Clarence 8. Carson 3

Sudha R. Shenoy 18

Timothy J. Wheeler 23

Hans F. Sennholz 33

Elizabeth Gillett 38

AI8ellerue 44

Irving E. Howard 46

Der Spiegel 51

APRIL 1966

The Flight from Reality19. The Flight from Economics.

On the Redistribution of Incomes.

The Armchair Skirmish Against Poverty.

Progress or Regress?

Pay Television: The Right to Competeand to Speak .

Market Price of Burros .

Will the Real Price AdministratorPlease Stand Up! .

Of Birds and Men

Books:

King of the Road .

Other Books .

John Chamberlain 54

57

COMPOUNDED DAILY, your savingsearn 4.970/0 when held one year at cur­rent rate of 4.85 0/0, paid semi-annually.

To: George Ross, Department FM, Coast Federal Savings and Loan Association9th & Hill Streets, Los Angeles, California 90014

o Please send me the free brochures Name(s) _on "Law and Order." (Please Print)

o Yes, I'd like to open a savings ac­count. Enclosed is my check (ormoney order) for $. _

o Individual Account Streeto Joint Accounto Please transfer my account. City State Zip _

.J;I' There'll doubtless be protest amongproponents of the "new economics"when a historian traces their flightfrom reality - so, On Guard! p. 3

J;I' Miss Shenoy, of India, offers someprovocative views of the harmful con­sequences of the compulsory redistri-bution of incomes. '" p. 18

J;I' The co-editor and publisher of anew journal for young conservativescarefully examines the war on poverty,and finds it wanting p. 23

yI In ancient history, Professor Senn­holz finds the familiar pattern of mostof the interventions proclaimed as to­day's new keys to progress...... p. 33

III'" Some vital aspects of the problemof freedom in general are involved inthe verbal, economic, and politicaldevelopments surrounding pay-tele-vision. .. .p. 38

yI The purchase and subsequent saleof a pair of "ornery critters" illustratehow everyone gains from any volun­tary exchange. . .. ... p. 44

J;I' Those who fear the consequencesof "administered pricing" shouldknow that the only force powerfulenough to enforce its monopoly is thegovernment. . p. 46

" Our feathered friends should takeexception to the notion that the wel­fare state is "for the birds." ...... p. 51

~ John Chamberlain congratulatesRalph and Estelle James for theirHoffa and the Teamsters: A Study ofUnion Power. . p. 54

yI Reviewer Opitz finds cause for con­cern in a pair of volumes dealing withthe uses of Church land and Churchwealth p. 57

~ And Robert Thornton draws somelessons on liberty from Hans Morgen­thau's Scientific Man versus PowerPolitics. ......... . ........ p. 61

~ Finally, there's a wealth of politicalwisdom in Carl B. Cone's analysis ofBurke and the Nature of Politics.

... p.62

Anyone wishing to communicate with authors may sendfirst-class mail in care of THE FREEMAN for forwarding.

APRIL 1966

LEONARD E. READ

PAUL L. POIROT

Vol. 16, No.4

President, Foundation forEconomic Education

Managing Edito1'

THE FREEMAN is published monthly by the

Foundation for Economic Education, Inc" a non­political, nonprofit educational champion of privateproperty, the free market, the profit and loss system,and limited goYernment, founded in 1946, with offices

at Irvington-on-Hudson, New York. Any interestedperson may receive its publications for the asking.The costs of Foundation projects and services, in­cluding THE FREEMAN, are met through volun­tary donations. Total expenses average $12.00 a yearper person on the mailing list. Donations are invitedin any amount - $5.00 to $10,000 - as the means ofmaintaining and extending the Foundation's work.

Copyright, 1966, The Foundation for Economic Education, Inc. Printed inin U.S.A.

Additional copies, postpaid, to one address: Single copy, 50 cents;3 for $1.00; 25 or more, 20 cents each.

Permission is hereby granted to anyone to reprint any article in wholeor in part, providing customary credit is given, except "The Flight fromReality," "The Armchair Skirmish Against Poverty," "Pay Television:The Right to Compete and to Speak," and "Of Birds and Men."

Any current article will be supplied in reprint form if there are enoughinquiries to justify the cost of the printing.

19.

The Flightfrom

Economics

CLARENCE B. CARSON

JOHN K. GALBRAITH, 1958

· .. In these crises there breaks out an epidemic that, in all earlier epochs,would have seemed an absurdity - the epidemic of over-production.... Be­cause there is too much civilization, too much means of subsistence, too muchindustry, too much commerce. KARL MARX and FREDERICK ENGELS, 1848

· .. The essence of social progress lies not in the increase of material wealthbut in a rise of the mar'gin of consumption. SIMON N. PATTEN, 1893

· . . In industry after industry potential output is vastly greater than de-mand - a condition which grows steadily worse. STUART CHASE, 1931

· .. Shall we continue to believe that panics, deflation, and bankruptcy areour only remedy for overproductivity in industry? Or shall we ... controlovercapacity and reconstruct the purchasing power of our people?

REXFORD G. TUGWELL, 1935

Given a sufficiency of demand, the responding production of goods in themodern economy is almost completely reliable. We have seen ... why menonce had reason to regard the economic system as a meager and perilousthing. And we have seen how these ideas have persisted after the problem ofproduction was conquered.

THE METHODS of reform havebeen drawn from a variety of in-

Dr. Carson is Professor of American Hi 4Oltoryat Grove City College, Pennsylvania. Amonghis earlier writings in THE FREEMAN werehis series on The Fateful Turn and TheAmerican Tradition, both of which .are nowavailable as books.

congruous sources - from war,from business, from charitable or­ganizations, from voluntary so­cieties, from feudal practices,from mercantile policies, amongothers. The consequences that

3

4 THE FREEMAN April

have followed attempts to usethese methods have been deter­mined by the methods. But thereis more to the matter of the meth­ods of the reformers than theirorigin. There have been strangejustifications for the use of themethods and peculiar, as well asparticular, applications of them.

The particular orientation ofmost reformers has been materi­alistic. They have professed con­cern with the material well-beingof people. Their interest and con­cern has had to do with hunger,deprivation, disease, malnutrition,poverty, poor housing, infesta­tions, and exposure. Such mattersfall in the realm of economy. Manyof the programs and policies ofreformers are aimed at or haveto do with things economic. Theseemphases make economics the cen­tral discipline for reformist atten­tion; their programs succeed orfail to the extent that they aremore or less economically sound.It would not be too much to saythat the vast meliorist reform ef­fort would only be morally, social­ly, and rationally justified if itwere in accord with sound eco­nomics.

Uneconomical Programs

On the face of it, many reformprograms appear to be uneconom­ical. Reformers have, at varioustimes, advocated crop restrictions

and control upon industrial pro­duction, subsidies for products al­ready in "surplus," loans to for­eign governments to enable themto buy American goods, give-awayprograms both domestic and for­eign, deficit spending by govern­ment in order to produce prosper­ity, inflation in order to increase"purchasing power," easy moneypolicies to promote spending, theraising of wages by promotingunionization and establishing min­imum wages, the establishing ofprices above or below marketprices, special taxes upon corpo­rations which had become majorinstruments of production, gradu­ated income taxes which wouldfall proportionately heaviest uponthose with the highest incomes,the governmental provision of in­come to those who do not produce,and so on. These are not measuresof a character that would usuallybe called economical. Men have notcustomarily thought it economical­ly sound to spend more than theymake, to take from those who pro­duce and give to those who do not,to pay more than the market pricefor goods and services, to giveaway their substance.

A deeper look at economics re­veals that such actions are, in­deed, uneconomical. Economics hasto do with scarcity. This characterof economics is indicated by theconventional uses of words related

1966 THE FLIGHT FROM ECONOMICS 5

to it. For example, one dictionarydefines "economical" as "avoidingwaste or extravagance; thrifty."It "implies prudent planning inthe disposition of resources so asto avoid unnecessary waste...."To "economize" is to "use spar­ingly or frugally." "Economy" re­fers to "thrifty management; fru­gality in the expenditure or con­sumption of money, materials, etc."Economics can be defined as thestudy and exposition of the mosteffective means for men to main­tain and increase the supply ofgoods and services at their dis­posal. These goods and servicesare understood to be scarce; andeconomics has to do with the fru­gal management of time, energy,resources, and materials so as tobring about the greatest increasein the supply of the goods and ser­vices most desired. An aspect ofeconomics, one with which muchof academic and theoretical eco­nomics has dealt, is the study andsetting forth of answers to thequestion of what are the best so­cial conditions within which eco­nomic behavior may take place.Such a study is known as politicaleconomy, but it, too, has beenpremised upon the existence ofscarcity.

Aggravated Scarcity

With these definitions in mind,it should be clear that the methods

of reformers have not been eco­nomical. Crop restrictions aremeans of increasing scarcity rath­er than diminishing iL Minimumwages, above the market rate, in­crease the shortage of labor bypricing it out of use (cause un­employment). Price supports forgoods make them unavailable tothose who cannot afford them atthat price, thus increasing theirscarcity. Inflation increases thesupply of money, not the supplyof goods. The giving away ofgoods decreases their supply; andif these are taken from someoneby government, this action de­creases the incentive for the pro­duction of goods. Loan~ to enablethe buying of goods are not eco­nomic, though if the loans be re­paid with interest, at or above themarket rate, it would be economi­cal for the lender. None of thesedevices involves frugal manage­ment of limited means to deal withthe problem of scarcity.

Mercantilism Perpetuated

Modern (Le., post-Medieval)economics took shape from pro­posals dealing with scarcity. Someof these developments in the six­teenth, seventeenth, and into theeighteenth centuries are knownnow as mercantilism. Mercantilismwas, and is, nationalistic, that is,a proposed economy for dealingwith the scarcity which confronts

6 THE FREEMAN April

a particular nation. The particularscarcity which mercantilists em­phasized was the scarcity of gold,but the value of gold was gen­erally understood to be its virtu­ally universal acceptability as amedium of exchange. At any rate,mercantilists focused attentionupon means for increasing thesupply of gold within a nation.They thought of one nation'swealth as being got at the expenseof other nations and conceived ofa variety of devices for gettinggold from other nations. Theirmain invention was the favorable­balance-of-trade idea, by which anation would sell more goods to anation than it bought from thatnation, the difference being madeup by gold. Mercantilists favoredmanufacturing, for thereby thevalue of a product would be en­hanced before it was sold, and theypromoted colonization for the se­curing of raw materials and mar­kets. Regulatory measures wereendorsed as means for enhancingthe trade and gold supply of anation.

Economically Sound BehaviorAdvantageous to Everyone

Dealing with scarcity was theobject of mercantilism, but weresuch practices economical? It wasthe great work of the physiocratsand Adam Smith in the latter partof the eighteenth century to show

that they were not. These writerstook a cosmopolitan or universalview of economics. They were con­cerned to discover and set forththe natural order for economic be­havior. From this broad view,Smith, particularly, demonstratedthat true economic behavior is so­cial, that when everyone behaveseconomically, everyone benefits.

In a century beset by worldwars-wars rooted mainly in tradeconflicts spawned by mercantilism-Smith held that trade is by na­ture peaceful, that the wealth ofa people is not obtained at the ex­pense of other peoples, that whenpeoples of one country trade withthose of another, bo~th benefit. Hemaintained that when each manpursues his own interest, when ex­change is free from arbitrarilyimposed obstacles, when each manmay buy at the lowest price any­where in the world and sell to thehighest bidder on the world mar­ket, when competition is allowedfree play, all will benefit. Eachman will be able to get the highestprice possible for his goods andservices and be able to obtain thosehe wants at the lowest possibleprice, that is, roughly, at the costof providing them. There is an in­visible hand - an order in the uni­verse - that brings harmony outof the diverse actions of men, ifthey may act as they choose andare prohibited to use force, fraud,

1966 THE FLIGHT FROM ECONOMICS 7

or deception in their dealings withothers.

Smith held that government in­tervention was not necessary tobring about these beneficent re­sults. On the contrary, governmentintervention is a positive deterrentto economic behavior; it places ob­stacles in the way of free ex­change, promotes uneconomic(viewed socially) behavior, anddistorts the market. In short, mer­cantilist practices are not eco­nomic.

Adam Smith Displaced

Economic thought, after Smith,consisted largely of refinements,extensions, and modifications ofpositions which he and the physio­crats had set forth. But the philo­sophical framework within whichSmith worked hardly survived theeighteenth century for most think­ers, as we have seen in earlierchapters. The breadth of visionmade possible by the cosmopolitan­ism, universalism, and belief in anatural order within a rationaluniverse gave way to the particu­larism of romanticism and the nu­merous abstractions which servedas a base for the proliferating ide­ologies of the nineteenth century.Economics became the "dismalscience," the discipline whichjustified the ways of scarcity andprivation to men.

Economists were soon, once

again, wrestling with the conun­drum which ever and again besetsthem. The 'l- conundrum has hadmany formulations, but the onewhich follows may, perhaps, statethe essence of them all. If man isconfronted with scarcity, if thesupply of goods and services is lessthan the desire for them, it looksas if one man's gain is anotherman's loss. That is, when one mantakes from the limited supply ofgoods, he has them at the expenseof others who might have· usedthem. If this were the case, thequest for goods and services wouldbe a clash or contest between thosewho had them and those whowanted them for possession,with one side the winner and onethe loser. Mercantilists had con­ceived of such a struggle amongnations. Ricardo and Malthus con­ceived of the matter as a contestbetween increasing population andthe limited means for subsistence.Marx rendered it into a class strug­gle. The social Darwinists, Spencerand Sumner,saw it as a struggle inwhich the fit survived.

Developing Economic Theory

Economists adopted a variety ofpostures about the struggle andthe scarcity. Ricardo held thatthat was the way things were andthere was nothing much to be doneabout it (though technological in­novations might temporarily ame-

8 THE FREEMAN April

liorate conditions for workers).Utilitarians held that free ex­change and competition were allto the good; though some mightget hurt, the greatest good for thegreatest number would be achieved.Marx opted for revolution. TheAustrians - Menger and Bohm­Bawerk - concluded that everyonebenefited from free exchange be­cause wants and values are subjec­tivee The social Darwinists heldthat it all added up to progress.Utopians, who did not accept scar­ci ty, were searching ou t thesources of privation in supposedexploitation and envisioning theirperfect societies.

The main lines of economicthought in the nineteenth centuryrun from the classicists - Smithand Ricardo - to the utilitarians ­Bentham and Mill- to the Austri­ans. These schools shared the view,more or less, that true economicbehavior is that of free men, will­ingly exchanging goods, makingtheir own calculations, and seek­ing their own ends. Governmentintervention was not economic tothem; it produced distortionswhich were antithetical to eco­nomic action. Even Karl Marx didnot hold much brief for palliativeaction by governments.

Concerned with Scarcity

Two points need particular em­phasis. Historically, economic

thought has been concerned withscarcity, however much the importof this may have been distorted bysome thinkers. Nor was this sim­ply an historical accident. Thereason for being of economy isscarcity. If there were no scarcity,there would be no justification foreconomics. There would be no oc­casion for saving, for careful man­agement, for priorities as to theorder of satisfying desires, forchoices among goods, or for effi­ciency. Second, economic thoughthas been, in the main, noninter­ventionist. Individual economistshave favored this or that inter­ventionist measure-the protectivetariff, compulsory workmen's com­pensation insurance, governmentinspections - but not on economicgrounds (the tariff being a possi­ble exception). If it were economi­cal, for instance, for an employerto take out insurance on his em­ployees, he could he persuaded ofthis, and compulsion would be ir­relevant.

There is no body of thoughtwhich demonstrates that it is eco­nomical for governments to inter­vene in the lives of people. Therehave been numerous claims, ofcourse, that governments couldmanage businesses more effec­tively than would private inter­ests, that governments will con­serve scarce resources, that gov­ernment action will render this or

1966 THE FLIGHT FROM ECONOMICS 9

that economic benefit. A careful ex­amination will show, I believe,that these are not economic argu­ments, that they are based notupon the premise of a scarcity ofgoods and services but an abun­dance. They are based, in short,upon the premise that economicbehavior is unnecessary.

The "Plague of Abundance"

At any rate, interventionistthought has been based upon theview that there exists an abun­dance of goods and services. Theidea that mankind is confrontedwith a glut of goods and servicesis not particularly recent. It goesback at least to The CommunistManifesto (1848), and possibly be­fore that time. But it has had itsparticular American articulation.This was provided mainly by thatschool of "economics" known asthe institutionalists. Prominentleaders of this school have beenThorstein Veblen, John R. Com­mons, Stuart Chase, and, lately,John K. Galbraith.

Their basic position is that con­ditions have changed, that it wasonce true, indeed had been fromtime immemorial, that societieswere confronted with scarcity,but that this condition is no longerthe case for some societies, no­tably the United States. StuartChase held that the United Statesreached a condition of abundance

in 1902. "Abundance," he said, "isself-defined, and means an eco­nomic condition where an abun­dance of material goods can beproduced for the entire populationof a given community."i RexfordG. Tugwell, the irrepressible NewDealer, described the change toplenty in this way: "Our economiccourse has carried us from the eraof economic development to an erawhich confronts us with the neces­sity for economic maintenanc'e. Inthis period of maintenance, thereis no scarcity of production. Thereis, in fact, a present capacity formore production than is consum­able, at least under a systemwhich shortens purchasing powerwhile it is lengthening capacity toproduce."2

John K. Galbraith, who playsStuart Chase to post World WarII America, describes the develop­ment as historical in the follow­ing: "Nearly all [people] through­out all history have been verypoor. The exception, almost in­significant in the whole span ofhuman existence, has been thelast few generations in the smallcorner of the world populated byEuropeans. Here, and especially inthe United States, there has been

1 Quoted in Charles S. Wyand, TheEconomics of Consumption (New York:Macmillan, 1937) , p. 54.

2 Rexford G. Tugwell, The Battle forDemocracy (New York: Columbia Uni­versity Press, 1935), p. 7.

10 THE FREEMAN April

great and quite unprecedentedaffluence."3 Vance Packard, whois to Galbraith as Galbraith is toVeblen and Keynes -that is, de­rivative - states the developmentwith his usual dramatic flair:

Man throughout recorded historyhas struggled - often against appall­ing odds..-to cope with material scar­city. Today, there has been a massivebreakthrough. The great challenge inthe United States-and soon in West­ern Europe-is to cope with a threat­ened overabundance of the staplesand amenities and frills of life.4

The Overproduction Theory

The evidence which purports tosupport these claims of abundancehas run the gamut from Veblen'sconspicuous consumption of theleisure class to Packard's chargesthat industrial waste makers preyupon the gullible public with theirshoddy merchandise with its built­in planned obsolescence. Theterms which have received thewidest acceptance for describingabundance are overp~oduction,un­employment, surpluses, unused in­dustrial capacity, and undercon­sumption.

The following is some of theevidence Stuart Chase submittedin 1931:

3 John K. Galbraith, The Affluent Soci­ety (Boston: Houghton Mifflin, 1958),p. 1.

4 Vance Packard, The Waste Makers(New York: David McKay, 1960), p. 7.

American oil wells are capable ofproducing 5,950,000 barrels a day,against a market demand of 4,000,000barrels, according to the figures of theStandard Oil Company of NewJersey.5

The real problem [in coal] is excesscapacity. The mines of the countrycan produce at least 750,000,000 tonsa year, while the market can absorbbut 500,000,000 tons.6

American shoe factories areequipped to turn out almost 900,000,­000 pairs of shoes a year. At presentwe buy about 300,000,000 pairs-twoand one-half pairs per capita. Thereis admittedly a considerable shortageof shoes [1], but could we wear out,or even amuse ourselves with, fivepairs per capita1 I doubt it. For my­self two pairs a year satisfy both util­ity and style. Yet if we doubled shoeconsumption - gorging the greatAmerican foot, as it were - one-thirdof the present shoe factory equipmentwould still lie idle.7

Jumping now across the economicfront to agriculture, we find that thebasic problem of the American farm­er lies in his "surplus." The govern­ment at the pre~ent writing hasbought and holds in storage millionsof bushels of wheat in a heroic andpossibly calamitous attempt to keepthe surplus from crushing wheatfarmers altogether.8

5 Stuart Chase, The Nemesis of Amer~ican Business (New York: Macmillan,1931), p. 88.

6 Ibid., p. 89.7 Ibid., p. 79.8 Ibid., p. 76.

1966 THE FLIGHT FROM ECONOMICS 11

One might suppose that thesewriters would rejoice at the abun­dance of goods, be glad that anage-old problem has been solved,be jubilant at the prospects ofplenty. They might even have beengrateful for an economic systemthat provided them with such anabundance. How good it is, theymight hnve snid, to live in Amer­ica where this has taken place. Ofcourse, they were in the mood tosay no such things. Instead, theyheld that abundance had producedgreat and difficult problems, prob­lems of a monumental scale thatthreatened to grow. Poverty hascontinued to exist alongside abun­dance, overproduction resulted inwaste and profligacy, mechanicalproduction eventuated in techno­logical unemployment, and pro­ducers reduced to all sorts ofstratagems to dispose of theirmounting goods and services.

Intervention Rationalized

One writer attempted to accountfor many of the untoward develop­ments of this century as a con­sequence of the efforts of pro­ducers to maintain artificial scar­ci.ty. The following are methodsthat he claims have been used tomaintain scarcity:

1. The Destruction of Surpluses byWarfare. For the temporary creationof scarcity, no more effective meanshas, yet been devised than modern

warfare. Within a relatively shorttime it can dissipate industrial sur­pluses and create an additional de­mand for goods that taxes productiveequipment to capacity....

2. The Extension of Loans. Withthe disappearance of wartime de­mands, other markets are sought inan effort to avoid an immediate andcomplete collapse of the industrialstructure.... The result [after WorldWar I] was a series of ... loans thatby 1929 totaled about $11,023,000,­000....

3. Public Subsidy of the Consumer.When the process of lending purchas­ing power to the consumer failed, theFederal government commenced whatis now an established practice of giv­ing to the indigent funds with whichto buy....

4. The Destruction of Goods andthe Curtailment of Output. Havingfailed through wars, loans, "gifts,"and a variety of other means to makepurchasing power keep pace withlarge-scale production, attempts arenow being made to preserve condi­tions of scarcity by deliberately con­trolling output so that it does not ex­ceed profitable demand.9

Many different specters havebeen raised over the years whichhave been supposed to have arisenfrom this overproduction, but nonehas been more persistent than thatof rising unemployment. StuartChase declared, in the early 1930's,

9 Wyand, Ope cit., pp. 44-48.

12 THE FREEMAN April

that the "current depression willpass." However,

What threatens to continue una­bated, in good times and bad, is tech­nological unemployment with its threefaces - the machine, the merger, thestop watch. In four years oil refineriesincreased output 84 per cent, and laidoff 5 per cent of their men while do­ing it. Tobacco manufacturing outputclimbed 53 per cent in the same peri­od, with 13 per cent fewer men at theend. This is the trend throughout in­dustry.

I t can mean only one thing. Anequivalent tonnage of goods can beproduced by a declining number ofworkers, and men must lose their jobsby the thousands - presently by themillions.l°

This would, according to hisanalysis, lead to a further increaseof surpluses, for there would beless and less income to buy thegoods produced.

The System Accused

All those who have written inthis vein about abundance havepointed finally to one thing: some­thing wrong in the system itself.r:I'heir reasoning is not difficult tofollow. Productive power has beendeveloped which can and does pro­duce a glut of goods. All sorts ofdevices have been got up to dis­pose of these surpluses. On theother hand, many are in need be-

10 Chase, Ope cit., pp. 15-16.

cause it does not require manyworkers to produce this greatbounty. One recent writer has pro­claimed that we have been wor­shiping a false god. He said,

Some people even seem to thinkthat mass production can cure all theworld's economic and social ills. Youmight almost say that it has becomea world mania. Mass production hasbecome our god, our cure-all, our eco­nomic savior)!

Writer after writer has pro­claimed that the flaw lies in dis­tribution. Stuart Chase put it thisway:

In respect to the whole body of fin­ished goods, it is not so much overpro­duction as underconsumption whichis the appalling fact. As a nation wecan make more than we can buy back.Save in certain categories, there is avast and tragic shortage of the goodsnecessary to maintain a comfortablestandard of living. Millions of tons ofadditional material could be mar­keted if purchasing power were avail­able. Alas, purchasing power is notavailable.12

Charles Wyand declared,

More goods are being producedthan can be profitably sold. On theother hand, it can be clearly shownthat most people are consuming at buta fraction of their potential capacity.. . . As will be shown later, the con-

11 Walter Hoving, The DistributionRevolution (New York: Ives Washburn,1960), p. 4.

12 Chase, Ope cit., p. 78.

1966 THE FLIGHT FROM ECONOMICS 13

sumer's buying power cannot absorball. that the nation can .produce be­

cause (1) incomes are insufficient,(2) too much of the nation's income issaved, and (3) prices are too high.13

Horace Kallen said,Indeed, at no time in the history of

industrial society has the productionof the necessities of ··life been suffi­cient to meet all needs. It was notneed which limited demand. It wasprice. Prices had so outdistancedwages that wages could not catch upwith them.l4

Palliatives Proposed

Those who have written in thisvein have not always been quiteconsistent. On the one hand, theyhave often indicated that there isan absolute surplus-actually moregoods produced than can or willbe consumed. On the other hand,and in certain moods, they holdthat the problem is only one ofmaldistribution. Then, too, somewriters have focused upon thewastefulness of private enterpriseand have advocated the conserva­tion of scarce resources. In recentyears, many of those who havedealt with such matters have pro­fessed great concern for "eco­nomic growth." It would, there­fore, be a misconstruction of whathas been going on to deal with all

13 Wyand, op. cit., p. 40.14 Horace M. Kallen, The Decline and

Rise of the Consumer (New York: D. Ap­pleton-Century,1936),p.404.

of it in connection with scarcity.What all these positions share

-whether it be a concern with over­production, underconsumption,maldistribution, wastefulness, oreconomic growth-is the view thatgovernment must intervene in oneway or another to correct the situ­ation. They hold that the "system"produces these unwanted conse­quences and that collective actionmust be taken to set it straight.

Simon Patten, an early advo­cate of the notion that a surplusexists and a teacher of RexfordG. Tugwell, advocated the absorp­tion of the surplus by taxation.He declared that taxation should"be placed not on particular formsof prosperity, but on general pros­perity. The State should not tryto hunt up the individual who prof­its by each of the improvementsit makes, but should make taxa­tion a reduction of the generalsurplus of society." His justifica­tion of this was that "we can con­ceive of the State as a factor inproduction, and hence entitled toa share of the undistributed pro­duce of industry. It has helped topromote general prosperity, andcan demand a part of the surplusof society along with landlords,employers, capitalists and labor­ers."15

15 Simon N. Patten, Essays in Eco­nomic Theory, Rexford G. Tugwell, ed.(New York: Alfred A. Knopf, 1924), p.98.

14 THE FREEMAN April

John R. Commons, an early andlate reformer, called in 1893 fora guaranteed right to employmentin order to take care of the "sur­plus" of laborers:

The right to employment when en­forced would have the effect of guar­anteeing to every worker, even thelowest, a share of the total income inexcess of his minimum of subsistence.It would give steady work throughthe year, which would increase thewages of the lowest labourers by 30%to 50 %. And by overcoming thechronic excess of labourers beyondthe opportunities for employment, itwould raise the marginal utility ofthe marginal labourers, thus raisingthe wages of all.16

So it has gone through theyears: the apostles of surplus,overproduction, technological un­employment (surplus workers),underconsumption, and maldistri­bution have been proposing somevariety of reform or intervention.Stuart Chase proclaimed that thesituation called for detailed plan­ning:

In my judgment the only final wayout lies through planned production.We have to scrap a large fraction oflaissez-faire, and deliberately orientproductive capacity to consumptiongoods....

For America, industrial co-ordina­tion must probably take the form of a

16 John R. Commons, The Distributionof Wealth (New York: Reprints of Eco­nomic Classics, 1963) , pp. 84-85.

drastic reVISIon of the anti-trustlaws; an alliance between industry,trade association, and government tocontrol investment (i. e., plant ca­pacity) on the one hand, and to guardagainst unwarranted monopoly priceson the other; a universal system ofminimum wages and guaranteedhours of labor to frighten off fly-by­night entrepreneurs and to stimulatepurchasing power; and finally • • • ,the setting up of a National PlanningBoard asa fact gatherer and in turnan advisor . • • on every major eco­nomic undertaking in accordance witha master blueprint.l7

Rexford G. Tugwell said,Let me summarize: In this era of

our·economic existence, I believe it ismanifest that a public interest • . •commands the protection, the main­tenance, the conservation, of our in­dustrial faculties against the destruc­tive forces of the unrestrained com­petition.... For today and for tomor­row our problem is that of our na­tional economic maintenance for thepublic welfare by governmental inter­vention....18

Charles Wyand held that-The gross effect of these trends is

to offer American business the choiceof some sort of private control ofbusiness practice or of growing gov­ernmental interference to prevent thecomplete collapse of the capitalisticeconomy.t9

17 Chase, op.·.cit., pp. 95-97.18 Tugwell, Ope cit., p. 9.19 Wyand, Ope cit., p. 73.

1966 THE FLIGHT FROM ECONOMICS 15

New Means to Old EndsThe emphasis has shifted some­

what over the years but not thegoal of government control anddirection. The problem, accordingto John K. Galbraith, is one ofprivate affluence and public pen­ury. There needs to be a great dealmore spending in the govern­mental realm. Following his lead,Vance Packard emphasized thedesirability of spending for edu­cation, government provided rec­reation facilities, support of re­search for the desalinization ofwater, and so forth.

The claims of abundance, sur­plus, and underconsumption arebut a prelude, then, to the callsfor positive government action.The arguments move, graduallyand subtly or swiftly, from eco­nomics to the political arena. Theirimport can now be spelled out. Ifthe problem were one of produc­tion, which it would be if thereremained the fundamental diffi­culty posed by scarcity, it wouldbe a matter for economics. To dealwith scarcity, there needs to befrugal management, saving, in­vestment, balanced budgets, cal­culations as to the best means touse to get the greatest returnfrom materials, and determina­tionsas to how to produce themost goods with the least expendi­ture of energy. But if the situa­tion were reversed, if abundance-

had replaced scarcity, economicbehavior would no longer be inorder. It might be helpful to spendmore than was taken in, to employmore workers than the task athand required, to use more ma­terials than would be called forby the undertaking. To be eco­nomical, at any rate, would beanachronistic.

Most important, economic anal­ysis has long shown conclusivelythat individuals and private com­panies have the incentives whenthey may exchange freely to dealas effectively as can be done withgeneral scarcity. But the casemight be quite different if abun­dance were the problem. This isthe character of the argumentswhich have been recapitulatedabove. When the problem becomesone of distribution, it then be­comes feasible to argue that gov­ernments can intervene for amel­iorative purposes. In short, itmight be admitted that forcewould be a poor way to achieveproduction, but the same wouldnot necessarily go for distribution.Governments can redistribute;they can take goods from someand give them to others; they canspend, expropriate, set aside landsand resources, confiscate, and evenwaste rather effectively. These aretasks which governments alone,because of their monopoly of theuse of force, would be suited to

16 THE FREEMAN April

perform, if anybody had to per­form such tasks.

The United States governmenthas indeed been engaging in suchpractices for't-a good many years,assisted on occasion by local andstate governments. The methodsfor doing these things are manyand varied. They run the gamutfrom low interest rates for thosein favored categories to the con­fiscatory taxation of the wealthy,from the subsidizing of somekinds of production to the limita­tion of other kinds, from minimumwages to maximum prices, frompublic welfare to social security,from financing low-rent housingto taxing high-rise apartments,and from the extension of powerto organized labor to the intimateregulation of business activity.These are not economic actions;they are, instead, political. Theyhave to do with power and itsuse. They have to do with artifi­cially creating shortages, withdriving prices above or below themarket price, with the allocationof manpower according to politicalconsiderations, with arbitrary con­servation and profligate spending.Even "surpluses" can be created ­that is, goods priced higher· thananyone can or will pay for them­by the use of force.

This shift from economics topolitics is mirrored in the activ­itiesof many of those who now

bear the name of economist. Apopular news magazine noted thischange recently. It said, "In thepalaces and Parliaments of a hun­dred countries, economists are in­creasingly called upon to build,revive, or draw together nationaleconomies. Their home is no longerthe ivory tower, and their profes­sion is no longer the 'gloomyscience' but a romantic and re­warding wielding of power." More­over, "the Presidents and Minis­ters are receptive to the advice....Several economists have risen tohead governments, including WestGermany's Ludwig Erhard, Portu­gal's Antonio Salazar, and Boliv­ia's Victor Paz Estenssoro. Others,such as Britain's Harold Wilson,are hopefully planning their owntakeover [since achieved in hiscasel."20 In America, many econ­omists have become well-knownnames in government circles overthe years: Rexford G. Tugwell,Walter Heller, John K. Galbraith,among others. Below this exaltedrank, hundreds more toil away inthe numerous government depart­ments which lay seige to economyin the land.

Economics as a Tool for Reform

There has, then, been a flightfrom economics, a flight from eco­nomics as a discipline for studyand exposition to "economics" as

20 Time (June 26, 1964), p. 86.

1966 THE FLIGHT FROM ECONOMICS 17

a tool for social reform, a flightfrom economics to politics. Thishas been, also, a flight from real­ity, though the full demonstrationof this will follow later on in this"'Ylork. It may be of s-ome use, how­ever, to observe here that scarcityis still with us, and may be ex­pected to remain. Scarcity arisesfrom the nature of the universeand the nature of man. Man wantsa great variety of commoditiesand attentions. The want of themmakes them economic goods andservices. In order for these goodsand services to be provided, some­one has to labor, to use resources,to defer the gratification of wants.Labor and materials are in limitedsupply (always); deferment re­quires discipline; wants are un­limited by these or any otherphysical considerations. Hence,scarcity is an enduring fact oflife.

Production is not somethingthat is solved, once and for all.Goods must continue to be pro­duced, else the supply that existswill be exhausted. Continued pro­duction requires the making ofeconomic decisions·- of decisionsas to which materials in shortsupply and how many men in thelimited labor pool and how muchcapital from the small store of itto employ to make what goods thatwill be in greatest demand.

Distribution is not something

separable from production, not,that is, if production is to bemaintained. Distribution - that is,exchange - is the great spur toproduction;. it is the close relationbetween efforts and rewards thatinduces individuals to apply theirenergies economically to produc­tion. Surpluses do not indicateabundance; they rather indicatemisallocation of materials, poorjudgment, false signals in theeconomy, price rigidities, and/orthe use of force to bring theseabout.

Scarcity remains. There is nobetter testimony .to this fact thanthe desperate efforts of socialiststo increase productivity, toachieve, as they say, "economicgrowth." But even these effortsare misunderstood by contempo­rary "distributionist economists."One writer notes that the SovietUnion has been using all sortsof devices to spur production."But, nowhere in his talks didKhrushchev say anything aboutdistribution. As a matter of facthe didn't seem to be aware of thisside of the economic picture at all.He seemed to think production isthe alpha and omega of the eco­nomic system."21

The view that America is nowsaddled with problems of abun­dance has been used to justify in-

21 Hoving, Ope cit., p. 4.

18 THE FREEMAN April

tervention, but the roots of eco­nomic' misunderstanding are evendeeper than this. There is a wholebody of pseudo-economic literaturedevoted to attempts to demonstrate

that economic behavior results incontradictions that can only beresolved by government interven­tion. These arguments deservesome examination. ~

, The next article in this series will concern "Meliorist Economics."

ON THEREDISTRIBUTIONOF'INCOMES

SUDHA R. SHENOY

THE IDEA of redistributing in­comes and wealth has become avirtual dogma which few dare toquestion. It is one of the oldestparts of the socialist ideology ;even th'ose social democrats whooppose communism because itstands for "violent revolution,"nevertheless argue that a "fairer"

Miss Shenoy, from Ahmedabad, India, is aB.Sc. (Econ.) student at the London Schoolof Economics.

distribution of income is •one' ofthe best· safeguards against suchrevolution. And many who other­wise oppose interventionism arguethat redistribution is necessaryto "correct" or "ameliorate" the"unfair" distribution of wealthand· income, .which they. believe' isone of the major flaws in, the' work­ing of the free market. Thus, wehear protests that: "A mere 6 percent of the people own 42 per cent

1966 ON THE REDISTRIBUTION OF INCOMES 19

of the nation's wealth"; or, "Thedistribution of. income in our. so­ciety should not be allowed to be­come so unequal that the greatwealth at one end of the scaleendangers the low incomes at theother."

What is most remarkable, how­ever, is that this idea of redistri­bution should· have tlcaught onu injust those areas-Western Europe,North America, and Australasia- that are distinguished from therest of the world precisely. by theirastonishing mass prosperity. Whatespecially strikes the visitor fromthe underdeveloped world (and Iwould include here the areas be­hind the Iron and Bamboo Cur­tains) is that the wide range ofproducts and services, which athome are enjoyed only by themiscroscopic minority, are herebought by the masses. The dif­ferencebetween the developed andthe underdeveloped parts of theworld lies not in the amenities en­joyed by the wealthy - who in cer­tain respects, such as personalservices, are better off in the un­derdeveloped areas - but in thecondition of the mass of the peo­ple in the respective areas. In theone, a wealth of goods and services(with a corresponding variety ofjobs) is available to virtuallyeveryone; in the other, the livesof the masses are marked by apoverty, the very memory of

which has vanished in the West ifwe may judge from the commentsin economic history textbooks.

The Process Misunderstood

Perhaps the basic reason forthe plausibility of redistribution­ist ideas is a, misapprehension ofthe nature of owne'rship and pro­duction. and what earning an in­come means in the context of afree market. The redistributionistseems to think that goods are "so­cially produced" and then thrownonto a common heap, from whichincomes are "individually appro­priated" - quite arbitrarily. Butthere is a pattern to the earningof incomes in a free market: thesize of the income earned dependson the extent to which the individ­ual- in cooperation with otherindividuals - succeeds in satisfy­ing the wants of his fellow men.Even capitalists must use "their"capital to produce for their fellowmen. Legal title· to any collectionof capital goods does not guaran­tee that income will flow in auto­matically.! For example, legal titleto a hula-hoop factory in theUnited States today does not meanautomatic profits to the owners­more likely, it means heavy losses

lOne. of the basic fallacies of Marxwas the notion that capital would "auto­matically beget profits." But the theoryof a capitalist conspiracy to keep wageslow and price~ high does not explain. whycapitalists sometimes have losses.

20 THE FREEMAN April

and strenuous efforts to salvagesomething from the wreckage. Inother words, in a free market, evencapitalists' incomes are "earned":by producing what their fellowmen wish to buy.2 Since, in thiscontext, the fulfillment of consum­er needs is the rationale of theproduction of capital goods, it isthe mass of consumers who, in afree market, must be regarded asthe real economic directors, if notthe legal owners, of capital.3

In short, though legal title toall the thousands of factories andmillions· of machines may lie witha numerical minority, this vastaccumulation of capital is not usedto produce exclusively those itemsconsumed by the few. The super­markets are not stocked with cavi­ar and champagne for "the 6 percent who own 42 per cent of thenation's wealth": the supermar­kets bulge with ite·ms for massconsumption. The vast amounts ofcapital equipment in the developednations are used principally to pro­duce an enormous variety of goodsand services - includipg leisure­for the vast majority of the peo­ple. The production of luxury

2 Aristocrats and manufacturers, forinstance, certainly were not the chiefbuyers of the coarse-and cheap-cottonsproduced by the first factories at the be­ginning of the Industrial Revolution.

S Ludwig von Mises, Socialism (Lon­don: Cape; and New Haven: Yale Uni­versity Press, 1951) pp. 37-42.

goods is a mere trickle comparedwith this outpouring of goods formass consumption.

Contrast this with conditions insuch countries as China or SovietRussia - where vast amounts ofresources are drawn into the con­struction of industrial or hydro­electric complexes that are usefulonly in the light of their rulers'military ambitions or for suchtechnologically spectacular butotherwise useless feats performedb-y Sputniks and Cosmonauts. Howmuch easier life could have beenfor Ivan Ivanovitch and his wifeand family if these resources hadbeen allocated according to theprinciple of consumer sovereignty!

Production and Trade

What does redistribution meanin practice? The goods and ser­vices we consume - and which con­stitute our real income - have allbeen produced for us by our fel­low men, in exchange for what wehave produced for them. If any ofus wishes to consume more - i.e.,have a higher income - he musteither produce more of the thingshis fellow men want - or some ofhis fellow men must voluntarilyturn over to him what they haveproduced, without asking any­thing in return. In other words,if we wish to consume more with­out producing more, someone elsemust produce for us without him-

1966 ON THE REDISTRIBUTION OF INCOMES 21

self consuming. The principle isnot changed if some third per­son, on our behalf, pays those whoproduce for us.

There is, of course, a thirdmethod of having more; and thatis by seizing what others haveproduced, and thus forcing themto do without. And this is whatis really involved in theredistribu­tion of incomes via the state ap­paratus - progressive .taxation to"soak the rich," and various "wel­fare" measures ostensibly aimedat raising the real income of thevery poorest. Aside from the ques..tion of whether these aims are infact achieved (which they arenot4 ) it must be seen that compul­sory redistribution of this type isjust another form of capital con­sumption.5 How is this? We mustask what the "rich" would havedone with the income if it had

4 Progressive taxation actually servesto maintain the existing distribution ofwealth and income: true, the already­wealthy are prevented from gettingwealthier, but those seeking to rise areprevented from rising at all. See Ludwigvon Mises, Human Action (New Haven:Yale University Press, 1949), pp. 803 if.,and David McCord Wright, Democracyand Pro,gress (New York: Macmillan,1948), pp. 94-103. For the British experi­ence with "equalitarian" welfare serv­ices, see the various Hobart Papers is­sued by the Institute of Economic Af­fairs, London.

5 See F. A. Hayek, The Pure Theory ofCapital (London: Routledge and KeganPaul, 19(1), ch. xxv.

been left in their hands. The an­swer is, they would have saved it­Le., demanded capital goods. Butif this income were handed overto those whose incomes are verymuch lower, they ·would not saveit; they would use, it to .purchaseconsumption goods. The effect thenof such redistribution would bethat' consumption goods are pro­duced where capital goods wouldhave been produced - i.e., there' iscapital consumption.6

Redistribution cannot, there­fore, continue indefinitely. Oncethe capital has been consumed, the"high" incomes derived from itsuse will no longer be available tobe redistributed. Nor can we as­sume that those who do earnhigher incomes will passively ac­quiesce in having ever greater pro­portions of their income taxedaway. After a time, progressivetaxation defeats its own ends. Theindividual simply ceases to earnthe income in taxable form - oras in some countries, is forced tostart keeping two sets of books.Observe, too, the inconsistencyhere: on the one hand, it is the

6 If resources are scarce, we cannothave more of both; if, with the Keynes­ians, we wish to argue that there arealways unemployed resources, then weare implicitly assuming either (a) thatthese resources are perfectly versatile,or (b) exactly the right sort of resourc­es are available in exactly the rightproportions.

22 THE FREEMAN April

people themselves who, in a freemarket, create these "high" in­comes by buying what the "cap­italists" help to produce - andthen, the people propose to "cor­rect" the "unequal" distributionof the market via the politicalprocess!7

Redistribution in Backward Countries

What about redistribution inother contexts - say, in an under­developed country, or under feu­dalism? Now, the characteristicmark of such precapitalistic ornoncapitalistic situations is theextreme poverty of the masses,against which the comparativewealth of the few landlords andnobles appears even more harsh.In these situations, the problemis to produce sufficient goods; i.e.,to buildup the capital resources re-

7 I am not saying that the developedareas today are, or at any time were,paradigms of the free market. In fact,only 80me free market principles wereever applied in the past; and the last100 years have seen an acceleratingmovement away from even this. What Iam saying is that we should try to clari­fy the ideas in terms of which we at­tempt to interpret the real world. If wewish to have a system based on gov~rn­

mental direction rather than one basedon the principle of consumer sovereign­ty, we should be clear about this.

quired to produce the consumptiongoods for the masses. The questionof political redistribution hardlyarises.

This is not, of course, to dis­parage the ideal of voluntary giv­ing. It would not be necessary toadd this, were it not for the per­sistent misunderstanding of theimplications of free market prin­ciples with respect to charity.Economics certainly does not as­sume that all men are selfish mon­sters - though a great many peo­ple, who should know better, goon talking in this fashion. Eco­nomics is concerned only with theprinciples governing the allocationof scarce resources among com­peting ends; it says nothing aboutthe ends themselves. And, formost people, these ends will in­clude, as a matter of course, theassisting of those who are in need.The pity is that in so many coun­tries, especially underdevelopedones, heavy taxation - includingdirect taxes, indirect taxes, andthe hidden tax of inflation - ismaking it more and more difficultto continue all those traditionalforms of giving that formerlywere regarded as the privilegeand the duty of the many whofelt they could afford it. ~

mini-

THOSE WHO SPEAK glibly of "allo­cating purchasing power" - bywhich they mean the 'forcible re­distribution of wealth, patently apolitical function - are preparedto employ means that are both im­practical and immoral, and alas,these persons are in full charge ofthe poverty debate today. If thesentimentalists casually prescribe,and get, massive crop supports toaid poor farmers, it is becausethere are all too few cool headsaround to point out that such aid isat the expense of the urban poor, inthe form of higher food and cloth­ing prices, loss of jobs, and an infla­tionary attack on the value of sav­ings and fixed pensions, not tomention the bad psychological ef­fects on both the' farmers and theurban poor involved in the unjusttransfer of wealth.

It is about time, then, that thepoverty problem be analyzed, inrigorous simplicity, as part of thebasic problem of the market econ­omy: overcoming scarcity.

The evidence is that economicprogress is rapidly overcomingmaterial impoverishment, and that

Mr. Wheeler edited the conservative studentjournal, Insight and Outlook, at the Univ~r­

sity of Wisconsin, then worked three years forNational Review before resigning to foundRally, a new national monthly journal ofopinion geared for the young, to advance freemarket ideas and provide a new voice for"second generation" libertarians and conserva­tives.

This' article is slightly condensed and re­printed by permission from the Winter 1965issue of RamPart Journal.

ices,. I!JJ6R~.Ltjf!\Sbrea onaice I den 0 s rto marry to the poor, spement for veterans, theinsane, widows, children, the aged,

ih digab!~'l~E:(;les, and un mployment compensa-

Industry! ,.( O~IH~n-"'PQ

tion of the 001", free contract, ex:-

j;;l~f~~~~on and snffr~~~

codes, pure food and drug regula­tio, railroad and utility legisla­t' .ihwst laws, iwusi g and

i 1 e t'd' ina-

23

24 THE FREEMAN April

in the process much of the miseryand demoralization that attendseconomic deprivation is evaporat­ing.(This is not to suggest thatmisery and demoralization andcrime are not increasing on thewhole: they are, but in my opinionfor spiritual reasons.) Therefore,as a tentative hypothesis it wouldseem that a properly directed in­crease in production should formthe core of any accelerated attackon poverty, and that, conversely,the kiss of politics should be em­phatically avoided.

Panac:eas Past and Present

Just about every panacea devis­able by man has already beenwheeled out against poverty. Few,if any, of these, however, haveever jarred the correlation be­tween the expanding supply ofgoods and services, broadly dis­tributed by a contractual economy,and the steady improvement in thelot of the poor.

Professor Robert Lampman ofthe University of Wisconsin hastaken note of past legislative at­tempts to help the poor.1 Theseinclude:

The English poor laws, mini­mum income allowances, workhouses, orphanages, asylums, alms

1 Robert J. Lampman, "The Anti-Pov­erty Program in Historical Perspective"(a paper presented to the UCLA Facul­ty Seminar on Poverty, February 25,1965).

houses, (Bentham's) Houses ofIndustry, (John Cary's) Corpora­tion of the Poor, free contract, ex­tension of education and suffrage,work relief for the able-bodied, reg­ulation of health and education,abolition of slavery, bankruptcyand usury laws, industrial safetycodes, pure food and drug regula­tions, railroad and utility legisla­tion, antitrust laws, housing andzoning ordinances, antidiscrimina­tion laws, minimum wage laws,collective bargaining laws, childlabor laws, work-hour regulations,minimum price controls, pricesupports, social insurance, pro­gressive taxation, tariff and immi­gration policy, job retraining, pub­lic works programs, rehab~litation

programs, vocational training,family services, hospitals, schools,libraries, clinics, information serv­ices, public housing, nurseries, rec­reational facilities, sanitary serv­ices, denial of suffrage and rightto marry to the poor, special treat­ment for veterans, the blind, theinsane, widows, children, the aged,the disabled, and the unemployed,tax cuts and rebates, public em­ployment agencies, welfare agen­cies, and unemployment compensa­tion.

Whatever miseries are sufferedby the poor, they do not sufferfrom political neglect.

In brief consideration of Pro­fessor Lampman's awesome list, it

1966 THE ARMCHAIR SKIRMISH AGAINST POVERTY 25

is readily seen that antipovertylegislation has been· sometimes in­effective and often harmful. Wemight very well wonder if wehaven't been killing the .poor withkindness. Pending further analy­sis, it might tentatively be sup­posed that such programs as havebeen effective in· helping the poorwith no strings attached are pre­cisely those which removed legis­lative interventions into the pro­duction process,· such as the abo­lition of slavery and the extensionof free contract.

Progress in Profile

In 1798, Jeremy Bentham wrote:"The multitude included under thedenomi~ationof the poor composethe bulk of the community - nine­teen-twentieths might perhaps befound to belong to that class."

A century ago, more than halfof the U.S. populace was poor bycontemporary definitions. JacobRiis estimated in 1892 that 20 to30 per cent of New York City livedin penury.

Studies made in 1939 and 1949established poverty lines of $1,950and $2,500 respectively. The 1965poverty line, suggested by thePresident's Council of EconomicAdvisers, is $3,000 income perfamily, or $1,500 per unattachedindividual per year.

Since the 1949 survey, by CEAfigures, the number of those living

in poverty has dropped from 32per cent to 20 per cent, while atthe same time the standard of pov­erty rose by $500, or 20 per cent.

Both of tbese trends - towardsfewer poor, and a rising standardof poverty - have been in effectsince Bentham's time. So dramatichas been the improvement in thestatus of the poor that a truly rev­01utionary belief in the final abo­lition of poverty has obtained inthe U.S. and Britain since aboutthe turn of the century. "In con­trast to the people of less fortu­nate lands, who have regardedpoverty as inevitable, Americanshave tended to regard it as an ab­normal condition," writes econom­ic historian Robert Bremner.2

Towards a Sharper Definition

The concept of poverty, like art,does not readily lend itself to ob­jective definition. This has provedto be the biggest stumbling blockfor serious analysts.

Dorothy Brady of the Univer­sity of Pennsylvania put it suc­cinctly: "When faced directly withthe problem of determining [pov­erty] f or a given time and place,the theorist will deny the possibil­ity of a· unique answer and thepropagandist will settle for one of

2 Robert H. Bremner, From theDepths: The Discovery of Poverty in theUnited States (New York UniversityPress, 1956).

26 THE FREEMAN April

many solutions if the result suitshis purpose."

This is not to suggest that pov­erty is indefinable, but rather thatanydefinition.,..is necessarily arbi­trary. There are quite as manydefinitions as there are povertyfighters. But for economists, per­plexed in many cases by an inabil­ity to distinguish the poor fromthe nonpoor, setting workablestandards .is the first order ofbusiness.

Most efforts thus far haveadopted either the "poverty line"or the "market basket" approach.

The poverty line defines as poorall those whose current cash in­come is less than a given amount,$3,000 in the case of the presentCEA standard.3 It is by all oddsthe least precise method of defini­tion, but it has the advantages ofbeing easily understood, simple towork with, and adaptable to re­liable and available figures.

Market basket studies definepoverty as some multiple (usuallytwice) of the cost of a subsistencediet. They are a great deal morereliable and discriminating thanpoverty line studies, but chron­ically lack. dependable data.

Some effort to cross-pollinatethe two approaches has been made,one report concluding that either

3 Economic Report to the President,prepared by the President's Council ofEconomic Advisers.

yielded about the same percentageof poor.. However, the evidence isslight, and no .. information existsabol\t comparable degrees of pov­erty.

Several highly flexible. defini­tions of poverty have been ad­vanced by economists who find in­superable the difficulties in lump­ing together as co-equals. in pov­erty a sharecropper's family withnine kids and one tired cow, and aretired couple with a fat portfolioand an urgent desire to do nothingmore taxing than rock on the frontporch of their retirement bunga­low.

One school suggests that pov­erty is relative; thus, at any givenmoment, a certain proportion ofthe population is defined as poor.Allowing for the steady change insocially-determined poverty stand­ards, this approach is not as whim­sical as it appears at first blush,and in fact has a good correlationwith poverty statistics assembledover the years by contemporary in-vestigators.

Another school seeks to definepoverty by first establishing whothe poor are. This method obligesthe investigator to look closely intoan individual's circumstances and,by using any or all provisionaldefinitions of poverty, decidewhether the individual is poor.Such detailed studies are time­consuming, so relatively few cases

1966 THE ARMCHAIR SKIRMISH AGAINST POVERTY 27

can be handled and statistics ofthis sort for large cross-sectionsof the population are unavailable.Nevertheless, this method has thevirtue of open-mindedness· and isfree of the distortions of massstatistics. Once several case-stud­ies are collected, the investigatorusually has a good idea of theeconomic characteristics of pov­erty, and he may also have goodinsights into its causes.

Rags and Patches?

Who are the poor?The question is. troublesome,

partly because the poor are rela­tively few and often isolated fromaffluent America, partly becausewe are blinded to the new poor bylingering images of mortgage fore­closures, tattered clothing, dilapi­dated hovels, and the other para­phernalia of poverty in years past.

According to figures developedfrom the CEA's $3,000 povertyline - bear in mind that thesefigures are meant to invoke thegloomiest possible view of theproblem - 33 to 35 million Ameri­cans live in poverty, one-third ofthem children. These include 9.3million . families (30 million peo­ple) and some 5 million unattachedindividuals.4 Again by CEA fig­ures, 5.4 million. families have in­comes under $2,000 a year, and

( Ibid.

1.3 million unattached individualshave incomes under $1,000.

Even if extravagantly over­stated, the figures make it clearthat poverty is still a seriousmatter.

Poverty in the United Statescuts across lines of age, sex,edu­cation, race, and locality. But it isby no means random. Persons inseveral distinguishable categories,the most important of which arethe aged, farm families, non­whites, and fatherless families,appear among the poor appreciablymore frequently than the average.Curiously, unemployment is welldown the list, which suggests thatmuch of the government antipov­erty effort aimed at alleviatingunemployment is misdirected.

Against a figure of 20 per centpoverty overall nationally, statis­tics indicate that among the poorare: 5

76% of families with no earners.48% of families with part-time

earners.34% of families whose heads are

unemployed.47% of families whose heads are

65 or older.31 % of families whose heads are

24 or younger.37% of families whose heads have

under eight y~ars of education.48% of families whose heads are

female.

5 Prof. Harry G. Johnson, "Povertyand Unemployment."

28 THE FREEMAN April

44% of nonwhite families.43% of farm families.84 % of nonwhite farm families.

Categories such as these arenot to be understood as causes ofpoverty, but rather as areas thatincur a high risk of poverty forother reasons. When the categoriesoverlap, as in the last-mentionedfigure, the risk of poverty is muchgreater.

80 the· statistics unfold. Thereare, happily, some pleasant sur­prises.

In Harlan County, Kentucky­scene of some of the nation's bit­terest labor battles,and by anystandard a very poor county, in­deed - 88 per cent of the familieshave their own washing machines(even if they lack running water) ;67 per cent have television sets;42 per cent have telephones; and59 per cent own an automobile. InTunica County, Mississippi, thepoorest county in the poorest state,52 per cent have television, 46per cent have autos, and 73 percent have washing machines.6

The Michigan 8urvey ResearchCenter reported last year that:

- of all families reporting in­comes from $2,000 to $3,000 in1962, 45 per cent owned their ownhom~s, and 66 per cent of these had

6 Herman P. Miller, Rich Man, PoorMan (New York: Thomas Y. CrowellCompany, 1964).

no mortgage; 42 per cent of the$1,000 to $2,000 bracket ownedtheir homes, and 35 per cent inthe under $1,000 bracket.

-in 1960, 14 per cent of familieswith incomes under $3,000 pur­chased new cars. 40 per cent ofthese families owned cars.

- of families with less than$3,000· income in 1960, 700,000purchased television sets duringthe year; 500,000 bought refriger­ators; and 300,000 bought washingmachines.

The large categories of the poordeserve further note: 7

Tthe aged. Numbering 2,581,000families, this is the largest groupof poor. However, the figure issubstantially overstated due to thesmaller than average size of fam­ilies headed by the aged, and duealso to their generally decreasedneeds and greater assets (themedian net worth of the aged is$8,000 as opposed to $4,500 forthe population as a whole). Atleast one upward statistical ad­justment is needed, on the otherhand, to allow for medical ex­penses among the aged two andone-half times the average.

The aged are mostly white, usu­ally live in urban areas, andstrongly tend to live as couples(two million). In addition, a half-million elderly women live withtheir children. The majority of

'l Miller, Ope cit.

1966 THE ARMCHAIR SKIRMISH AGAINST POVERTY 29

the aged receive Social Security ora pension; 36 per cent. of themreceive all of their income fromthese sources. Many older peopleown their own home •. free andclear. Half have incomes over$2,500 a year (half, that is, of theaged poor), and 64 percent haveincomes over $2,000, most of whomwould be removed from the rollsof the poor given a more realisticestimate of their circumstances.

Farm families. The second larg­est group of poor is found amongfarmers, although, again, the num­ber is much inflated due to non­cash incomes common on farms inthe form of food, fuel, and lodging.A lower consumer price index inrural areas also adds to the over­statement. About 1,570,000 farmfamilies are counted among thepoor, the majority of whom haveincomes under $2,000.

At the same time, farmers. tendto have relatively high assets. Onestudy of functioning farms in1963 found average net assets of$35,800. Another sampling, of twomillion farmers, yielded an aver­age net worth of $43,973.

Half the poor farms are in theSouth. The number of Negrofarmers has dropped sharply inrecent decades, and the exodus ofNegroes to urban areas is con­tinuing. Colored farm familiespresently number only about aquarter of a million.

Three-hundred thousand farmfamilies are headed by men oversixty-five, but over half are headedby men in the thirty-five to sixty­five bracket. Farm families headedby women are rare.

Fatherless families. Sometimescalled broken homes, 1,560,000families are counted in this group,almost all in large metropolitanareas. One-third of all fatherlessfamilies are colored (as opposedto a tenth of the general popu­lace), a disproportion sociologistsfeel reflects the relatively greaterinstability of Negro marriages.

Nonwhite families. The last ma­jor category of poor is the non­whites, of whom 950,000 familieslive under the poverty line, or al­most half. the total Negro popula­tion of 2,030,000 families. It is al­together likely that the numberof Negro poor is understated, al­though not seriously. In a numberof ways, American Negroes stillmust deal with markets and em­ployment opportunities constrictedby discrimination, voluntary seg­regation, and a variety of othercauses. As a result of the dimin­ished supply of goods and servicesavailable to him, the .Negro's costof living rises, especially for hous­ing.

Hidden Roots

The causes of poverty resisteconomic analysis. They may be

36 THE FREEMAN April

lost in the secrets' of' the mind,' asin'the case ,of men too lazy or toonervous' to hold a job.··Or they maybe lost in complex external events,such as caste, custom, or· doggedmisfortune. Or, routinely~ povertycan be caused by the interactionof the internal and the external­the vexing Negro',' question is acase in point.

What the economist may say jsthat the market assigns a highrisk of poverty to the unproductiveand the' underproductive. This iscorroborated by the high incidenceof poverty among sman familyfarmers, the market for whoseproduct has long been depressed,or among fatherless families, inwhich the mother must stay homeand care for her children ratherthan obtain outside employment,and so on.

It is worthy of remark that onemajor cause of poverty is povertyitself.

Professor' Lampman has ob­served, "It is interesting that fewchildren, even those of below-av­erage ability, who are not born andraised in poverty, actually end upin poverty. This suggests that pov­erty is to some extent an inheriteddisease."8

Poverty perpetuates itself from8 Robert J. Lampman, "Approaches to

the Reduction of Poverty" (a paper pre­pared for the American Economic Asso­ciation meeting in Chicago, December30, 1964).

generation to generation by deny­ing to those in its grip the essen­tial means to escape-education, in­formation, training,opportunity,motivation, and even health andstrength.

The poor are more frequentlyill than the average; they stay illlonger, and their illnesses tend tobe more severe; they lose moretime from work than the average;they suffer higher than averagerates of infant and maternal mor­tality, they are subject to moresevere mental disease, and theydie younger.9

In severe cases, the poor areconstantly wrapped up in sheersurvival. When one must worrywhere .the next meal is comingfrom, one's potential···· and aspira­tions are sure to be stunted. Thereis no time to spare, no will to di­versify interests, and no impulseto gain skills or training, or toembark on programs of self-im­provement. In time, bitterness orapathy can consume the poor, andthereafter their chances to escapetheir plight are slim.

Where Next?

Poverty exists and works itshardships, we may conclude, al­though it is extremely difficult toknow with exactitude its charac­teristics and causes. And we pay

9 Michael Harrington,"A Glib Fal­lacy," The New Leader, March 30, 1964.

1966 THE ARMCHAIR. SKIRMISH~GAINST POVERTY 31

twice for poverty, it has beensaid; once in wasted· potential,again in diverting resources to··al­leviate its hardships. Even as awarehouse fire in Hong Kong ortornado damage on the GreatPlains eventually makes.itself felt,through the interdependence·ofmarket effects, in our own pocket­books, so do we very literally payfor thEf existence of povertywhether we are taxed because ofit or not.

Thus, even those among us .whoprefer not to .be their brothers'keepers have· an interest in invest­ing in the eradication of poverty.The question ,is,of course, howshall we set about to achieve thisend?

"Weare going to try," said thePresident a year ago, "to take allof. the money that we think is un­necessarily being spent and takeit from the 'haves' and give it tothe 'have nots~·. that need it somuch." Of course Robin Hood andhis merry men made a good thingout of it, but the approach isre~

pugnant. It is also self-defeating.Good ends cannot be gained

through bad. means, simple theftin this case. The notion of stealingfor the good of the poor containsthe massive •presumption that athird party, here the. government,c~n comprehend completely .thelives and goals of two· individuals,and adjudge with cosmic wisdom

that both would ~be better off ifone were forced to hand over someof hispropetty to the other. Thehuman race.· in ·.general, and itsgovernments in particular, are aIittle· short of .. that· sort of cosmicwisdom.

Consider ~he Job Corps

Fora .typical· example of this,contained in the Economic Oppor­tunity Act, consider the Job Corps.

Authorized under Title I of theact, the Job Corps is the most.im­portant, the most expensive, andthe·mostballyhooed of the ·admin­istration's antipoverty programs.It is for youth of either sex fromsixteen to twenty-one who are outof school... and unemployed. Theyoungsters serve in conservationcamps or training centers, and re­ceiveroom, board, clothing and es­sential services, .living and travelexpenses, and· leave allowances.The cost per capita works out tosome $4,700 a year,enough, somehostile editorialists· have .pointedout,to send a young man to Har­vard and pay for his tuition, room,board, books, pocket money, andinstallments on a sports car.

But it is not only the expenseof the Job Corps that appalls;· itis the misdirection as well. Thecorps. maybe ·a yummy way· todeal with .dropouts .... and delin­quents, but what has it to do withpoverty? And what will· have been

32 THE FREEMAN April

achieved when the youngsters de­camp? - the art of planting treesis not, after all, a highly market­able skill. Moreover, the young­sters eligible for· the program arelikely to be the least responsibleof their afie groups - not so· muchthe deprived, but the drifters andtroublemakers. Removing themfrom whatever disciplinary influ­ence their parents still wield andturning them loose in the north­woods may result in top-grademayhem.1o

Such is the cosmic wisdom oftwo billion dollars' worth of WarAgainst Poverty. The state of NewJersey has already witbdrawnfrom the Job Corps program be­cause it was aggravating ratherthan solving the school dropoutproblem. It never occurred to theplanners that offering attractivesituations to school dropouts wouldattract students to drop out ofschool, but of course that's justwhat happened in New Jersey andis probably happening elsewhere.

Two billion dollars would buy alot of bread for the hungry. Whynot let the hungry keep it?

We will never be able to saywith certainty what income andwhat resources distinguish thepoor from the nonpoor. Neither

10 Since written, this prediction hasbeen borne out by numerous news­paper accounts of Jof> Corps incidentsincluding rape, dope-addiction, and allkinds of violence.

will we ever be able to say withcertainty what causes poverty. Butwe can observe that poverty is al­ways, to a greater or lesser de­gree, a matter of economic want.We may infer, therefore, thatpoverty is curable by alleviatingwant. That is simply a marketproblem.

Mass Production through PrivateEnterprise '''e Best Hope

The real war, the natural war,against poverty lies in the abilityof the market to bring more andbetter goods and services to thepoor more cheaply. It lies in im­proving entrepreneurial ability todiscern the special needs of thepoor and satisfy them at pricesthe poor are willing to pay. It liesin increasing the mobility of themarket by removing the fettersand regulations that bind it down,cutting away the tax burden thateats away its productive capacity,and investing our utmost energiesinto its functioning. It lies, ulti­mately, in our resolve to be free.

Virtue is not at cross purposes.As we strive to improve our ownvalues and our resources, we helprather than harm those whom weinfluence morally and economi­cally. Under the contractual econ­omy, one man's productivity is notanother man's loss; everybodygains. In a very real sense, werender the poor great service by

1966 THE ARMCHAIR SKIRMISH AGAINST POVERTY 33

leading the best lives we can. Trueself-interest is profoundly charita­ble.

But the charity of selflessnesshas its place, too..One of the mostonerous by-products of state wel­farism and the ideology that nour­ishes it is the stultification of ourimpulse towards charity. Not onlydoes the state seize our means tobe charitable, it steals our will tobe charitable.

In short, the state takes a decent

human instinct and converts it in­to the dole. It should not be so.There are many ways we could ex­tend a helping hand to the poorthat would not attack their prideand initiative. It is not so mucha matter of taking a basket offruit to the slums over ·theholi­days, but of tactfully sharing ourexperience, training, insights, as­pirations, to impart to the poorthe will and the knowledge of theway to escape their dilemma. •

HANS F. SENNHOLZ

NOT LONG AGO, a small Pennsyl­vania corporation received thePresidential "E" award for itscontribution to export trade andthe nation's balance of payments.In its fiscal year, 1965, the com­pany sold more than $16 millionof its products to foreign cus­tomers. Since 1960, its salesabroad returned $55 million to theUnited States.

Dr. Sennholz heads the Department of Eco­nomics at Grove City College, Pennsylvania.

I t seems that some Americanpolicies are reverting to the prin­ciples and doctrines of the seven­teenth century_ Others are repeat­ing the errors and follies of thedark Middle Ages. In 1628 thebest known mercantilist writer,Thomas Mun, urged his country­men always "to sell more tostrangers yearly than we consumeof theirs in value." In 1667 themost famous of German mercantil­ist writers, Becher, advocated as

34 THE FREEMAN April

a most important economic ruleand axiom "that it is always betterto sell goods toothers .than to buygoods from others, for the formerbrings a certain advantage •andthe· latter inevitable damage." In1712, Charles King in The BritishMerchant declared the export offinished products "in the highestdegree beneficial," the export ofnatural products "so much cleargain," and the corresponding im­port "so much real loss."

Napoleon Bonaparte appliedthis idea on a huge scale in hisContinental System. He gave pub­lic recognition, . bestowed .medals,and issued citations to Frenchmenwho exported manufactured goodsto England.

In recent years our foreigntrade policies gradually havefallen under the sway of seven­teenth century economic thought.Our "unfavorable" balance of pay­ments caused the Eisenhower Ad­ministration to prohibit Americanownership of gold in foreign coun­tries. Since then, the United Statesgovernment added a "voluntary"program that restricts bank andbusiness investments abroad inorder to keep money and gold inthe United States. Furthermore, apunitive tax on American pur­chases of foreign securities aimsto curb our heavy losses of gold.Those are some of the steps al­r~ady taken toward comprehen-

sive government control over allour foreign trade and transactions.

In England, comprehensive for­eignexchange control dates backto the darkness of the MiddleAges. Until the reign of CharlesI (1628) the office of Royal Ex­changer handled. all exchange· op­erations and all trade in preciousmetals.1 Exportation of bullionand coin was. summarily outlaweduntil 1663 when the prohib,itionwas narrowed to English coinsonly.

In France exportation of goldand silver was outlawed from theMiddle Ages until the eighteenthcentury. Th~ usual penalty fortaking coins out of the realm wasdeath. In Spain and Portugal theexport of bullion and coins wenton undisturbed for more than 200years as if no prohibitions existed,even though the penalty wasdeath.

The "Spending" Multiplier

In recent months we have wit­nessed a marked increase in gov­ernment and private spending anda strong rise in economic activity.The demand for goods and serv­ices has been stimulated by ex­pansionary government and Fed­eral Reserve actions. Spending;whether by governments or citi­zens. is considered the powerful

1 Cf. Eli F. Heckscher, Mercantilism,Vol. II, p. 246.

1966 PROGRESS OR REGRESS? 35

engine of economic progress andprosperity.

Spendthrifts of all ages haveadvanced similar economic doc­trines. In 1686, for instance, theAustrian write,r, Wilhelm Schrot...ter, Thomas Mun's· pupil, wrote:"The more a manufacturer causesmoney to pass ·from one hand toanother, the more useful it is tothe country, for so many peopledoes it maintain." And at anotherplace: "Through the exchange ofmoney the sustenance of so manypeople is multiplied."

Thrift was regarded as the causeof unemployment, for real incomewas thought to·diminish if moneywere withdrawn from circulation.For this reason Schrotter wrote along discussion on "How a PrinceShould Limit his Thrift." In 1695the English writer, Cary, advo­cated the same principle with evengreater clarity. He stated thateverybody's spending causes in­come to rise. If everybody in­creases his .spending, according toCary, everybody "might •then livemore plentifully."2

Export Embargoes

On Jan. 21, 1966, the UnitedStates and British governmentspl~ced curbs on exportation of

2An Essay on the State of Englandin relation to its. Trade, London, 1695:p. 148 if; cited in Heckscher.Vol IIp.209. .,

copper in order to protect theirshares of dwindling world suppliesof the· metal. The United StatesCommerce Department sharply ex­panded its controls over exportsof copper from the United Statesand clamped tight limits on abroad range of categories, includ­ing shipments overseas of copperores and refined copper.

In England,. this policy of "pro­vision" dated back to the twelfthcentury and lasted until. the nine­teenth. Export prohibitions oniron, copper, and bell metal wererepealed in 1694. Other restric­tions that were imposed by HenryII, in 1176 and 1177, lasted until1822. The high-water mark wasreached under Edward .III aboutthe middle of the fourteenth cen­tury.

In· France, export restrictionswere first imposed during thethir­teenth and fourteenth centuries.They aimed at keeping essentialmaterials, particularly foodstuffs,within the country. At the begin­ning of the nineteenth century,Napoleon still conducted a "policyof provision" with regard to food­stuffs. The first French law that'permitted their exportation wasenacted in 1819.3

Early "Poor Laws"

Even our war on pover.ty de­clared by the present·.administra-

3 Ibid, p. 92.

36 THE FREEMAN April

tion is not new at all. During theperiod of the Stuarts and of theTudors, the English governmentendeavored to aid the low incomeclasses of society. The avowed aimof an act of Parliament in 1603was to raise the wage's of textileworkers. Minimum wage rateswere fixed, and manufacturerswere fined one shilling for everypenny of wages paid below theprescribed rates. Especially in theyears 1629 to 1640, a wide "policyof welfare" was pursued.

In order to prevent unemploy­ment, businessmen were com­pelled to continue their operationseven when suffering losses. Theyhad to keep wages high, and wereimprisoned in case of disobedi­ence. For the benefit of the poor,food prices were intensively con­trolled. Grain was to be sold undercost price.

Already in 1563, the Eliza­bethan Statute of Artificers triedto regulate labor conditions in alldetails, and it remained on thebooks until 1814. In order to as­sure "just" wages to the workingpopulation, wage rates were fixedanew each year by the Justicesof the Peace according "to theplenty or scarcity of the time."The Justices in turn had to con­sider the cost of living by refer­ring to "the prices of all kind ofvictuals, fuel, raiment and ap­parel, both linen and woolen, and

also house rent." Wage fixing insixteenth-century London wassimilar in many respects to wagefixing in London today.

Regulation 01 Business

If you believe that governmentregulations of commerce and in­dustry are new and progressive,you should study the twelfth cen­tury English industrial regula­tions. At least since 1197, theEnglish state had tried to regulatethe technique of manufacture. Forthe cloth industry, for instance,the English government pre­scribed the various dimensions ofcloth, technique of production, dye­ing, stretching, finishing, the toolsof trade, the packaging and label­ing, and soon. Similar regula­tions, more or less complete, wereimposed on all other industries.

In France, Louis XIV, the SunKing, appointed intendants andinspectors who were charged withthe regulation of industry. Fromthe handling of raw materials toall subsequent stages of produc­tion, these servants of the kingcontrolled the production process.

The system of control obviouslynecessitated a variety of penalties.Frequently, "defective" goodswere confiscated or cut to pieces,money fines were imposed, or theright to practice the craft or con­duct the business was withdrawn.According to a decree of 1670, the

1966 PROGRESS OR REGRESS? 37

name of the offending merchantwas to be posted, and the offenderhimself could be placed in a pilloryfor public derision.

In spite of countless regulationsand limitations that aimed toachieve uniform standards, cor­ruption and personal favoritismblunted the controls. The govern­ment could make individual ex­ceptions to any prescription. Per­sonal influence. was as importantas it is today.

Mercanli'ismPersists

For instance, the medical pro­fession today labors under theprofessional discipline. of severalregulatory agencies. Under theancien regime, training and ex­amination of physicians also wasa serious government matter. Un­der the watchful eyes of the gov­ernment, ancient quackery was tobe perpetuated. In some cases, per­sons with no training whatsoeverwere practicing the business ofhealing and offering salves andmedicaments because they curriedfavor with the inspectors, or suc­ceeded in winning over the lack­eys, valets, mistresses, and adven­turesses of the Court. Royal char­ters, permits from princes, andacquired titles of physicians of

the king or queen, of surgeons ofthe navy, and the like, sanctionedall kinds of quackery.

The methods of favoritism, cur­rying favors, obtaining fran­chises, licenses, or. government or­ders have not changed materiallysince the seventeenth century.Diamonds and minks, personalconnections and right contacts,government positions and offices,seem to retain their significancefor professional success and finan­cial reward.

How modern and progressiveare our prevailing doctrines andofficial policies? A historian whoattempts to dissect the so~called

modern version of political econ­omy may be surprised to· discoverits true age. Despite claims oforiginality, many of the modernare of ancient origin. Some stemfrom the armory of Marxism andFabian socialism as they were de­veloped during the nineteenth cen­tury. Others date back to the ageof Mercantilism that prevailed inWestern Europe from the six­teenth to the eighteenth century.And still others have survivedfrom the darkness of the .MiddleAges. Much that passes for prog­ress today is but a regression intothe follies of the past. •

PAYTV

%HE RIGHT TO COMPETE­AND TO SPEAK

ELIZABETH GILLETT

ON NOVEMBER 4, 1964, it becameillegal in California, by a two-to­one vote of the people, for anyoneto sell and broadcast original tele­vision programs to you on yourhome set.

How the California viewer losthis option to pay at home forspecial TV shows without com­mercials and not available on otherchannels is an amazing story intwentieth-century America. Itcould only happen in this nation'scurrent "mixed economy" of swell­ing government controls overbusiness, endorsed or unchallengedby the businessmen themselves.

Today, in this "land of thefree," enough aroused citizens canstill "execute" a business com­petitor, and freedom of speech,simply by majority vote-even asthe Athenians "democratically"voted the death of Socrates some

Elizabeth Gillett is a free-lance writer on busi­ness, economic, and political matters, whoseby-lined articles have appeared in Barron's,The Journal of Commerce, Saturday Review,and elsewhere. This article is condensed froman original research piece she is doing foranother publication.

38

2,300 years ago. Fortunately, alsoin this country, the victim of suchperversions of constitutional gov­ernment can seek redress by exer­cising his constitutional right touse the governmental function ina proper way - as the avenue ofhis self-defense and the agent oflegitimate retaliatory force. Some­times, however, the court costs­in time and. money - of such re­dress can be crippling.

The Battle

The "gadfly" of the GoldenState, its victim, is SubscriptionTelevision, Inc. (STV), run sinceOctober 1963 by Sylvester (Pat)Weaver, veteran of commercialtelevision, former president of Na­tional Broadcasting Company. STYwas' formed in January 1963 withpatents on a cable system fromSkiatron Electronics and capitalfrom Lear Siegler, Inc. (electron­ics manufacturer) and Reuben H.Donnelley Corp. (sales promotionorganization). In the next yearand a half, STY got total public

1966 PAY TELEVISION 39

financing of around $20 .million.Broadcasting over STY's three

simultaneous channels to 2,300subscribers in Los Angeles beganJuly 17, 1964; to 1,810 subscribersin· San Francisco, on August 14,1964. In both sites, STY gatheredfewer starting subscriptions onthe movie industry's home-groundthan anticipated. Mr. Weaver soonlined up five major film producersto make movies for STY, amongother original programing hesought for subscribers each eve­ning during "prime time," 7 to11 p.m., in compatible color.

Meanwhile, the pay-Tv antagon­ists, led by the Southern Cali­fornia Theatre Owners ,Associa­tion - backed. by what is now theNational Association of TheatI'eOwners, Inc., were lining up strat­egy, funds, and allies, includingtheir former foes, commercial tele­vision and even community-an­tenna companies. All saw .a com­petitive threat in STY. Theyfeared that if pay televisioncaught on and gained enough sub­scriber-volume, audiences wouldnot come to movie theaters andcommercial TV might lose some ofits top attractions to :pay-Tv.

The antagonists persuadedmany California residents thatpay-Tv meant the end of "free"(advertiser-supported) television.They gathered a "war., chest" of$1.5 million or more from trade,

union, and individual contributors.SCTOA recruited, the ,necessary468,259 signatures togetProposi­tion 15 .on,., the' California "ballot,which would outlaw pay-TV in thehome.

Despite protests from localBetter Business Bureaus andChambers· of Commerce, /SouthernCalifornia print space and airtime --were flooded with .warningsagainst the predatory menace, ofpay-TV, which, it was alleged,would end the World Series _on"free T'V"- despite NBC's contract(recently renewed through 1968).

However, STY had suffered farheavier expenses than planned,thanks to its elabora.te program­ingand -time-consuming _cable -in­stallations, even before _this for­midable -campaign erupted. It didmanage topour $180,000 and muchenergy into the fight, plus a fewthousands contributed by variousindividuals -and unions. But theantagonists were toOl strong, theirpropaganda apparently over­whelming. When Proposition 15was voted into law in November1964, Mr. Weaver's operation hadreportedly been losing between$3,000 and $10,000 a day since itsstart·of operations.

STY suspended broadcasting asof November 10,1964. It recov­ered its- 6,000 receiver-billingboxes, refunded installationcharges, and shelved "orders for

40 THE FREEMAN April

40,000 more [installations]," ac­cording to Lewis M. Marcy, STYvice-president. It also retrenchedby selling most of its usable equip­ment and moving a reduced staffto New York City. Its stock's $12offering price soon reached a lowof $1.50. In late March 1965, STVfiled a Chapter 11 bankruptcy plea.

But this was not the end ofSTV (whose stock in mid-Febru­ary 1966 had recovered to over $4)or of the resilient Mr. Weaver,who began plans for a new businessof "network program service" in1965, while directing STY's courtbattles on the Coast.

The Turning Point

On· May 20, 1965, Judge IrvingH. Perluss of the Superior Courtof Sacramento County overruledthe California Secretary of State'srejection of Mr. Weaver's charterfor a new subscription televisioncompany, submitted on December9, 1964. Judge Perluss found theFree Television Act, establishedby favorable initiative vote onProposition 15, unconstitutionalbecause it "abridges freedom ofspeech."

About the pay-TV opponents,Judge Perluss observed, the" 'evil'with which they are concerned isspeculative and illusory....[namely] that subscription tele­vision may destroy free televisionoperation" (emphasis his) . He

also noted that "the charges heremade could have been made by theradio industry when televisionwas made available for the home.. . . Invention and progress maynot and should not be so re­stricted...."

The defendant, California's Sec­retary of State, with amicus cu­riae, the theater-owners, soon ap­pealed this decision.! (On March 2,the State Supreme Court in a 6-1decision agreed with Judge Perlussthat the, November 1964 Free Tele­vision Act is unconstitutional.)Also outstanding is a decision onSTV's conspiracy suit against sev­eral California exhibitors' groupsand others for $117 million in dam­ages, the verdict on which mayalso cause an appeal. (STV, inaddition, is suing the State ofCalifornia for $14 million in dam­ages sustained as a result of theProposition 15 initiative.) Forgood measure, the theater ownerswill have to continue lobbying onthe FCC's pending decision on thepetition of Zenith Corporation,through Teeo, Inc., to establish thefirst nationwide pay-TV system (byair, not cable), submitted just be­fore Judge Perluss' decision.

Significance

What is to be learned from

1 Paramount's International TelemeterCorp. and the American Civil LibertiesUnion were amici curiae for STY.

1966 PAY TELEVISION 41

these facts and events? Some en­during and fundamental truthsunderlie them, of economic, polit­ical, and moral nature. Besides,this infant industry carries signifi­cant implications for its entrepre­neurs, its competitors, and itspotential customers.

We must begin by stressing thatthe quality of fare offered by thevarious screen media via differenttechnical and marketing methodsis not at issue here. Rather, thep1l'operty right of every business­man to offer his own wares in afree market is the crucial conceptdenied by the voters of Californiain the 1964 election. Instead, theylegalized the false concept thatexisting vested interests have theproperty "right" to rule a freemarket - a contradiction.

As STY's Marcy puts it, "Thiscould be compared to WesternUnion saying there should be notelephones."

What were STY's propertyrights? Did the company overstepthem? STY sought to sell pro­grams cheaply that it had createdand paid for, sent out over cablesit had bought and laid (attachedto phone wires· for which it paidrent), to be received on a sub­scriber's own TV set by means ofa small control box owned andmanufactured by STY, which itrented cheaply to the subscriberafter a moderate installation fee.

STY never forced anyone tosubscribe, but tried to win cus­tomers on the appeal of its wares:absolutely no commercials, thenovelty of paid performances seenin the home by residents and theirguests, original··. programs not tobe seen on freevee, limited butconvenient viewing times, and lowprices in comparison with most al­ternatives. STY stressed its sup­plemental nature in relation tocommercial TV. It had no cancella­tions during its few operatingmonths. It made no attempt tocrush its competition - except tosurvive.

Since STY's form of businesswas a variation of an existing masscommunications medium, freedomof speech was also violated whenthe Free Television Act forcedSTY to stop operating. Thus,when any individual propertyrights can be abolished overnightby majority vote, as happened inCalifornia; then all related, sub­sidiary individual rights becomelegally vulnerable to the mob. In­dividual rights are safe only ifproperty rights - which includethe right to sell or trade one's owngoods - are legally inalienable,protected by government. Other­wise, blondes and brunettes couldvote the exile or extinction of red­heads, since one's life is also one'sproperty.

What "crime," then, did STY

42 THE FREEMAN April

commit that persuaded Californiavoters to outlaw it?

The .' highly publicized "threat"that pay-TV would deprive the low­income viewing masses of "free"TV· entertainment by bidding awaytop shows and talent for the exclu-.sive pleasure of "those willing andable to pay for it," in the wordsof RobertW. Sarnoff on June 3,1964 in Beverly Hills, California.While Mr. Sarnoff, then NBCchairman, now RCA president, alsodeplored "seeking government pro­tection against a pay system thatdoes not use .public frequencies,"movie exhibitors ignored this qual­ification and echoed his basiccharge in spades.

This righteous-sounding objec­tion is typical of today's muddledeconomic thinking: "Anythingthat hurts my business is immoraland ought to be illegal." It meansthat those who can pay for specialentertainment should not be per­mitted to buy it on television.Does Sam, who can afford to buy acar, deprive Jack, who cannot, ofanything that is rightfully Jack's?No. Nor does Sam owe a car toJack simply because Sam hasmore money.

Almost twenty years ago, in anantitrust decision, exhibitors losttheir contractually exclusive rightto first runs of new films producedby the movie companies - beforetelevision of any kind. Had film

producers retained (or regained)their ownership of movie theaters,there. would be no question todayas to who gets new movies first. Butsince new films can be sold to thehighest bidder, and· commercial TVnow has the biggest audience andpocketbook, it now may be just a·matter of time. for exhibitors.2

Now, they want their government­destroyed property right reinstatedin a new form by crying wolf atpay-TV.

Conclusion

The craven, despicable behaviorof commercial TV and movie ex­hibitors toward their· new com­petitor springs from a commondefault by most twentieth-centuryU.S. businessmen. They have nottroubled to see that consistent,proper restrictions were kept ongovernment relative to business.Instead, some have sought gov­ernment favors. Many have stoodby and watched while government,under varied pressures, took onmore powers and usurped propertyrights of other businessmen. Afew even sought these ends.

Now, American communicationsleaders, in particular, have losttheir own freedom of business ac­tion. Since the 1920's, when thegovernment confiscated perma-

2 The networks have already startedto help finance a few new movies slatedfor first runs on television.

1966 PAY TELEVISION 43

nently the property rights to air­waves (in the "public interest"),urged by men who should haveknown better,3 the mass communi­cations field has· become an ever­thickening jungle of intrigue andbureaucratic "pull." One musthave the government on one's side~ and off one's back - to gain

business success in broadcasting.The actions of exhibitors and

commercial TV toward pay-TV areonly understandable if we seetheir roles as fellow creators of aFrankenstein monster: expanding,manipulative governmental power.It has turned on them, and they donot know where it will strike next;they seek to win safety from thetyrant by feeding it victims otherthan themselves. Having sacrificedtheir own property rights - to theair waves and to integrated pro­duction and distribution of theirproduct - they do not shrink atsacrificing the .property rights . ofanyone else, especially a. competi­tor for part of their lethargicmarket.

The twentieth-century UnitedStates has gained tremendouswealth and technological achieve­ments, thanks. primarily to theprecedent-setting, arduous effortsof its politically free men of thenineteenth century .who began

3 For a full discussion of these mat­ters see "The Property Status of theAir~aves," by Ayn Rand, in The Objec­tivist Newsletter of April 1964.

with their own property - oftenslight at first - and competed withother men like themselves in amarket almost entirely free ofgovernmental restrictions.

If the California theater ownersand commercial TV can keep, theircompetition outlawed, this willmean a regression to the- medievalguild system. There, all innova­tors were imprisoned and old waysof doing things were forcefullyenshrined for centuries, to every­one's loss. Poverty, ignorance, dec­adence, and serfdom were theresult. (Do Californians wantthis ?)

Under free-enterprise capitalismgovernment must protect· the in­dividual's right to buy and sell asbest he can, not guarantee him acaptive market. Today's maliciousstampede to manipulate govern­ment for one's own benefit at thedirect expense of some other citi­zen or group or business enter­prise must be halted. So must theevil of allowing anyone's propertyrights, and the derived rights likefreedom of speech, to be votedaway by the majority or strippedaway by court decision.

If individual property and busi­ness initiative do not receive theirjust, legal. protection, then allAmericans risk losing present andfuture benefits from the richesthat only free, independent menever have produced-or ever will.

M'AllK£T'llIC£OfBUll1l0SAL BELLERUE

SEVERAL YEARS AGO, my wife andI purchased a string of four bur­ros for our family. We built astable and corral out of wood anda.ssigned each of our daughters aduty-day to perform the requiredchores for the animals. The saleprice of the burros was $200 andthe material for the stable cost$100.

For a number of months we hadgreat fun and the children wiil­ingly did their chores. They didnot even object too much, at first,

Mr. Bellerue operates a cactus-growing busi­ness in the high desert area of Southern Cali­fornia. He was President of the Desert Elec­tric Cooperative in Twentynine Palms, themembers of which recently elected to sell thebusiness to the Southern California EdisonCompany to avail themselves of the lowerrates offered by private enterprise.

This article is reprinted by permission fromthe February 6 issue of The (Santa Ana)Re4ister, a division of Freedom Newspapers,Inc.

44

to the forced hikes in the hotdesert sun to fetch Daddy and thetruck to tow a balking burrohome.

We never ceased to marvel athow anyone of the burros, in themidst of a twenty-mile-per-hourgallop, could spontaneously cometo a dead stop. Unfortunately,none of the riders in our familycould ever achieve this feat at thesame time as the burro did. Wewere able to achieve the dead stopall right, but always at leasttwenty feet beyond the burro.

Needless to say, interest inburro-riding was waning; and itwas a good thing, because ourtime and efforts were now beingconsumed hunting the critters.Nearly every morning we would

1966 MARKET PRICE OF BURROS 45

find they had eaten their way outof the corral. What an appetitethey had for wood! We thoughtthey might need more exerciseand that a larger area to romp inmight solve the problem; so wefenced in the entire fifteen acreswith barbed wire. Our total in­vestment was now well over $600,and the price of feed was increas­ing every month.

Do you think those burros ap­preciated what we did for them?No siree! They spent every dayon the family patio and theirnights were spent trying to breakinto the house. The day after theyate. the wild bird feed, woodenfeeder box and all, we sold theentire lot to a local horse traderfor $100. Peace and tranquillityhas returned to our Rancho. Eventhe horse trader is happy becausehe sold them the next day for aprofit.

This brings me to the subjectof market price and value. Thevalue of those burros to me wassomething less than $100 at thetime of the sale. To be truthful, Imight have paid someone to take

them. The value of the burros tothe horse trader was more than$100 or that amount for whichhe could sell them and still makea profit. Value, therefore, is com­pletely subjective. Market price,however, was that figure mutuallyagreed upon, wherein we bothcoud benefit from the transaction,based upon our own subjectivevalues at opposite ends of thecushion of· profit.

One. may mistakenly think thatI did not gain when I first pur­chased the burros. It must be re­membered that their value to meat that time was higher than whenI later sold them. In other words,at the time I purchased the bur­ros, I wanted them more than Iwanted the money I voluntarilypaid for them. Therefore, I gainedfrom the original purchase as wellas from the sale, when I couldn'tget rid of the ornery critters fastenough. The market price of. bur­ros, as well as of everything else,can only be determined by the buy­er and the seller and their respec­tive value judgments at the time ofthe transaction. ~

Mutual Gain

SO LONG as the basic right of ownership is preserved, a contem­

plated trade is never a conflict; it is an attempted act of coopera­tion under which both parties, not merely one, stand to benefit.

F. A. HARPER, A Just Price and Emergency Price Fixing

WILL THE Rssl PRICE ADMINISTRATOR

plss~s ~tand Up!IRVINH E. HOWARD

AMERICANS saw a display of na­ked arbitrary power in the recentroll-back of aluminum, copper,. andlater, steel prices in response togovernment threats or "persua­sion." It brought a warning com­ment in The Wall Street Journal(January 5, 1966): "The struc­tural steel price increase an­nounced in the past few daysthreatens to usher in a new.era ofinformal but intensive Presiden­tial price control."

Government intervention in thepricing process is not new inAmerican history. In fact, it has along pedigree in antitrust legisla-

The Reverend Mr. Howard is assistant editorof Christian Economics and is working towarda doctoral degree in economics at New YorkUniversity.

46

tion, as recounted by former Fed­eral Trade Commissioner, LowellMason:

As an administrator of two anti­trust laws diametrically opposed toeach other, it was not difficult forme to accuse everybody at a tradeconvention with being some kind of alawbreaker. Either they were allcharging everyone the same prices,indicating a violation of the Sher­man Act, or they were not chargingeveryone the same price, a circum­stance indicating a violation of theRobinson-Patman Act.

Yet the purpose of the ShermanAntitrust Act was to protect com­petition and keep the market free.While the Act was being debatedin the Senate in 1890, Senator

1966 WILL THE REAL PRICE ADMINISTRATOR PLEASE STAND Up! 47

Hoar declared: "The great thingthat this bill does, 'except afford~

ing a remedy, is to extend ,thecommon-law principles, which pro­tected fair competition' in tradein old, times in England, to' inter­national and, interstate commercein the United States."

The legislators sincerely thoughtthat, they'were enlarging freedomagain, in 1914 when they passedthe, Federal Trade ' CommissionA.ct and, the "Clayton Act. TheFederal Trade Commission be­came an investigative body ofwhich Lowell Mason was an ad­ministrator. By forbidding 'dis­crimination in price between dif.;,ferent purchasers of commodities,the Clayton Act introduced thecontradiction to which Mr. Masonreferred.

Cosf-of.Prod,udion Theory of Pric;n,g

In 1936, still bent on keepingthe market free, the legislatorspassed the Robinson-Patman Actwhich, among other things, for­bi~s price discrimination in theform of •discounts, rebates, or ad­vertising allowances greater thanavailable to competitors. Thedrafters of this Act reasoned thatp~;,ices are discriminatory if theyare not matched by like differencesin costs. This kind of thinkingr~aches back to Adam, Smith,David Ricardo, and to the labor

theory of value. Is economic valuedetermined, by the cost of laborinvolved 'in manufacture? ',Econ­omists exploded this tiotiona cen­tury ago, and'the gist, of their' re­buttal is found in a simple ex­ample: "Pearls are', not valuablebecause men dive' for them, butmen dive for them' because theyare, valuable." The'price of 'a good- its economic value -is measuredby the satisfaction' the economicgood brings to the consumer.

For example, what of a theaterthat charges a lower price for amatinee than for the evening per­formance?It is the same show.The costs of producing it are prac­tically" the same. Is the theaterguilty of price' discrimination bycharging·' a lower price in theafternoon? If differences in costare to be the criterion, the·y are. Ifthe satisfaction of the consumer(demand) is the criterion, theyare not. The Robinson-Patman Actfoundered upon this misunder­standing of the nature of eco­nomic value·.

Moreover, the history of anti­trust legislation in America illus­trates another principle empha­sized by Dr. Ludwig von Mises­namely, that one government in­tervention inevitably leads to an­other, and that to another, untilall freedom of movement is lostin a maze of government regula­tions.

48 THE FREEMAN April

Serle and Means

It was against such a back­ground that Adolphe A. Berle andGardner C. Means set forth theirtheory of "administered prices."Means' book, Pri6ing Power andthe Public Interest. A Study Basedon Steel,l contains the most com­plete statement of the theory.

By an "administered price"these economists mean a price setby administrative action, ratherthan one resulting from marketforces, and held constant over aperiod of time. They contendthat large corporations in oligop­olistic markets (few sellers andmany buyers) have sufficient con­trol of the market to do this.

At first, Dr. Means thought hehad found the cause of the GreatDepression. Large corporations,he argued, held their prices firmand varied their production, layingoff men, creating unemployment,and thus worsening the depres­sion.

In 1939, Dr. Jules Backmanpublished "Price Flexibility andChanges in Production"2 in whichhe said: "Not so!" He concludedthat he could find no clear-cut re-

1 Means, Gardner C., Pricing Powerand the Public Interest. A Study Basedon Steel (New York: Harper andBrothers, 1962).

2 Backman, Jules, "Price Flexibilityand Changes in Production," The Con­ference Board Bulletin, National Indus­trial Conference Board, New York, Feb­ruary 20, 1939, pp. 45, 51.

lationship between specific com­modity prices and productionchanges.

hi 1942, Professor Alfred C.Neal joined Dr. Jules Backman inrejecting Means' thesis. In hisstudy, Industrial Conc'entrationand Price Flexibility, he com­mented:

. . . one must be excused for won­dering why so much ink has beenspilled in· debating these issues whenthere has been so little theoreticalpresumption in favor of the conclu­sions under dispute. There is, per­haps, much truth in Du Brul's re­mark that if Mr. Means' thesis hadnot been useful as a tool of politics,it would have died an early death.3

Political value it has had! TheBerle-Means theory resulted in theKefauver Committee making athree-year study of steel, automo­bile, and drug prices beginning in1957.

Out of the hearings of thisCommittee, Dr. Means drew muchmaterial for his book, PricingPower and the Public Interest. Inthis book, published in 1962, Dr.Means reversed his earlier theoryand argued that administeredprices cause an inflation. In fact,he coined the phrase, "admin­istered inflation," to. describe theinflation in 1955-1958. Professor

3 Neal, Alfred C., Industrial Concen­tration and Price Inflexibility, AmericanCouncil on Public Affairs, 1942, p. 37.

1966 WILL THE REAL PRICE ADMINISTRATOR PLEASE STAND Up! 49

Gottfried Haberler has thoroughlydiscredited Dr. Means' "adminis­tered inflation" in his book, In­flation - Its Cau,ses and Cures,4·

but the mere fact that "adminis­tered prices" were supposed tohave caused a deflation, and thenalso to have caused an inflation,should have been enough to raisea suspicion regarding the inherentconsistence of Means' thesis.

Price and Wage Guideposts

However, the theory had polit­ical value, and politicians weresoon to make the most of it. In1962, the EC'onomic Report to thePresident suggested wage andprice guideposts as a ceiling forincreases in wages and prices. Inadopting this guidepost. concept,the Council of Economic Adviserswere tacitly admitting that theyhad accepted the theory that pricesand wages are administered andare not the result of marketforces. Consequently, the conclu­sion was soon reached that, sincethe prices of commodities manu­factured by large corporations aredetermined by management ratherthan by the market, the govern­ment should control the pricingpolicy. Wages have remainedstrangely immune to the applica­tion of the guidepost standard.-4I-I'aberler, Gottfried, Inflation. ItsCauses and Cures (Washington, D. C.:American Enterprise Association, 1960),p. 40-45.

The recent application of theguidepost to aluminum, copper,and steel prices has ignored thefact that the philosophy behindthe guidepost concept, the busi­ness-administered price theory,has never been proved. In fact,evidence has been accumulatingthat the relative inflexibility ofthe prices under discussion hasbeen the result of inflexible wagerates which have been adminis­tered by national labor unions,and also stems from other inflexi­bilities introduced into the econ­omy by government fixed rates,such as freight rates, public utilityrates, postal rates, interest rates- to say nothing of agriculturalsupport prices and a host of othergovernment controlled prices.These are "administered prices"indeed!

The so-called "administeredprices" of private industry arevery sensitive to foreign competi­tion. Both steel and automobileprices, favorite whipping boys ofthe Kefauver Committee, havebeen driven down by foreign com­petition since this debate started.Moreover, metals all face competi­tion from substitute materials.While prices in large corporationscannot be determined by an auc­tion like securities on the stockexchange, nevertheless, manage­ment cannot disregard all the dif­ferent kinds of competition its

50 THE FREEMAN April

product must face when settingits asking prices.

There is much more to competi­tion than Berle and Means andtheir followers are ,villing to ad­mit. Not only is there competitionbetween firms within an industry,and companies within a family,such as the General Motors fam­ily, but there is competition be­tween very different industries.There is also competition fromall kinds of substitutes. There isnonprice competition in qualityand services. In short, the realworld is much more competitivethan it is painted by some econ­omists.

The Magical "3.2"

Not only is the "administeredprice" theory open to question,but the guidepost itself is ofdoubtful value as a measure ofprices. The guidepost is the ratiobetween total output and totalman-hour input. It was devised byeconomists interested in nationaleconomic growth as a roughmeasure of productivity. Politi­cians have applied it to prices andwages.

In 1965, the government arrivedat 3.2 per cent as its guidepost.Some statisticians thbught itshould be 3.4 per cent and otherschose another percentage, but isany percentage trustworthy as ameasure of prices and wages?

Total output and total man-hourinput are only rough estimatesand are not precise enough to de­termine the specific .price of any­thing. Moreover, at best, theguidepost ratio is a five-year mov­ing average! How many individ­uals or companies are average?The price and wage increases ofsome should be above and othersbelow that five year average!

Nevertheless, the guidepost ra­tio was the yardstick the govern­ment used in its recent assaultupon aluminum, copper, and steel.A price resulting from such dic­tation, is an "administered price."

The guideposts are supposed tobe "voluntary" standards, but asMr. George Champion, chairmanof the Chase Manhattan Bank, hasobserved, "Always in the back­ground is the threat that failureto comply voluntarily with theguidelines would bring measuresapplied, for the most part, withoutdebate in Congress or legal appealin the courts."

The Limits of Tolerance

The most disappointing aspectof this new development betweengovernment and business has beenthe sheeplike acceptance of gov­ernment domination by the busi­ness community.

"This is no time to be timid oftone or fearful of economic re­prisal," Mr. Champion warned. "If

1966 WILL THE REAL PRICE ADMINISTRATOR PLEASE STAND Up! 51

we have men afraid of standingup to the government, then wehave the strongest indictment of'big government' that could everbe imagined. When that happens,economic freedom in our countrywill be dead."

The Berle-Means thesis thatlarge corporations fix inflexible

prices has been exploded by com­petent economists. Nevertheless,bureaucrats have used the theoryto justify government adminis­tered prices. Now we see wherethe "administered price" theoristswere going! Now the real priceadministrator has stood up andhas been recognized! +

WHAT the investigator saw re­minded him of a list of cases on acourt calendar: adultery, aliena­tion of affections, bigamy, rape,incest, assault upon neighbors andwithin families.

These crimes were being com­mitted, not in the slum district ofa great city, but along a hedge oflilacs on the grounds of the Wil­helmineriberg Biological Stationin Vienna. And the perpetrators

52 THE FREEMAN April

of these misbehaviors were maleand female specimens of a groupof cattle egrets, a bird about halfthe size of the stork, importedfrom Tunisia by the famed animalpsychologist, Professor OttoKoenig. His hope in this experi­ment was to discover what mightbe expected of human beings con­demned to a sort of super-welfare­state, so fully mechanized thatmen need spend hardly any energyto subsist, protected by the stateagainst sickness and old age, freedfrom work and care for a life ofleisure.

Similarity to Human Community

From earlier observations un­der natural conditions along thegrassy shores of Neusiedler Lakenear Vienna, Koenig had foundthat certain types of herons whichbreed and nest in colonies developcompact social structures similarto the human family, tribe, andcommunity. This is why he chosethe colony of cattle egrets for hismodel welfare state, observingthem over a period of six years ina large enclosure outside the win­dow of his study, providing themwith every necessity for life andcomfort: food, water, bathing fa­cilities, and nesting materials.

At the 1965 annual meeting ofthe German Ornithological Societyin Constance, Professor Koenigfirst reported the results of his

prolonged investigation of cattleegret response to the guaranteedlife, stressing two points:

1. The social order of the colonycompletely collapsed.

2. The sexual activity of thefeathered creatures became ab­normal.

Within the enclosure, food al­ways was at hand in abundance, sothere was no need to go off insearch of it. All members of thecolony remained continually insight of one another, literallypressed together. More frequentlythan under normal conditionsthere was strife, often bitterfighting. And as the fighting in­creased, so did the sexual activity.While a male was feeding, his matemight be raped by a neighbor, leav­ing her young in the nest to be mo­lested by others. During the breed­ing season, the hackles of thefemales were torn and bloodied bythe claws of the sex-crazed males.

Koenig also noted a sexual jeal­ousy not found among wild egretsor herons. In their natural state,other herons of a colony are un­concerned about the home life ofa couple; but in the Viennese cage,the mating act often evoked inter­ference from other males.

Three or four couples of the ex­perimental egrets frequentlybanded together. Nest-buildingamong egrets usually is initiatedby the male, who selects the site

1966 OF BIRDS AND MEN 53

and then lures his companion toit. But in Koenig's enclosure, twoor three females often would an­swer the call to the nest; nor wasit uncommon to find a sister ordaughter of the male in his harem.Such polygamy became criticalduring the brooding period, withother females sitting atop thechief brooder. Now and again,Koenig saw egrets piled three deepon the eggs. Such congestion dis­turbed the normal p.attern ofparents taking turns sitting, andmany of the eggs were either brok­en or kicked out of the nest. Thus,the negligence induced by welfar­ism resulted in declining numbersof healthy young egrets in thecolony.

The rearing of the young birdsalso became a problem. In·wildcolonies, as soon as the youngherons are able to leave the nestthey gather among the reeds forgames of "catch" by which theylearn to capture insects. So strongis their urge for self-reliance that

the fledglings often fail to returnhome and parents must seek themout to feed them.

In the Viennese experimentalcage, however, the young egretswere simply beggars, incessantlypestering their ever-present eldersfor food. And apparently in searchof quiet, the parents obliged, stuf­fing the young ones not only toexcess, but far beyond the timewhen they should have been ableto care for themselves. Theyounger birds would be found stillbegging, even after they had off­spring of their own - the grand­parents caring for them all.

Because of similarities betweenthese egrets and other bipeds,Professor Koenig believes thatwhat happened to the birds in hisyard under super-welfare-stateconditions might similarly affecthuman beings exposed to effortlessmaterial abundance without needor incentive for self-responsi­bility. •

Against Nature

"IN MOUNT RAINIER NATIONAL PARK, Washington, a rangercautions visitors against feeding the animals. The ranger explainsthat deer grow accustomed to visitors' handouts and lose ability tofend for themselves. Bears, he says, come to believe that free foodChipmunks and squirrels congregate where handouts are supplied,is their due - and become grouchy and violent if they don't get it.and thus upset the balance of nature."

From an editorial in The Richmond N eWB Leader

A REVIEWER1S NOTEBOOK

JIMMY HOFFA is the current devilamong labor leaders. But a closereading of Hoffa and the Tea,m­sters: a Study of Union Power, byRalph and Estelle James (VanNostrand, $6.95), leaves you won­dering whether he is any worse orbetter than other professionalbrokers of the workingman's "in­teTests." The Jameses make youfeel that Hoffa differs from othersin the guild mainly by his con­tempt for public relations. He hasbeen ruthless in his drive forpower, and he uses his pensionfund to build influence, and he iscynical about the law (which heregards as something to be ma­nipulated). But if you accept hispremise that society is a battle­ground of warring interests, ev­erything that he does falls logi­cally into place. His end, which isto get good contracts for histruckers, is the excuse for themeans, which are elaborated interms of Chinese-style "fight,

54

JOHN CHAMBERLAIN

OF THE ROAD

fight, talk, talk" military cam­paigning.

The genesis of this book aboutHoffa is curious, and explains agood deal about Jimmy's "take itor leave it" character. When Dr.J ames was teaching industrial re­lations at the Massachusetts Insti­tute of Technology in 1961, he in­duced Hoffa to give a talk to hisstudents. Hoffa accepted OIl. condi­tion that he might quit after get­ting two "unintelligent" questionsin a row. He spoke for threehours, complaining that govern­ment investigators, reporters, andacademicians do not depict howthe world really operates. Finally,after defending certain notoriousfigures involved in corruptioncases, he challenged Dr. James totravel with him for six months,disguised as his assistant, to learnthe "truth" about unionism.

Dr. James took him up on theoffer, insisting, however, that hepay his own travel bills. As he and

1966 KING OF THE ROAD 55

his wife dug deeper into theTeamsters' activities, Dr. Jamesconstantly expected Hoffa to callthe deal off. But, possibly becausehe felt he had less to fear fromtwo objective academicians thanhe had to fear from investigatorBobby Kennedy (whom he callsthe "little monster"), Hoffa letthe Jameses carry their projectthrough. Hoffa registered somepersonal objections to the Jameses'characterization of him as "an ex­tremelycompetent, complex, andambiguous individual, subject torapidly changing moods and sub­stantial self-deception." But, otherthan to say "you make me looklike a bum," he did nothing to getthem to change a word in themanuscript.

Exploiting the Situation

As a matter of fact, it is notHoffa who "looks like a bum" inthis book, it is the American peo­ple. The truckers, whether theyare local carters or long-distancedelivery men, travel on roads thatare the property of federal, state,and municipal governments, and"society," as the owner of thehighways, could presumably makeits own rules for road use. But the"owner," in this case,has stoodaside. The "rules of the road"don't insist on an open road foranybody.

In his campaign to control the

use of the roads insofar as com­mercial haulage is .concerned,Hoffa has been a great militarystrategist. Though he cut his eyeteeth in the labor wars of Detroit,Hoffa really went to school underFarrell Dobbs and the threeDunne brothers of Minneapolis.Dobbs and the Dunne brotherswere Trotskyite Marxists whothought of assailing the capitalistsystem at its crucial bottlenecks.The road system of America, toDobbs and the Dunnes, was ofjugular importance. Anyone whocould impose his will on the high­ways could obviously dictate histerms to society as a whole.

But where Dobbs and the Dunnebrothers were ideologues, JimmyHoffa is a pragmatist. His idea isnot to overthrow capitalism, butto milk it for all that it will yieldfor the teamsters. Instead of be­ing a revolutionary, he is a twen­tiethcentury robber baron, reach­ing for control of the "narrows"in the interests of his own bandof followers.

Coming and Going

Crucial to Hoffa's strategy is hisnotion of "leapfrogging." By or­ganizing over-the-road truckers,he can dictate what goes into thetowns to be picked up by localcarters. Or, by organizing at thelocal end, he can impose his termson long-distance carriers who need

56 THE FREEMAN April

access to the town. There is "lev­erage" in all this, for the right to"interline" - i.e., to transfer cargofrom one carrier to another - isessential to most business survival.All you have to do is to cut thecartage connections at a singlepoint to get the whole circuit un­der your control.

Having picked up the "leapfrog­ging" concept from Farrell Dobbs'sfirst operations in the MiddleWest, Hoffa has applied it on a na­tional scale. Nobody can stand outagainst it. If the businessmen ofOmaha, say, resist dealing withHoffa, they may wake up to dis­cover that shipments into Ne­braska have been cut off at Denverand Cheyenne, and that nothing iscoming up from a strike-boundKansas City.

Open-end Grievances

Since local unions are dependenton handling "interlined" goodsfrom the outside world, Hoffa hasthe key to total union disciplinein his hand. He has used the keyto "level up" wages in depressedtrucking areas, as in Philadelphiaand Los Angeles, and to restrainunion exuberance in the high­wage San Francisco Bay region tothe end of making his deals inOregon and Idaho look better.Much of Hoffa's power comes fromhis detailed economic knowledgeof what employers will be able to

bear. ("It's a lousy contract," hesaid in one instance, "but if wetake any more he'll go broke.")This general concern with profita­bility has led to charges of "sell­ing out to management." ButHoffa lets his critics talk.

The laws prohibiting secondaryboycotts have not restrainedHoffa's application of "leapfrog­ging" techniques. By insisting onhis own patented "open-end griev­ance procedures," Hoffa can al­ways threaten a strike whereverone is necessary in order to affecta decision elsewhere. The "connec­tion" between a strike in Okla­homa City over the application offreight interchange rules and acampaign to adj ust wages some­where else may not be admitted,but Hoffa works his "coincidences"with supreme contempt for gov­ernment lawyers. If there is al­ways an "open-end grievance" totake up, there can be nothing buta series of "legal primary dis­putes."

The Jameses make it plain thatHoffa's organizing and bargainingstrength derive from a cannyman's ability to use the existingsocial codes to his own advantage.In doing this he does not differfrom a Walter Reuther, or aGeorge Meany, or a Mike Quill.The "law" may be circumvented,but if courts won't issue injunc­tions and governors won't call out

1966 KING OF THE ROAD 57

national guards, then there islittle use in putting new laws onthe books.

Changing the Climate

But what are we to do aboutmonopolistic union power? Whatif Jimmy Hoffa were to tie up thecountry? Hoffa himself deridesthe possibility of a "nationalstrike." He has studied the tran­sit systems of the United States,and has it figured out that hecould substantially halt truckingall across the country by striking"six strategic terminal cities." TheJ ameses say that in case of a "sixcity" terminal strike, the mainbody of Teamsters, thrown out ofwork as "a consequence of inter­rupted interlining, would collectunemployment compensation fromthe government instead of drain­ing strike benefits from the IBTtreasury." Thus the citizens of anation would find legality usedagainst them. They would be feed­ing the union that was throttlingtheir production.

The J ameses say that "Hoffa isunlikely to test this plan." Butthis is just another way of sayingthat Hoffa will get what he wantsanyway. Even if he goes to jail itwould hardly make any difference,for Hoffa, is the product of a wayof thinking about unions, andsomeone would quickly move up totake his place. ~

~ PUBLIC REGULATION OF THE

RELIGIOUS USE OF LAND by

James E. Curry (Charlottesville,

Virginia: The Mitchie Company,

1964) , 429 pp. $12.50.

~ CHURCH WEALTH AND BUSI­NESS INCOME by Martin A.

Larson (New York: PhilosophicalLibrary, Inc., 1965), 120 pp. $3.95.

Reviewed by Edmund A. Opitz

NEW CHURCH construction is go­ing on all over this land, at therate of about a billion dollar'sworth a year. Everyone of thesenew churches needs a suitable sitefor its buildings, parking lot, andgrounds, so church committees gointo the real estate market anddicker with potential sellers ofland for the location of theirchoice. This is as it should be. Butthen they bump into the local zon­ing board, an agency operating injust about every major commun­ity in the nation except Houston.The church building committeemay have completed arrangementswith the architect, the bankers,the builder, the real estate men,and then be told by the zoningboard backed by the authority ofthe police power: "You can't buildyour church here!" At which pointthe famed partition between churchand state erodes a bit.

This is where Mr. Curry'sunique book comes in. The author

58 THE FREEMAN April

is a veteran of more than thirtyyears of law practice, specializingin the kind of cases treated inthis book. Actually, this is severalvolumes in one, each aimed at adifferent category of reader. Seri­ous students of the church-staterelationships are familiar with po­litical impairments of religiousliberty, but lack knowledge of thekind of impairments that goonat the level of mere zoning. Thisbook's careful legal analysis of onehundred court cases involvingchurches with location problemsmakes it an indispensable text forthe lawyer, and a church groupabout to build might save itself alot of grief by consulting this book.

Zoned for Worship

Those concerned with the prob­lem of zoning as such will findmuch meat here. And those whoraise such philosophical questionsas What is religion? and What isthe Church? will note well the im­propriety of dumping such ques­tions into the lap of the courts. Nobranch of government, howeverwell disposed, is equipped in thenature of the case, to tackle ques­tions of this order. Small wonder,then, that the results are so gen­erally unsatisfactory! We havereached the critical point in atleast one state where the Court ofAppeals has declared, in effect,that a community may actually

ban churches by refusing a con­gregation the right to buy landand build! Simple religious or an­tireligious prejudice is alwayswith us, and we can take it instride - unless it joins forces withthe police power. But this is some­thing different. Zealots willing toinvoke nonreligious means tofurther their one true faith wereonce the problem; but now thethreat arises from the mindless,noiseless, impersonal processes ofzoning laws, or appears in thewake of "urban renewal."

Raise our sights and it becomesevident that the denial of religiousliberty by means of a zoning or­dinance is but one instance of agrowing disposition to turn allsorts of social problems over togovernment. Government is unique­ly an agency for redressing injury.Confine it to this difficult job andthe peaceful relationships of menin society are no longer its con­cern; it merely acts to deter andpunish acts of aggression, andmen are free to administer theirprivate affiairs. The public sectoris small and well defined. In a so­ciety so organized, power is dis­persed and limited; there is no onebig lever by which society ismoved, and so the opportunitiesare minimized for evil men toseize control and do a lot of harm.Such an attitude toward govern­ment - characteristic of the old

1966 OTHER BOOKS 59

Whig-Classical Liberal tradition- cannot but appear mean andniggardly among a people afflictedwith ideas of grandeur.

The Man in Charge

Modern Ihubris dictates that thepoliticar problem be conceived asthe task of concentrating powerin society into one gigantic levercapable of getting the whole showinto operation, then putting virtu­ous men in charge in order toachieve great good. Once such apolitical scheme gets going thepeople will be permitted one lastdecision; they will be allowed todecide who will, from now on, begiven power to make their deci­sions for them! This is Tocque­ville's "democratic despotism," andit is a measure of our decline thatwe insist on calling it "freedom."

The tumult and the shoutingabout Church and State goes onat the level of Bible reading andprayers in the classroom. Genera­tion after generation of Ameri­cans violated the First Amend­ment, we are to believe, but virtu­ally no one noticed it - until now.Then, all of a sudden, and with thehelp of some eminent jurists, wewere made aware that the wallwas not in place; and we joinedforces to prop it back by banningreligious exercises in the tax-sup­ported schools.

But while our attention is en-

gaged at this largely theoreticallevel we have been backed into amuch more serious problem. Few,if any, local zoning boards are an­imated by antireligious feelings;they simply accept the commonlyheld belief that most folks don'tknow how to use their propertyor plan their lives, and thereforesomebody else should tell them. Asthe cartoon character, Peanuts,says: "The world is full of peoplewho long to act in an advisory ca­pacity." Better yet, in a manager­ial capacity.

The First Amendment to theConstitution places a restrictionon Congress. Congress, it says,shall take no steps leading to anofficial religion. No national churchmay be established here, nor isany man to be' impeded in theexercise of his religious prefer­ences. Heresy is not a crime. Jeff­erson's phrase, "wall of separa­tion," came later, and although itis repeated on every side today,it does not accurately reflect Amer­ican mores or practices, nor themind of the First Congress. Thesemen, after passing the FirstAmendment, actually voted moneyto send four missionaries to theIndians;" for they believed thatsound morals are necessary forthe civil order, and that religiousinstruction is the indispensablebasis for morality. It was in thiscontext that religious, educational,

60 THE FREEMAN April

and charitable institutions weregranted certain exemptions fromtaxation.

Taxation then was a means offinancing the operations of gov­ernment; now, taxation is .largelyan instrument for accomplishingsocial change. Political exactionsemployed for this purpose are nec­essarily unfair, and in order forthe governing class to secure thecompliance of the educational andreligious communities it must in­troduce some "sweeteners" in theform of exemptions. At the sametime, this iniquitous tax structurewill provoke other sectors of so­ciety to invent all sorts of ingen­ious schemes for living with animpossible situation. If the presentsystem of taxation were appliedrigorously across the boards to allmen and organizations alike itwould not last a week, and if any­one had thought it would be soapplied it never would have beenfoisted upon us in the first place!

The Growing Scope andProblem of Tax Exemption

Mr. Larson, author of the sec­ond book under review, does notsee it this way at all, but ratherregards the various loopholes inthe tax laws as beating govern­ment out of what rightfully be­longs to it. Nevertheless, he hasbrought together a host of fasci­nating and disquieting statistics,

nearly all from unimpeachablesources.

Mr. Larson focuses on four cities,Buffalo, Baltimore, Washingtonand Denver, which collectively typ­ify America, and then he arguesconvincingly that he has validgrounds for extrapolating to ar­rive at a reliable estimate for thecountry at large. The figures arewell nigh incredible, even as per­tains to the market value of theplant owned by religious, educa­tional, and charitable institutionsused for'those particular purposes;but these enterprises also own andoperate various businesses, andthey have enormous holdings ofstocks and bonds. These chunksof real estate and other property,and the income deriving fromthem, are largely tax exempt, andpercentagewise they increase yearby year. During the past genera­tion in Buffalo, for instance, theratio of exempt to taxable realestate rose from 19 per cent to44 per cent; and more than halfof this exempt property is heldby churches and other religiousinstitutions. The picture in everypart of the country is Inuch thesame, but there's no way ofstraightening out this mess shortof confining government within itsproper boundaries so that freedommight perform its remedial workin the economic, educational, andreligious sectors of society. ~

1966 OTHER BOOKS 61

~ SCIENTIFIC MAN VERSUS

POWER POLITICS by Hans J.Morgenthau (Chicago: PhoenixBooks, 1965), 245 pp. $1.95 (pa-per).

Reviewed by Robert M. Thornton

THE MEN who had most to do withlaunching this republic had noillusions about human nature.They viewed man as a flawed crea­ture, and hence not to be trustedwith power over his fellows; andthey sensed the tragic dimensionof human life. As John Jay put itin one of his Federalist papers:"I do not expect that mankindwill, before the millennium, bewhat they ought to be; and there­fore, in my opinion, every politicaltheory which does not regardthem as being what bhey a,re, willprove abortive."

This realistic view of humannature, dominant in our traditionsince the days of the Greeks, wasalready giving way to another out­look even as Jay wrote. The opti­mistic rationalism of the Enlight­enment equated evil with igno­rance. It held out the promise thata perfect human society was at­tainable just as soon as the boun­daries of knowledge were pushedback to the edge of things - in ageneration or two at most.

Professor Morgenthau criticizesthis philosophy in no uncertainterms: "Rationalism misunder-

stands the nature of the world,and the nature of reason itself.It sees the world dominated byreason throughout, an independentand self-sufficient force which can­not fail, sooner or later, to elimi­nate the still remaining vestigesof unreason. Evil, then, is a merenegative quality, the absence ofsomething whose presence wouldbe good. It can be conceived onlyas lack of reason and is incapableof positive determination basedupon its own intrinsic qualities.

"This philosophical and ethicalmonism, which is so characteristicof the rationalistic mode ofthought, is a deviation from thetradition of Western thought. Inthis tradition God is challengedby the devil, who is conceived asa permanent and necessary ele­ment in the order of the world.The sinfulness of man is likewiseconceived, from Duns Scotus andThomas Aquinas to Luther, not asan accidental disturbance of theorder of the world sure to be over­come by a gradual developmenttoward the good, but as an in­escapable necessity which givesmeaning to the existence of manand which only an act of grace orsalvation in another world is ableto overcome."

Lacking this sober view of hu­man nature, people think in ex­uberant terms of Man takingcharge of his destiny - which

62 THE FREEMAN April

means in practice that some menwill ride herd on their fellows. Pol­itics will be regarded as a scienceof control, rather than an art. Thesocial engineer, coming to the fore,will try to impose a rational orderon society, and any problems whicharise will be submitted to "fact­finders," "neutral parties," orother "experts." People must neverbe allowed to work out and re­solve their problems in freedomand by their own devices. Shep­herded by those who know best,they will be protected from theconsequences of their own folly.

Some people are wiser than therest of us, and many people arefoolish indeed; but none are sofoolish as those who think them­selves wise enough to assume con­trol of human affairs. ~

~BURKE AND THE NATUREOF POLITICS by Carl B. Cone(Lexington: University of Ken­tucky Press, Vol. 1,1957,415 pp.;Vol. II, 1964, 527 pp.), $15.00 theset.

Reviewed by Edmund A. Opitz

EDMUND BURKE may have sufferedfrom misinterpretation during hisown lifetime as well as from com­mentators since his death, but noone can say he has been neglected.Controversy swirled about himwhile he was alive, and has notceased. The note on which he end-

ed his public ca,reer, his fierce an­tagonism to the revolution inFrance, still sounds above thetumult of modern politics. Forthere is a sense in which theFrench Revolution is the fountain­head of the various social move­ments which today claim men'sallegiance and divide their loyal­ties.

The collectivist ideology appearsin several guises today, but itsparentage may be traced to theideas -unleashed in eighteenth cen­tury France. Likewise, there areseveral varieties of anticollectiv­ism, but each owes something toBurke's response to the challengeto European civilization posed bythe Philosophes. Stated differently,it may be said that there are,broadly speaking, two conflictingphilosophies of man and social or­ganization; today's neoliberalism,with its offshoots and extensions,and conservatism-libertarianismsimilarly developed. The formerstems directly from the FrenchRevolution; the latter's point ofdeparture is Burke's mighty an­swer to that revolution.

Differences Ignored

Neoliberalism overlooks the "ac­cidents" that divide human beingsinto male and female, English­men and Frenchmen, Moslem andHindu, and the like; it reducesevery unique person to a mere unit

1966 OTHER BOOKS 63

of humanity. Its advanced think­ers, struck by the evils whichplague mankind and regarding so-ciety as a mere artifact, draw upa blueprint for a form of socialorganization in which every hu­man unit has its place and awaitsonly the political command whichwill cause it to function properlyin lock step with every other unit.There will, of course, be recalci­trants who obstruct the march to­ward utopia, so the Plan includesan active enforcement agency totake care of such. people! But oneday, when all the lingering effectsof ancient class antagonisms arebeaten and bred out of the citi­zenry, Man will have his utopia!

The opponent of this nightmare,whatever he chooses to call thebanner he serves under, takes ac­count of the variety and complex­ity of human beings, regardingthem as imperfect and imperfect­ible in this life. Of course, thereare evils in human affairs and, ofcourse, we should work to dimin­ish tl~m by restoring justice. Butthe human situation at best willbe only tolerable, never perfect.

Samuel Johnson says in thePreface to his English Dictionarythat it "was written with littleassistance of the learned, andwithout any patronage of thegreat; not in the soft obscuritiesof retirement, or under the shelterof academic bowers, but amidst

inconvenience and distraction, insickness and in sorrow."

His distinguished contemporaryand friend, Edmund Burke, madehis noble contributions to politi­cal philosophy under similar con­ditions. Burke was no cloisteredthinker, but quite the opposite;his philosophy was hammered outto meet the exigencies of an activeand abrasive political career. Itdealt with real people and notwith bloodless abstractions; withEnglishmen pursuing their ances­tral ways amid institutions half asold as time, not with Man livingup on cloud nine - the target ofthe Philosophes across the chan­nel.

Something for Everyone

Burke in his natural politicalhabitat is the subject matter ofProfessor Cone's two massive vol­umes. They are obviously thefruits of prodigious research, andare addressed as much to the pro­fessional historian of the periodas to the interested amateur. Theyare detailed but readable, and theauthor respects Mr. Burke's pri­vacy ; only his public career isdealt with, and we learn as muchas anyone needs to know aboutthat career.

Learning about a public figureis all we want to know of mostof them, but this is not true ofEdmund Burke, a master of rhet-

64 THE FREEMAN April

oric as well as one of the greatpolitical philosophers. Whetherhe is read as literature, or philoso­phy, or for the role he played inthe history of his nation and ours,matters not at all so long as he isread. Go to Dr. Cone for the back­ground, then pick up one or moreof the several anthologies ofBurke's writings now in print.

Start with the fat Anchor paper­back of selections edited by PeterStanlis, well remembered for hisbook, Burke and the Natural Law.Or, if you wish to add a handsomevolume from Knopf to your li­brary shelf, look up the large selec­tion of Burke's writings skillfullyedited by Hoffman and Levack.These will do for a starter. +

Pioneers

CIVILIZATION PROGRESSES at about the rate at which mankindabandons superstition in favor of thinking.

It should follow that the greatest benefactors of mankind arethose who teach others to abandon the ,blind fears of superstitionand to seek natural causes of natural phenomena.

When men realize that they are dealing with natural and notsupernatural causes, they bestir themselves to improve theirenvironment.

As superstition is pushed back, human thinking and achieve­ment get their chance. So long as the ocean was thought to bea fringe of black horrors around the land, men clung to theshore and let superstition have its way.

When Columbus exploded the superstition and discovered thatthe ocean was just more water extending to more land, the menof the Old World became explorers, built ships, and settled anew hemisphere.

WI L L I AM FE AT HER, from the William Feather Magazine, J anual'y 1~66

Also available instandard clothbound volume, $2.50

in a new, attractive,low-priced paperback:

$ .95

2.00

6.00

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3 copies

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~~~

~rstedition of MAINSPRING (279 pp., in­dexed) was published in 1947. Since Mr. Weaver'spassing, this great book has been the property ofFEE. Previous to this new paperback edition, 350,­000 copies have been printed.

One large company's circulating library for em­ployees required 150 volumes to meet the demand.

Based on FEE's experience, MAl NSPRIN G topsall books as a starter for any aspiring student ofliberty. Easy reading - indeed, exciting - the be­ginner becomes so interested in freedom that hecan hardly help pursuing the subject further.

FEE's recommendation: Keep a good supply ofthe paperbacks on hand to present to any individualwho shows a spark of interest in freedom.

THE FOUNDATION FOR ECONOMIC EDUCATION, INC.

IRVINGTON-ON-HUDSON, NEW YORK, 10533

THEY NEVER GET ALL THEY WANT

• The reactions of people in some of the foreign nationswho have been enriched by our foreign-aid gifts are likethe house-party guest who was having a good time. "Oh,sure," he replied. "Fine food. I have a swell room, the hostand hostess are marvelous, weather is great, and the enter­tainment is all anyone could ask for. Actually, there's onlyone thing."

HOne thing you don't like?" asked his fellow guest. HAndwhat might that be?"

HProbably I shouldn't even mention it, but to be per­fectly frank with you - they're not giving me any spendingmoney."

From THE CURTIS caURI ER (February 1966) edited by Thomas Dreier