The Economics of Liberty Edited by Llewellyn H. Rockwell The Ludwig von Mises Institute Auburn, Alabama 36849 The Ludwig von Mises Institute gratefully acknowledges the Patrons whose generosity made the publication of this book possible: a.p. Alford, III James W. Frevert Robert E. Miller Morgan Adams, Jr. John B. Gardner A. Minis, Jr. The Adams Fund Martin Garfinkel Dr. K. Lyle Moore Anonymous (4) Thomas E. Gee Dr. Francis Powers Dr. J.e. Arthur Bernard G. Geuting Donald Mosby Rembert Joe Baldinger W.B. Grant V.S. Boddicker AANGS Co. James M. Rodney The Boddicker W. Grover Catherine Dixon Roland Investment Co. Freeway Fasteners Sheldon Rose Brenda Bretan Dr. Robert M. Hansen Dwight Rounds Franklin M. Buchta Harry H. Hoiles Gary G. Schlarbaum E.O. Buck Charles Hollinger Mrs. Harold B. Chait T.D. James Stanley Schmidt J.E. Coberly, Jr. G.E. Johnson Charles K. Seven William B. Coberly, Jr. Michael L. Keiser Vincent J. Severini Coberly-West Co. John F. Kieser E.D. Shaw, Jr. Dr. Everett S. Coleman H.E. King Shaw Oxygen Co. Christopher P. Condon The M.H. King Russell Shoemaker Morgan Cowperthwaite Foundation Shoemaker's Candies Charles G. Dannelly W.H. Kleiner Abe Siemens Carl A. Davis Julius and Emma Clyde A. Sluhan Davls-Lynch, Inc. Kleiner Foundation Robert E. Derges Dr. Richard J. Donald R. Stewart John Dewees Kossmann David F. Swain, Jr. William A. Diehl John L. Kreischer Walter F. Taylor Robert H. Krieble Robert T. Dofflemyer Dr. Benjamin H. Krteble Associates Dr. William A. Dunn Thurman Norma R. Lineberger Dunn Capital C.S. Trosper Management Robert D. Love Edgar J. Uihlein Mrs. Card G. Elliott, Jr. Love Box Co. Mr. & Mrs. C.R. Estes William Lowndes, III Lawrence Van Estes Enterprises The Lowndes Corp. Someren, Sr. Jason H. Fane Walter Marcyan Charles H. Wacker, III Alice B. Fawcett Forrest E. Mars, Sr. Frederick G. Wacker, Jr. William W. Massey, Jr. Willard Fischer W.F. & Sue T. Whitfield Mr. & Mrs. James R. Richard A. Maussner Trammell-Whitfield Co. Focht Ellice McDonald, Jr. Tom Zignego John G. Ford Dr. J.L. McLean The Zignego Co. Copyright © 1990 by The Ludwig von Mises Institute All rights reserved. Written permission must be se­ cured from the publisher to use or reproduce any part of this book, except for brief quotations in critical reviews or articles. Library ofCongress CatalogCard Number: 90-062-46 ISBN: 0-945466-08-0 DEDICATION To O. P. ALFORD, III, entrepreneur and activist for liberty Contents Introduction Llewellyn H. Rockwell 13 1. ECONOMIC TRUTH VS. POLITICAL POWER Outlawing Jobs: The Minimum Wage, Once More Murray N. Rothbard 17 The Scourge of Unionism Llewellyn H. Rockwell 21 Keynesianism Redux Murray N. Rothbard 27 The Keynesian Dream Murray N. Rothbard 32 The Free-Rider Confusion Tom Bethell . 35 Property Rights, Taxation, and the Supply-Siders Tom Bethell . 41 The Regulatory Attack on the Market Llewellyn H. Rockwell .. .. 47 Are Savings Too Low? Murray N. Rothbard . 51 The "We" Fallacy Sheldon L. Richman . 55 U.S. Trade Law: Losing Its Bearings Alex Tabarrok 59 7 8 THE ECONOMICS OF LIBERTY Statistics: Destroyed from Within? Murray N. Rothbard 63 The Truth About Economic Forecasting Graeme B. Littler 66 Michael R. Milken: Political Prisoner? Llewellyn H. Rockwell 70 The Economic Wisdom of the Late Scholastics Jeffrey A. Tucker 73 2. DEBUNKING THE BANKERS Bring Back the Bank Run! James Grant 79 Nick and Jim Dandy to the Rescue Bradley Miller 84 Q&A on the S&L Mess Murray N. Rothbard 88 Inflation Redux Murray N. Rothbard 95 Faustian Economics John \Z Denson .. .. 98 A Gold Standard for Russia? Murray N. Rothbard . 101 The Source of the Business Cycle Jeffrey A. Tucker 104 The Key to Sound Money Edwin Vieira, Jr. 108 Foreclose on the World Bank E. Cort Kirkwood .. .. .. .. .. ...... .. .. .. .. ............ .. .. 112 3. UNMASKING THE BUREAUCRATS Why Bureaucracy Must Fail Llewellyn H. Rockwell 119 CONTENTS 9 Your Visit to Our Nation's Capital Llewellyn H. Rockwell 124 The Case Against NASA Sheldon L. Richman .. 127 Kemp at HUD: Should Free-Marketeers Be Optimistic? Greg Kaza .. .. .. 132 Government and Hurricane Hugo: A Deadly Combination Murray N. Rothbard . 136 Big Government: An Unnatural Disaster Llewellyn H. Rockwell 140 In Defense of Congress Llewellyn H. Rockwell 144 Exxon: Biggest Victim of the Alaskan Oil Spill Llewellyn H. Rockwell 148 "Mraid to Trust the People With Arms" Stephen P. Halbrook 153 4. THE GOVERNMENT MESS Back to First Principles Joseph Sobran 159 Why Government Grows Llewellyn H. Rockwell 169 Our Tentative Economic Freedoms Llewellyn H. Rockwell 174 The Great Society and 25 Years of Decline William Murchison 178 Civil Rights and the Politics of Theft Joseph Sobran 182 Triumph of Liberty? Not in the U.S. Robert Higgs 187 10 THE ECONOMICS OF LIBERTY The Federal Agricultural Swamp James Bovard 191 Government Garbage Llewellyn H. Rockwell 197 Artistic "Entitlement" Doug Bandow .. .. .. .. .. .. .. .. .. .. .. .. ...... .. .. .... .. .. .. .. 201 What To Do About Traffic Congestion Walter Block 207 Time for An American Perestroika RobertHiggs 211 Immigration and Private Property Llewellyn H. Rockwell 216 5. THREATS AND OUTRAGES End the War on Drugs Joseph Sobran 221 Drugs and Adultery Llewellyn H. Rockwell 226 Would Legalization Increase Drug Use? Lawrence W. Reed 231 Mickey Leland: Humanitarian? Llewellyn H. Rockwell 235 Choice in Schooling Sheldon L. Richman 238 The High Court Stems the Tupperware Threat Sheldon L. Richman 244 Welcoming the Vietnamese Murray N. Rothbard .. 247 The Double Danger ofAIDS Richard Hite 249 CONTENTS 11 The Megaeconomic Threat Llewellyn H. Rockwell 253 Cantrolling the World Economy Graeme B. Littler and Jeffrey A. Tucker 257 The Dangers of "National Service" Sheldon L. Richman .. 263 The Mandated-Benefits Scheme Sheldon L. Richman 267 Animal Crackers Llewellyn H. Rockwell 272 Christian Economics Carl C. Curtis, III 276 Breaking Up the Opinion Cartel Llewellyn H. Rockwell 280 Lyndon Baines Bush? Llewellyn H. Rockwell 285 The Environmentalist Threat Llewellyn H. Rockwell 289 6. THE COMMUNIST CRACKUP Mises Vindicated Llewellyn H. Rockwell 313 The Freedom Revolution Murray N. Rothbard 318 The Old Right Was Right Sheldon L. Richman .. 322 The Vanishing Spectre of Communism Doug Bandow .. .. .. .. .. .. .. .... .. .. .. .. .. .. .. .. .. .. .. .. .... 332 12 THE ECONOMICS OF LIBERTY The Socialist Holocaust in Armenia Llewellyn H. Rockwell 334 How to Desocialize? Murray N. Rothbard 338 A Radical Prescription for the Socialist Bloc Murray N. Rothbard .. .. 342 Mises in Moscow! An Interview with an Austrian Economist From the U.S.S.R. Jeffrey A. Tucker 346 Cambodian Catharsis Lawrence * Reed .. .. .. .. .. .. .. .. .. .. .. ........... .. .. .. 354 Mises's Blueprint for the Free Society Sheldon L. Richman 359 APPENDIX A FOREIGN POLICY FOR A FREE-MARKET AMERICA: TWO VIEWS A New Nationalism Patrick J. Buchanan .. 363 America First, Once More Bill Kalfffman 368 INDEX 375 ABOUT THE CONTRIBUTORS 391 INTRODUCTION oday, the whole world knows about the socialist T fiasco. But in 1920, when Ludwig von Mises's jour­ nal article on "Economic Calculation in the Socialist Commonwealth" was published, he was a lone voice of truth. "Socialism," he wrote in the book that followed two years later, "is the watchword and the catchword of our day." It "dominates the modern spirit" and "has set its seal upon our time. When history comes to tell our story it will write above the chapter 'The Epoch ofSocialism.'" Until the glorious year of1989, almosteveryone seemed to agree that history was indeed on the side of socialism. The only question was the pace of the transition. The Marxists and Nazis wanted immediate revolution; the Fabians and New Dealers wanted gradualism. But for all of them, laissez-faire capitalism was the enemy. 13 14 THE ECONOMICS OF UBERTY Yet no socialist had ever written a scientific defense ofsocialism, nor a blueprint for exactly how the economy would function when the means of production were collectively owned. According to Karl Marx's doctrine, anyone question­ ing the socialist scheme lacked class consciousness. Bourgeois values prevented an understanding of the logic of history. Because "people were not allowed to talk or to think about the nature of the socialist community," Mises notes, socialism became "the dominant political move­ ment of the late nineteenth and early twentieth centu­ ries." But Mises refused to play by the socialist rules, and he challenged left-Wing intellectuals with questions they were unable to answer. If there is no private ownership of the factors of production, and thus no market prices for them, how can we calculate profit and loss? Without the ability to make profit and loss calculations, how can we judge the value ofresources. determine the correctness ofvarious meth­ ods ofproduction, or tell whether time and resources are being wasted or put to good use? In a market economy, prices tell us the needs of society and the best ways to meet those needs. Without prices, economic decision must be arbitrary. Mises criticized socialism on other grounds-that it politicizes society. fosters laziness, and relies on violence. for example-but his calculation argument is the most important. With it, he showed that socialism is inherently irrational and uneconomic, as the wreckage of the East Bloc and the Third World demonstrates today. INTRODUCTION 15 One socialist response to Mises was to invent pretend market prices, missing the point that private property is necessary for real prices. And that is why the Misesian calculation argument has relevance for the mixed econ­ omy. It shows what is wrong with all government inter­ ventions in the free market. In a government agency, there are no private owners. There are no market prices for its goods or services. There is no way to determine profits or losses. So its decisions must be arbitrary. Mises's case against socialism is also the case for laissez-faire capitalism, "the only conceivable form of social economy which is appropriate to the fulfillment of the demands which society makes of any economic organization." But despite their economic failure, socialist systems survived until men and women ofcourage brought about their political downfall.