what's good for them; the government wants." knows what's good for them (never mind that the gov­ R eally? H ayek, co-winner of the 1974 Nobel Prize ernment was elected by these same ignorant people). in economics, delivered the most fundamental critique Therefore, the government should decide what people of Galbraith's thesis. Hayek conceded that most wants do are to have. not originate with the individual; our innate wants, he Galbraith's magnum opus was The New Industrial wrote, "are probably confined to food, shelter and sex." State, in which he argued that large firms dominate the All other wants we learn from what we see around us. American economy. "The mature corporation," he Probably all our aesthetic feelings-our enj oyment of wrote, "had readily at hand the means for controlling the music and literature, for example-are learned. So, wrote prices at which it sells as well as those at which it buys. H ayek, "to say that a desire is not important because it is ... Since General Motors produces some half of all the not innate is to say that the whole cultural achievement automobiles, its designs do not reflect the current mode, of man is not important." Hayek could but are the current mode. The proper have taken the point further. Few of Galbraith used the shape of an automobile, for most peo­ us, for example, have an innate desire ple, will be what the automobile mak­ for penicillin. It had to be first pro- same argument for ers decree the current shape to be." duced and then advertised before doc­ Well, not quite. Although GM tors could know about it. And it's safe government spending would have loved to "decree" the to say that we've found it very valu­ on education that he shape of automobiles in the 1980s, it able. seems consumers had different ideas. Interestingly, w hen it came time attacked as a poor T hat is one reason why GM, which to outline proposals for government argument for private did produce about half of all U.S.­ pohcy, Galbraith didn't adhere to his bought autos in the 1960s, sells only a own argument. H e advocated that expenditure on quarter of all U.S.-bought autos today. money be taken from the private sec­ " . " Interestingly, in his autobiography tor-that is, taxed away by force from unnecessary Items. Galbraith presented the very evidence individuals- and put into government that should have talked him out of his programs, especially programs like education. Why 1s conclusion in The New Industrial State. In 1954 Galbraith education so valuable' Because it creates desires. Gal­ was on a consulting team hired by Canadian Pacific braith wrote: " [T]here can be little doubt that education R ailway (CPR), Canada's dominant railway at the time. has a marked influence in widening the span of the indi­ H e saw quickly that CPR's most promising assets were vidual's wants . ... [M]ore esoteric desires-music and its forests and land, not its railway. Yet CPR basically fine arts, literary and scientific interests, and to some ignored the team's advice. H e wrote, " The railway men extent travel-can normally be synthesized, if at all , only did not look with favor on such passing fads as air­ on the basis of a good deal of prior education." planes." This should have clued him in to the idea that In other words, Galbraith used the same argument for large firms like CPR could " decree" virtually nothing. government spending on education that he attacked as a To his credit, Galbraith ultimately admitted, with a poor argument for private expenditure on "unnecessary 15-year lag, the major problem with his thesis. In July items." T hus having accepted that wants acquired 1982 the steel and auto companies he had claimed were through education are legitimate, he should have reject­ immune from competition and recessions were laying ed his earlier statement that wants which do not origi­ ofT workers in response to both foreign competition and nate with the individual are illegitimate. recession. Asked on "Meet the Press" whether he had

23 DECEMBER 2006 David R. Henderson ~ ------underestimated the extent of risk that even large corpo­ ly on less important prices while more important rations face, Galbraith paused and replied, "Yeah, I think ones awaited action--vigorously on pepper, not at all I did." on bread. Finally we began to realize for the first time what an unreasonably large number of products and Ambassador to India prices there were in the American economy. albraith was also President Kennedy's U.S. ambas­ G sador to India in the early 1960s. While there, Such are the woes of a central planner. Unfortunate­ Galbraith gave a series of speeches on economic devel­ ly Galbraith didn't much talk about the even-greater opment in which he hailed the role of government woes that the poor victims of his planning faced: fre­ planning as opposed to economic freedom. In one quent shortages of gasoline, tires, nylon stockings, sugar, speech, Galbraith stated, "[T]he market cannot reach eggs, and meat. The vast majority of the American pop­ forward to take great strides when these are called for. ulation were the victims, and the beneficiaries were a ... To trust to the market is to take an unacceptable privileged few who happened, like Galbraith, to be high risk that nothing, or too little, will happen." The Indian in government or to have government connections. government took his advice. It did not Finally, in evaluating Galbraith's take the "risk" of relying on the market work on economics, we shouldn't for­ but instead stuck with its system get his disastrous 1977 PBS series, "The of detailed controls over every indus­ Age of Uncertainty." It was full of eco­ try. The result: "nothing, or too little" nomic error and absurd subjectivity, happened. India was mired in poverty, truly Galbraith at his worst. The reader which began to lift only after some who wants to know more details decontrol started in 1991. should check two articles by David Galbraith was also one of the chief Kelley: "Distorted Picture: A Hard price controllers during World War II, Look at Galbraith's 'Age of Uncertain­ as head of the Price Section of the U.S. ty," Barron\July 18, 1977, and " 'Age of government's Office of Price Admin­ Uncertainty': The Taxpayer Should Ask istration. Unlike other economists for His Money Back," Barron's, August involved with price controls, such as 1, 1977, along with the revealing George Shultz during the Nixon response and rejoinder by Galbraith and administration and Frank Taussig dur­ Kelley, respectively, in Barron's, October ing the Wilson administration, Gal­ John Kenneth Galbrait h, 1961 3, 1977. braith emerged as an advocate of Photograph from the papers of John Kenneth Galbra1th So what's to like about Galbraith's in the John F. Kennedy Presidential Li brary and Museum, permanent price controls, an unpopu- Boston thinking and about his contributions to lar position among economists. In his society? A number of things. First, Gal­ autobiography Galbraith wrote about his experience as braith was a strong opponent of military conscription. a price controller in a way that recalls Ludwig von Writing in his autobiography about the debate over Mises's insights about how one intervention leads to renewing the draft before the attack on Pearl Harbor, another, but with a very different tone and bottom line: Galbraith used his rapier wit to score a point against advocates of the draft: "[T]he draft involved only the life Since one firm's prices could be another's costs, the and liberty of the subject. Price control involved money uncontrolled or later-controlled prices were begin­ and property and thus had to be taken more seriously." ning to unhinge those under earlier control. And the Later, in the 1960s, he wrote, "[T]he draft survives prin­ profits of the later-controlled producers were a point cipally as a device by which we use compulsion to get of comparison for those we had attended to earlier. young men to serve at less than the market rate of pay." Also very often we found ourselves moving decisive- In the interest of full disclosure, though, I should point

THE FR EEMAN : Ideas o n liberty 24 John Kenneth Galbraith: A Criticism and an Appreciat i on out that when I asked him in 1980 to sign "The Econ­ evil genius Albert Speer. In other words, the incredible omists' Statement Against the Draft," which I had writ­ destruction that the British and U.S. air forces wreaked ten and got almost 300 economists, including Milton on Germany, with the high loss of human life, didn't Friedman and Alan Greenspan, to sign, he had his secre­ even have the intended effect of slowing Germany's tary tell me, "Professor Galbraith will not be signing." war-production machine. Galbraith had to fight hard to have his report published without it being rewritten to Independent Mind hide the essential points. "I defended it," he wrote, "with hat else is impressive about Galbraith? He a maximum of arrogance and a minimum of tact." W brought an independent mind to some of the In my experience as a senior economist with Presi­ biggest issues of the twentieth century, those involving dent Reagan's Council of Economic Advisers, I found war and peace. For all his refusal to look at evidence, tact to be strongly overrated. To prevail, Galbraith prob­ Galbraith did some of his most important work on the ably needed about as littl e tact as he used. effect ofAllied bombing of Germany during World War Galbraith also visited Japan, where he analyzed the II. As a director of the U.S. Strategic Bombing Survey he effect of the use of the atom bomb. He wrote: went to Germany immediately after the European war and headed a team to do an overall economic assessment Nor were the atomic bombs decisive. It has long been of the German mobilization and the effect of the bomb­ held in justification that they made unnecessary an ing on that mobilization. Galbraith's team included invasion of the Japanese mainland and thus saved the economists Burton H. Klein, w ho made his reputation resulting fighting and thousands, possibly hundreds of with his work on that team, Nicholas (later Lord) thousands, of casualties on both sides. On few matters Kaldor, E. F. Schumacher (later author of Small Is Beauti­ is the adverse evidence so strong. The bombs fell after ful), Tibor Scitovsky, and Edward Dennison. the decision had been taken by the Japanese govern­ What they found was devastating. Galbraith wrote ment to surrender. That the war had to be ended was wittily, "Nothing in World War II air operations was sub­ agreed at a meeting of key members of the Supreme ject to such assault as open agricultural land." Successful War Direction Council with the Emperor on June attacks on war-production plants were much rarer. 20, 1945, a full six weeks before the devastation of Whereas in 1940, 1941, and 1942, average monthly pro­ Hiroshima. The next steps took time. The Japanese duction of Panzer vehicles was 136, 316, and 516, government had the usual bureaucratic lags as respectively, in 1943 (when the bombing had begun in between decision and action. earnest) and 1944, monthly Panzer production was up to 1,005 and 1 ,583, respectively. They found similar results Not to be missed in a listing of Galbraith's criticisms for airplane production. Galbraith's boss, George Ball of war are three later activities or writings. First, despite (later undersecretary of state under Presidents Kennedy the fact that he was close to Kennedy, Galbraith pulled and Johnson), found something equally disturbing about no punches in his evaluation of Kennedy's decisions the firebombing of cities. The RAF's bombing of central during the 1962 Cuban missile crisis. In his autobiogra­ Hamburg, for example, destroyed many lives and many phy, Galbraith pointed out that Kennedy's actions almost businesses in the central city-restaurants, cabarets, destroyed the world and that he took the risk so as not department stores, banks, and more. What were the to appear "insufficiently stalwart." "Domestic American newly unemployed waiters, bank clerks, and entertainers political considerations," wrote Galbraith, "intruded far to do? That's right: seek jobs in the war plants on the too deeply on an issue that threatened the end for all edge of the cities "to get the ration cards that the Nazis time of the civilized world." thoughtfully distributed to workers there." Second was Galbraith's early thoughtful and analytic Moreover, the effect of the bombing was to shift con­ opposition to the Vietnam War. Even though Galbraith trol of production from the incompetent Hermann was an insider with Johnson's administration, he criti­ Goering and the Luftwaffe to the far-more-competent cized the war as early as 1966.After trying personally to

25 DECEMBER 2006 I Dav i d R. Hen d e rso n r-1------persuade LBJ, Galbraith went public and made opposi­ cracy itself. Action in the organization interest, or in tion to the war one of his causes. response to the bureaucratic truth, can thus be a for­ Finally, Galbraith learned early in his dealings with mula for public disservice or even public disaster. the military not to have any special respect for their opinions just because they wore a uniform and had Many of my fellow free-market economists would do risked their lives. His short 1969 book, How to Control the well to understand this insight fully, to understand that Military, is still well worth reading today. Indeed, in my the bureaucracy known as the Department of Defense opinion it and his autobiography rank as his two best promotes defense about as much as the Department of books. Here is one of its best paragraphs: Health and Human Services promotes health and human services. Whatever his other failings, Galbraith The problem of military power is not unique; it is got this right. merely a rather formidable example of the tendency Finally, I confess some sadness. In November 1981 I of an organization, in an age of organization, to was the warm-up speaker for Galbraith at an event held develop a life and purpose and truth of its own. This by the Chicago Council on Foreign Relations. We had tendency holds for all great bureaucracies, both pub­ a short, friendly interaction, but I went into it knowing lic and private. And their action is not what serves a virtually nothing about Galbraith's keen observations on larger public interest, their belief does not reflect the war and peace. How much different our conversation reality of life. What is done and what is believed are, and my speech might have been had I paid Galbraith the first and naturally, what serve the goals of the bureau- respect that was his due. @

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TH E FREEMAN : Idea s on libe rty 26 Our Econonlic Past

From the Armistice to the Great Depression

BY ROBERT HIGGS

hen the Armistice took effect on November people, especially for middle-class people, who held 11, 1918, bringing World War I to a close, monetary assets such as bonds, insurance policies, and W the belligerent nations ofEurope were eco­ bank accounts, this inflationary eruption proved devas­ nomically almost prostrate-their labor forces and capi­ tating not only to the economy but, in the longer run, tal stocks depleted greatly, their domestic economic to the moral fortitude of the bourgeoisie, which felt that structures distorted grotesquely, and their old arrange­ the rug had been pulled out from under frugal, m ents for international trade and investment shattered. respectable people. By creating disaffection with the To make matters worse, the Versailles Treaty, signed on Weimar Republic, the hyperinflation helped to prepare June 28, 1919, required that Germany fertile ground for the growth and make huge reparations payments to In effect the Germans eventual triumph of Hitler's party. France, Great Britain, Italy, and Bel- After the hyperinflation was gium. To earn the wherewithal to borrowed from the stopped, new international lending make these annual transfers for the arrangements were hastily concocted, next several decades, Germany needed Americans and then but each such band-aid served only as a to sell great amounts of its goods handed over much of temporary means of stanching the abroad, but doing so was nearly bleeding. The reparations regime was impossible, given the country's eco­ the proceeds to the simply not viable in the long run; the nomic devastation and its loss of French and the only question was precisely how it Important territories and other would break down and what would resources to the victorious powers­ British, who in turn replace it. From the start, according to not to m ention the barriers other economic historian Peter Temin's countries erected to protect their own sent some of the Lessons f ront tire Great D epression, the producers from foreign competition. money back to the German government "struggled cease­ It soon became clear that the repara­ lessly for the reduction and elimination tions would be paid only if Germany United States to of its reparations obligations." After the borrowed large amounts from other repay loans received Germans defaulted in 1923 and the countries, and the only lenders capa­ French army occupied the Ruhr dis­ ble of providing sufficient funds were during the war. trict in response, the payments were the Americans. rescheduled in 1924, scaled down in Therefore, in effect the Germans borrowed from the 1929, then delayed, and ultimately, after Hitler came to Americans and then handed over much of the proceeds power in 1933, repudiated along with every other Ger- to the French and the British, who in turn sent some of man obligation under the Versailles Treaty. the money back to the United States to repay loans At the same time that the economically advanced received during the war. This scheme held so little countries were dealing with the reparations problem, they charm for the Germans, w ho got nothing out of it but were striving to reconstruct the international financial m ore debt, that they resorted to engineering a hyperin­ Robert Higgs (rh [email protected]) is smior fellolt' at the bidcpeudem flation of the German currency in 1922-23 to ease the lnstifll te (li'IIIW.iudepmdei1C.Oig}, editor of The Independent Review, government's fiscal woes. Unfortunately for the German a11d awlwr of Depression, War, and Cold War (l11depe11de11t i11stitute) .

27 DECEMBER 2006 Robert Higgs regime they had wrecked during the war by suspending a regime of cheap money," as Lionel Robbins described the gold standard and issuing vast quantities of fiat money. it, caused the U.S. money stock to grow faster than it oth­ The general assumption was that the European nations ervvise would have grown, kept interest rates lower than ought to return to the gold standard, and one by one they they otherwise would have been, and thereby encouraged did so during the latter half of the 1920s. The monetary domestic investors to make certain investments-in new system to which they "returned," however, was not the structures and other long-lived producer goods-that old prewar gold standard, but a "gold-exchange" standard they otherwise would not have made. In short, U.S. mon­ that lacked essential attributes of the old system, such as etary policies, aimed at assisting the British monetary circulating gold coins and domestic convertibility. Murray authorities, had the effect of bringing about "malinvest­ Rothbard called it "a bowdlerized and essentially sham ments" in the United States, distorting the structure of the version of that venerable standard." Unlike the classical U.S. capital stock in an unsustainable fashion (because system, it was subject to constant "management" by cen­ investments in structures and other long-lived capital tral bankers who sought to achieve new goals, such as goods will ultimately prove economically unwarranted price stability or a low rate of unemployment. when they have been made in response to artificially low When Great Britain finally resumed international interest rates, and such projects will go bankrupt). convertibility of the pound sterling into gold in 1925, it made a serious mistake by setting the official value of the A Feeding Frenzy pound at the old, prewar parity. Because of the rise in .S. central bankers also began to worry in the late prices that had occurred in Britain during the war, how­ U 1920s that by keeping interest rates artificially low, ever, the pound in free exchange was no longer worth as their policies were feeding a frenzy to buy corporate much relative to the U.S. dollar as it had been worth shares and creating a stock-market bubble destined to before the war. By officially overvaluing the pound (at pop with destructive effects on the real economy. £1 = $4.86, when the prevailing free-market rate was Accordingly, in 1928 and especially in 1929 they moved approximately $4.40), the British made their exports­ away from their "cheap money" policies, adopting poli­ goods priced in terms of the pound sterling-relatively cies of higher interest rates and exerting direct pressure expensive and hence difficult to sell overseas. British on commercial banks to stem what they saw as "specu­ export industries, such as coal, steel, textiles, and ship­ lative excesses" and diversions of bank loans from eco­ building, suffered accordingly, and workers in those nomically sound purposes. Most economists now industries, traditionally reluctant to go far afield in search believe that this change of monetary policy triggered the of jobs, endured high rates of unemployment. Many U.S. economic downturn that occurred in mid-1929 workers subsisted on the infamous "dole." The British and the stock-market crash that followed later in the economy languished, and investment funds tended to year. Others believe that the prior ("cheap money") flow out of the country, especially to the United States, policies themselves presaged the downturn, because the putting even more_pressure on the overvalued pound. malinvestments that those policies had fostered would To help the British succeed in their resumption of have to be liquidated sooner or later by means of bank­ gold convertibility, central bankers in the United States, ruptcies and reallocations of resources to more sustain­ led by Benjamin Strong, who headed the Federal able uses, a process marked by economic disruptions and Reserve Bank of New York, pursued monetary policies transitional unemployment. that would reduce interest rates in the United States, After the initial downturn in 1929, owing to a suc­ thereby diminishing the relative attractiveness of U.S. cession of extraordinarily detrimental government investments for British investors and causing them to actions, the recession mushroomed into the Great reduce the pressure they would otherwise put on the Depression, a catastrophe that contributed greatly to the pound's exchange value by trading pounds for dollars. rise of Hitler and ultimately, in 1939, to the onset of a These U.S. policies, however, also had effects on the second, even more horrendous phase of the fighting that American economy. The "momentous decision of forcing the Armistice had ended in 1918. ~

TH E FR EE MA N: Ideas on Liberty 28 The Peace Principle

BY JIM PERON

he key principle of liberalism is peace. Some He has redistributed the existing pool of goods more would say peaceful cooperation is the key. But to his favor. But in the process he has also destroyed. T in a free society one is also free peacefully 1wt to The owner is not only out a television but a window or cooperate. door as well. And even if the crirninal has managed to M any would say the core principle of liberalism is steal the television without destroying a materia] aspect freedom. And since the word liberalism is derived from of life, he has destroyed something valuable to human the Latin fib er, which means free, that is a reasonable beings: their peace of mind, their sense of security, their conclusion. But underneath this is the principle of ability to feel at home in the place where they live. peace. Or perhaps it is better to say nonviolence. While it may redistribute some material wealth, vio­ If I wish to gain a value I can do it peacefully or vio­ lence usually does so at the expense of other material lently. Liberalism eschews the use of violence in gaining wealth and almost always at the expense of immaterial values. Only peaceful methods are permissible. wealth. The violent methods are often obvious. We can sim­ The more violent a society is the poorer it tends to ply knock someone over the head and take what we be. That's because violence or the threat of it discourages want. If the value we seek is not material, but some other the production of wealth. When productive people real­ form of satisfaction that depends on others acting in ize that the fruit of their efforts is for naught, they tend ways we prefer, we can pull out a whip or a rifle and to make less, or no, effort. The man who tills the field forc e them to do as we wish. diligently only to have harvest after harvest confiscated Throughout history many have sought to gain values for the use of others ceases to till. In this sense random by such means. And for a few it worked, or worked well violence is far less harmful than systematic violence. for a time. It does not work when such violence is prac­ And that brings us to the state. Unconstrained gov­ ticed wholesale, nor does it work well for the vast major­ ernment engages in the threat of violence and does so ity of people. systematically. This is an efficient way to keep people Violence fails over time because it is inherently fr ightened enough to comply "voluntarily" with the destructive. It produces nothing. At best it merely state's requirements. It conserves the resources of those rearranges the existing pool of goods to satisfy those making the threats, while effectively confiscating who hold the whip. Worse yet, violence destroys exist­ wealth. ing wealth. But such systematic and pervasive threats have nega­ Wealth, broadly construed to include nonmaterial tive consequences as well. Taxation is an obvious exam­ values, tends to be consumed and destroyed when vio­ ple. It rests on the threat of force, but it is not the lence is exercised. Imagine the theft of a television. The violence of the petty criminal who says: "Your money or criminal may break down a door of a home or smash a your life." His violence is random and often fleeting. window. He may terrorize the owner, before successful- ly walking off with the television. )i111 Pero11 ([email protected]) is a 111riter livi11g i11 Berli11, Cer111a11y.

29 D E C E M B E R 2 0 0 6 Jim Peron

He may confiscate what money his victim is carrying. the suppression of vice, does not enhance civil society He may make his victim fearful and angry, but the vic­ but ultimately undermines it. tim won't have to endure the experience again the next "[T] he State, in the last analysis, has absolutely noth­ day, the day after, and for as long as he can anticipate. ing to offer that it has not already expropriated from its I have been mugged and I have been taxed. The subjects," Morley said. "So, in worship of the State, men mugger took far less, showed up only once, and didn't sacrifice their souls to a false god that can give them in try to persuade me he was doing it for my own good. return only what has already been placed by the wor­ The tax man is entirely different. His threat of vio­ shippers themselves on this sacrilegious altar." lence is imposed on everyone. Some people do not regard this as violence, but all they need do to see their Health of the State error is watch what happens if someone refuses to com­ hat is true domestically is also true internation­ ply. It is well documented that taxation leads to the W ally. War is the ultimate expression of force. The results mentioned above. It redistributes existing wealth, World War I critic Randolph Bourne said, "War is the making some people worse off; consumes wealth, mak­ health of the state." That is because government power ing the entire society poorer; and discourages the pro­ expands during war. In 1949, with World War II fresh in duction of future wealth. mind, Morley reminded his readers that "the strength by A great liberal author, Felix Morley, wrote, "The state, a victorious State through war is in large part taken not in short, subjects people, whereas society associates them from the enemy but from its own people. All the private voluntarily.... State and society ... are naturally and elements in Society-the family, the church, the press, continuously in opposition." the school, the corporation, the union, and other co­ As Morley pointed out, the moralist who wants operatives-are subject to special discipline by the State vice-behavior which, though perhaps morally objec­ in wartime.... And it is scarcely necessary to emphasize tionable, does not violate the rights of others-prevent­ that once an emergency control has been established by ed violently may argue that such violence "may be the State, all sorts of arguments for making it permanent utilized to forward morality, and to oppose immorality." are forthcoming." But "since the State has no conscience, and is primarily It is well known that in collectives individuals can a mechanism of material power, the human welfare side lose moral restraint. A lynch mob will kill, although as an of State activity should blind no thoughtful person to its individual each member would be horrified at the underlying menace. And the potential of the State for thought. Likewise, state power is a collective power in 'The Abolition of Man'-to use the telling phrase which the individuals who participate in decision-mak­ employed by C.S. Lewis-is the greater because Man ing lose their normal sense of responsibility for their himself has created and directs this juggernaut that rolls actions. In fact the law often explicitly denies individual over hin1." culpability in those who wield power. Morley argued that the advocates of coercive meth­ None of this implies pacifism. To reject violence as ods "exaggerate the potential of the state for good [and] a means of gaining values does not require the renunci­ underestimate its capacity for evil." When one under­ ation of self-defense to protect one's values. stands that government produces nothing, but merely In the end it matters not the intentions behind the rearranges existing wealth while consuming vast accumulation of power, for good intentions do not amounts of it in the process, you understand that such determine results. The nature of state power is such that power is almost always destructive. Morley, like Albert whether it is expanded in the name of welfare, state Jay Nock before him, noted an increase in state power security, or morality, the results ultimately are the same. comes at the expense of society. This is why attempts to Social power is diminished, and the restraints of com­ promote civil society through the violence of law, as in mon morality are reduced. @

THE FREEMAN : I deas on liberty 30 Milton Friedman (1912-2006)

BY RICHARD M. EBELING AND SHELDON RICHMAN

ilton Friedman, who died last month at age lenged the Keynesian position that discretionary gov­ 94, was one of the twentieth century's most ernment policy was essential to assu re full employment. M influential champions of individual liberry Friedman was able to show that the macroeconomic and free markets. The 1976 winner of the Nobel Prize policymakers would never have sufficient knowledge in economics and an early associate of FEE, Friedman about changing market conditions to successfully did more than any single person in our time to teach the manipulate the fiscal and monetary policy tools in a public the merits of deregulation, privatization, low timely manner. Instead, he argued, the wisest long-run taxes, and free trade. His work inspired the economic policy was for government to follow a small number of agendas of President Ronald Reagan and British Prime predictable policy rules. Minister Margaret Thatcher, as well as the Beginning in the 1950s Friedman liberalization of economies in eastern presented a restatement of the quantiry Europe and the former Soviet Union. theory of money, arguing that all pro­ Born in New York Ciry in 1912 to longed and sustained general rises in Jewish immigrants, Friedman went on to prices were caused by an increase in the become a major force in theoretical eco­ supply of money. " Inflation," he said, "is nomics in the second half of the century always and everywhere a monetary phe­ and the leading figure of the Chicago, or nomenon." His Monetary History cif the monetarist, school. As a professor of eco­ United States demonstrated that govern­ nomics at the prestigious Universiry of ment manipulation of the money supply C hicago, he is widely credited with over­ was the primary factor behind the boom­ turning the dominant Keynesian para­ and-bust cycles experienced in the twen­ Milton Friedman (1912- 2006) digm regarding the tradeoff between tieth century. In addition he argued that unemployment and inflation. He made monumental (if it was misguided Federal R eserve policy in the early controversial) contributions to monetary theory, policy, 1930s that generated the severiry of the Great Depres­ and history in such books as Studies in the Quantity The­ sion-and not any inherent failures in the market econ­ ory cif Money (1956) and A Monetary History cif the United omy. States, 1867-1960 (co-written with Anna Schwanz, This led Friedman to make the case for a "monetary 1963). rule," under which the monetary authoriry would be denied any discretionary powers over the money supply. Slayer of Keynesianism Instead, the Federal Reserve would be limited to n the post-World War II era, when Keynesianism increasing the supply of money at a fixed annual rate of I dominated the economics profession, Friedman undertook a series of studies to undermine some of Richard Ebeling([email protected]) is the presidmt of FEE. Sheldon Keynes's leading assumptions. In the late 1940s he chal- Richman ([email protected]) is the ediror of The Freeman.

31 DECEMBER 2006 I Ri chard M. Ebeling a nd Sheldon Richman 11------

around 3 percent. This would create a high degree of discovered the truth about the rate of inflation, they predictability about monetary policy and generate a rel­ would demand higher wages and resource prices to atively stable price level in a growing economy. compensate for lost purchasing power. That would In making the case for a monetary rule, Friedman reduce profit margins and return unemployment to its advocated a paper-money standard rather than the gold "natural" level. standard, arguing that this would save on the resource Unless the monetary authority was willing to con­ costs of digging the metal out of the ground just to store tinuously increase the rate of price inflation above peo­ it away in bank vaults. But in the years after he received ple's adjusted expectations, the lesson had to be accepted the Nobel Prize he had second thoughts about his mon­ that in the long run, monetary policy cannot influence etary rule and the gold standard. In a series of articles in levels of employment and output. These are ultimately the 1980s Friedman stated that Public Choice theory determined by market conditions and not by govern­ had convinced him it will never be in the long-run ment manipulation. interest of governments or their monetary authorities to Through these contributions, Friedman permanently follow the type of rule he proposed, transformed the debate in macroeco- since the temptation to abuse the nomics and in the process under­ printing press for political reasons At a time w hen mined many of the most cherished would always be too strong. He there­ popular writing that assumptions of Keynesian economics. fore concluded that, given the actual history of Federal Reserve policy in went against the Public Intellectual the twentieth century, remaining on collectivist grain had s influential as Friedman's aca­ the gold standard would have been far A denuc work was among profes­ less costly for America than the Fed­ few mass outlets, sional economists, he had as profound created inflations and recessions. Friedman managed an impact on non-economists' think­ One final and lasting contribution ing about the virtues of free markets of Friedman's was his formulation of to reach a wide and linuted government. At a time the "natural rate" of unemployment. when popular writing that went The Keynesians of the 1950s and audience with his against the collectivist grain had few 1960s believed that it was possible to clear and good­ mass outlets, Friedman managed to permanently lower the rate of unem­ reach a wide audience with his clear ployment through manipulation of the natured style. and good-natured style. He accom- rate of inflation. In his presidential plished this through many books, a address before the American Economic Association in long-running Newsweek column, and his 1980 television 1967, Friedman argued that, at most, monetary policy series, "Free to Choose," based on his bestselling book of could temporarily lower the level of unemployment. But the same title. in the long run it would return to its "natural rate." His 1962 book Capitalism and Freedom was an acces­ He said that the amount of unemployment at any sible volume that presented bold free-market thinking time was determined by changing supply-and-demand on such issues as medical licensing, the volunteer army, conditions in the market and people's expectations and antitrust laws. It was also the book in which Fried- about the future rate of inflation, which influenced man unveiled controversial proposals for school vouch­ their resource-price and wage demands. The monetary ers and the negative income tax as transitions from the authority could fool people by increasing the inflation welfare state. The book undoubtedly inspired many rate above people's expectations, resulting in prices ris­ youthful readers to pursue careers in economics. ing faster than wages, and the resulting larger profit mar­ Friedman started addressing a large popular audience gins would create an incentive for employers to increase in 1966, when he inaugurated a regular column in output and hire more workers. But over time, as people Neii!Sweek, succeeding Henry Hazlitt. Friedman's col-

THE FREEMAN: Ideas on lib e r ty 32 ------11 M i Ito n Friedman ( 1 91 2-2 0 0 6) umn, which rotated with those of the Keynesian Paul beautiful location footage, including scenes of Hong Samuelson and H enry Wallich, presented the case for Kong's success. free-market policies across a wide range of issues-such Four years later Friedman again combined a book as wage and price controls (imposed by President Nixon with a television series in Tlze Tyranny of the Status Quo, in 1971) and the minimum wage-and did much to also co-written with Rose Friedman. inject the libertarian perspective into the public debate. Friedman was fearless in the face of controversy, The column ran until 1983. (A compilation of columns vigorously opposing the military draft during the Viet­ was published as Bright Promises, Dismal Peiformance.) nam War and drug prohibition. But he was no idle Meanwhile, on December 19, 1969, Friedman's pic­ author. In 1969-70 he participated in the President's ture made the cover of Time under the Commission on an All-Volunteer title "Will There Be a Recession?" It Friedman was fearless Armed Force. His pro-freedom cre­ was a rare distinction for an academic dentials made his a powerful voice in economist, but by then, Friedman was in the face of the effort to end the involuntary more than that: he was a public intel­ servitude of conscription. lectual. controversy, Friedman won many honors for his Friedman achieved bona fide star vigorously opposing work. Besides the Nobel Prize he also status in 1980 with release of his book won the Presidential Medal of Free­ Free to Choose, written with his wife the military draft dom and the National Medal of Sci­ Rose Friedman, also an economist. In during the Vietnam ence, both in 1988. H e served as Free to Choose Friedman explained the president of the American Economic unparalleled contributions to human War and drug Association. well-being of the division oflabor and prohibition. In 1947 Friedman was one of a free exchange, the tyranny of govern­ select group of some 40 econ!Jmists ment regulation, the dangers of infla- and writers invited by F. A. Hayek to tion and the welfare state, and the problems intrinsic to attend the founding meeting of the Mont Pelerin Soci­ the government school monopoly. His chapters on how ety in Switzerland. Leonard Read, FEE's founding pres­ the competitive marketplace protects consumers and ident, Henry Hazlitt, and Ludwig von Mises also workers were eye-openers for an audience that until participated in that meeting to establish a worldwide then had been led to believe that only coercive govern­ network of classical-liberal scholars. ment could do those things. Friedman co-wrote (with George Stigler, who also Free to Choose, according to the Fortune Encyclopedia later won the Nobel Prize) one of the first publications rf Economics, became the best-selling nonfiction book of FEE released, the 1946 pamphlet "Roofs or Ceilings? 1980. Sales were boosted by the ten-part companion The Current Housing Problem," a critique of rent con­ television series on PBS. Each week viewers saw the trol (www.fee.org/ library/ books/ RoofS_or_Ceilings.asp). congenial Friedman clearly explain why free markets Sadly, Milton Friedman is gone from us now. But his serve individuals and society best, and why government legacy and devotion to liberty will inspire freedom creates chaos and poverty-all well illustrated with lovers for many generations. @

33 DECEMBER 2006 uses an example from Nozick's Anarchy, State, al!d Utopia Book Reviews to argue that any distribution of income and wealth that arises out of voluntary transactions each of which is individually just must also be considered just. For exam­ The Ethics of the Market ple, suppose that a hundred people each start out with by John Meadowcroft an income of$100.And further suppose that 99 of them Palgrave Macmillan • 2006 • 173 pages • $80.00 each voluntarily and happily offers $10 to the hundredth to perform in a sports tournament. After these acts of Reviewed by Richard M. Ebeling free exchange this one individual would have S 1 ,090, o the extent that countries while the others would each have only $90. T around the world have turned But, Meadowcroft points out, this distribution has their backs on socialism and heavy­ "naturally" arisen out of the individual acts of trade handed government regulation of between this one person and the others and is one of the the economy, it has been for prag­ unintended but inseparable results of individuals being matic reasons. Governments have free to act on their own preferences. In addition, if we reduced regulation, denationalized keep in mind that individuals will never demonstrate the industries, and opened their same willingness to save, work, and invest, then it is economies to degrees of global inevitable that people's wealth and income will be competition due to the pressures of international market unequal. Any interference with these outcomes on a forces and domestic fiscal problems. free market must have perverse effects on productive Neither those governments nor many of their own incentives. citizens have supported market-oriented reforms out of The results of free transactions should be considered philosophical conviction concerning the value of eco­ fair and just-unless the critic presumes to know what nomic liberty. Most often they have grudgingly accept­ others in society should have wanted and what prices ed these changes as "concessions" to a reality they wish should be placed on goods-and then presumes to redis­ they could deny. tribute income according to his own preferred order of Thus such market-based institutional changes as have things. But on what objective basis can he claim to pre­ been introduced have occurred in a political environ­ empt the choices and outcomes of the market partici­ ment still dominated by thinking that rejects classical pants themselves? liberalism. So it is absolutely essential for friends of Meadowcroft does not bring out as clearly as he freedom to make the positive case for liberty and the might have that what the social critic really desires is to free-market economy. This is what makes John Mead­ tyrannically impose his own wishes on the other mem­ owcroft's Tize Ethics qfthe Marker a very useful contribution. bers of society, using the power of the state to achieve his His defense of the market and its related social out­ ends. If individuals A and B have more wealth than the comes is based on the philosophical and poiitical­ critic thinks they should have, then he may want the economic writings of Robert Nozick and FA. Hayek. government to use its coercive authority to take some of Meadowcroft's starting point is the Lockean idea of their wealth and redistribute it to individuals C, D, and "self-ownership," that every individual has a property E. Now suppose that A and B, having honestly acquired right to his own person and, by extension, to the objects their wealth, resist this forced taking of their property. Is he makes by mixing his mental and physical labor with the critic willing to kill them to carry out his plan? On previously unclaimed resources. what m.oral ground can the critic say that their Jives are It follows logically that an owner of such justly to be forfeited so some others may have a greater degree acquired goods may peacefully exchange them for other of material comfort and convenience' I wish that Mead­ goods he prefers more. The goods he receives in owcroft had stated the argument in this more direct exchange are now rightfully his property. Meadowcroft fashion, since he does ground his own theory of indi-

THE FREEMAN: Ideas on Liberty 34 Book Rev i e w s vidual rights on self-ownership, which surely precludes While his book is not without flaws, John Meadow­ the state liquidating human lives in the cause of"redis­ croft has effectively summarized and applied many of tributive justice." the best arguments for the free society. @ The second task that Meadowcroft undertakes is the Richard Ebeling {[email protected]) is tl1c presidcm of FEE. defense of the market process as a social system for human betterment. H ere he takes his lead from H ayek in emphasizing that a complex division oflabor has as its complement an inescapable division of knowledge. If we Peddling Panaceas: Popular Economists are to take advantage of all the dispersed knowledge and in the New Deal Era abilities that only reside in the separate individuals of by Gary Deart Best society, then we must use the competitive price system. Transaction Publishers • 2005 • 273 pages • $49.95 Because of the natural limits of the human mind, central R eviewed by Burton Folsom,Jr. planning and government regulation can never solve the problem of coordinating the actions of billions of peo­ he Great Depression of the ple in the global economy. T 1930s marked a sharp turn in Meadowcroft argues that by using the price system in American economic thought. Ortho­ this manner, each of us can succeed in assisting far more dox economists, who argued for people around the world than can ever be effectively free markets and limited govern­ reached through government. As H ayek explained many ment, seemed to be discredited­ decades ago, it is not necessary for each of us to know even though most of their solutions the unique circumstances and wants of multitudes of remained untried under President others to successfully orient our own activities toward Hoover. Instead, Americans were them. By simply following the pricing signals that readier than ever to listen to new ideas about how gov­ encourage the pursuit of profit and the avoidance ofloss, ernment could be used to restore economic we can apply ourselves in ways that serve our fellow growth. Stuart Chase, in the last line of his 1932 book A men while advancing our own interests. This is a pro­ New Deal asked: "Why should the Russians have all the found insight that has been understood since the time fun of remaking a world'" of Adam Smith, but has to be restated over and over In Peddling Panaceas Gary Dean Best ably describes again in the face of critics who never seem to grasp the the thinking of three popular and influential economists argument. during the 1930s-Chase, Edward Rumely, and David M eadowcroft also responds to those who say that the Cushman Coyle. Not one of these three men had market undermines the diversity of human culture and advanced degrees and formal training in economics, but reduces it to the lowest common denominator. Drawing each one latched onto and popularized various ideas for on a number of recent works, including Tyler Cowen's government planning in the 1930s. In Praise of Commercial Culture and Creative Destruction, Rumely was an inflationist; he promoted his views as Meadowcroft shows that the market economy has sup­ executive secretary of the Conunittee for the Nation to plied the means for maintaining and enhancing a wide R ebuild Prices and Purchasing Power. He and his variety of cultural contributions and has made them Committee argued that economic recovery would available for people in other societies to enjoy as well. To occur if the United States went off the gold standard and the extent that Western culture (including music, artificially raised the price of gold. If the price of gold movies, and methods of doing business) has spread to went up, Rumely said, the price of commodities would other societies, it has been freely chosen, and should be do so as well. That price hike, in Rumely's calculations, respected as the result of voluntary exchange, just as would break the deflationary spiral and lift American aspects of non-Western culture have been absorbed into farmers and businessmen out of the economic dol­ everyday life in America and Europe. drums.

35 DECEMBER 2006 J Book Revi ews

The problem was that Roosevelt took the United Coyle to dine with him and discuss ideas. When Roo­ States off the gold standard and raised the price of gold, sevelt raised the income tax on top rates to 79 percent but the prices of commodities did not rise as well. By in 1935, that decision in part reflected Coyle's influence. 1934 Rumely was discredited and the President turned Professor Best, a diligent and perceptive historian, has to other advisers. done an excellent job in describing the sincere but Chase, trained as an engineer and an accountant, had deluded thinking of these three self-described econo­ his own recipe for prosperity: " [P]ut at least five billion mists. In doing so his book highlights this truth: He who dollars in ultimate consumers' hands during the next few wins the battle of ideas wins the battle of policy. months. Such an amount in such a place has an excel­ One year after Roosevelt died Henry Hazlitt wrote lent chance of definitely ending deflation." But where Economics in One Lesson for a general audience to join was the $5 billion to come from? Sharply raise the pro­ this battle of ideas and refute many of the failed policies gressivity of the income tax, Chase said, and ask the promoted by Chase and Coyle in particular. The statist recipients of the $5 billion to spend it as quickly as they ideas of the 1930s led to economic chaos throughout can. the twentieth century. Gary Dean Best pinpoints the Chase wrote an average of one book a year from origins of several of the most destructive ideas and helps 1929 to 1936, and his ideas-which also included a plea us to understand why such nonsense could reach all the for collectivizing much of American industry-clearly way to the White House. @ influenced President Roosevelt's public-works pro­ Burton Folsom ([email protected]) is the Charles Kline grams, especially the Works Projects Administration Professor in History and Management at Hillsdale College. His book (WPA). Roosevelt even named his grand scheme for The Myth of the Robber Barons is in its jo11rth edition. restoring the nation to economic health "the New Deal," borrowing the title from Chase's book. However, as Chase finally admitted after a massive $4.8 billion WPA spending binge in 1935, " If recovery is Philosophers of Capitalism: to be measured in employment, there is none." Menger, Mises, Rand, and Beyond Finally, Coyle was an engineer turned economist edited by Edward W Younkins w ho promoted his theory of " underconsumptionism," Lexington Books • 2005 • 374 pages • $28.95 the idea that wages were too low and that consumption Reviewed by Aeon J. Skoble needed to be boosted by massive government programs for low-wage earners. Also needed were "free educa­ dward Younkins is a man with tion, free public health services ... and, above all, a gen­ E an idea. His idea is that there erous old-age pension system." is an underlying theme linking Coyle endorsed "soak the rich" tax policies to pay for Austrian economics, neo-Aristotelian these programs and also to teach the rich a lesson. "The moral theory, and Ayn Rand's taxes on mammoth incomes are not so much for rev­ Objectivism. His ultimate goal is an enue as for police purposes," Coyle said, "to control integrated, comprehensive philoso­ those floods of money, and to direct them into harmless phy that coordinates the insights of paths." Menger, Mises, Rothbard, Aristotle, He elaborated: "The higher the income tax, the larg­ and Rand. It is an ambitious project and a challenging er will be the middle class incomes. Business is like a idea, and Younkins does a good job here of demonstrat­ farm where more fertilizer gives more yield. Income ing these thematic connections. Such connections will taxation fertilizes business." Led by Thomas Corcoran, not be obvious to some. For instance, Austrian econom­ Roosevelt's chief adviser, the New Dealers bought and ics holds that values are subjective, while Rand would distributed hundreds of thousands of Coyle's pamphlets argue that values are objective, but Younkins shows how and books in the 1930s. The President even invited those are not incompatible claims-partly because

THE FREEMAN : Ideas on Liberty 36 ------1\ Book Reviews they're not really claims about the same things. Part of Younkins's big idea, w hich will surely seem Younkins, a professor in the department of business at correct to supporters of a foundation devoted to eco­ Wheeling Jesuit University, notes that both Menger and nomic education, is that those of us who support free Rand would agree that "the ultimate standard of value is enterprise and the political systems that facilitate it have the life of the valuer." Furthermore, w hile Menger's pri­ an obligation not only to understand but also to be able mary focus is on economic values and Rand's is on to articulate the moral foundations of those political and moral values, their "shared biocentric concept of value economic systems. Part of Younkins's rationale for contends that every value serves biological needs," and underta!Gng this project is that the synthesis he has in thus value in both senses "has its roots in the condition­ mind better enables us to do just that. al nature of life." So, according to Youn!Gns's argument, Youn!Gns is more than just the editor, and the book the value-subjectivity of the Austrians is not only not is more than just an anthology of essays on the philoso­ incompatible with a Randian sense of objectivity, but phy of capitalism. It opens with three essays by Younk­ indeed complements it. Younkins has an ambitious (and ins, which lay out the basic arguments of Menger, Mises, plausible) schematic that links Aristotelian theories of and Rand, respectively. The middle section of the book human flourishing and Objectivist arguments about the co11ects 12 previously published essays by philosophers nature of reality and "man's distinctive attributes of rea­ and economists from a variety of scholarly journals. son and free will" with Austrian praxeological concep­ This section features many names familiar to readers of tions of valuation, decision-making, and cooperation. The Freeman: Samuel Bostaph, Gloria Z{Jniga, Murray It's no secret that Rand was influenced by Aristotle, Rothbard, Jeffrey Herbener, Douglas Rasmussen, Chris and one way Younkins ties Objectivism to Austrianism Sciabarra, Barry Smith, Walter Block, Richard J ohnsson, is to document the Aristotelian influence on Menger. As Ricardo Crespo, Larry Sechrest, Tibor Machan. The Younkins puts it, " M enger's Aristotelian inclinations can book then concludes with a long capstone essay by be observed in his desire to uncover the essence of eco­ Younkins in which he makes his case for the integrated nomic phenomena .... Like Aristotle, Menger thought Austrian/ Objectivist/ Aristotelian model, further devel­ that the laws governing phenomena of thought process­ oping ideas from his earli er book Capitalism and Com­ es and the natural and social world were a11 related as merce. parts of the natural order." This means that our volition­ The book is thus not quite a monograph , yet more al end-seeking is connected to our natures as human than an anthology. The combination ofYounkins's own beings-a theme that appears in both R and and later original arguments, which are compelling and sophisti­ Austrians, notably Mises and Rothbard. cated, with the array of other scholarly perspectives that Younkins explains those areas w here Mises and he presents is a very effective approach. The book will be Rothbard differ, but shows that those differences do not of great interest for proponents of all three of the schools supersede the fundamental agreement about a praxeo­ of thought Youn!Gns ties together, and also for interest­ logical conception of economic choice. Youn!Gns says ed critics of them. Perhaps some of their objections will that according to Mises, men are "rational beings with be answered by Younkins's synthesis. {j free wi11 who have the ability to form their own pur­ Aeo11 Skoble (askoble@bridgew. edlt) is associate professo r a11d chair if the poses and aims." But this is surely something Rand philosophy department at Brit{~ellla t er State College i11 Massachusetts. would agree with, and it is indeed rooted in an Aris­ totelian worldview. This is the binding tie, according to Younkins, that ultimately links Objectivism with Austri­ anism. (Younkins isn't claiming, of course, that Austrians are "really" Objectivists or the Objectivists are "really" Austrians. He's claiming that the two schools of thought can be incorporated into the integrated worldview he is defining and defending here.)

37 DECEMBER 2006 Book Reviews

Winning the Race: Beyond the Crisis in structive behavior of the kind that recent immigrants Black America (Vietnamese, for instance) have engaged in to begin by John McWhorter their economic ascent. "Alienation," McWhorter writes, Gotham Books • 2005 • 422 pages • $27.50 "drifted from being a spur to action to being a form of self-medication. Here is where legendary Civil Rights Reviewed by George C. Leef activist Bayard Rustin became dismayed as a new gener­ WINNING f you ask most academics why ation of black activists began embracing the 'heroics' of I black Americans generally con­ idle protest and theatrical rage, uninterested in rolling THE RACE tinue to trail behind whites and their sleeves up and working out concrete plans for ~IH'>';~ .If "" ~ '" F' \1.. II. '\'; ...; . ( , Asians in income, education, and change." JOHN McWHORTER social status, the answer is apt to Yes, that is the sound of a gauntlet crashing down. include phrases like "institutional McWhorter amasses a great deal of persuasive evi­ racism" and "privilege." In their dence for his argument. For example, labor-force partic­ thought world it is never appropri­ ipation began to decline among young blacks (men, ate to blame the "victim" or even to especially) in the 1960s, when the nation's economy was meekly suggest that the explanation for inequality might racing along. What happened? Alienation happened. The not be found in defects in "society." (Former Harvard idea that working "for peanuts" was demeaning and act­ president Larry Summers found out how true that is.) ing up was cool took hold among young blacks. To the A few individuals, however, dare to challenge the standard claim that good jobs left inner-city areas mak­ orthodoxy and have argued that the shortage of black ing it impossible for blacks to work and stay off welfare, progress is mainly due to bad ideas coursing around in McWhorter cites the contrary example of Indianapolis, the black community. The two best-known advocates where plenty of work remained within short commutes of that position are Shelby Steele and the author of this and unemployment among blacks rose anyway. The book, John McWhorter. McWhorter, who is a scholar excuse that white, business-class America denied blacks affiliated with the Manhattan Institute and was former­ "access" to jobs leaves McWhorter exasperated: ly a professor of linguistics at the University of Califor­ "[I]f millions of blacks had picked up stakes from the nia, has shattered quite a few intellectual taboos in his South and moved thousands of miles from their homes rather young career, and Winning the Race leaves them in in search of work for decades, why did a core of their shards everywhere. children suddenly lapse into criminality and generations "It's not that there is 'something wrong with black of living on the dole when work moved a twenty­ people,' but rather that there is something wrong with minute drive away?" what black people learned from a new breed of white Another facet of the problem is the attitude of many people in the 1960s," McWhorter writes. "It's something young blacks toward education. Why is there such a large that manifests itself in many ways, generating a range of achievement gap between black students and whites and tendencies and events and customs that can seem Asians, even when the latter come from the same or unconnected but are rooted in the same source." That lower socio-economic strata than the blacks? McWhort­ source is what he calls "the meme of therapeutic alien­ er is persuaded that the root of the problem is attitude. ation." Too many young blacks pursue education in a desultory A meme is "an idea, behavior, style, or usage that fashion, expecting high grades just for showing up. "My spreads from person to person within a culture." people suffered in the past, so now I'm entitled" seems McWhorter's contention is that the idea that blacks are to be the chip-on-the-shoulder frame of mind. Further­ entitled to a sense of indignation and will be better off more, serious academic work isn't cool. It's "acting for vociferously expressing it has rapidly, thoughtlessly white." spread throughout the black community. Unfortunately, Apropos of education, Me Whorter attacks one of the indignation for its own sake gets in the way of con- most sacred of all cows in the leftist herd-" affirmative

THE FREEMAN: Ideas on Liberty 38 Book Reviews

action." Rather than assisting blacks, preferential treat­ Supreme Court mindlessly bought into in its 2003 deci­ ment in college admissions actually harmed them sion in Crutter v. Bollinger. That demolition itself is worth because "the lowered bar onJy deprives black students the price of the book. and parents of any reason to learn how to hit the high­ Winning the Race is a fantastic piece of sociological est note." Thus "affirmative action" seduces its supposed analysis that points the way to success for American beneficiaries into thinking that mediocrity is fine. In the blacks: Stop wallowing in alienation and government cocoon of higher education it may be, but not in the support; instead, take advantage of the great opportuni­ tough competition of life. ties available in the market. @) McWhorter proceeds with a demolition of the George Leej (geo [email protected]) is the book review editor of The "diversity leads to better education" rationale that the Freeman.

Coming in the January-February issue of The Freeman

Climate Change: What if They're Right?

by Max Borders

Remembering Julian Simon

by Paul A. Cleveland and Erin Hagert

Europe Meets America: Property Rights in the New World

by Andrew P. Morriss

Open-Source Software: Who Needs Intellectual Property?

by David K. Levine and Michele Boldrin

··- @ @ ~

39 DECEMBER 2006 The Pursuit of Happiness

Hayek on the Rule ofLaw and Unions

BY CHARLES W. BAIRD

n FA. Hayek's mind the rule of law has two equal­ Muddled thinking leads public opm10n to tolerate ly important parts. Like most writers on the subject legislation, such as the National Labor Relations Act I he argued that the rule of law requires everyone, (NLRA), that exempts unions from the rule of law. including those who wield government powers, to be Hayek continues, bound by the same set of rules. He called this principle "isonomia" (Greek for "equal law"). Isonomia, by itself, [T]he fact that it is legitimate for unions to try to says nothing about the scope of government activities. secure higher wages has been interpreted to mean So long as all the rules apply equally to everyone, isono­ that they must be allowed to do whatever seems nec­ mia exists whether a government is limited to enforcing essary to succeed in their effort. In particular, because individual rights or is permitted to intervene extensive­ striking has been accepted as a legitimate weapon of ly in private affairs. unions, it has come to be believed that they must be The second part of the Hayekian rule of law is the allowed to do whatever seems necessary to make a principle of limited government. Hayek often wrote strike successful. In general, the legalization of unions about the proper scope of government action, and he has come to mean that whatever methods they regard thoroughly examined the issue in The Constitution cf Lib­ as indispensable for their purposes are also to be con­ erty (1960). There he argued that the principal function sidered legal. of a government under the rule of law is to provide the protective services of the classical night-watchman state. A government limited to enforcing the rules of just The legitimate protective role of the state is to enforce conduct is a government that, among other things, does the "rules of just conduct" among people. These rules not abridge any person's freedom of association; yet, create an environment within which people remain free to pursue their own purposes while dealing with all oth­ Most people . .. still support the aspirations of the ers solely on the basis of voluntary exchange. Later, in unions in the belief that they are struggling for "free­ Law, Legislation and Liberty I (1973), he made clear that dom of association," when this term has in fact lost its "law" in "the rule of law" is "nomos: the law of liberty." meaning and the real issue has become the freedom Hayek's two most detailed discussions oflabor unions of the individual to join or not join a union. The are found in The Constitution cf Liberty and in 1980s existing confusion is due in part to the rapidity with Unemployment and the Unions (2nd edition, 1984). He which the character of the problem has changed; in argued that unions, because of the legislation that many countries voluntary associations of workers had empowers them, violate both principles of the rule of only just become legal when they began to use coer­ law. Isonomia precludes privilege; yet, as he wrote in The cion to force unwilling workers into membership and Constitution cf Liberty: "Public policy concerning labor to keep non-members out of employment. Most unions has, in little more than a century, moved from people probably still believe that a "labor dispute" one extreme to the other. From a state in which little the normally means a disagreement about remuneration unions could do was legal if they were not prohibited altogether, we now have reached a state where they have Charles Baird ([email protected]) is a professor cif eCOIIOIIlics become uniquely privileged institutions to which the and the director of the Smith Center for Private Enterprise Studies at general rules of law do not apply." Califomia State University at East Bay.

THE FREEMAN : Ideas on Liberty 40 ------11 Hayek on the Ru l e of Law and Un i ons I

and the conditions of employment, while as often as absence of an unexpired fixed-term employment con­ not its sole cause is an attempt on the part of the tract, any individual worker has a right to withhold his unions to force unwilling workers to join. labor from an employer who doesn't offer satisfactory tern1s. If every worker has such a right they all can indi­ Hayek also thought that statutory unionism leads to vidually choose to exercise it simultaneously. Even if a the crippling of the market economy, which in turn worker has an unexpired fixed-term contract with an leads to a vastly expanded scope of government's role in employer, he cannot be forced to continue on the job. If the economy. he walks off the job the employer's only recourse is to sue him for breach of contract and let other employers [Unions] are using their power in a manner which know that he is an unreliable employee. But the NLRA's tends to make the market system ineffective and statutory right to strike allows strikers, with impunity, to which, at the same time, gives them a control of the use violence and threats of violence to try to prevent direction of economic activity which would be dan­ customers, suppliers and, most of all, replacement work­ gerous in the hands of government but is intolerable ers from exercising their rights under the rule of law to if exercised by a particular group.... do business with any strike target. Although Hayek never discussed the principle of Unionism as it is now tends to produce that very mandatory good-faith bargaining incorporated in the system of overall socialist planning which few unions NLRA, it is clear that that principle too is inconsistent want and which, indeed, it is in their best interest to with the Hayek:ian rule of law. In ordinary contract law avoid. all parties to a contract must have freely chosen to bar­ gain with the others over the terms and have consented Notwithstanding this, Hayek was not opposed to to the terms that emerged from the bargaining. Absent unionism per se. Rather he was concerned with the mutual consent a contract is null and void. The NLRA unions' statutory exemptions from the rule oflaw. As he forces employers to bargain with unions over anything made clear in 1960 and again in 1984 Hayek supported the union chooses except things that it is illegal for the right of workers, exercising their freedom of associ­ either party to do. Individuals are not free to choose to ation, to form voluntary labor unions and even to strike bargain for themselves. Simply put, every union-negoti­ so long as the rules of behavior in strikes are consistent ated contract under the rules of the NLRA violates the with the rule of law. rule oflaw. The principles of exclusive representation and union American politicians frequently proclaim their fealty security embodied in the NLRA, which I have to what they call the rule of law. To most of them this is explained in earlier columns, make American unions the idea that all people must be equally subject to what­ involuntary organizations and therefore outside the rule ever statutes are enacted-even if those statutes, such as of law. the NLRA, invade what H ayek and other classical liber­ The statutory right to strike embodied in the NLRA als regard as the protected private domain of all individ­ also violates the rule oflaw. If" strike" is defined as a col­ uals. This is the rule of might-makes-right, not the rule lective withholding of labor services by workers who of law. Just as collectivists stole the word "liberal," they find the terms and conditions of employment unaccept­ have stolen the phrase "rule of law." We must try to able, a strike is consistent with the rule of law. In the reclaim them both. ~

41 DECEMBER 2 006 INDEX: ARE CEOs paid too much' (Murphy) BIOGRAPHY, tribute, continued THE FREEMAN: 10:8-12 Passing of a libertarian activist: Chris ARE highways subsidized? (O'Toole) Tame, 1949- 2006 (Barry) 9:39-40 IDEAS ON LIBERTY 11:27-32 Antonio Rosmini: philosopher of VOLUME 56 ARTS, reading, film property (Mingardi) 4:26-29 JANUARY-DECEMBER Free-market moments on the silver Arthur Seldon's contribution to freedom screen (Reed) 5:14-15 (Barry) 4:32-33 2006 Jeffersonians in space (Keating) 4:13-14 Two who made a difference (Reed) So much to read! (Boudreaux) 4:15-16 12:12-13 Prepared by Beth A. Hcffman, managing AS Frank Chodorov sees it (Chodorov) BLANCHETTE, Jude editor, with the assistance of Brianna 4:39-40 The Freeman through the years. 1/2:8-11 Cardiff, FEE summer intern AUTOMOBILES We should trust the leader. not the law? Are highways subsidized' (O'Toole) It just ain't so! 9:6-7 NOTE: In page references, the number preceding 11:27-32 BORDERS, Max the colon designates the month, the numbers Government-mandated fuel-efficiency Broadband: a basic right' 3:16-18 following refer to the pages. For example, standards (Heberling) 9:36-38 BOUDREAUX, Donald J. 1/2:47-48 refers to pages 47-48 of the Privatize the DMV (Semmens) 9:25-28 Thoughts on freedom column January/February issue. Articles have at least three Capitalism and natural disasters. entries-author, title, and subject-except in 1/2:12-13 cases when the title and appropriate subject coincide. Books reviewed are listed alphabetically B Libertarian paternalism' 9:12-13 by author on page ~8. Mencken's wisdom. 6:10-11 BACKING the wrong horse: how private On bad arguments. 11:16-17 schools are good for the poor (Tooley) So much to read! 4:15-16 5:8-13 It just ain't so! BAIRD, Charles W. The trade deficit is debt? It just ain't sol A The pursuit if happiness column: 12:6-7 Freedom for workers. 9:47-48 See also Book reviews (Kling; Sunstein) AFRICA The government-created right-to-work BOVARD, James Backing the wrong horse: how private issue. 112:47-48 Democracy versus liberty. 7/8:19-24 schools are good for the poor (Tooley) Hayek on the rule of law and unions. Uncle Sam's flood machine. 1/ 2:36-40 5:8-13 12:40-41 BROADBAND: a basic right' (Borders) AGRICULTURE Unions and abortion protesters. 5:47-48 3:16-18 Origin of American farm subsidies BARNETT, Gary D. BUSINESS (Folsom) 4:34-35 The USA Patriot Act and finance: the Are CEOs paid too much' (Murphy) AKERS, Becky hidden threat. 9:8-9 10:8- 12 Can we tell those huddled masses to BARRY, Norman Goverrunent in business (Rothbard) scram? immigration and the Japan, Germany, and the end of the third 10:40-41 Constirution. 11:8-13 way. 5:20-23 Wal-Mart wasn't always the biggest Leviathan's legionnaires. 6:23-28 The passing of a libertarian activist: Chris (Semmens) 7/8:16-18 See also Book reviews (Hochschild; Ward) Tame (1949-2006). 9:39-40 ALWAYS think of incentives (Davies) Arthur Seldon's contribution to freedom. 10:38-39 4:32-33 AMERICAN history BELT and braces in the labor market c Constitution Day (Williams) 11:47-48 (de Jasay) 6:8-9 From the Armistice to the Great BIERLY, Ivan R. CALLAHAN, Gene Depression (Higgs) 12:27-28 The real revolution and you. 3:38-40 Inflation is a "phantom menace"' It just How U.S. econorrilc warfare provoked BIOGRAPHY, tribute ain't so' 10:6-7 Japan's attack on Pearl Harbor (Higgs) Milton Friedman, 1912-2006 (Ebeling & Sales, flat, or spherical, tax reform isn't 5:36-37 Richman) 12:31-33 the answer. 11:18-21 Leviathan's legionnaires (Akers) 6:23-28 Milton Friedman and the Chicago school See also Book reviews (Diamond) Our presidents and the national debt of economics (Ebeling) 12:2-3 CAN we tell those huddled masses to (Folsom) 7/8:34-35 John Kenneth Galbraith: a criticism­ scram' itnmigration and the Real revolution and you (Bierly) 3:38-40 and an appreciation (Henderson) Constitution (Akers) 11 :8-13 Supreme Court to be proud of (Reed) 12:21-26 CAPITAL letters (letters to the editor) 3:41; 3:14-15 Hayek and freedom (Horwitz) 5:26-28 4:46; 7/8:46 When the government took over U.S. Auberon Herbert:Vindicating CAPITALISM and democracy (Foulkes) investment (Higgs) 9:34-35 voluntaryism (Gall es) 11:33-35 11:22-24 Which New Deal program had a death Jane Jacobs, 1916-2006 (Richman) CAPITALISM and natural disasters rate' (Folsom) 11:36-37 6:4-5 (Boudreaux) 1/ 2:12-13 ANATOMY of econorrilc advice (Kirzner) Jane Jacobs (Ikeda) 9:20-22 CAPITALISM part I, 7/8:28-33; part II , 9:14-19; part Mencken's wisdom (Boudreaux) 6:1 0-11 If there were no capitalism (Chamberlin) Ill , 10:17-22 Ludwig von Mises: the political 112:30-33 ANDERSON, William L. See Book reviews economist of liberty (Ebeling), part I, CENTRAL planning comes to Main Street (Cherry) 5:16-19; part II 6:3+-40 (Greenhut) 7/8:8-13

THE FREEMAN: Ideas on Liberty 42 CHAMBERLIN, William Henry EDUCATION If there were no capitalism. 112:3().-33 E Backing the wrong horse: how private CHERNOBYL in perspective (Peron) sc hools are good for the poor (Tooley) 10:34-37 EARLY history of FEE (Hazlitt) 5:38-40 5:8- 13 C HINA EBELING, Richard M. Should professors be allowed to unionize' Institutions and development: the case of From the president column: (Lee£) 4:35-37 Ch.ina (Dorn) 6:1 8-20 FEE at 60: self-improvement and first EMINENT domain. See Property rights CHODOROV, Frank principles. 3:2-3 END run to freedom (Roberts) 6:47-48 As Frank C hodorov sees it. 4:39- 40 Freedom and the pirfalls of predicting the ENERGY C HRISTMAS Carol: Was Dickens really a future. 6:2-3 Chernobyl in perspective (Peron) socialist' (Pike) 12:14-16 Milton Friedman and the Chicago sc hool 10:34-37 CLEANING up after the elephants of economics. 12:2-3 Government-mandated fuel-efficiency (Richman) 7/8:4-5 The great Austrian inflation. 4:2-3 standards (Heberling) 9:36-38 CONSTITUTION Day (Williams) John Maynard Keynes: the damage still High cost of misunderstanding gasoline 11:47-48 done by a defunct economist. 5:2- 3 economics (Foulkes) 4:36-38 Keynesian economics and constitutional C OOLEY, Oscar W. & Paul L. Poi rot Higher gasoline ta:-c will "solve The freedom to move. 11:14-15 government. 11:2-3 everything"' It just ain't so! (Cordaro) COOPER, Sara F The misplaced acceptance of political 4:6-7 Scandinavian irony: socialism meets leaders. 9:2-3 Mandating renewable energy: it's not easy liberalization. 9:29-33 Not losing sight of the best in the pursuit being green (Heberli ng) 10:23-26 C ORDATO, Roy of liberty. 7/8:2-3 We need a stiff oil tax? It j ust ain't so! A higher gasoline tax will "solve Principles must come before politics. (Henderson) 3:6-7 everything"? It just ain't so 1 4:6-7 10:2-3 ENTREPRENEURSHIP CUNDIFF, Kirby R.. Still neither left nor right. 1/ 2:2-3 Freedom and the hotel: the lessons of the Economics and American health care. Feawre articles: St. Nicholas and Statler (Hager) 3:1 9-22 Ludwig von Mises: the political 3:25-27 CWIK, Paul economist of liberty, part l. 5:1 6-19 Moral and cultural climate of A government program for all. 12:17-18 Ludwig von Mises: the political entrepreneurship (R asmussen) 3:1 1-13 economist of liberty, part II. 6:34-40 ENVIRONMENT See also Book reviews (Dahl; Easterly; Chernobyl in perspective (Peron) Friedman; Grayling; HamO\'V)'; La!; 10:34-37 D Meadowcroft; Mises; Pipes; Stiglitz & Mandating renewable energy: it's not easy Charlton) being green (Heberling) 10:23-26 DAVIES, Stephen EBELING, Richard M. & Sheldon EUROPEAN history Our economic past column Richman Great Austrian inflation (Ebeling) Always think of incentives. 10:38-39 Milton Friedman (1912-2006).12:31-33 4:2-3 Free trade: history and perception. EC ONOMICS and American health care ff there were no capitalism (Chamberlin) 3:33-34 (Cundiff) 3:19-22 112:3().-33 The history of"underdevelopment." ECONOMICS for the citizen (Williams) Ludwig von Mises: the political 6:32-33 part IV, 4:47-48; partY, 7/ 8:47-48 economist of liberty (Ebeling), part l, DAY the glue came undone (Richman) ECONOMICS 5:16-19; part II , 6:34-40 112:22-23 Anatomy of economic advice (Kirzner), EXPORT-led recovery, multipliers, and De JASAY, Anthony part I, 7/8:28-33; part II, 9:14-19; part other fanciful notions (Lingle) Belt and braces in the labor market. III, 10:17-22 10:13-14 6:8-9 Export-led recovery, multipliers, and EYE on the ball (Richman) 11:25-26 DeARMOND, Fred other fanciful notions (Lingle) The jewel of consistency. 6:29-31 10:13-14 DeBOW, Michael. See Book reviews Milton Friedman and the Chicago school (Breyer) of economics (Ebeling) 12:2-3 DEBT, deficit Government program for all (Cwik) F Our presidents and the national debt 12:17-18 (Folsom) 7/8:34-35 High cost of misunderstanding gasoline FEE at 60: self-improvement and first DEMOCRACY economics (Foulkes) 4:36-38 principles (Ebeling) 3:2-3 Capitalism and democracy (Foulkes) John Maynard Keynes: the damage still FIFTY years later (Richman) 1/ 2:4-5 11:22-24 done by a defunct economist (Ebeling) FOLSOM, Burton,Jr. DEMOCRACY versus liberty (Bovard) 5:2-3 Our eCOIIOIIliC past column 7/8:19-24 Keynesian economics and constitutional The origin of American farm subsidies. D ICKENS, Charles: really a socialist? (Pike) government (Ebeling) 11:2-3 4:34-35 12:14-16 On bad arguments (Boudreaux) Our presidents and the national debt. DISCONNECT between political promises 11:16-17 7/ 8:34-35 and performance (Lee) 4:17-21 We need multimedia economics teaching Which New Deal program had a death DORN,James A. (Roberts) 10:47-48 rate' 11:36-37 Institutions and development: the case of ECONOMISTS against economics See also Book reviews (Best; Schweikart C hina. 6:1 8-20 (Richman) 12:4-5 & Allen)

43 DECEMBE R 2 006 FOULKES, Arthur E. GOLDSMITH, P. Gardner GRISWOLD, Daniel Capitalism and democracy. 11 :22-24 The government licensing scam. 4:30-31 The trade deficit lowers our living The high cost of misunderstanding A home with a view ... and a higher standard? It just ain't so! 1/2:6-7 gasoline economics. 4:36-38 pro perry tax. 9:10-11 GROWING up means resisting the statist FOUNDATION for Economic Education GOVERNMENT in business (Rothbard) impulse (Reed) 10:15-16 Early history of FEE (Hazlitt) 5:38-40 10:40-41 FEE at 60: self-improvement and first GOVERNMENT licensing scam principles (Ebeling) 3:2-3 (Goldsmith) 4:30-31 See also Freemarz GOVERNMENT program for all (Cwik) FRANCE 12:17-18 H Belt and braces in the labor market (de GOVERNMENT putts (Reed) HAGER, Daniel Jasay) 6:8-9 7/ 8:14-15 Freedom and the hotel: the lessons of the What is going on in France' (Garello) GOVERNMENT, government St. Nicholas and Stader. 3:25-27 10:29-33 intervention HAYEK and freedom (Horwitz) 5:26-28 FREE trade: history and perception Broadband: a basic right' (Borders) HAYEK on the rule of law and unions (Davies) 3:33-34 3:16-18 (Baird) 12:40-41 FREEDOM and the hotel: the lessons of Democracy versus liberry (Bovard) HAZL!TT, Henry the St. Nicholas and Statler (Hager) 7/ 8:19-24 The early history of FEE. 5:38-40 3:25-27 Full context (Richman) 4:24-25 The function of The Free111at1. FREEDOM and the pitfalls of predicting Growing up means resisting the statist 1/2:19-21 the future (Ebeling) 6:2-3 impulse (Reed) 10:15-16 HEALTH, health care. See Medicine FREEDOM for workers (Baird) 9:47-48 High cost of misunderstanding gasoline HEBERLING, Michael FREEDOM to move (Cooley & Poirot) economics (Foulkes) 4:36-38 11:14-15 Government-mandated fuel-efficiency Japan, Germany, and the end of the third standards. 9:36-38 FREEMAN 50th anniversary way (Barry) 5:20-23 Mandating renewable energy: it's not easy Fifty years later (Richman) 1/2:+-5 Keynesian economics and constitutional The Freeman: an eyewitness view (Liggio) being green. 10:23-26 government (Ebeling) 11:2-3 HENDERSON, David R. 1/ 2:17-18 Neglected factor in the housing "bubble" John Kenneth Galbraith: a criticism-and The Freeman: ideas on liberry (Poirot) (Keating) 3:8-10 1/ 2:14-16 an appreciation. 12:21-26 Nothing to learn from the antifederalisrs' Only the rich are getting richer' It just The Freema11 through the years 1 It just ain't so (Stromberg) 6:6-7 ain't so! 7/ 8:6-7 (Blanchette) 1/ 2:8-11 On misplaced concreteness in social Function of The Freeman (Hazlitt) Raising the minimum wage will theory (Stromberg) 5:29-35 1 1/2:19-21 discourage migration' It just ain't so "Parent of the country" (Richman) 11:6-7 Reflections on 17ze Freeman 1/ 2:24-27 3:4-5 FREE-MARKET moments on the silver We need medical rationing? It JUSt ain't USA Patriot Act and finance: the hidden sol 5:6-7 screen (Reed) 5:14-15 threat (Barnett) 9:8-9 FRIEDMAN, Milton, 1912- 2006 (Ebeling We need a stiff oil tax' It just ain't so! Wartime executive power: are warrantless 3:6-7 & Richman) 12:31-33 wiretaps legal? (Levy) 7/ 8:36-40 FRIEDMAN, Milton, and the Chicago HIGGS, Robert When the government took over U.S. Our eC0110111ic past column school of economics (Ebeling) 12:2-3 investment (Higgs) 9:34-35 FROM the Armistice to the Great From the Armistice to the Great GOVERNMENT planning Depression.12:27-28 Depression (Higgs) 12:27-28 Central planning comes to Main Street FROM the president. See Ebeling How U.S. economic warfare provoked (Greenhut) 7/ 8:8-13 Japan's attack on Pearl Harbor. 5:36-37 FULL context (Richman) 4:24-25 Libertarian paternalism' (Boudreaux) FUNCTION of The Freema11 (Hazlitt) Quasi-corporatism: America's 9:12-13 1/2:19-21 homegrown fascism. 1/ 2:34-35 New urbanism: same old social When the government took over U.S . engineering (Greenhut) 4:8-12 investment. 9:34-35 GOVERNMENT-created right-to-work HIGH cost of misunderstanding gasoline G issue (Baird) 1/2:47-48 economics (Foulkes) 4:36-38 GOVERNMENT-mandated fuel-efficiency HIGHER gasoline tax will "solve GALBRAITH, John Kenneth: a criticism­ standards (Heberling) 9:36-38 everything"' It just ain't so1 (Cordaro) and an appreciation (Henderson) GOVERNMENTAL habit (Richman) 4:6-7 12:21-26 9:4-5 HISTORY of"underdevelopment" (Davies) GALLES, Gary GREAT Austrian inflation (Ebeling) 6:32-33 Vindicating voluntaryism. 11 :33-35 4:2-3 HISTORY. See American history: European See also Book reviews (Bernstein) GREENHUT, Steven history GARELLO, Pierre Central planning comes to Main Street. HOME with a view ... and a higher What is going on in France' 10:29-33 7/ 8:8-13 property tax (Goldsmith) 9:1 0-11 GARRISON, Roger W. New urbanism: same old social HORWITZ, Steven The Greenspan Fed in perspective. engineering. 4:8-12 Hayek and freedom. 5:26-28 6:12- 17 GREENSPAN Fed in perspective HOW public transit undermines safety GASOLINE. See Energy (Garrison) 6:12-17 (Semmens) 4:22-23

THE FREEMAN : Ideas on Li berty 44 H OW U.S. economic warfare provoked IT JUSt ain't so! Japan's attack on Pearl Harbor (Higgs) A higher gasoline tax will "solve L 5:36-37 everything"? (Cordaro) 4:6-7 LABOR, labor unions H UEBERT,]. H. See Book reviews (Evans Infl ati on is a "phantom menace"' Belt and braces in the labor marker & Schmalensee) (Callahan) 10:6-7 (de Jasay) 6:8-9 HURRICANE Katrina N othing to learn fro m the antifederalists' Economists against economics Capitalism an d natural disasters (Stromberg) 6:6-7 (Richman) 12:4-5 (Boudreaux) 1/ 2:12- 13 Only the rich are getting richer' Freedom for workers (Baird) 9:47-48 Day the glue came undone (Richman) (Henderson) 7/ 8:6-7 Government-created right-to-work issue 1/ 2:22-23 Raising the minimum wage will discourage (Baird) 1/ 2:47-48 Uncle Sam's flood machine (Bovard) migration' (Henderson) 11:6-7 Hayek on the rule of law and unions 1/ 2:36-40 The trade deficit is debt' (Boudrea ux) (Baird) 12:40-41 12:6- 7 Raising the minimum wage will The trade defi cit lowers our li ving discourage migration? It JUSt ain 't so! standard' (Griswold) 1/ 2:6-7 (Henderson) 11:6- 7 We need a stiff o il tax' (H enderso n) Should professors be all owed to I 3:6-7 unionize? (Lee£) 3:35-37 We need medical ra tioning' (Henderson) W hat is going on in France' (G arello) IDEAS, ideology 5:6-7 10:29- 33 C leaning up after the elephants We should trust th e leader, not the law' LAW, legislation (Richman) 7 / 8:+-5 (Blanchette) 9:6-7 Psychiatry: a branch of the bw (Szasz) End run to freedom (R oberts) 6:47--1-8 IT"S always something (R oberts) 12: 19-20 Eye on the ball (Richman) 11:25-26 3:-1- 7--1- 8 Neither left nor right (R ead) 1/2:28-29 We should trust the leader, not the law' Not losing sight of th e best in the pursuit It just ain't so1 (Blanchette) 9:6-7 of liberry (Ebeling) 7/ 8:2-3 LEE, Dwight R. On misplaced concreteness in social The disconnect between poli tical theory (Stromberg) 5:29- 35 promises and performance. 4:17- 21 Still neither left nor right (Ebeling) J LEEF, George C. l / 2:2-3 JACOBS, Jane, 1916-2006 (Richman) Should professors be all owed to IDEAS and consequences. Sec R eed 6:4- 5 unionize' 3:35- 37 IF there were no capita li sm (Chamberlin) JACOBS,Jane (Ikeda) 9:20-22 See also Book reviews (Crichto n; Downs; 112:30-33 JACOBSON, Vicror Epstein; Evans; Farrell ; Malanga; IKEDA, Sandy Most important. 7/ 8:27 McCullough; McWhorter; Segerfeldt; Jane Jacobs. 9:20-22 JAPAN, Germany, and the end of the third Siegan) IMMIGRAT ION way (Barry) 5:20-23 LEGAL plunder mislabeled "defense" Can we tell those huddled masses to JEFFERSO N IANS in space (Keating) (Richman) 5:4-5 scram' immigration and the -1-:1 3-1 4 LEH MAN, Tom. See Book reviews Constitution (A kers) 11 :8-13 JEWEL of consistency (DeArmond) (Gwartney, Stroup & Lee) Freedom to move (Cooley & Poirot) 6:29-31 LEVIATHAN'S legionnaires (Akers) 11: 14-15 JONES, Harold B. ,Jr. 6:23-28 Natural, not national, rights (Richman) The immorality of redistribution. LEVY, R obert A. 11:4-5 3:28- 32 Wartime executive power: are warrantless R aising the mi nimum wage will wiretaps legal' 7/ 8:36-40 discourage migration' It j ust ai n't so' LIBERTARIAN paternalism' (Boudreaux) (Henderson) 11: 6- 7 9:12-13 IMMO RALITY of redistribution (Jones) K LIGGIO, Leonard P 3:28-32 The Free111a11 : an eyewitness view. INCENTIVES KEAT! N G, R aymond]. 1/2:1 7-18 Always think of incentives (Davies) Jeffersonians in space. 4:13- 14 LIN GLE, Christopher 10:38-39 T he neglected factor in the housing Export-led recovery, multi pliers, and IN COME. See Wealth "bubble." 3:8-10 other fanciful noti ons. 10:13- 14 IN DIVIDUAL action, responsibil ity KEYNES, John Maynard: the damage still LITTMANN, David L. Sec Book reviews Two who made a difference (R eed) done by a defunct economist (Ebeling) (Shortt) 12: 12- 13 5:2-3 IN FLATION is a "phantom menace"' KEYNESIAN economics and constitutional It just ain't so 1 (Callahan) 10:6-7 government (Ebeling) 11 :2-3 IN FLATION. See Money K!R ZNER, Israel M INSTITUT IONS and development: the T he anatomy of economic advice, part I. case of C hina (Dorn) 6:1 8-20 7/ 8:28-33 MAJEW SKI,John. See Book reviews INTELLECT UAL properry rights The anatomy of economic advice, part ll. (Thornton & Ekelund) Patently unnecessary? (Richman) 4:4-5 9:1 4- 19 MANDATING renewable energy: it's not IS the income tax unconstitutional' The anatomy of economic advice, part easy being green (Heberli ng) (Richman) 9:23- 24 Ill. 10:17- 22 10:23- 26

45 DECEMBER 2006 McCARTHY, Fredrick K. NEITHER left nor right (Read) 112:28- 29 POLITICS, cominued More eminent-domain bullying. NEW urbanism: same old social Principles must come before politics 11:38-40 engineering (Greenhut) 4:8-12 (Ebeling) 10:2-3 MEDICINE, drugs, health insurance NOT losing sight of the best in the pursuit PRINCIPLES must come before politics Economics and American health care ofliberty (Ebeling) 7/8:2-3 (Ebeling) 10:2-3 (Cundiff) 3:19-22 NOTHING to learn from the PRIVATIZE the DMV (Semmens) Mental illness as brain disease: a brief antifederalists' It just ain't so! 9:25-28 history lesson (Szasz) 5:24-25 (Stromberg) 6:6-7 PROPERTY rights Mental illness: sickness or status' (S zasz) Home with a view ... and a higher 7/8:25-26 property tax (Goldsmith) 9:10-11 Psychiatry: a branch of the law 0 More eminent-domain bullyi ng (Szasz) 12:19-20 (McCarthy) 11:38-40 Psychiatry: disease inflation (Szasz) OCCUPATIONAL licensing PSYCHIATRY: a branch of the law (Szasz) 3:23-24 Government licensing scam (Goldsmith) 12:19-20 Therapeutic temptation (Szasz) 4:30-31 PSYCHIATRY: disease inflation (Szasz) 10:27-28 O'TOOLE, Randal 3:23-24 We need medical rationing? It just ain't Are highways subsidized? 11:27-32 PURSUIT of happiness. See Baird; Roberts; so! (Henderson) 5:6-7 ON bad arguments (Boudreaux) Williams Your money ar1d your life: the price of 11:16-17 QUASI-CORPORATISM: America's "universal health care" (Orient) ON misplaced concreteness in social theory homegrown fascism (Higgs) 112:34-35 12:8- 11 (Stromberg) 5:29-35 MENCKEN'S wisdom (Boudreaux) 6:10-11 ONLY the rich are getting richer? It just MENTAL illness as brain disease: a brief ain't so! (Henderson) 7/8:6-7 history lesson (Szasz) 5:24- 25 ORIENT,Jane M. R MENTAL illness: sickness or status' (Szasz) Your money and your life: the price of 7/8:25-26 "universal health care." 12:8- 11 RAISING the minimum wage will MINGARDI, Alberto ORIGIN of American farm subsidies discourage migration' It just ain't so! Antonio Rosmini: philosopher of (Folsom) 4:34-35 (Henderson) 11:6-7 property. 4:26-29 OUR economic past. See Davies; Folsom; RASMUSSEN, D ouglas B. MINIMUM wage. See Labor. Higgs The moral and cultural climate of MISES, Ludwig von: the political economist OUR presidents and the national debt entrepreneurship. 3:11-13 ofliberty (Ebeling), part I, 5:16-19; (Folsom) 7/ 8:3-1--35 READ, Leonard E. part II, 6:34-40 Neither left nor right. 112:28-29 MISPLACED acceptance of political leaders REAL revolution and you (Bierly) 3:38-40 (Ebeling) 9:2-3 MONEY P-Q REED, Lawrence W Great Austrian inflation (Ebeling) 4:2-3 Ideas and consequences column The Greenspan Fed in perspective "PARENT of the country" (Richman) Free-market moments on the silver (Garrison) 6:1 2-17 3:4-5 screen. 5:14-15 Inflation is a "phantom menace"? It just PASSING of a libertarian activist: Chris Government putts. 7/ 8:14-15 ain't so' (Callahan) 10:6- 7 Tame, 1949-2006 (Barry) 9:39-40 Growing up means resisting the statist impulse. 10:1 5- 16 MORAL and cultural climate of PATENTLY unnecessary? (Richman) entrepreneurship (R asmussen) 3:11 - 13 4:4- 5 A Supreme Court to be proud of. MORALITY PEACE principle (Peron) 12:29- 30 3:1 4-15 Inunorality of redistribution Oones) PERIPATETICS. See Richman Two who made a difference. 12:12-13 3:28- 32 PERON, Jim REFLECTIONS on Tile Freeman Moral and cultural climate of Chernobyl in perspective. 10:34-37 112:24-27 T he peace principle. 12:29-30 entrepreneurship (Rasmussen) 3:1 1-13 RIC HMAN, Sheldon MORE eminent-domain bullying PERSPECTIVE. See Richman Peripatetics column: (McCarthy) 11:38-40 PETERSON, William H . See Book reviews The day the glue came undone. MOST important Oacobson) 7/8:27 (Thornton) 112:22-23 MURPHY, Robert P. PIKE, William E. Eye on the ball. 11:25- 26 Are CEOs paid too much? 10:8-12 Was Dickens really a socialist? 12:14-16 Full context. 4:24-25 MURRAY, Philip R. See Book reviews PLANNING Is the income tax unconstitutional? New urbanism: same old social 9:23-24 (H enderson & H ooper) engineering (Greenhut) 4:8-12 "The tariff is the mother of trusts." POlROT, PaulL. 6:21-22 The Freeman: ideas on liberty. 1/ 2:14-16 Perspective N POIROT, Paul L. co-author. See Cooley C leaning up after the elephants. 7/8:4-5 POLITICS Economists against economics. 12:4-5 NATURAL, not national, rights (Richman) Disconnect between political promises Fifty years later. 1/2:4-5 11:4- 5 and performance (Lee) 4:17-21 The governmental habit. 9:4-5 NEGLECTED factor in the housing Misplaced acceptance of political leaders Jane Jacobs (1916-2006). 6:4-5 "bubble" (Keating) 3:8- 10 (Ebeling) 9:2- 3 Legal plunder mislabeled "defense." 5:4-5

THE FREEMAN: Ideas on liberty 46 RJCHMAN Sheldon, con/inned SZASZ, Thomas, continued UNIONS and abortion protesters (Baird) Natural, not national, rights. 11:4-5 Mental illness: sickness or status' 5:47-48 "Parent of the country." 3:4-5 7/8:25-26 UNIONS. See also Labor Patently unnecessary' 4:4-5 Psychiatry: a branch of the law. URBAN planning Why cut taxes? 10:4-5 12:19-20 Central planning comes to Main Street RICHMAN, Sheldon. co-author. See Ebeling Psychiatry: disease inflation. 3:23-24 (Greenhut) 7/ 8:8-13 ROBERTS, Russell The therapeutic temptation. 10:27-28 Jane Jacobs, 1916-2006 (Richman) Pursuit of happi11ess column 6:4-5 The end run to freedom. 6:47-48 Jane Jacobs (Ikeda) 9:20-22 It's always something. 3:47-48 New urbanism: same old social We need multimedia economics T engineering (Greenhut) 4:8-12 teaching. 10:47-48 TAME, Chris, 1949-2006: passing of a USA Patriot Act and finance: the hidden ROSM!Nl, Antonio: philosopher of libertarian activist (Barry) 9:39-40 threat (Barnett) 9:8-9 property (Mingardi) 4:26-29 "TARIFF is the mother of trusts" VINDICATING voluntaryism (Galles) ROTHBARD, Murray (Richman) 6:21-22 11 :33-35 Government in business. 10:40-41 TAXES, taxation Higher gasoline tax will "solve everything"' It just ain't so! (Cordaro) 4:6-7 s Home with a view . . . and a higher w-z property tax (Goldsmith) 9:1 0-11 SALES, Oat, or spherical, tax reform isn't the Is the income tax unconstitutional' WAL-MART wasn't always the biggest answer (Callahan) 11:18-21 (Richman) 9: 23- 24 (Semmens) 7/ 8:16-18 SCANDINAVIAN irony: socialism meets Sales, flat, or spherical, tax reform isn't WAH.TIME executive power: are warrantless liberalization (Cooper) 9:29-33 the answer (Callahan) 11:18-21 wiretaps legal' (Levy) 7/ 8:36-40 SELDON, Arthur: contribution to freedom We need a stiff oil tax' It just ain't so! WAS Dickens really a socialist' (Pike) 12:14-16 (Barry) 4:32-33 (Henderson) 3:6-7 WE need a stiff oil tax' It just ain't so! SEMMENS, John Why cut taxes' (Richman) 10:4-5 H ow publi c transit undermines safety. (Henderson) 3:6-7 THERAPEUTIC state. See Szasz 4:22-23 THERAPEUTIC temptation (Szasz) WE need medical rationing' It just ain't so! Privatize the DMV. 9:25-28 10:27-28 (H enderson) 5:6-7 Wal-Mart wasn't always the biggest. THOUGHTS on freedom. See Boudreaux WE need multimedia economics teaching 7/ 8:16-18 TOOLEY, James (R oberts) 10:4 7-48 SHAW, JaneS. See Book reviews (Schoenbrod) Backing the wrong horse: how private WE should trust the leader, not the law' It SHOULD professors be allowed to just ain't so! (Blanchette) 9:6-7 schools are good for the poor. 5:8-13 unionize' (Leef) 3:35-37 TRADE deficit is debt? It just ain't so! WEALTH, income SKOBLE, Aeon J. See Book reviews (Younkins) (Boudreaux) 12:6-7 Are CEOs paid too much? (Murphy) SMITH, Bradley A. See Book reviews TRADE deficit lowers our living standard' 10:8-12 (Samples) It just ain't so! (Griswold) 1/2:6-7 Only the rich are getting richer' It just SO much to read! (Boudreaux) 4:15-16 TRANSPORTATION ain't so! (Henderson) 7/ 8:6- 7 SPORTS, government subsidies to Are highways subsidized? (O'Toole) WELCH, Tom. See Book reviews (Rivoli) Government putts (R eed) 7/ 8:14-15 11 :27-32 WHAT is going on in France' (GareUo) More eminent-domain bullying How public transit undermines safety 10:29-33 (McCarthy) 11 :38-40 (Semmens) 4:22-23 WHEN the government took over U.S. STATE power TWO who made a difference (R eed) investment (Higgs) 9:34-35 Peace principle (Peron) 12:29-30 12:12-13 WHICH New Deal program had a death ST ILL neither left nor right (Ebeling) 1/2:2-3 rate? (Folsom) 11:36-37 STROMBER G, Joseph R. WHY cut taxes? (Richman) 1 0:4- 5 Nothing to learn from the antifederalists? WILLIAMS, Walter E. It just ain't so! 6:6-7 U-V The pursuit of happi11ess column On misplaced concreteness in social Constitution Day. 11:47-48 theory. 5:29-35 U.S. Constitution Economics for the citizen, part IV. SUPREME Court to be proud of (R eed) Can we tell those huddled masses to 4:47-48 3:14-15 scram' immigration and the Economics for the citizen: part V. SZASZ, Thomas Constitution (Akers) 11:8-13 7/ 8:47-48 The therapeutic state column: Constitution Day (Williams) 11:47- 48 YOUR money and your life: the price of Mental illness as brain disease: a brief UNCLE Sam's flood machine (Bovard) "universal health care" (Orient) history lesson. 5:24-25 l/2:36-40 12:8-11

47 DECEMBER 2006 BOOKS (Reviewer's name in parentheses)

BERNSTEIN, Andrew GRAYLING, A.C. RlVOLl, Pietra The capitalist manifesto (Galles) Among the dead cities: the history and The travels of a t-shirt in the global 6:42-43 moral legacy of the WWII bombing of economy: an economist examines the BEST, Gary Dean civilians in Germany and Japan markets, power, and politics of world Peddling panaceas: popular economists (Ebeling) 7/ 8:41-42 trade (Welch) 4:42-43 in the New Deal era (Folsom) GWARTNEY,James, Richard L. Stroup & SAMPLES, john 12:35-36 Dwight R. Lee Welfare for politicians': taxpayer BREYER, Stephen Common sense economics: what financing of campaigns (Smith) Active liberty: interpreting our everyone should know about wealth 4:43-44 democratic Constitution (DeBow) and prosperity (Lehman) 6:45-46 SCHOENBROD, David 11:44-45 HAMOWY, Ronald Saving our environment from CHERRY, Mark J. The political sociology of freedom: Adam Washington (Shaw) 7/ 8:43-44 Kidney for sale by owner: human organs, Ferguson and FA. Hayek (Ebeling) SCHWEIKART, Larry & Michael Allen transplantation, and the market 4:41-42 A patriot's history of the United States: (Anderson) 9:45-46 HENDERSON, David R. & from Columbus's great discovery to CRICHTON, Michael Charles L. Hooper the war on terror (Folsom) State offear (Lee£) 1/ 2:44-45 Making great decisions in business and 112:45-46 DAHL, Robert A. life (Murray) 11:45-46 SEGERFELDT, Fredrik On political economy (Ebeling) 9:41-42 HOCHSCHILD, Adam Water for sale: how business and the DIAMOND, Jared Bury the chains: prophets and rebels in market can resolve the world's water Collapse: how societies choose to fail or the fight to free an empire's slaves crisis (Lee£) 6:43-H succeed (Callahan) 9:42-43 (Akers) 10:44-45 SHORTT, Bruce N. DOWNS, Donald Alexander KLING, Arnold The harsh truth about public schools Restoring free speech and liberty on Learning economics (Boudreaux) (Littmann) 3:44-45 campus (Lee£) 4:45-46 5:45-46 SIEGAN, Bernard H. EASTERLY, William LAL, Deepak Economic liberties and the Constitution The white man's burden: why the West's R eviving the invisible hand: the case for (Lee£) 9:44-45 efforts to aid the rest have done so classical liberalism in the twenty-first STIGLITZ, Joseph E. & Andrew Charlton much ill and so little good (Ebeling) century (Ebeling) 10:42-43 Fair trade for all: how trade can promote 6:41-42 MALANGA, Steven development (Ebeling) 3:42-43 EPSTEIN, Richard A. The new new left: how American politics SUNSTE!N, Cass How progressives rewrote the works today (Lee£) 5:43-44 Laws of fear (Boudreaux) 10 :43-H Constitution (Lee£) 7/ 8:42-43 McCULLOUGH, David THORNTON, Mark & Robert B. EVANS, DavidS. & Richard Schmalensee 1776 (Lee£) 11:43-44 Ekelund,Jr. Paying with plastic: the digital revolution McWHORTER, John Tariffs, blockades, and inflation: the in buying and borrowing (Huebert) Winning the race: beyond the crisis in economics of the Civil War (Majewski) 5:42-43 black America (Lee£) 12:38-39 3:45-46 EVANS, Harold MEADOWCROFT, john THORNTON, Mark, ed. They made America: from the steam The ethics of the market (Ebeling) The quotable Mises (Peterson) 7/ 8:45 engine to the search engine: rwo 12:34-35 WARD, Lee centuries of innovators (Lee£) M!SES, Ludwig von The politics of liberty in England and 3:43-44 Nation, state, and economy: contributions revolutionary America (Akers) FARRELL, Warren to the politics and the history of our 1/2:42-43 Why men earn more (Lee£) 10:46-47 time (Ebeling) 11 :41-42 YOUNKINS, Edward W., ed. FRIEDMAN, Benjamin M. PIPES, Richard Philosophers of capitalism: Menger, The moral consequences of economic Russian conservatism and its critics Mises, Rand, and beyond (Skoble) growth (Ebeling) 1/2:41-42 (Ebeling) 5:41-42 12:36-37

THE FREEMAN : Ideas on Liberty 48 LuD-w-IG VON MISES Marxism Unmasked: From Delusion to Destruction Edited and with an introduction by Richard M. Ebeling

In the summer of 1952 Ludwig von Mises delivered a series of lec­ tures at a seminar in San Francisco sponsored by The Freeman magazine. Bettina Bien Greaves, a member of FEE's staff at the time, took down every word of each lecture in shorthand and faithfully transcribed them for eventual publication. Marx ism Unmasked: From D elusion to D estruction uniquely captures Mises as teacher. Unlike many ofhis longer, more formal writings, these lectures are peppered with numerous historical asides and common­ sense examples that convey the ease and spirit of the spoken word. Mises presents his insight into the fundamental errors and miscon­ ceptions to be found in Marx's theories of dialectical materialism and class warfare, as well as a historical analysis of the real benefits from the Industrial Revolution that coincided with the emergence of modern capitalist society. H e also explains the role of savings, investment, and the profit-and­ loss system as the engines for economic and cultural progress, and which have helped eliminate the poverty that has plagued mankind through most of history. He also dis­ cusses the nature and workings of capital markets and the importance of market-based interest rates free from government manipulation and inflation. In addition, he shows that foreign investment in under­ developed parts of the world has not been the cause of poverty or exploitation, as socialists have con­ stantly claimed, but rather the source of accelerated prosperity and human improvement for tens of millions of people. All of Mises's arguments and analyses are placed in the wider context of individualism versus collec­ tivism, the importance of freedom for the dignity and betterment of every human being, and the dan­ gers from surrendering liberty and property to the paternalistic state. Through it all, he offers the reader a vision of the classical-liberal ideal of the free and prosperous society.

128 pages, including ind ex, ~ Special introductory price: $11

Also available: The Free Market and Its Enemies: Pseudo-Science, Socialism, and Inflation (FEE, 2004), the first volume in this Mises Seminar Lectures series, $11. Buy both Marxism Unmasked and The Free Market and I ts Enemies for $20.

Standard postage and handling: Please add $3 per order of $25 or less. Call for shipping rates on orders over $25. Sorry, this special offer is not available through our online store. Send order, with accompanying check or money order, to FEE, 30 South Broadway, Irvington­ on-Hudson, NY 10533. Credit-card orders welcome: (800) 960-4FEE. "Those of us who believe in freedom must believe also in the freedom of individuals to make their own mistakes. If a man knowingly prefers to live for today, to use his resources for current enjoyment, deliberately choosing a penurious old age, by what right do we prevent him from doing so? We may argue with him, seek to persuade him that he is wrong, but are we entitled to use coercion to prevent him from doing what he chooses to do? Is there not always the possibility that he is right and that we are wrong? Humility is the distinguishing virtue of the true believer in freedom; arrogance, of the paternalist."

Milton Friedman, Capitalism and Freedom

FOUNDATION FOR E CONOMIC EDUCATION 30 South Broadway Irvington-on-Hudson, NY 10533 www.fce.org