The Freeman 1985 - Foundation for Economic Education · existing network of costly programs ......

theFreemanVOL. 35, NO. 6 • JUNE 1985

The Positive Approach-A Page on Freedom, No. 20

Why freedom outperforms socialism.

Dean Russell 323

Economic Reality and U.S.Government Farm Programs E. C. Pasour, Jr. 325

The consequences of intervention will not be cured by more meddling.

Comparable Worth versus Civil Liberty:Are Feminists Pro-Choice? Jane M. Orient 332

Potential gains not worth the tremendous costs.

The Spirit of Freedom Robert Bearce 341A timely reminder of the wisdom ol the Founders.

The Morality of ProfitHow to gain through better service.

Craig Russell 350

Language Traps Bettina Bien Greaves 353How words can change their meaning-and our lives.

The Ecology of EntrepreneurshipTry the new theory of entrepreneurship.

Sven Rydenfelt 363

Redigging Old Wells John K. Williams 367Time to open again the ancient wells of human rights, private property,and individualism.

Book Reviews: 380"The American Idea: Ending Limits to Growth" by Jack Kemp"Beyond Liberal and Conservative" by William S. Maddox andStuart A. Lilie

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

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A Page on Freedom Number 20

The Positive ApproachTHE LIBERAL-SOCIALIST is always positively for something. But theconservative-libertarian is all too frequently merely against something. That's why the socialists are winning.

Now personally I'm positively for every good thing there is. Forexample, I'm aggressively in favor of higher standards for education-and more and better education-than any socialist I ever met.I want the best possible medical care for everyone. With all my heart,I desire that every family in the U'nited States and elsewhere shallbe well fed, well clothed, and well housed.

While the socialists campaign for minimum wages and minimumstandards of living, I shall continue positively to explain to peoplehow the free market will bring maximum wages, high standards,and more goods and services for everyone. I'm for the maximum andagainst the minimum.

If people only realized it, the advocates of these minimums andaverages are their deadliest enemies. The socialists want to depressthe people to a common level; the libertarian wants to elevate eachindividual person to his highest capabilities.

The socialists want to standardize people; the libertarian wants toencourage and assist each person to develop his own personality andpotentiality to the fullest.

The socialists want to restrict and forbid and control; the libertarian wants to remove the artificial and man-made obstacles topeace, progress, and plenty.

Since that is what you and I favor, why don't we say so? If weexplain our viewpoints consistently and effectively, we will soon putthe socialists on the defensive where they belong. For when it comesto an interest in the true welfare of people, the socialists are smallmen of little vision. -Dean Russell ®

THE FOUNDATION FOR ECONOMIC EDUCATION, INC.IRVINGTO~ON-HUDSON, NEW YORK 10.533

323

1985 Summer Seminars at FEE

June 23-29July 14-20August 4-10

For twenty-two years our annual summer seminars have offered a thorough introduction to the principles of limited government and the marketeconomy. Our sessions attract lively and diverse groups of peopleincluding students, teachers, business proprietors and employees.

The week includes thirty-five hours of lecture and discussion, withample time for participants to meet informally with both staff and distinguished guest lecturers. The Foundation, situated on a five-acre estate in a quiet suburb near New York City, provides an ideal setting fora week of study and reflection.

The charge for a seminar-tuition, supplies, room and board-is$400. Fellowships (including partial travel grants) are available. A detailed seminar brochure will be sent on request.

Please address all requests for applications and further information to:

Summer SeminarsFoundation for Econom ic EducationIrvington, New York 10533(914) 591-7230

E. C. Pasour, Jr.

Economic Realityand

u.s. GovernmentFarm Programs

FARM BANKRUPTCIES are front-pagenews. Although the magnitude oftheproblem has undoubtedly been overstated by the media, there are nohard data on the precise number offarm businesses experiencing financial stress. According to a 1984 survey, less than 20 percent of all farmoperators had debt/asset ratios of40 percent or higher.! While theUSDA on the basis ofa recent American Bankers Association survey ofagricultural banks found the incidence of farm bankruptcies "relatively low," pleas for government to"do something" are widespreadthroughout the land.2

The paradoxical nature of the callfor government action to alleviatethe economic distress in U.S. agricul-

Dr. Pasour is a Professor of Economics at North Carolina State University at Raleigh.

ture is too Iittle recognized. Asshown in the following analysis, current farm problems are rooted in pastgovernment programs.3 As so oftenhappens when government intervenes, government farm programsnot only have failed to achieve theirobjectives but have created pressures for further intervention to dealwith the unforeseen and unintendedconsequences of these policies.

Despite the fact that U.S. agriculture is often considered to be a bastion of free enterprise, farm programs today are remarkably similarto the protectionist Roosevelt NewDeal policies instituted during theGreat Depression of the 1930s.Moreover, it is ironic that government outlays for farm programshave increased greatly during theReagan Administration. The taxpayer cost of farm price support pro-

325

326 THE FREEMAN June

grams alone increased from $4 bi!·lion in 1980 to more than $20 billionin 1983-making these programs themost rapidly growing item in thedef1.cit·plagued federal budget.

Although agriculture escaped thederegulation movement of the late1970s and early 1980s that affectedtransportation, banking, and so on,it appears that major changes arelikely to occur in U.S. farm policieswithin the next decade. The pressures for change are due to changingeconomic conditions and to an increasing public awareness of the ef·fects of past government farmpolicies.

As the U.S. Congress debates a1985 farm bill, agricultural policy isat a crossroads with only two choices.The choice is either to continue theexisting network of costly programsinvolving government subsidies andgovernment·sanctioned restrictionson competition that now affect abouthalf the output of U.S. farms or, al·t~rnatively, to rely on the competitive market process to bring aboutappropriate adjustments in production and resource use. In making thischoice, it is important to consider theobjectives and results of current andpast farm programs.

Government Intervention to AssistLow-Income Farmers

Price supports, marketing orders,'and other restrictions on competition were instituted to increase farm

prices and incomes during the GreatDepression when economic condi·tions in agriculture were greatly different than they are today. Whilefarm incomes, on average, historically have been lower than nonfarmincomes, this is no longer the 'case.If the half of the farms that are noncommercial rural residences areeliminated from the income statistics, the farm sector has higher family incomes, on average, than thenonfarm sector.4 Of course, there isno presumption that wages shouldbe equal. And, if public policies areinstituted to equalize wages in different sectors regardless of underlying economic trends, there is littleincentive for labor to adjust inresponse to changing economicconditions.

Furthermore, government farmprograms make the income distribution less equal within agriculturesince most farm program benefitsare related to farm size. Consequently, when farm product pricesare increased by price supports, incomes of small farmers are affectedrelatively little. Economist WilliamLesher estimates that just 13 percent of the farms obtain 45 percentof direct government payments,while 71 percent of the farms receiveonly 22 percent of the payments.5

The result is that although farm programs are justified on the basis ofhelping low-income farmers, it isowners of large farms with incomes

1985 ECONOMIC REALITY AND FARM PROGRAMS 327

quite high relative to nonfarmerswho receive most of the benefits.

Government Intervention to"Stabilize Agriculture"

Another goal of farm policy is to"stabilize" farm product prices andincome. Despite this often statedgoal, there is little doubt that pastgovernment policies have contributed to the current financial distressbeing experienced by substantialnumbers of farmers. The record suggests that government attempts tostabilize agricultural markets havebeen no more successful than simi1ar attempts by government to "finetune" the overall level of economicactivity during the past 15-20 years.Indeed, much of the current economic distress in U.S. agriculturecan be traced directly to inflationarymonetary and fiscal policies and tosubsidized credit, which inducedfarmers to overinvest in land andcapital facilities during the late1970s.

Economic instability is often increased by government interventionas Washington political decisionmakers manipulate agricultural(and other) programs to affect upcoming elections. Prior to the 1976election, for example, the FordAdministration raised the loan rateon wheat from $1.50 to $2.25 perbushel and tripled the tariff on imported sugar.6 Similarly, PresidentCarter increased dairy price sup-

ports on the eve of the 1980 election.Again, in September 1984 PresidentReagan changed the rules of theFarmers HQrne Administration(FmHA) to postpone and reduce farmdebt-thereby merely postponing theday of reckoning for many farmers.

The subsidized credit programs operated by the FmHA create an incentive to expand the size offarm operations through borrowing. Thehigh ratio of capital to labor in U.S.agriculture makes farming particularly sensitive to changes in interestrates. When the cost ofcapital is subsidized, farmers are induced to substitute capital for labor and land.Thus, easy government credit policies undoubtedly have contributedto the recent increase in farmbankruptcies.

The importance of the export market for U.S. farm products increasedmarkedly during the early 1970s.Although the United States is theworld's largest exporter of agricultural products, government policiesincrease uncertainty and insb~bility

in export markets. The suspension ofgrain sales to the Soviet Union in1980 by President Carter is a primeexample. Uncertainty and instability inevitably increase when the demand and price of farm productshinge on unpredictable politicalfactors.

However, it is not only trade restrictions directly affecting agricultural exports that are of importance


to U.S. farmers. During the recentrecession, the Reagan Administration tightened import restrictions ona range of products including autos,steel, textile products, and motorcycles. Since buyers of U.S. farmproducts must obtain dollars to makethese purchases, such restrictions onimports, whether "voluntary" or involuntary, are especially damagingto U.S. agriculture. The conclusionis that much of the market instability for U.S. farm products during thepast decade can be traced to government policies.

Indirect Effects of Farm Programs

Restrictions on competition inevitably reduce the efficiency of resource use. In current wheat, feedgrain, and cotton programs, the government pays U.S. farmers not to tillsome of the world's most productivefarmland. The higher prices forbread, milk, sugar and other products resulting from price supportprograms are especially harmful tothose with low incomes and createincreased pressures for food stampsand other income transfer programs.

There is a cost ofproduction "trap"associated with the operation of allagricultural price support programs.Any effective price support will increase cost of production as increases in product prices are capitalized into prices of land, productionrights, and other specialized resources. Thus, if the price of wheat

were doubled or tripled to (say) $10per bushel, prices of land and otherspecialized resources in wheat production would be bid up so that theexpected cost of production, including the return to entrepreneurship,would tend to equal product price.

Since the benefits of farm programs are largely capitalized intohigher prices of inputs (especiallyland), it is the owners of these inputsat that time who benefit. Producerswho enter production later receivelittle benefit from such programs unless price support levels are furtherincreased. Later entrants into production receive higher productprices, but they also have highercosts. Moreover, the increased pricesof land and other inputs creates atrap that makes it difficult to abolishfarm programs. If price support levels are reduced or abolished, pricesof land and other specialized assetsdecrease-imposing huge losses oncurrent farmers, particularly landowners. The windfall losses wouldnot necessarily be incurred by thosewho received the gains since manyfarmers bought land and other farmassets after prices ofthese assets hadalready increased and, therefore, didnot receive the original windfall.

There is a great deal of public concern about the viability of the smallfarm. Thus, it is ironic that interestrate subsidies of the FmHA and theCCC (Commodity Credit Corporation) promote the trend toward fewer


and larger farms by encouraging thesubstitution of machinery and othercapital inputs for labor. When creditis allocated on the basis of opportunity cost, credit is used by thoseproducers who best accommodateconsumer demands. IT credit is subsidized, some less productive producers are kept in business, therebyincreasing output with lower product prices. Thus, another indirecteffect of subsidized credit is to harmthose producers not receiving preferential treatment in capitalmarkets.

Schizophrenic Nature of Programs

Farm programs are incrediblycomplex and there is no way to determine the net impact of the network of price supports, marketingorders, credit subsidies, conservation subsidies, food stamps, andother programs financed through theU.S. Department of Agriculture.However, the programs are often inconsistent, having opposite effects onfarm product prices. For example,price support programs for milk,sugar, feed grains, wheat, cotton, andtobacco along with food stamp andother subsidized food assistance programs increase product prices. Onthe other hand, government-financed research activities andcredit, land, and water subsidiestend to increase output and decreasefarm product prices.

Expenditures to "stabilize farm

prices and income" by reducing output totalled about $20 billion in fiscal 1983. During the same period,expenditures that increase outputtotalled about $15 billion. If the dollars spent on these programs wereequally efficient in achieving theirconflicting objectives, some $30 billion may have been spent in 1983 onactivities having little (or no) net effect on food costs, farm prices, orfarm incomes. That is, because oftheir opposite effects on productprices, a substantial part of farmprogram expenditures merely cancelout each other. However, there areimportant gainers and losers associated with the operation of farmprograms as indicated below even ifthe expenditures, on average, areself-defeating.

The fundamental problem in agriculture, as in other areas, is toachieve the most productive patternof resource use. There are only twoways of securing economic cooperation-the market system and centraldirection. There is, in general, astrong case for decentralized competitive markets as the most effective means ofcoping with constantlychanging economic conditions. Thecompetitive entrepreneurial marketprocess is fully as applicable in agriculture as in other economic sectors. The market in agricultural production and marketing activities cando what central planning cannot do:it can utilize the detailed informa-


tion in millions of minds that cannotbe conveyed to any planning authority. In view of the record of pastgovernment farm programs, the burden of proof should be on those advocating continuation or expansionof progams that prohibit or inhibitthe operation of the entrepreneurialmarket process.

The value of U.S. farm exportsjumped from $8 billion in 1972 toabout $44 billion in 1981-a dramatic increase in real terms. The increased dependence of U.S. agriculture on international trade hasimportant implications for domesticagricultural policies since there is afundamental incompatibility between domestic agricultural pricesupport programs and free international trade. When domestic pricesof dairy, tobacco, peanut, sugar, andother products are raised above theworld price, imports must be restricted to prevent domestic consumers from purchasing lower priced imports. As the dependence of U.S.agriculture on exports increases, theliberalization of trade becomes increasingly important. However, theUnited States cannot be a credibleproponent of free trade as long asU.S. farmers operate under an umbrella of protectionist domestic agricultural policies.

Implications and Conclusions

The effect of government-enfor~edrestrictions on competition in agri-

culture is to increase income towheat growers, sugar producers,dairy farmers, and other smallgroups at the expense of the publicat large. Consumers and taxpayersbear the major costs of governmentfarm programs. Price support programs mean that consumers facehigher prices of milk, sugar, peanuts, tobacco, oranges, and otherproducts. Consumers are hit especially hard in the case of sugar anddairy products. In late 1984, the do~

mestic price of sugar was four timesthe world price. Similarly, U.S. dairyproduct prices were two to threetimes the world price. The dairy program is also expensive to the taxpayer. In fiscal 1983, the treasurycosts were $2.6 billion-or about$13,000 per commercial dairyfarmer.7 The cost of price supports,subsidized credit, and other USDAoutlays is now roughly $50 billionper year and increasing rapidly.Farm programs are not an unmixedblessing to farmers. Farmers whorent or buy land, production rights,or other specialized resources, alsoface increased production costs.

The notion of individual rights, including the ability of people to engage in voluntary exchange is central to questions concerning theappropriate role of government inagriculture (and in other sectors). Inthe decentralized market process,maximum scope is provided for individual choice. Only through this


approach can the nation's agricultural resources be used most economically serving the interests offarmers, consumers, and taxpayersalike. In agriculture, as in manyother areas ofeconomic activity, government might make its greatestcontribution by attempting to doless. In the long run, noninflationary monetary and fiscal policies plusa more open economy would benefitagriculture far more than the network of costly action programs nowin place. @

-FOOTNOTES-

1Agricultural Finance: Outlook and Situation Report, ERS, AFO-25, U.S. Department ofAgriculture, December 1984, p. 7.

2Ibid., p. 3.

Reprints . ..

3Many of the points discussed below are elaborated upon in more detail in E. C. Pasour, Jr.,"The High Cost of Farm Subsidies," Backgrounder No. 388 (Wash., D.C.: Heritage Foundation, Oct. 22, 1984) and E. C. Pasour, Jr., "TheFree Market Answer to U.S. Farm Problems,"Backgrounder No. 389 (Wash., D.C.: HeritageFoundation, October 30, 1984).

4David H. Harrington, "Income and WealthIssues in Commercial Farm and AgriculturalPolicy," pp. 145-153 in Increasing Understandring ofPublic Problems and Policies-1984 (OakBrook, TIL: Farm Foundation, 1984), p. 147.

5William G. Lesher, at the Conference on Alternative Agricultural and Food Policies andthe 1985 Farm Bill, sponsored by the GianniniFoundation and Resources for the Future,Berkeley, California, June 11, 1984.

6Bruce L. Gardner, The Governing of Agriculture (Lawrence, Kansas: Regents Press ofKansas, 1981), p. 118.

7Dairy: Background for 1985 Farm Legislartion, Economic Research Service, U.S. Department of Agriculture, Agricultural InformationBulletin No. 474, September 1984, p. 28.

A Page on Freedom

Each of these brief messages is a handy way to share with friends,teachers, editors, clergymen, employees and others a thought-starteron liberty. It also serves to introduce the reader to our work at FEE.

See page 323 for this month's Page on Freedom. (Copies of previousmessages are also available; specify title when ordering.) Small quantities, no charge; 100 or more, 5 cents each. Or, feel free to reprint themessage in your own format if you'd prefer.

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Jane M. Orient

Comparable Worthversus Civil Liberty:

Are FeministsPro-Choice?

THOUGH enshrined in the 1984 platform of the Party of New Ideas, thecomparable worth concept was bothproposed and demolished in 1928 byGeorge Bernard Shaw. "To EachWhat She Deserves" was the title ofits chapter in his book The Intelligent Woman's Guide to Socialism,Capitalism, Sovietism, and Fascism.Shaw's discussion might be especially helpful to those who confusethe idea with the fundamentally different issue of equal pay for equalwork.

"Well think it out," he says. "Theclergyman ... is able to read theNew Testament in Greek; so that hecan do something the blacksmithcannot do. On the other hand, the

Jane M. Orient, M.D., Is In the private practice ofmedicine In Tucson, Arizona. She Is also adjunct assistant professor of Internal medicine at the University of Arizona ColI~ge of Medicine.

332

blacksmith can make a horseshoe,which the parson cannot. How manyverses of the Greek Testament areworth one horseshoe? You have onlyto ask the silly question to see thatnobody .can answer it."

Shaw also discussed an alternatebut similar notion: "Since measuring their merits is no use, why nottry to measure their faults? Supposethe blacksmith swears a gooddeal ...! Everybody in the villageknows this; but the parson has tokeep his faults to himself." And iftheparson were discovered to have thefault of distorted values (say that hepreferred fashionable society to religion), would that make him "as badas the blacksmith, or twice as bad,... or only half as bad?"

A system that paid prizefighters somuch money had to be absurd, Shawconcluded. "But to suppose that it

COMPARABLE WORTH VS. CIVIL LIBERTY 333

could be changed by any possible calculation that an ounce of archbishopor three ounces of judge is worth apound ofprizefighter would be sillierstill."

Proponents of comparable worthmake exactly that supposition. Ascale devised by the Hay Study inSan Jose assigned points on the samescale to 231 different jobs, takinginto account skill, effort, responsibility, and working conditions. Forexample, the position of puppeteerwas given 124 points, equivalent tooffset press operator, engineeringtechnician I, or street sweeper operator. A maintenance worker I wasconsidered to be worth 140 points, asenior recreation leader 158 points,and a stage hand 178 points.

At first glance, such a scale looksperfectly objective. After all, whatcould be more objective than a number? In reality, the numbers· simplycodify the subjective values of theconsultant. Rather consistently, suchjob evaluations tend to place a highervalue on college education than employers do. Similarly, they seem toaward points for social worthiness.The raters then presume to imposetheir values on everyone, throughthe legislature and the courts. Notonly do they determine conversionfactors-how many horseshoes equala Greek verse-but they pretend thatthese are as precise as the factorsthat convert centimeters into inches,at least to three significant digits.

Ofcourse, individuals do place values on horseshoes and Biblicaltranslations. The values differ withthe individual, and with his needs(and resources) at the moment. Theperson who has seen horses only inB-grade Western movies would prizethem less than would a farmer in anunderdeveloped nation, who depends on them to transport his produce to market. A person studyingfor the ministry would probably appreciate Greek scholars more than amanufacturer of semiconductorswould.

Subjective Values

Economic values are subjectiveand variable. Comparable worthchallenges both the legitimacy ofvoluntary exchange in the marketplace, and the values represented inthe wages and prices thus determined. Paradoxically, this attack oneconomic pluralism is led by defenders of the right to choose alternativelifestyles, even those consideredmorally reprehensible in the recentpast. '

Comparable worth is promoted asa moral or civil rights issue. Themoral imperative arises from theperceived injustice in the presentsystem. The "59 cent gap" (the average woman earns 59 cents-now 61cents- for each dollar earned by theaverage man) may be grounds forsuspecting unfairness, though it doesnot constitute a prima-facie case.


About half the gap is due to undetermined factors, and is attributedto discrimination. Half is accountedfor by "human capital" factors: education, experience, and commitment to the labor force. Part of thisdifference between women and menmay result from past discrimination,mandated by laws restricting women's conditions of work and, morepowerfully, by unwritten custom.

Interestingly, past discriminatorypractices were motivated by a concern for social justice. Labor unions,the Catholic Church, the social welfare movement, and even Americansocialist parties all belonged to a coalition supporting the "familywage." The "one-paycheck-per-family" idea was meant to protect thosemost vulnerable to competition, themen at the low end of the wage scale.Fair competition would have meantunemployment for some breadwinners (men), while their jobs weredone by women, who were bringingin a supplementary income.1 In addition, increasing the size of the labor force drives wages down, by thelaw of supply and demand. Keepingwomen at home helped men to command a "living wage."

Although past discrimination resulted from good intentions, yesterday's social justice has become today's unfairness. The values that our

lWilliam Tucker, "Condemned to Liberation:the Woman as Breadwinner," The AmericanSpectator, November 1984, p. 22.

forefathers imposed on the economywere wrong, according to currentthought. However, comparableworth advocates would follow theprecedent of rejecting the free market and enforcing, by legislation orlitigation, their own vision of whatis right. They fear that too muchfreedom might lead to oppression.

On the one hand, it is argued thatthe market is too free-at least foremployers. A representative of theAmerican Federation of State,County, and Municipal Employeesstated that freedom from bias wasthe only legitimate freedom of themarketplace.

A Question of Choice

On the other hand, it is claimedthat women are not really free, buthave been "herded" into the "pinkcollar ghetto," that is, segregateddisproportionately into low payingjobs, more or less deliberately. Butwhy do women settle for "unacceptably" low wages? Why do they notclamor to enter relatively well-paid,if humble, occupations, such as theskilled trades? When pressed, comparable worth proponents acknowledge that women don't want to dothosejobs. They do not strive for upward mobility, except into positionsof high status, as in medicine,administration, or government.They want to stay where they are,albeit with a raise in pay.

Clearly, this is an admission that

1985 COMPARABLE WORTH VB. CIVIL LIBERTY 335

"women's work" does have certainadvantages. Compensation cannotbe measured solely in terms of dollars and cents. Although the low salaries of librarians, secretaries,nurses, and teachers are no secretand certainly not a recent development-women, and increasing numbers of men, still prefer these fields.The working conditions are pleasant, at least in comparison withbricklaying and plumbing; the hoursare convenient; and entry to and exitfrom the work force are relativelyeasy.

Thus, the seeming ambivalenceabout freedom is explained: it is related to the definition. Comparableworth advocates are not concernedabout freedom to make choices, butabout freedom from the consequences of those choices. Their realgrievance is that they do not controlthe market forces that determinewhat will be offered for each job.They resent the law of supply anddemand, and are unhappy about thevalues that employers assign to various jobs.

Payment for Caring

Though conceding that peopleshould be compensated for enduringthe hot sun and other difficult conditions, comparable worth advocatesindict our society for placing a lowvalue on intellectual abilities andattributes such as "caring," whichare required in traditionally femi-

nine roles. How can a civilized nation show such slight appreciation(in monetary terms) for those whonurture and teach the young? Whatsort of society values a strong backmore than compassion and a liberaleducation? The United States is nomore advanced in that regard thanthe England of George BernardShaw.

Of course, increases in pay ofprofessionals such as nurses andteachers have occurred, but in response to shortages rather than because of enlightenment. Likewise,comparable worth would not rely onenlightenment either, but wouldsubstitute legal compulsion foramoral market forces. Furthermore,it is in reality just as materialisticas the marketplace, since all admissible rewards are monetary.

It is easy to deplore the taste andjudgment of the common man, as reflected in market values. The question is whether we can assume thatan ad hoc, elite commission woulddistribute rewards any more fairly.Arguably, such a commission couldbe disinterested and able to considerfactors beyond brute economics,whereas employers have a vested interest in the cost of production.Nevertheless, no group could claimto be immune to all bias, especiallyif it owed its very existence to a special interest group whose values differed from the prevailing ones.

Acknowledging that the compa-


rable worth commission must possess some bias, is it not morally preferable to be biased in favor of the"disadvantaged"? This appealingidea has profound implications. Tosay, a priori, that in the scales ofjustice the rights of employees ·outweigh those of employers (and of thecustomers who ultimately pay thecost of production) is incompatiblewith the principle of equality beforethe law, the very foundation of civilrights. At first, the "disadvantaged"may appear to gain. But sooner orlater, those who are most skilled inmanipulating the political processwill define "social justice." In otherwords, in the absence of equality before the law, might makes right.

It is crucial to understand the conflict between civil rights and comparable worth. Civil rights demanda society ruled by law and based oncontract. Under the law, each individual must have the right to makevoluntary agreements with others.The courts uphold contracts, andprevent coercion, which might beunderstood to include arbitrary barriers to employment, that is, barriers unrelated to ability to performthe job. Comparable worth, on theother hand, necessarily resorts torule by men rather than by law, andwould make status rather than contract the basis of society. Rule bymen is inevitable because there canbe no objective criteria to determinewhat each should be paid. No library

would even be large enough to contain the statute books that enumerated all the possible combinations of knowledge, experience, andpersonal attributes, along with thepay due to each individual possessing that combination for performingjobs with particular requirements.

Turn Back the Clock?

However advantageous rule bymen may appear to be in certain circumstances, the idea should alarmthe student of history. Do we wish toturn the clock back to the time before the Magna Carta establishedthe supremacy of the law over theruler? Do we desire to emulate thecurrent example of the People's Republic of China, which has not published a legal code, but relies on a"democratic political process" for alldecisions? Useful as it might be tostudy models remote in time or place,it might be adequate simply to lookat the other side of the comparableworth equation.

If some groups of people are to bepaid relatively more, who is to bepaid relatively less? Since comparable worth advocates tend to compare the pay of teachers and secretaries with that of blue collarworkers, one suspects they wouldlike to economize on janitors, truckdrivers, garbage collectors, andplumbers-hardly a group with outstanding privileges. Naturally, agroup seeking political influence

1985 COMPARABLE WOR'rH VS. CIVIL LIBERTY 337

would be reluctant to name thosewho would be hurt by its proposals.

In all likelihood, there would be noexplicit pay cuts-just no raises forthe previously "favored" until justice has been achieved. Especially ifgovernment employees, who are inthe front ranks of the advocates, areupgraded in salary in large numbers, the mechanism of financing islikely to be inflation, a tried-and-truemethod of cutting people's pay without facing the storm of protest. Thisis the second way in which compa··rable worth is deceptive, the firstbeing the pretense that the numberson the scale are objective measuresrather than statements of opinion.

Moral Objections

So far, we have considered themoral objections to the comparableworth proposal. It is deceptive, coercive, elitist, and arrogant. More seriously, it would suspend the rule oflaw. In place of an alleged genderdiscrimination (which is assumed tobe the reason for the wage gap), itwould substitute legalized class discrimination (where class is definedby points "On a scale of worthiness).

Today, many seem to believe thatnoble ends justify the means. Disregarding the due process of law,they focus on results. Therefore, letus next discuss the likely outcome ofcomparable worth, in the light ofsome desirable goals: 1. higher valuation of femininity, 2. broader op-

portunities for women, 3. higher payfor women, and 4. greater independence for women.

Although feminists tend to see therelatively low wages in female dominated fields as evidence of lowesteem for women, there is anotherside to the "family wage." Althoughwomen of the elite view a career asa means of self-fulfillment, those oflesser skills might regard a job asfurther drudgery that they must perform in addition to household dutiesand child care. The "59 cent gap"provides some women (about 40 percent ofmarried women) the option ofstaying at home. Indeed, the differentiation of family responsibilitiesby gender probably accounts formuch of the gap. The average pay ofwomen who have never married, andwho have continuously participatedin the labor market, is virtually thesame as that of married men.2

Closing the gap might mean thatall but the most well-to-do would require two paychecks to make endsmeet. In fact, more and more families are finding themselves in thatsituatio~. The implication is that awoman's work in the home is not sufficient to merit a living: clearly, a devaluation of her contribution to society. That women hire substitutesfor child care and homemaking, atwages less than they themselves

2Michael Levin, "Comparable Worth: theFeminist Road to Socialism," Commentary,September 1984, p. 13.


earn, is further evidence that theirvalue in the home is less than in theoutside world. Are mothers reallyless important than secretaries?Only if we think in terms of dollars.Probably, no one could afford to paywomen what they are really worth.

Ofcourse, it does not seem fair thatsome women are blessed with provident husbands, whereas many others are not so fortunate. However,comparable worth could not alleviate that problem, and mightworsen it, just as aid to dependentchildren has been accompanied by anincrease in the number of women onthe welfare rolls. Comparable worthis tinged with envy. Why shouldsome women have just one job (athome), while others must commuteto a stressful, unglamorous secondone?

Within the Market

Naturally, comparable worth advocates are more concerned aboutthe welfare of women who are in thelabor market than those who are not.At least, the working woman shouldbenefit from the proposal. However,"entitlement" to a certain wage isnot very helpful if a worker cannotfind employment at that rate. Themarket price, or market wage, is oneat which supply and demand reachan equilibrium. Interference withthis mechanism, as by comparableworth, results in an excess of eithersupply or demand.

Increasing wages by judicial fiatwould increase the demand for theaffected jobs at the same time thatit decreased their supply, causingstiffer competition among thoseseeking the positions. Those withfewer skills (or fewer "connections")will find no opportunity. They mightdemand that the number of slots beincreased, or frozen, but this wouldat best be a short-term solution.Businesses forced to pay workersmore than they are worth eventually face several options: bankruptcy, replacement of workers withword processors or machines, or exporting jobs to Taiwan or other morecompetitive areas.

Looking again at the other side ofthe equation, lower wages in otherfields would cause a shortage ofpeopIe willing to accept some jobs. Whybother to study calculus, in whichthe attrition rate is as high as 70percent, when similar compensationis mandated for those who elect library science instead? Why liftheavy boxes if a desk job pays more?Shortages of workers decrease productivity, affecting the entireeconomy.

"Social worth," defined by an elitecommission, may sound more fairthan "demand," defined by the marketplace. But in reality it simply replaces a voluntary decision by aforced one. Its fairness is debatable,but the disruption of the economy isobvious.

1985 COMPARABLE WOR1rH V8. CIVIL LIBERTY 339

Resort to the continuing use offorce in order to "liberate" womenwould seem paradoxical ifwe did notunderstand the definition of freedomthat ·is inherent in utopian proposals. To schemes aimed at liberatingus from the human condition, political liberty is an obstacle, becausepeople might make decisions thatthwart the aims ofthe self-styled liberators. These utopians do not wantwomen to be independent as individuals, free to become engineers and tomake contracts. Rather, they wish toreplace the perceived subjugation ofwomen to men with the subjugationof everyone to a "political· process"dominated by philosopher-kingswith the "right" values, who promise to free people from their problems. Many ofthe proposed solutionsare familiar: more state-supportedday-care centers, more maternitybenefits, and of course more plan··ning and less economic freedom.

Could there be any other solu··tions? What ifthe emphasis changedfrom escaping the burdens ofwomento coping with them in creativeways? What if we allowed morefreedom?

The main problem. of women is, ina word, children. Women have a disproportionate share of that burden..As a survey of executive women bythe Wall Street Journal showed,their husbands rarely assume primary responsibility for meal planning, caring for sick children, or

shopping for them. We can't do awaywith children, and transferring theircare to someone else also createsproblems. Infectious diseases aremore common in day care centers,and child abuse has been reported.Most importantly, parents relinquish much of their critical early influence on the child's upbringing. Isthere any way in which women couldcare for their own children, and yetmake full use oftheir other abilities?

The Information Revolutionand Freedom in the Market

The information revolution is onemeans by which freedom in the marketplace could increase freedom forwomen. The "telecommuting" sector could potentially involve 15 to 20percent of the work force by the endofthe decade. Writers, travel agents,programmers, financial advisors,and coders of insurance forms evennow frequently work from their terminals at home. Of course, men whoprefer to work at home and handicapped persons benefit along withwomen who have small children. Netincome is greater, if there are nochild care expenses, and time. otherwise spent commuting can be usedmore productively. As a bonus, children who see their mothers at workneed not rely on pictures in schoolbooks to learn that women makeimportant contributions to theeconomy.

Though it would seem to be in

340 THE FREEMAN

women's best interests to be in theforefront of the telecommuting revolution, feminists are forming alliances with those who oppose economic freedom in general, and homework in particular. Resolutionsagainst computer home work havebeen passed at union conventions,with rhetorical threats of"electronicsweatshops." In at least one instance, local authorities have shutdown a computer home worker because of alleged violation of a zoninglaw.

A 1943 Labor Department rulingbans all home work in seven industries. Only recently, Secretary of Labor Donovan attempted to rescindthe most notorious restrictions forbidding workers to knit outerwearat home, but he faces court challenges from the International Ladies' Garment Workers Union. 3

Thus, the most conspicuous proponents of comparable worth, unionsand government, are fightingagainst the real civil rights issue ofthe 1980s: the right to work withoutrigid restrictions and meddlesomeintrusions.

Not all women would wish to telecommute. But women benefit fromhaving as many options as possible,including a division oflabor in whicha man is the chiefbreadwinner. They

3David Rubins, "Telecommuting: Will thePlug Be Pulled?" Reason, October 1984, p. 25.

should encourage their daughters tolearn their mathematics, since inadequate quantitative skills excludewomen from a wide variety of occupations. They might advocate expansion of vocational education, inview ofthe glut of college graduates.They should favor policies that promote economic growth, which creates jobs. Above all, they should support a system that is open to theunforese'en opportunities resultingfrom innovation and technologicaladvance, which has already relievedthem of much of their great-grandmothers' drudgery. In short, womenbelong in the front lines of the battleto preserve economic liberty.

George.Bernard Shaw,· Fabian socialist, after rejecting comparableworth, eventually concluded thateveryone should be paid exactly thesame amount. He recognized onlyone difficulty: what about the poorbloke who just wasn't worth what society was obligated to pay him? Shawsuggested that we simply executesuch a fellow, in a kindly manner ofcourse.

Comparable worth advocates don'tpropose to execute people, at leastnot yet. But for a small increase inthe paychecks of some, the demise ofthe rule of law, the death ofeconomicfreedom, distorted growth, abortedpotential, and stillborn opportunities are too high a price. @

Robert Bearce

The Spiritof

Freedom

ON July 3, 1776, the events of thE~

previous day were fresh on John Adams' mind when he wrote to his wifeAbigail: "The second day of July,1776, will be the most memorableepocha in the history of America. Iam apt to believe that it will be celebrated by succeeding generationsas the great anniversary festival. Itought to be commemorated as theday of deliverance, by solemn acts ofdevotion to God Almighty. It oughtto be solemnized with pomp and parade, with shows, games, sports,guns, bells, bonfires, and illuminations, from one end of this continen.tto the other, from this time forwardforevermore."

John Adams was enthusiasticabout the historic action taken bythe Continental Congress on July 2.

Mr. Bearce Is a free-lance writer In Houston, Texas.

A resolution favoring independencefrom Great Britain had been carriedby the affirmative vote of twelveColonies. Not until the 4th of. July,though, was the actual Declarationof Independence formally adopted.Although Adams missed foretellingthe exact day of future celebrations,he accurately described the mannerin which America's IndependenceDay would be remembered by latergenerations.

Each Fourth of July, Americanscommemorate the adoption of theDeclaration of Independence. "OldGlory" comes out of the closet andappears on front porches across thenation. Bands play "The Stars andStripes Forever." Thoughtful citizens give thanks for the blessings ofliberty.

Such patriotic enthusiasm appearsas a yearly ritual across the United

341


States. The outward display of loyalty is there, but does this allegiancereflect an in-depth understanding ofthe Declaration of Independencea real commitment to personalfreedom?

Although John Adams wrotetriumphantly to Abigail about thevote for independence, he added acritical observation: "You will thinkme transported with enthusiasm,but I am not. I am well aware of thetoil and blood and treasure that itwill cost us to maintain this Declaration and support and defend thesestates."

The Critical Challenge

We are now facing that same critical challenge. The Declaration ofIndependence may be extolled, butjust praising it as a relevant,thoughtful document offreedom willnot preserve it. Enshrining it willnot strengthen freedom. Instead, wemust re-examine and reassert theprinciples outlined in the Declaration of Independence.

Consider the second inspiring sentence of the document: "We holdthese truths to be self-evident: Thatall men are created equal; that theyare endowed by their Creator withcertain unalienable rights; thatamong these are life, liberty, and thepursuit of happiness..."

The colonists had enjoyed theseGod-given rights and others since thefirst settling of America. With vary-

ing degrees of freedom, they couldown property, bear firearms, andworship as they pleased. They hadthe right of trial by jury, and theypracticed representative government. Most important, they hadbeen free to live their own livesas they-not the government-bestsaw fit.

When these freedoms were threatened by Parliament and King GeorgeIII, the colonists became indignant.Receiving no just response to theirgrievances, they chose to separatethemselves from the mother country. The Declaration of Independence was the formal statement oftheir decision to be totally independent and self-governing.

The real importance of the Declaration, however, is its fundamentalassertion of individual freedom.Even if the demand for political independence had not been made, thedocument would still be a profoundstatement in defense of human dignity. When the Thirteen Coloniesproclaimed their independence asthe United States, they were reaffirming personal freedom and rejecting authoritarian rule by government over the individual.

Several years after the UnitedStates had won independence fromGreat Britain, a veteran of the Lexington-Concord fight in 1775 wasasked why he had fought against theBritish. "We had always governedourselves," replied the rugged old

1985 THE SPIRIT OF FREEDOM 343

minuteman, "and we always meantto. They didn't mean we should."

His forthright answer reveals themain issue of the American War ofIndependence-FREEDOM. The minuteman understood that if he was tohave freedom, he would have to enjoy the right of self-government. Hereasoned that he could govern himself only to the extent that he exercised personal judgment and choiceover his own affairs. For almost onehundred fifty years, the colonists haddone just that-accepted individualfreedom, responsibility, and accountability for their own lives. Government regulations and controlsthreatened that freedom.

Oppressive Government

The Declaration of Independenceclearly states the objection to oppressive governmental authority.The central portion of the documentshows that the colonists were protesting abuse ofpower, usurpation oftheir rights, obstruction of justice,and governmental interference.Speaking of the King of England,they pointed to this abuse of government authority: "He has erected amultitude of new offices, and senthither swarms of officers to harassour people and eat out theirsubstance."

Although he was eventually characterized as such, King George IIIwas not a tyrant. He and Parliamenthad shown a rather benevolent, pa-

ternalistic attitude toward the Thirteen Colonies-an attitude similar tothe "compassion" and "concern forthe disadvantaged" supposedlyshown by our modern-day politicians. Like young, immature children, the Colonies were to benefitfrom the fatherly hand ofthe BritishCrown. But they were not very impressed by this paternal hand of regulation, decrees, taxes, and other bureaucratic interventions.

"Tyranny!" shouted the colonists.They saw unlimited governmentpower for what it was-the seed ofrepression and subjugation. Patriotslike Thomas Jefferson fought for theprinciples of limited government andindividual freedom. They knew thatthe main role of government wastwofold: (1) apprehending and punishing domestic evildoers-thosepeople who would violate other peopie's right to "life, liberty, and thepursuit of happiness," (2) organizingthe defense of law-abiding citizensagainst foreign aggression. Government was not to be the source of apeople's material welfare.

The Declaration of Independencespeaks eloquently of "life, liberty,and the pursuit ofhappiness" for theindividual. These rights could be secured only when government itselfwas held within strict boundaries ofpower and authority. The colonistsrealized they could improve theirown personal lives if they were freeofgovernment interference. They did


not want the government trying todo for them what they could andshould do for themselves. They askedonly for the freedom to enjoy the justfruits of their daily labors.

Even as the Crown continued toinfringe upon their "unalienablerights," the colonists followed legalchannels of protest, expressing loyalty to the King. There was the firmintention of retaining the traditional political relationship withEngland.. The preservation of freedom-not revolution-was on the colonists' minds.

Eventually, patience ran out,prompting Patrick Henry to declare:"We have done everything that couldbe done to avert the storm which isnow coming on. We have petitioned,we have remonstrated, we have supplicated, we have prostrated ourselves before the throne, and haveimplored its interposition to arrestthe tyrannical hands of the ministryand Parliament. Our petitions havebeen slighted; our remonstranceshave produced additional violenceand insult; our supplications havebeen disregarded; and we have beenspurned with contempt from the footof the throne."

Individual Dignity

The American War of Independence was fought to preserve a truly"revolutionary" truth-each of us isa unique individual, able to acceptself-responsibility and thus to enjoy

personal dignity. For the most part,the governments, systems, revolutions, societies, and ideologies of theworld have tried to suppress thattruth. People have been enslaved,tortured, and killed by those whoreject man's God-given right to"life, liberty, and the pursuit ofhappiness."

The American colonists had seenthe approach of slavery. In the Declaration of Independence, they accused King George III of seeking the"establishment of an absolute tyranny over these States." Similarlanguage was used by the revolutionary Jacobins during the FrenchRevolution when they assailed themonarchy under Louis XVI. TheFrench radicals shouted lofty slogans about liberty, but their bloodyrevolution against the monarchyhardly parallels the spirit of theAmerican Revolution-the truespirit of freedom.

"Liberty! Equality! Fraternity!"clamored the revolutionaries ofFrance. Louis XVI lost his head onthe guillotine. So did thousands ofother Frenchmen.

The leaders of the French Revolution of 1789 had read the Declaration of Independence. They admired America's document offreedom. Unfortunately, they laudedit but rejected its principles. Theyfailed to comprehend what Jeffersonand Adams meant when they said"all men are created equal." Equal-

1985 THE SpmIT OF FREEDOM 345

ity as it is outlined in the Declaration says that individuals are equalin their right to be free and indedent-to be free and independent aslong as they respect the rights ofothers to be free and independent, with.everyone respecting property andother individual rights.

Each person should have the rightto rise to the height of self-realization consistent with that person'sindividual talents, ambition, andwillingness to accept personal accountability. In seeking this self-fulfillment, each person must respectthe equal rights ofother individuals.

When a government respects trueequality-the equal right to enjoypersonal freedom-the result will bethat many differences will existamong the citizenry. This naturalcondition of inequality is consistentwith freedom, justice, and humannature. Individuals are unique. Eachperson has varying talents, aspirations, and weaknesses. If individualsare free to arrange their own lives,they create a diverse society wheremen and women attain different social, intellectual, and economicstatus.

Equal Treatment Resultsin Many Differences

Individuals are equal in their rightto "life, liberty, and the pursuit ofhappiness"-so long as they acceptresponsibility for their own lives andrecognize their personal accounta-

bility for their failures, shortcomings, and misdeeds. Regrettably formankind, modern-day politiciansand "social architects" like theFrench revolutionaries reject thistruth.

Robespierre, Danton, and otherleaders of the French Revolution believed they could bring about the regeneration of humanity through thepower of the State (governmentpower and authority). Although theyspoke much about freedom, they actually deniedself-determination andthe free will of the individual. Theyinsisted that man was the product ofhis environment. Crime, poverty,greed-these were supposedly inflicted upon humanity by corrupt political, social, and economic conditions/institutions. By the use ofgovernment authority and power,the revolutionaries believed theycould erect a near-perfect if not perfect society.

The visionaries of RevolutionaryFrance had a distorted view of human nature-a distorted view stillheld by many people today in themedia, in politics, in our universities, and even in our religious institutions. The theory-minded leadersof the French Revolution believedthat the individual was inherentlyvirtuous. Ifa person committed murder, he should not be harshly condemned for a criminal act. Rather,he should be regarded as the victimof adverse social or economic condi-


tions which drove him to the act oftaking another individual's life.

Thus, the French revolutionariesfocused their efforts to build the virtuous society by removing what theymistakenly thought caused people toact in "antisocial" ways. By reconstructing society through the powerof the State, they were convincedthat people would return to theirbasic goodness, virtue, and righteousness.

The government leaders of theFrench Revolution said that theyloved humanity. They said that theywere for the "poor and homeless,""the helpless and abused," and "theneedy," but in reality, they rejectedthe true meaning of human dignitycontained in the Declaration of Independence. They placed Society andthe State above the individual andindividual freedom, whereas thefifty-six signers of the Declaration ofIndependence in America placed theindividual above the State.

The patriots of the American Revolution had faith in individual freedom. Freedom-not governmentpower-was the foundation for trueprogress, self-improvement, andhappiness. Absolute equality andperfection brought about by government authority were illusions. Onlyfree individuals in a truly free nation could achieve material welfare,human dignity, and personal fulfillment. Only when the individual hasboth the freedom to make choices

and the corresponding obligation toabide by the just consequences ofthose choices, can he achieve selfrespect.

By adhering to the principles oftheDeclaration of Independence, Americans have attained material abundance and personal dignity. Theblessings of liberty have been enjoyed because free individuals havebeen allowed in the past to laborfreely in a free society. Yet, we havealso been abandoning the basictruths upon which America wasfounded.

"Omnipotent" Government

From the halls of Congress to theacademic forum, we hear that government has the answer to all of oursociety's ills. We are assured thatgovernment can and should solveevery problem from hunger to faultyautomobile bumpers. Commissions... regulations ... controls ... rules... coercion ... Congressional com-mittees subcommittees ... regi-mentation and more regimenta-tion-all should remind us of thegrievances listed in the Declarationof Independence.

Coercion, paternalism, restrictivelegislation, and unconstitutionalgovernment intervention will gainground to the extent that we are indifferent to the cause of true freedom. When we remain silent, we willbe responsible for our own destruction-moral degeneracy, material!


economic stagnation, and eventualphysical slavery.

The principles of freedom will continue to be eroded as long as free individuals relax in their complacency. "Is this the part ofwise men,"asked Patrick Henry in March, 1775,"engaged in a great and arduousstruggle for liberty? Are we disposedto be of the number of those who,having eyes, see not, and havingears, hear not, the things which sonearly concern their temporalsalvation?"

Freedom is threatened today justas it was threatened at the time ofthe Declaration of Independence.The colonists wanted less government-not more of it in their dailylives. They wanted to be free to release their own creativity and energies. The "pursuit ofhappiness" wastheir own responsibility. They statedin the Declaration "that, to securethese rights, governments are instituted among men, deriving their justpowers from the consent of the governed." The early patriots of America believed that government shouldprotect their "unalienable rights."It had no right to interfere with "life,liberty, and the pursuit of happiness" other than that of prosecutinglaw-breakers and maintaining selfdefense from foreign aggression. Thecolonists were free people strugglingto remain free.

Living in freedom had strengthened the character of the colonists.

They recognized the existence ofmoral absolutes. Right was right.Wrong was wrong. They were individuals who valued honesty, hardwork, thrift, and an equal respect forthe rights ofothers. They knew whatthey believed and why they believedit. They said what they meant andmeant what they said.

Humble Before God

Although the colonists were selfreliant and independent, they werehumble before God. True liberty wasfound in a genuine reverence for Almighty God and obedience to Hiscommandments-not worship ofgovernment authority. Their spiritualfaith gave them a clear understanding of their personal roles in life.They accepted the rugged challengesof life, knowing that in worldly affairs, the Lord, indeed, helped thosewho helped themselves.

The farmers and shopkeepers whotook up arms against the Redcoatsheeded Ben Franklin's admonition:"They that can give up essential liberty to obtain a little temporarysafety deserve neither liberty norsafety."

The patriots of 1776 chose both liberty and the responsibility of defending that freedom. The Continental soldier fought at Trenton andGermantown ... suffered at ValleyForge ... and finally won independence. The "spirit of '76" is the faithand spirit of freedom. If Patrick


Henry and other patriots were willing to die for freedom, certainly weshould live for freedom. We face thecontinued struggle for liberty. Battles lie ahead. We are in continualwarfare. These are facts that wemust accept honestly as we considerPatrick Henry's words back in 1775:

"The battle, sir, is not to the strongalone; it is to the vigilant, the active,the brave. Besides, sir, we have noelection. If we were base enough todesire it, it is not too late to retirefrom the contest. There is no retreatbut in submission and slavery!"

A State of War

Today, free people are in a stateof warfare-a continued battleprompted by those who oppose freedom. We need to acknowledge ourcurrent challenge to keep alive thespirit of freedom and to strengthenfreedom.

First, we need an honest, sincere,and broad understanding of thebasics of freedom. We cannot verywell defend that which we cannotadequately explain and present toother people. We should ask ourselves how well we truly understandsuch principles of freedom as thefree-market exchange of goods andservices ... personal freedom/accountability ... no coercion againstlaw-abiding citizens ... voluntarycooperation ... limited, strictly defined government power.

Do we understand these princi-

pIes? Are we doing what we can tounderstand them better?

Second, in order to rejuvenate thespirit of freedom, we must practicethe freedom faith continually, consistently, and earnestly in our ownpersonal lives. Some warriors for thecause of freedom know the ABCs onthe subject, and they are on the battlefronts, such as actively campaigning for pro-freedom candidates forCongress.

Such "activism" is_ to be cheeredand encouraged, but woe! Some ofthose hard-charging freedom warriors will (1) on Monday, demand thetotal elimination of the federallyfunded Legal Services Corporation,but (2) on Tuesday lobby the federalgovernment for an increase in federal subsidies and low interest loansfor farmers. The wayward, backslidden freedom troopers in this case arean association of farmers who aremore interested in their "special interest" than in individual freedomand responsibility.

No, we cannot have that type of inconsistency if the spirit offreedom isto be enhanced and strengthened.

Third, we must diligently protectfreedom. Patrick Henry advised thatthose who would defend liberty mustbe strong, active, brave, and vigilant. "Vigilance is the price of liberty," and today we should be vigilant-seeing where and how freedomis being undermined.

For example, we ought to see that


many reporters, commentators, editors, publishers, and anchor personsare not the fair, objective, accurate,and honest news people they wouldlike us to believe. Instead, they areprejudiced against freedom. Theyshow a clear bias in favor of moregovernment-a support for moregovernment intervention that dailytranslates into a corruption of thetruth.

A good portion of the major newsmedia people have a personal beliefthat the government should bespending more-not less-for education, the arts, welfare, health, andthe like. They personally believethat government regulations andprograms-not free people workingfreely in a free society-are the bestway to make sure individuals aresufficiently housed, clothed, fed, andgiven proper medical care.

Even though we may have a verysound grasp of the basics of freedom,we must be vigilant to the distortions, half-truths, and slanted reporting we receive from mediasources around us.

Fourth, we should be earnestspokesmen for freedom, actively taking a part in the current battles affecting our daily lives. It isn'tenough to appreciate the writings ofBastiat, Jefferson, Burke, Tocqueville, and Ludwig von Mises. Nor dowe accomplish much by railing at thesupper table about Congress's latest

repudiation ofthe oath ofoffice to defend the Constitution of theUnitedStates. Rather, we should practicewhat we preach by becoming intelligently, firmly, and consistently involved defending freedom, explaining it, and strengthening it.

Words of Wisdom

Two men who signed the Declaration of Independence back in 1776still speak to us as we seek to learnmore about freedom. "A wise andfrugal government," advises ThomasJefferson, "which shall restrain menfrom injuring one another, shallleave them otherwise free to regulate their own pursuits of industryand improvement, and shall not takefrom the mouth of labor the bread ithas earned. This is the sum of goodgovernment..."

Dr. John Witherspoon, the only active clergyman to sign the Declaration, gives us a final insight into thespirit of freedom:

"A good form of government mayhold the rotten materials togetherfor some time, but beyond a certainpitch even the best constitution willbe ineffectual, and slavery will ensue. On the other hand, when themanners of a nation are pure, whentrue religion and internal principlesmaintain their vigor, the attempts ofthe most powerful enemies to oppress them are commonly baffledand disappointed." ®

Craig Russell

The Morality ofProfit

ONE of the banks on Main Streetlends a display window to local community groups. Recently featuredthere was a food co-op. Prominent inthe display was a sign that read, inlarge black letters, FOOD FORPEOPLE, NOT FOR PROFIT. Thisimplied that there was somethingwrong, something immoral aboutprofit; that if something was forprofit, it couldn't be for people.

I don't sell food, but I do sell remaindered books and operate a paperback exchange. I own the building my bookstore is in; I live behindthe store and rent the apartmentsupstairs. Both my books and myapartments are for people, and both

Mr. Russell owns a bookstore in upstate New York.

350

bring me a profit. My income is completely dependent on customers whobuy my books and tenants who rentmy apartments. I do not get a regular paycheck. Each week, indeed,each day, is different and brings agreater or lesser reward for my efforts. How much money I have to paythe mortgage, the taxes, the utilities, and the other bills owning ahouse and a business entail-eventhe amount I have for food-is entirely up to the public. I cannot forcethem to support me. I can't evenforce them into the store or theapartments. They have to come oftheir own free will. They have tocome because they want to.

How do I get them into the store?I attract them by offering the best

THE MORALITY OF PROFIT 351

books I can find at the best possiblE~

prices. First, of course, I have to buythe books. There are several companies out there bidding for my business. One of them, my main supplier,sells me books in quantity. ThoughI don't know what titles I'm getting,I do know the price is better than anyother company's I deal with, and themore books I buy at once, the lowerthe per-copy price. I then supplement what I have with specific titlesfrom other companies. They chargemore but I choose exactly what Iwant.

Supply and Demand

What then do I charge for thesebooks? Certainly I can't sell them forcost. If I did, I'd quickly be out ofbusiness. Instead, I charge as muchas I can for them. Just as the cus··tomer wants the most for his money,I want the most for my product. Iwant to pay my bills, I want to eat,I want my store to grow and im··prove, and I want to save for thosedays when I don't make very much.It's not only in my interest to get thebest price I can but in my customer'sas well because the more profit Imake, the more secure the businesswill be and the more books I'll beable to stock, giving my customer awider and wider selection to choosefrom.

Naturally, I can't sell the books foras much as I'd like, only as much asI can get. For one thing, I have direct

competition. In the paperback exchange on Main Street, a customertrades in two books to get one free.In mine, he turns in one book to getanother of equal value for 25¢. Theother bookstore on Main Street sellsa few remainders as does the one inthe mall, though neither has asmany as I do and their prices arehigher. I also have indirect competition in the form of bowling alleys,movie theaters, libraries, and everyother place people patronize in theirleisure time.

My usual price for remainders is$1.98, though I do have a few at$2.98. Most things marked higherwon't sell; to my customers, $3.98 isjust too much money. Therefore Ican't make more profit by raising myprices, only by lowering my costs. Imake more profit on books from mymajor supplier, because my costs arelower, than on those from my minorsuppliers. I also lowered my overallcosts by building my shelves myselfrather than buying them and byrunning my business out of the samebuilding I live in rather than rentinga separate place.

My apartments have to be profitable, too. Indeed, why should a tenant pay my cost for the apartment?He did not have to put a down payment on the building. He does nothave a mortgage and is free to leaveon thirty days notice, or less if hewants to forfeit his security deposit,whereas I'm tied down here. He is

352 THE FREEMAN

not responsible for the taxes, theutility bills, the maintenance, or therepairs; I am.

Competition Defines How Muchthe Market Will Bear

How much do I charge, then? Aswith my books, I charge as much asI can. And again as with my books,it's in the tenant's interest to do thisas well as my own. If I charge toolittle, I won't have enough for improvements or repairs. If the tenant's refrigerator breaks down, orthe roof springs a leak, I won't haveenough money to fix it. Two yearsago, the city government herestarted enforcing its housing code.Without profit from rents, I wouldnot have been able to afford the$1000 it took to bring the house upto code, and my tenants may wellhave been evicted by the city! It's inthe tenant's interest as well as mineto charge as much as I can becausethat's our only insurance that thehouse won't deteriorate.

Still, I can't charge as much as I'dlike because there is competition inrentals just as there is in books. If Iwant too mqch, the tenant can always find another place at a moreattractive price. The way to increasemy profits here, as with my books,is to lower my costs. For'example,several years ago I had the buildinginsulated. While it was a high inti-

tial cost, it has since more than paidfor itselfby cutting my monthly fuelbill in half.

To say "food for people, not forprofit" is to misunderstand the necessity of profit. Without it, theremay well be rio food. You only haveto think of the starving millions inAfrica, or the chronic food shortagesin socialist countries around theworld, to realize that. Without profit,there is no production. With profit,production is abundant because production is what benefits others, andifyou don't benefit others with goodsand services, they won't benefit youwith money.

The slogan also makes a false distinction and fails to understand themorality ofprofit. There is no either/or here; profit is not to the exclusionof people. The two go together. Producers, after all, are people too. I donot steal from my customers andtenants when I sell and rent. We exchange. We satisfy and benefit eachother by trading what we have forwhat we don't have. Both sides gainin free market transactions. OnceI've lowered my costs and raised myprices as much as possible, the onlyway I can profit further is to benefitmore people, who in turn benefit me.This, then, is the essential, inescapable morality of profit: people helping people and i~proving each other's lives. @)

Bettina Bien Greaves

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THE ORIGIN of language is shroudedin antiquity. No matter how we mayspeculate, we can never really knowhow language actually startedlong, long ago before the dawn ofhistory. Words may have begun asgrunts and cries of fear, joy, expressions or interjections. Or perhaps asattempts to imitate the sounds ofnature, the cries of wild creatures.Modern linguists are inclined to believe, however, that words developedas people tried to express themselvesvocally and to describe realitythrough symbols. The origin of language is not as important for us today, however, as what language is

Mrs. Greaves is a member of FEE's Senior Staff. inFebruary she gave a series of six lectures, in Spanish, to students at the Universidad Francisco Marroquin in Guatemala. This is a slightly shortened English version of one of her talks.

and how it enables us to expressourselves.

Language is a major tool for communicating. It has helped to unifysocieties and to develop cultures. Ithas encouraged individual expression and intellectual development.Language permits us to transmitknowledge from person to personthroughout society and downthrough the ages. Thus, languagemakes it possible for us to learn, notjust from our own personal experiences, but from other persons, evenfrom many who lived far away andlong ago. Properly used, languagecan facilitate teamwork and cooperation, making increased production possible. If misused, however, itcan mislead, distort and misrepresent, its words becoming veritable"language traps." To communicate

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successfully, therefore, it is important to choose one's words carefullyso as to convey the ideas we want toexpress and avoid misunderstandings.

An Ongoing Process

The development of language is anongoing process. It is evolving continually as people conceive of newideas and want to pass them alongto others. Many persons, specialists,scientists and scholars, often find existing words inappropriate for theirpurposes. As they seek to expressthemselves ever more precisely theyenrich our language. Thus, newwords are being created every day,some by specialists, some borrowedfrom other languages and other cultures. To accommodate new ideas,fads and fashions, as well as expanding scientific knowledge, theusage and meanings ofold words alsochange from time to time. Witnessthe many new words and terms thathave entered our language with theBeatnik generation, for instance,and the development of electronicsand computers. Some new words andnew meanings for old words provehelpful and in time are accepted intolanguage; others tend to confuserather than to clarify and are eventually dropped and forgotten.

After World War II, the Germanpeople found they had not only toclear away the rubble left from thebombings. They had also "to revive

the German language" to undo thedamage done by Nazi propaganda.German novelist Hans-Werner Richter noted in a recent interview(Pan American Clipper, July 1983):

After 12 years during which Germanhad been distorted to a mumbo jumbo ofNazi propaganda ... even ordinarywords had lost their true meanings. Youcouldn't use such words as heart, spirit,blood, soil, folk, country, because duringthe Third Reich they had acquired a senseand implication that those of us who returned from the war rejected ... Then,slowly, we began using traditional wordsand expressions again, though very cautiously, in order to give them once moretheir lost meaning and content.

Leonard Read, FEE's Presidentfrom 1946 until his death in 1983,used to tell a story to illustrate howthe words we hear and use can influence not only language but alsothought. In 1947, Read attended thefounding meeting of the Mont Pelerin Society in Switzerland. Also attending the meeting were Ludwigvon Mises, "dean" of Austrian economists, and Walter Eucken, notedGerman professor and free marketeconomist. Eucken had lived in Germany throughout World War II.Though a critic of the Nazi regime,he had been so well respected thatthe authorities had left him prettymuch alone. Eucken addressed theMont Pelerin meeting. Mter hearing him speak, Mises commented toRead, "It is amazing how the Nazi

1985 LANGUAGE TRAPS 355

jargon has unwittingly been admitted into his speech. He always spokesuch perfect German and he used tobe a good economist." Through itsjargon, the Nazi propaganda hadeven affected the economic ideas ofEucken, one ofNazism's most severecritics.

In the Mises seminars at New YorkUniversity, which I attended formany years, Mises frequently spokeof the importance of carefully choosing one's terminology. He oftenwarned against using mechanicalterms or similes and metaphors fromthe physical sciences to explain human action. As shorthand expressions, they may be helpful at timesto illustrate an abstract point. However, the danger exists that suchsimiles or metaphors may be takenliterally. Moreover, they are neverreally suitable for describing humanaction, which is always purposive,intentional, never mechanical.

Some words are appropriate, others inappropriate, for expressing theideas we want to convey. Some mayactually conceal and distort themeaning we have in mind. And, aswe have seen, some may even changethe opinions of those who use andhear them. Among the worst offenders nowadays are words that havebeen borrowed by economists fromthe languages of violence, mechanics, the physical sciences and mathematics. Such words may even become "language traps."

Terms of ViolenceConsider the word "revolution,"

with its two basic meanings. Thefirst comes from the verb "to revolve," meaning to rotate around asingle point, the second refers to theviolent overthrow of a regime. "Revolution" was first applied to the industrial world by writers who noticed the important technologicaldevelopments of the late 18th andearly 19th centuries. They obviouslydid not consider these developmentsto be rotating around an axis; ratherthey used "revolution" to describethe overturn, within a fairly shortperiod, of earlier production methods. " 'A revolution is making,' saidArthur Young in 1788 when he sawthe textile machines spread from thecotton to the woolen industry." TheMarxians later drew a parallel between the technological "revolution" that was taking place and thechanges in political and intellectuallife which they hoped that "revolution" would bring about.

Careful historians know that theold order was not "suddenly brokenin pieces by the mighty blows of thesteam engine and the power loom,"as sociologist and economist ArnoldToynbee (1852-1883) put it. From1760 to 1830, industrial productionwas going through "the slow gradual process of economic evolution.... [there was] no sudden shiftof scene" but rather "a constant tideof progress and change, in which the


old is blended almost imperceptivelywith the new." (E. Lipson, An Introduction to the Economic History ofEngland). Economic historian T. S.Ashton also deplored the use of theword "revolution" in this context for,as he writes:

The word "revolution" implies a suddenness of change that is not, in fact,characteristic of economic processes. Thesystem of human relationships that issometimes called capitalism had itsorigins long before 1760, and attained itsfull development long after 1830. (The Industrial Revolution, 1944/1964. p. 4)

The factory system with its assembly lines did not spring full blownfrom the system of medieval handtooled production to destroy thesmall scale industry with a single

- blow. Yet that is the implication inToynbee's use of the term. And sincehis day, the phrase, "industrial revolution," has gained broad acceptance in our language, carrying withit the connotation ofviolence and theimplication that the changeswrought by the "industrial revolution" were antagonistic to the interests and wants of the people.

Terms of violence-"strike" and"pickets"-are also used to describethe activities ofmodern labor unions.To "strike" implies the use of force.The word "picket" originally referred, in military terminology, tothe pointed posts or stakes used tobuild a defensive stockade or to thesoldiers ordered to stand guard

around a military position. Literallyspeaking, "peaceful pickets" and"educational picketing,'" dignified byreferences in U.S. Supreme COl:1rtdecisions, are contradictions interms.

Members of modern, speciallyprivileged, labor unions are often notprohibited from using force or threatof force. And when they "strike" or"picket" their previous places of employment, they sometimes actuallyengage in acts of violence. So termsofviolence may not be inappropriateto describe their activities. However,such terms are not suitable for describing the peaceful employer-employee relations of a free marketsociety.

Nor are terms of violence suitablefor describing the other processes offree and open competition on themarket. Nevertheless, frequent references to "cutthroat competition,""the law ofthe jungle," and the like,appear in the popular economic literature. Persons who understand theprinciples of human action and themarket process look on the operations of the market from a very different perspective.

Competition

Competition in the marketplace ispart of a cooperative process ratherthan a physical struggle among entrepreneurs, investors, workers andselling personnel. All these variouscategories of producers cooperate in


the effort to attain their commongoal, to try to serve consumers better. Producers of the same or similarproducts may sometimes feel as ifthey are in a race with one another.Yet a producer's prime goal is not todestroy or defeat others. Rather eachis looking for ways to provide consumers with something they wantmore than the other goods and services then being offered.

The fact that many consumers aredemanding the same or similaritems does not make them turn onone another tooth and claw. Ratherit works to their advantage. It stimulates increased production andmakes economies ofmass productionpossible. Everyone who wants ahammer, a television set or any otheritem, benefits from the fact thatother people also want hammers andTVs, for instance, for it leads producers to manufacture more hammers and TV sets, better hammersand TVs, cheaper hammers and TVsor better and cheaper hammers andTVs. And the demands of many producers for specific raw materials, orspecialized workers, for instance,help other producers of the same orsimilar products in an unanticipated.way-by inducing savers and inves·,tors to enter and/or to expand thoseparticular fields of production.

Thus, market competition resultsin a complex process of cooperation.among producers ofall the goods and.services needed at every stage ofpro-

duction to transform and transportraw materials from their naturalstate into finished goods in the handsof final consumers. This processbears no similarity at all to anythinglike brutal "cutthroat competition"or "the law of the jungle."

Terms from the Physical Sciences

The tremendous advances made inthe physical sciences, especially during the last hundred years, has ledto remarkable technological dev~l

opments. We now enjoy the fruits ofcountless inventions undreamed ofonly a few decades ago. Many ofthese improvements were made possible because the physical scientistscould conduct controlled experiments, analyzing physical phenomena quantitatively as well asqualitatively.

As the prestige of the physical sciences has advanced, many personshave come to expect that the scienceof human action, economics, shouldalso be transformed from a qualitative to a quantitative science. Yetboth the subject matter and themethodology ofthe science ofhumanaction are very different from thoseof the physical sciences. The termsthat describe and explain the one arenot suitable for describing and explaining the other. They may evenbecome veritable "language traps,"distorting meaning, leading to misunderstandings and preventing theclear expression of economic ideas.


Economics deals with the conscious, purposive actions of individuals, based on their ideas, ideaswhich are always changing. Neitherideas nor actions can be quantifiedor measured as physical phenomenacan be. Moreover, there are no constant relations in the field of ideasand actions, so that controlled experiments are impossible. Yet it isthe actions of individuals on the basis of their ideas that make the economy, the market, which economistsstudy. Without individuals, ideasand actions, there would be no economy, no market. Thus, market phenomena are always the outcomes ofthe conscious and purposive actionsof living, thinking, acting individuals, not of machines, automatons, orrobots.

Social Cooperation

Social cooperation and the marketbegan countless centuries ago aspeople discovered that it was to theiradvantage to cooperate, divide thelabor, specialize and trade the results of their efforts. They learnedthey could increase the total amountof goods and services produced andthus improve the situation of all participants. As people became aware ofthe benefits of social cooperation, society developed. Thus, society itself,as Mises points out, "is a product ofsocial cooperation." And the marketevolved gradually over centuries, outof countless conscious and purposive

actions of individuals, as peoplereached out to touch more and morepersons throughout the world.

As individuals noticed more andmore opportunities to gain throughcooperation and trade, the complexity and extent of their cooperationincreased. The division of labor became more and more specialized andtrading transactions expanded. Stepby step there evolved the extremelycomplicated and interrelated production processes and far-reachingmarket transactions we see today,which make it possible for all of usto have and consume goods and services that come from many lands.The long-term, large scale, effects ofthis widespread social cooperation,dovetail so perfectly that it is tempting to look on the market as something that functions "mechanically"or "automatically." While it is truethat today's social cooperation andmarket arrangements were not consciously planned, it is not true thatthey are in some way "mechanical"or "automatic." Each of the manyseparate steps that led to them waspurposively undertaken by some individual or individuals.

It is to the credit of FriedrichHayek, winner of the .1974 Nobelprize in economics, that he has explained explicitly that "the spontaneously grown institutions" such asprivate property, the market, language, media of exchange (Le., moneys), moral codes, and so forth, al-


though not intentionally designed bymen are in effect man-made, in the

/sense that they are the outcomes ofcountless purposive individual actions. Hayek cites the early Englisheconomist, Adam Smith (1723-1790)who noted that man in society is led"to promote an end which was nopart of his intention." He also refersto his Austrian predecessor, CarlMenger (1840-1921), who considered "the major problem of theoretical interpretation" to be "the originof social structures arisingunintentionally."

Orderly Activities

The actions of the unnumberedmillions who have participated inthe market may each have beenplanned by an individual, i.e., theywere all "micro." Certainly, theywere all conscious, purposive, intentional, and not "automatic" or "mechanical." However, no one intentionally planned the totality of theresults, Le., the "macro" effects. Theoverall results, though unforeseen,appear "orderly" and are generallybeneficial to society. Hayek explainsin The Counter-revolution ofSciencethat "the independent actions of individuals will produce an orderwhich is no part of their intention."As he puts it there is nothing mysterious in the fact that: " ... moneyor the price system enable man toachieve things which he desires, although they were not designed for

that purpose, and hardly could havebeen consciously designed beforethat growth of civilization whichthey made possible ..."

Hayek is well aware of "languagetraps." In The Counter-revolution ofScience, he specifically calls attention to the fact that "the term institution itself is rather misleading inthis respect as it suggests somethingdeliberately instituted." (p. 83).Hayek certainly must appreciatealso the difference between the waythings"grow" in nature and the wayhuman institutions develop out ofthe conscious actions and choices ofindividuals. Yet, enchantment withthe phrase "spontaneously growninstitutions" can easily lead one intoa "language trap." It is most important not to forget that Hayek's"spontaneously grown institutions,"though not specifically conceived orintended by man, are actually outcomes of many separate, conscious,purposive actions of individuals.

Adam Smith's "invisible hand"metaphor is somewhat analagous toHayek's "spontaneously grown institutions." Smith's "invisible hand"metaphor dramatized the fact that,thanks to market forces, the structure of prices and free and open competition, no Production Czar wasneeded to control production andequate supply and demand. Yet,some ofSmith's admirers have falleninto a "language trap" Smith certainly didn't intend to set. They have


interpreted his phrase to imply thatan all-knowing, all-powerful God actively intervenes in human affairs toassure that supply on the marketwill tend to equal demand, and viceyersa. This misinterpretation reinforces Mises' words of caution thatsimiles and metaphors may lead tomisunderstandings if interpretedliterally.

Individuals Choose

Persons who introduce into economic discussions and analysesterms from the fields of the physicalsciences and mechanics fail to understand clearly the nature of economics. They do not realize that economics deals with personal ideas andconscious actions of individualswhich are neither quantifiable normeasurable. Nor do they realize thatthere are no constant relations in thefield of human action. There is nothing "automatic" or mechanicalabout the market. Using terms thatimply that there is denies, in effect,the essence of market transactionsbased on individual ideas and subjective values and purposive actions.It ignores the inevitability ofchangeand may very well mislead unwaryusers into unfortunate "languagetraps." Thus such terms as "marketmechanism," "automatic forces ofthe market," "business cycles" or"equilibrium prices" are never appropriate for describing marketphenomena.

Terms from MathematicsThe current infatuation with ag

gregate economics and computershas enhanced the popularity ofmathematical terms for describingmarket phenomena. However, theyare not appropriate for dealing withthe principles of human action. Tounderstand why not, consider theorigins and' definitions of mathematical terms.

When physical scientists analyzethe world and the universe, theyseek to describe distance, area,weight, volume, time, sound, heat,light, and s'o on, in units of measurement that do not change, or atleast do not change perceptiblyenough to distort the particularmeasurements being taken. Eachunit of measurement is related insome way to the physical world itself. Units of distance and area aredefined in terms of the earth's surface. The unit of time by which wereckon years, months, days, hours,minutes and seconds, is based on therotation of the earth and the movement of the stars. The weight of anobject is a measurement of its resistance to the earth's gravitationalpull, i.e., according to Webster's NewCollegiate Dictionary (1951), weightis "the force with which a body is attracted toward the earth. It is equalto the mass of a body multiplied bythe acceleration due to gravity." Volume is a measure of solid content, ora dry or liquid measure.


Various scales have been devisedto record temperatures-Centigrade,Fahrenheit, Kelvin, Reaumur, etc.all easily convertible for "on each ofthese [scales] are two fixed points,the melting point of ice and thefreezing point of water under standard pressure" (The Columbia Encyclopedia). The most frequentlyused units of measurement for heatare the Calorie and the British Thermal Unit, both defined as "theamount of heat required to raise thetemperature [of a certain amount] ofwater at its maximum density onedegree" Centigrade or Fahrenheit,respectively. Scientists can alsomeasure sound, heat and light nowby the waves they emit.

Units of Measurement

These units of physical measurements are all precisely defined. Theydo not deal with ideas, opinions orvalues. Scientists may mismeasureor misread measurements. Their instruments may be wrongly calibrated. Their very attempts to measure an element may raise or lowerits temperature, influence its chemistry or physiology in some way andso affect the measurements takenthe Werner Heisenberg principle.Their experiments may go awry andtheir interpretations of their resultsmay vary. However, the existence ofsuch difficulties does not affect thebasic fact that physical scientists candeal with physical objects as if they

are constant, or variable only withincertain inconsequential limits. Andthey can expect that physical experiments and measurements carefullycarried out, under controlled conditions' will be precise and accurate.

Mises used to say, "economics isnot potatoes." Rather economics is astudy of the ideas, actions and values of men. The study of economicsprovides the theories and understanding that help men determinehow best to supply consumers withprecisely enough potatoes, neithertoo few nor too many, so as to satisfytheir demands for potatoes withoutwasting time, labor and other resources, resources that might betterbe used to satisfy other market demands, more urgent than the demand for more potatoes. This, in essence, is the "economic problem."

Now it is true that some ofthe consequences of conscious, purposivehuman action may be measured inmathematical terms. The raw materials and agricultural productsbrought forth from the earth, potatoes for example, may be counted,measured and weighed. The physical goods produced with the cooperation ofentrepreneurs, investors andworkers may also be totaled andmeasured in various ways. However,these physical goods and services aredistinct from the values men placeon them and it is their values to menthat interest economists.

Economics is the science of human

362 THE FREEMAN

action, of individuals, their ideas andvalues. It deals, not with physicalphenomena, goods and servicesthemselves, 'whose size, weight, volume, heat, cold, light, sound, and thelike can be measured-but with hum'an responses to them-emotions,sensations, feelings, values and theideas they evoke. Such responses arepersonal and subjective. They canonly be compared by the individualexperiencing them. It is not evenpossible for an individual to measure his/her emotions, sensations,feelings, values and ideas, nor tocompare them with other persons'emotions, sensations, feelings, values and ideas. And there is certainlyno universal, constant, scale of measurement, that can be precisely defined and calibrated, against whichthe emotions, sensations, feelings,values and ideas of one, several,many or all persons may bemeasured.

A Study of Human Action

If we forget that economics is astudy of human action and begin tolook on it as being concerned simplywith the production of potatoes-orof the many and sundry other goodsand services on the market-it becomes tempting to describe economicphenomena in terms of mathematical "language traps." However, thepopular mathematical terms frequently applied to economic concepts-the "balance of payments,"

"price levels," "stable prices," the"rate of profit," "market equilibrium," business or trade "cycles,""index numbers"-imply somethingthat is not true. They imply thatmarket phenomena-the outcomes ofideas, values and actions of individuals-are in some way quantifiable,measurable and predictable. Thus,such terms are more apt to misleadthan enlighten.

The goal of economics is to try toalleviate insofar as possible the"economic problem," the fact thatthere is a scarcity of goods and services relative to the demand forthem. Economics seeks to determinehow best the world's resourcesshould be arranged so as to providepeople with the goods and servicesthey want, not too many or too few,without wasting scarce resources.However, this is not a question oftechnology, mathematical measurement or of business and commerce.Only on the basis of an understanding of the principles ofhuman actionand the role of ideas and values caneconomists determine how individuals should cooperate, divide the labor, exchange the goods.and servicesand calculate so as to plan production to yield the best possible resultsas valued by consum~rs.Terms thatmisrepresent or conceal the contribution economics can make towardalleviating the "economic problem"are "language traps" to be avoided.

@

Sven Rydenfelt

The Ecology ofEntrepreneurship

J.M. KEYNES' theories with prescriptions promising to cure unemployment and depression were greeted asgospel by economists and politiciansof the 1930s. Just as peace-lovers allover the world launched the slogan"no more war," so the newly-fledgedKeynesians felt strong enough intheir faith to promise "no more depression and mass unemployment."

The Keynesian miracle drug was,in fact, never tested in the thirties.The Second World War came instead. Following the war was the"golden quarter of a century" from1945 to 1970-ahappy period withfull employment for which the politicians gladly proclaimed credit.

Then came the 1970s and the birthof a severe economic crisis, a social

Dr. Rydenfelt is professor of economics at the University of Lund in Sweden.

plague developing into a virtualdepression with mass unemployment. At long last the Keynesiandrug could be tested to prove itshealing powers.

Despite governmental borrowingin volumes Keynes never dreamedof, with doses rapidly increased intowild overdoses, the economic crisisspread. The awkward truth finallybecame clear: the miracle drug wasa failure, producing no visible healing effects. Still, the politicians stubbornly refused to open their eyes anddesperately continued to increasethe Keynesian doses.

New theories and new remedieswere sorely needed, and out of thetravails of the crisis new theorieswere born. One of them will be presented here. The theory of entrepreneurship, explains the roots of the

363


crisis and indicates ways out of it.And the time evidently is ripe for thenew theory, dry soil is waiting forrain and seed. The idea is spreadingeven into the camps of the enemies,even into Socialist governments ofthe West where officials today speakof the necessity of creating a bettereconomic climate for business anddeclare themselves prepared to accept higher profits.

Austrian Economics andthe Entrepreneurial Role

The ideas of the new theory can betraced back to the 18th centurywhere one of the pioneers, theFrench economist J.B. Say, added tothe three classic factors of production-land, labor and capital-afourth factor, the entrepreneurs.These ideas were further spread bythe Austrians Mises, Schumpeterand Hayek as well as by modernAmerican economic historians likeDouglass North and Robert Thomas.

Mallyeconomists have contributed to the work, but so far only Professor Israel Kirzner at New YorkUniversity has presented a coherenttheory of entrepreneurship. The theory, however, is far from finished andcomplete, and different versionshave been presented by different authors. The interpretation here is myown.

I especially want to emphasize theclose relation to modern ecology, thescience of the dependence of allliv-

ing beings on the environment.While Keynesianism is a mechanistic theory, treating society like amachine you are able to control bymeans of "social engineering," thetheory of entrepreneurship is fundamentally humanistic. Everythingin society is produced by humanbeings, whose performances are dependent not only on the physical environment but as much on the political and economic one.

In an unfavorable environment we,as a rule, develop only a fraction ofour possibilities, while in a favorable one we are able to develop ourfull potential. If economic growthwith full employment and rapidlyincreasing living standards is to develop in a society, among other production factors the following threemust be present:

1. Capital2. Entrepreneurs3. A favorable entrepreneurial

environmentThe third factor is by far the most

decisive. In every society there arekey groups-in medicine the doctors,in education the teachers-and if society is to function well these groupsmust be offered adequate incentivesto do their best and develop their fullpotential.

In all societies a minority ofpeopleare equipped with entrepreneurialtalents enabling them to start, manage and develop enterprises. Thisminority holds the key to business

1985 THE ECOLOGY OF ENTREPRENEURSHIP 365

productivity, growth and employment. But they will use their specialtalents fully only in an environmentwith adequate incentives. In such anenvironment they will attract or create the necessary capital.

Modern growth theory has, as arule, concluded that the shortage ofcapital is the deciding cause of poverty in under-developed countries.Moreover, the theory holds that theprovision of capital via aid from theindustrial countries should be sufficient to start economic growth inthe poor countries. Vast discouraging experiences indicate that thistheory is not realistic.

Capital, according to the theory ofentrepreneurship, is a necessary butnot a sufficient condition. Accordingto this theory the cause ofthe dismalexperiences is the fact that theregimes of these countries, mostlysocialistic, have systematicallyoppressed and exploited their entrepreneurs. Policies destroying theentrepreneurial environment musthave counterproductive effects.

Similarly, the theory of entreprineurship is able to explain the economic crisis of the 1970s and 1980sin the West. During the goldenquarter from 1945 to 1970, the entrepreneurs were allowed to workand produce in a largely favorableenvironment. Stimulated by adequate incentives, they developedsuch productive energies that manygovernments had to apply brakes on

their wild investment plans, brakesin the form of special taxes and fees.Not unemployment, but a shortageof labor, was the problem during thisperiod.

Economic "doctors" of the presentcrisis often try to explain hardshipsas a product of "technological unemployment," resulting from laborsaving machines and devices such ascomputers and robots. But such explanations are mere nonsense. Allmachines since the industrial revolution in the 18th century have been"labor saving." In spite of this,shortage of labor was still the problem in the 1960s. Since the 18th century the bogey of "technological unemployment" has been picked upfrom dark closets during all slumpsand depressions and sent back to itshideout whenever better timesarrived.

Just like garments and other cultural manifestations, governmentalpolicies are strongly affected bychanges of fashion. In the entireWestern industrial world the 1970smeant a rapid expansion of stateregulations, restricting the freedomof entrepreneurs. Simultaneously,the increasing taxing of firms andentrepreneurs was transformed intoconfiscation policies. In total, thismeant a systematic destruction ofthe entrepreneurial environment.

An obvious conclusion arises fromthe entrepreneurial interpretationof the present Western crisis. A sit-

366 THE FREEMAN

uation with full employment and rapid growth-a situation similar tothat prevailing before the 1970scan be created only by restoring economic environments with adequateincentives for the entrepreneurs.

Critics often object that such policies would imply the establishmentof a new privileged class-the entrepreneurs. However, policies producing adequate incentives for entrepreneurs should be pursued not forthe sake of the entrepreneurs but forthe sake of the unemployed andother victims of the crisis.

In countries like the U.S.A. andSweden we have the best educatedand most healthy manpower of theworld. But what is the use of theseunique resources as long as our politicians systematically kill the incentives-and .possibilities-of ourentrepreneurs to invest and to create jobs? @

Factors of Production

-REFERENCES-

Casson, Mark. The Entrepreneur: An EconomicTheory. Oxford: Martin Robertson, 1982.

Gilder, George. The Spirit of Enterprise. NewYork: Simon & Schuster, 1984.

Hayek, F. A. Full Employment at Any Price.London: The Institute of Economic Affairs,1975.

Kirzner, Israel. Perception, Opportunity, andProfit. Chicago: University of Chicago Press,1979.

Kirzner and others. The Prime Mover ofProgress: The Entrepreneur in Capitalism and S~cialism. London: The Institute of EconomicAffairs, 1980.

Mises, Ludwig von. Human Action: A Treatiseon Economics. 2nd printing. New Haven: YaleUniversity Press, 1949.

North, Douglass & Thomas, Robert. The Riseof the Western World: A New Economic History. Cambridge: Cambridge UniversityPress, 1973.

Rydenfelt, Sven. A Pattern for Failure: SocialistEconomies in Crisis: San Diego, New York,London: Harcourt Brace Jovanovich, 1984.

Schumpeter, Joseph A. The Theory of Economic Development. Cambridge, Mass.: Harvard University Press, 1951.

IDEAS ON

LIBERTY

PHYSICAL EXERTION turns into a factor of human production when it isdirected by reason toward a definite end and employs tools and previously produced intermediary products. Mind-reason-is the most important equipment of man. In the human sphere, labor counts only asone item in a combination of natural resources, capital goods, and labor;all these three factors are employed, according to a definite plan devisedby reason, for the attainment of an end chosen. Labor, in the sense inwhich this term is used in dealing with human affairs, is only one ofseveral factors of production.

. . . Entrepreneurial judgment directs the toil of the workers and theemployment of the capital goods toward the ultimate end of production,the best possible removal of what causes people to feel discontented andunhappy.

LUDWIG VON MISES

John K. Williams

RediggingOld Wells

TUCKED away in the book of Genesisis the simple report of an incident referring to the Jewish patriarchsAbraham and his son Isaac. Whenresiding in the arid wasteland thatwas Gerar, Abraham labored long todig wells. Years after his father'sdeath, Isaac returned to Gerar. ThePhilistines, he discovered, had filledAbraham's wells with earth andsealed them off. So Isaac, as the Biblical writer puts it, "dug again thewells ... of Abraham his father... and gave them the names his father had given them."

The story tells of a gain achieved,a loss suffered, and the recovery ofwhat had been lost. This sequence of

The Reverend Doctor John K. Williams has been ateacher and currently does free-lance writing andlecturing from his base In North Melbourne, Victoria,Australia.

This article Is from a seminar lecture at the Foundation for Economic Education.

events is a commonplace of humanhistory. Men and women again andyet again have faced two distincttasks: on the one hand, new gains tobe made; but on the other hand, oldgains to be re-won. New wells to bedug, yes; but also old wells, filledover the passing of time with rubble,to be dug again. The former task maybe more dramatic than the latter, butthe importance of redigging wellsfirst dug by our forefathers cannotbe minimized. In a sense, SamuelJohnson made the point when, sometwo centuries ago, he said, "Thenumber of new things we need toknow is small compared with thenumber of old things we need to bereminded of."

Reminding ourselves and others ofold truths easily forgotten-redigging old wells dug long ago by ourforefathers but filled up and sealed

367


off by the Philistines of our age-isa task those of us committed to thecause of liberty cannot shirk. For thetask, I submit, is urgent.

Human Rights

The first such well is the well ofhuman rights.

The distinction between a "humanright" and a "positive" or "contractual right," should be clear. Unfortunately, however, it has not provedclear to some. In particular, I thinkofan influential British philosopher,Thomas Hill Green,! who last century argued that the mere absenceof an obligation to surrender somegood or desist from some activity wasvacuous. What mattered was the actual ownership of the good or successful execution of the activity. My"right" to climb a mountain is useless, according to Green, if I lack theequipment and skills necessary toexecute a successful climb. Green'sclaim is echoed by those who mockthe notion of human rights byasking what use to an impoverished person is the "right" to enter an expensive restaurant and dine?

In this way, the notion of a humanright was transformed. My right toown a wrist-watch signifies for manytoday not simply the obligation ofother people not to force me to surrender a wrist-watch I have legallyacquired, but to provide me with thewrist-watch. Immediately any notion of "equal rights" vanishes, for

two sets of people have been specified: those entitled to receive certaingoods and services, and those obligated to provide those goods and services. The assertion, for example,that the wealthy are obligated toprovide goods and services specifiedby the alleged "rights" of the poor,cannot be referring to a "humanright." The alleged "right" rests notupon what all people have in common-their humanity-but uponwhat they do not have in common.

Privileges for SomeObligations for Others

I submit that claimed "rights"generating positive privileges forsome and positive obligations forothers are but arbitrary claims givenmuscle and a measure of respectability by the State. Such "rights"have nothing whatsoever to do withwhat your forefathers meant by "unalienable rights." Your forefatherswere moved by the vision ofa societywithout castes or classes or legallyprivileged elites of any kind. Thosewho today advocate and agitate foran exponentially increasing numberof "positive rights" are necessarilydemanding a society of caste and ofclass. The alleged "rights" of someto particular goods and services obligate others to provide those goodsand services. The alleged right of aset of people described as the "poor"to, say, a minimum income obligatesthe wealthy to surrender what is

1985 REDIGGING OLD WELLS 369

theirs, namely some of their alleg··edly "excess" wealth, and in prin··ciple could well be appealed to as ob··ligating the wealthy to create that"excess wealth."

The result is disaster. Society col-·lapses into a hostile contest betweenspecial interest groups jockeying forgovernment-conferred privileges ..The politics of principle reverts tothe politics of patronage. De facto,benefits typically go to well-orga··nized and concentrated groups whoknow what they have been given:,and the costs are carried by dis··persed and disorganized people whodo not know what they are paying.A government performing the vitaltask ofprotecting the equal rights ofall degenerates into a "hit man" en·forcing the special privileges ofsome.

Yet the vision remains-the visionof men and women endowed by theirCreator with a common humanityand thus enjoying equal humanrights. With that vision goes a task:the task of redigging a well our forefathers dug and named the well ofhuman rights.

Property

The second well needing such redigging is explicitly named in theVirginia Bill of Rights. Among the"inherent rights" enjoyed by all are,"the representatives of the good people of Virginia" declared, "the enjoyment of life and liberty, with themeans of acquiring and possessing

property, and pursuing and obtaining happiness and safety."

It has today become fashionable todownplay the importance of privateproperty rights. I refer not to Marxists and collectivist anarchists whoattack the institution of privateproperty as such, but to the mentality which displays itself in such slogans and bumper stickers as "Human Rights Before Property Rights"and "People Before P~operty."

The first point I would makeshould not have to be made. Property rights are rights ascribed to people; they are not "rights" ascribed toinanimate objects. Doubtlessly,sooner or later groups of people willstart agitating for the "rights" ofporridge, plums, and protons-indeed I was enchanted to receive inmy mail recently an appeal fromsome people mightily concernedabout the "rights" of the EucalyptusGum Tree-but we can, I think, deferdiscussion of this particular manifestation of sheer lunacy. Propertyrights are human rights.

Property rights as such are inescapable. In any conceivable society,decisions have to be made as to howmaterial goods are to be utilized-inone way rather than in another; forthis purpose rather than for thatpurpose. Rules specifying who, legitimately, may make such decisionsare describing "property rights."Maybe a solitary dictator is the legitimized decision maker. Or maybe


members of an aristocracy or a particular political party. The "who"does not affect the nature of therules. The rules are specifying property rights, and such rules areinescapable.

My second point is less obvious. Itdraws upon an argument skillfullyelaborated by Murray Rothbard.2 If"human rights" are to mean anything, they must be earthed andgrounded in property rights. StatesRothbard: "Not only are there no human rights which are not also property rights, but the former lose theirabsoluteness and clarity ... whenproperty rights are not used as thestandard."3

The point is that human beings arematerial creatures living in a material, spatio-temporal world. Theyare not pure, unextended spirits. Inthe language of the author of Genesis chapter three, man-adam-is "ofthe earth" -adamah. Abstract"rights" unrelated to matter, spaceand time are utterly vacuous whenascribed to a being who, if he or sheis to act at all, must act in a material, spatio-temporal world.

You visit, let us say, the country ofWillania. You are informed that youenjoy, in Willania, a right to freespeech-that is, you are not obligated to refrain from speaking freely.You are further informed, however,that you are obligated to desist fromseeking to own, rent, borrow, or begany space you may fill with sound

waves. You are told, in other words,that while enjoying a right to freespeech, you do not enjoy a right toown, rent, borrow or beg a hall or anyother physical place where you mayengage in such speech. You realizeyour alleged right to free speech is ajoke. It means nothing whatsoever.

You learn, likewise, that in Willania there is a right to a free press.Individuals or sets of individuals donot, however, have the right to own,borrow, or beg paper, ink, printingdevices of any kind, or any spacewhere they may sell or give awaytracts, pamphlets, newspapers, orwhatever. Again you laugh, for thealleged "right" signifies nothing atall.

Material Rights

In my language, the word "right"must become "flesh." The "rights" ofmaterial creatures must themselvesrelate to material realities. Ifthey donot, they signify nothing at all.

Let me underscore that, just as my"right" to climb a mountain indicates merely that I am not obligatedto desist from attempting to climbthe mountain, rather than someguarantee that I shall succeed inthat endeavor, so my "right" to property does not signify that I will succeed in acquiring property. My"right" to free speech does not obligate anyone to provide me with aplace where I can speak or an audience to whom I can speak. The in-


stitution of private property cer·,tainly makes it more likely that an.individual will succeed in acquiring,directly or indirectly, the materialgoods necessary to exercise a "right"than does a set of rules establishing,say, that members of a particular po·,litical party "own" and thus deter··mine the use of scarce materialresources.

It is unlikely that the politicallydetermined ,;controllers of resourceswould grant me access to the ink, pa··per, and printing equipment necessary to publish materials attackinga politically based system of property rights. If, however, the ownersof printing presses in a society coordinated by a system of privatElproperty rights believe my tract orpamphlet will sell, or I can otherwisepay them for the use of their equip··ment, they will, in all probability:,happily print a little tract or bookletattacking the institution of privateproperty. Be that as it may, privateproperty rights do not guarantee therealized ownership or temporarycontrol of a material resource. Theysimply rule out an obligation to des··ist from attempting to acquire ortemporarily enjoy the use of a ma~

terial resource.

Property as a Standard

Consider Rothbard's second claim:not only are "human rights" vacuous when unrelated to "propertyrights," but the former "lose their

absoluteness and clarity" when"property rights are not used as thestandard."

To take an obvious case, considermy claimed "right" to smoke cigarettes. If unrelated to property, this"right" is notoriously vague, and Iam forever engaging in attempts toresolve clashes between my "right"to smoke, and non-smokers' "rights"to smoke-free air. If, however, I remind myself that smoking is a physical activity, and that I must, if I am.to smoke, smoke in some place, alleged clashes of "rights" are resolved. I own an apartment, let ussay. It is for me to determine howthat space is used. I smoke in thatapartment. My mother, owning herown home, determines how thatspace is used, and finding cigarettesmoke unpleasant, she has decidedthat no one may smoke in her home.There is no problem-save, perhaps,my decision as to whether I shallvisit my mother and, ifI do, my problem of sitting in the living room andattempting to be civil while cravingfor a cigarette.

There are problems with communally owned property, but the problems are unrelated to the allegedlyconflicting "rights" of smokers andnon-smokers. The problems are simply related to the difficulty in specifying decision-making procedures,acceptable to all parties, applicableto communally owned and controlledspaces.


So with a "right" to free speech.Tie that "right" to where the physical activity of speaking is exercised,and alleged conflicts of "rights" areresolved.

To reiterate: property rights arehuman rights, hence to speak of human rights taking priority overproperty rights is folly. Propertyrights are inescapable, some rulesdetermining who legitimately maydecide how material resources are tobe utilized being inevitable in anysociety. A society embracing humanrights, as earlier defined, must, ifthese human rights are to mean anything, ground them in propertyrights. In the absence of privateproperty rights, individual humanrights are utterly vacuous.

The Well of Private Property

Simply, having dug the well of human rights, our forefathers inexorably were led to dig the well of private property.

One can also, I submit, defend theinstitution of private property onpragmatic grounds. Historicallyspeaking, the lot of the vast majorityof human beings has been destitution. Life for the masses has, atnearly all times and in nearly allplaces, been nasty, brutish, andshort. The historical oddity cryingout for explanation is plenty, notpaucity; wealth, not poverty.

Now an improved material standard of living for all members of a

society rests upon sustained economic growth. That means, simply,that a society's output of goods andservices must increase more rapidlythan does its population.

Sustained economic growth firstbecame a reality in stxteenth-century England and the Netherlands.Why? The population of these nations did not decrease; it increased.These nations did not live by plundering other nations. No remarkabletechnological innovation can be citedas the cause of this sustained economic growth. Nor can one point tothe practice of voluntary exchangeas the key, for this practice as suchis ubiquitous, being, it would seem,"natural" to human beings of alltimes and at all places.

What was common to, anduniquely characteristic of, sixteenth-century England and theNetherlands was a peculiar systemof property rights. And that systemconstitutes the key to sustained economic growth.

Imagine that you are a farmer.Your farming methods are preciselythe same as those of your fellowfarmers and your farming ancestors.One year, however, you make achange in your methods, perhaps byaccident. That change results in anincreased crop.

Given collective ownership of theland and its fruits, that increasedcrop is shared among many. The improvement in the situation of each


recipient is small, so small that itmay not even be noticed.

The Incentive to Change

Suppose, however, that you ownthe land and its fruits. You discoverthat you have more food for yourselfand your family, and an increasedsurplus you can directly or indirectly exchange for other goods andservices. Your situation has improved dramatically. You thus bothdiscover that your changed methodsof farming lead to increased crops,and are encouraged to do what human beings are loathe to do-namely,permanently change the entrenchedhabits of years. Your neighbors, incidentally, are also slightly betteroff, more food being available forthem to buy. Let us call the additional food your neighbors can purchase the "social rate of return" onyour innovation, and your own improved standard of living the "private rate of return" on your innovation. As your private rate ofreturnis close to the social rate of returnyou have every chance ofdiscoveringa desirable innovation in farmingmethods, and every incentive to adoptthat change. The key to this discovery-facilitating, incentive-providingprocess is the system of precisely defined and efficiently enforced property rights we call private property.

Admittedly, one might attempt todevise alternative systems of property rights which display some ofthe

features of private property rights.A recent volume of essays by mainland Chinese economists addressesthe elaboration and implementationof some such system. The authors attempt to tie the income ofworkers totheir productive output, and castigate egalitarianism as an evil which"protects the backward, obstructsthe advanced, frustrates the enthusiastic, lowers working efficiency,and is, in general, a hindrance to therealization of socialist modernization."4 The catch is, however, that anarmy of bureaucrats and other stateofficials come between the acting individual and the "information-plusincentives" automatically providedby a system of private propertyrights.

The discovery and rapid adoptionof changes in behavior which improve the material situation of human beings are facilitated by thesystem of private property rights wecall "private property." The systemis not "perfect," whatever that maymean in this context, but it is theleast inadequate discovery-facilitating, incentive-providing system thehuman species has yet evolved. Aconcern for the material well-beingof flesh and blood men, women, andchildren, inexorably leads to advocacy of the institution of privateproperty.

I have called this defense of private property pragmatic. Yet it isnot, as I have just hinted, without a


moral dimension. To embrace a collectivist system of property rightsand thereby jeopardize sustainedeconomic growth, inevitably misallocate scarce resources, and almostnecessarily perpetuate destitution,hardly merits moral acclaim. Indeed, intellectuals in general andchurch leaders in particular who bewail the continued existence of poverty absolutely defined, and whostate that they yearn for a world inwhich the hungry are fed, the nakedclothed, and the destitute housed, yetwho ceaselessly undermine the verysystem which, to date, has best donewhat they claim to value most, are,surely, moral imbeciles.

Conservation of Resources

One could develop the case further.We are told, for example, that private ownership jeopardizes the conservation of scarce resources. Yetconsider. Here is a farmer who ownshis land. He is anxious that his landshould provide a living for himselfand his chosen successors tomorrowas well as today. Is he likely to adoptmethods of farming which producelarge profits today, but reduce hisland to a desert-like waste? Or is thepolitical controller, anxious to pleasethe short-term wants of a fickle electorate or a demanding Party, theperson more likely to exchange tomorrow's productivity for today'skilling?

Notice, incidentally, that our pri-

vate owner's motivation to use hisresources with an eye to the futureis tied to his ability to dispose ofwhatis his as he chooses. Knowing hischildren and his children's childrenwill inherit his farm, he is evenloathe to cut down the beautiful oaktree his own great-grandfatherplanted, and motivated to seek outsome way to retain that tree withoutsubstantially reducing his productive output. Those who cry out for theconservation of scarce resources andthe preservation of what is of sentimental value, should, I suggest, bein the front ranks of those attackingthe iniquitous tax we call "deathduties."

But enough. Our forefathers perceived the crucial importance of private property. The well they dugcries out for redigging.

Individualism

I refer finally to an old well usually named Individualism. Othernames have been given it, and whatalready has been said about our forefathers' understanding of humanrights and property rights indicatesmuch ofwhat I, at any rate, mean bythe word. Frankly, I choose to use theterm "Individualism" simply because the term, at least in churchcircles, is so frequently used derogatively. I read, for example, in a parish church bulletin that "capitalismis utterly incompatible with Christian values. In fact it is incompatible


with any civilized system of values.At its heart lies individualism, andindividualism is the opposite ofcommunity."

Let me indicate what individualism is not. First, it is not a denial ofthe claim that human beings are social animals. Clearly, the life of thehuman mind and the joy of the human heart are largely the gifts offellowship, friendship, and intimacy. Inthe absence of language, thought, sonecessary for a fully human existence would be but rudimentary, andlanguage is an essentially socialphenomenon. Indeed, it is necessarily a social phenomenon, as the phi10sopher Ludwig Wittgenstein sopowerfully argued.5 Evidence existsfor asserting that an infant deprivedof "tender, loving care" is deprivedof something utterly vital. The hunger of the human spirit for communion with selves beyond it is a real andalmost insatiable hunger. The Individualist in no way denies that theachievement of an authentically human existence, in both the cognitiveand affective domains, is a cooperative enterprise, not a solitaryendeavor.

Second, the Individualist does notdeny his material dependence uponother people. He does not, unless heis an extremely foolish Individualist, pretend that he is a "self-mademan" or "self-sufficient." He bothcan, and is wise to, make his own theassertion of Michael Oakeshott that

"the greater part of what we have isnot a burden to be carried or an incubus to be thrown off, but an inheritance to be enjoyed."

Exercise in Interdependence

Indeed, the free market so laudedby the Individualist is an exercise ininterdependence. Before typing thislecture, I purchased a new ribbon formy typewriter. I ambled into myfriendly local stationery store, andexchanged what I would earn for approximately half-an-hour's tutoringin Greek Philosophy for a new ribbon. The generosity of the exchangeis stunning. Just consider that ribbon. Consider the skills involved inlocating, mining, and refining themetals making up the spool, theskills involved in weaving the ribbon wound around the spool and synthesizing the "ink" impregnatingthe ribbon, the skills in manufacturing the completed object, theskills in making the plastic box andprinting the paper label informingintending buyers of the box's contents, the skills in ensuring that mylocal stationer had on his shelves theappropriate ribbon for a very aged"Royal Typewriter." Literallyhundreds of thousands of skills arecoordinated through the sheer miracle that is the free market. Interdependence is the \rery name of thegame.

Amusingly, if Individualism signifies a desire for complete self-suf-


ficiency, Marx and Lenin are advocates of Individualism! Both lamentthe so-called "alienation" derivingfrom the division of labor. Their Utopia is an imprecisely described stateof affairs where individuals able todo everything for themselves magically emerge. Marx sings of the daywhen I will be able "to hunt in themorning, fish in the afternoon, rearcattle in the evening, criticize afterdinner, just as I have a mind, without ever becoming hunter, fisherman, shepherd, or critic."6 Leninagrees, claiming that with the abolition "ofthe division of labor amongpeople" a new humanity "of peopleable to do everything" will becreated.7

As an unrepentant Individualist, Iregard this postulated self-sufficiency as neither a possible nor aparticularly enchanting prospect.Frankly, I enjoy being part of thecomplex web of human interrelatedness that is the free market.

Collectivism in Contrast

If we would understand Individualism, it is useful to look at its contrast, namely, collectivism. An appropriate, albeit not the onlypossible, starting point is thethought of Jean Jacques Rousseau.

According to Rousseau, a society iscoordinated and unified by what hecalls the "general will." This will isdistinct from the will of any individual or set of individuals. It is neither

the "majority will" nor what onemight call a "consensus will." Somehow, over and above the individualwills of the members of a community, there actually exists this additional will, a will the wisdom and beneficence of which exceeds thewisdom and beneficence of any individual or set of individuals.

Since there is but one general will,there is but one supreme"good" andone over-riding "goal" towardswhich a community must strive. Individuals and voluntary associations positing other "goods" andother "goals" are thus anathema.Indeed, the Jacobins and Girondinsrightly appealed to Rousseau when,during the reign of terror, they outlawed all voluntary associations.

Rulers, by a process Rousseau doesnot care to elaborate, are somehowsensitive to the dictates of the general will, encoding these in particular laws. Since the ultimate sourceof these laws is the wise and beneficent general will, it is unthinkablethat anyone might challenge theselaws. The good citizen is the citizenwho actually identifies his own willand the general will. There can beno tension between an individual'sreal "will" and the general will; ifsuch a tension is allegedly experienced' an individual is in error as towhat he or she truly "wills."

Rousseau displays his full colorswhen writing on schooling. TheState, he insists, must control all


schooling, .and thereby ensure "thatchildren are imbued with ... themaxims of the general will and[learn] to respect them above allelse." The entire objective of schooling is to create citizens who, as Rousseau puts it, "wish only what thecommunity wishes."8

Rousseau on Education

Rousseau's best-known volume oneducation is frequently misinterpreted on this matter-indeed, Rousseau is sometimes cited as a defender of a permissive, childcentered approach to schooling. After all, in Emile, the titular hero-achild named Emile-is supposedlyfreed from the constraints of anadult's will. Emile will learn all heneeds to know by freely exploringnature and her necessities. In thisway one who is "born free" will remain free, unfettered by the artificial constraints of society. His onlyconstraints will be those imposed bynature.

Such a reading ofEmile overlooks,however, the fact that the pupil hasa tutor. The tutor's task it is to ensure that Emile's encounter with nature is systematically fraudulent, forhe must so arrange matters that nature will "teach" his charge precisely what he, the tutor, wishes it toteach. "[TJhere is," writes Rousseauwith a complacency bordering uponcynicism, "no subjection more perfect than that which retains the ap-

pearance of liberty." "No doubt," headds, "[the pupil] must not do anything but what he wants to do, buthe ought not want to do anything butwhat you want him to do; he oughtnot to take a single step that youhave not foreseen."9

Why, one might ask, the pretense?Why the elaborate charade? Why isthe tutor never openly to show hishand? The answer is simple: whatmust at all costs be avoided is a clashbetween the will ofthe tutor, and thewill of little Emile. Compliance withthe tutor's will must be perceived byEmile as the exercise ofhis own will.Thus he is conditioned to perceivecompliance with his community'sgeneral will as the exercise of hisown, "true" will.

Hegel and Marx

Rousseau's influence was considerable. When debates about compulsory, state-controlled schooling resurfaced in your country during the1830s, the philosopher most cited byadvocates ofsuch schooling was JeanJacques Rousseau.l° More significantly, the transition from Rousseau's belief in this mysterious"general will" to Hegel's belief thatthe state was the earthly manifestation of .the Absolute or God, wasan easy transition.ll The indebtedness ofMarx to Hegel is well known,but the advocates of Fascist andNazi totalitarianism were no lessindebted.12


What has been outlined is the essence of collectivism. The individualwill, the individual person and his orher own ideas, values, hopes, anddreams, mean nothing. What matters is the whole of which the individual is a part and which transcends any individual or any set ofindividuals. The collective-the community-the people-society-theState: that is reality. The individualis ultimately a fiction.

To this Individualism says "No." Iften people are on an island, there areten individual wills and the relationships between them. There isno eleventh will, a "general will"distinct from and other than the individual wills, and the way those tenwills interact. There is not some"thing" called society distinct fromten individuals, their skills, andtheir relationships. Should one individual seize power and start exacting tribute from his nine neighbors, what exists is nine bulliedvictims, one bullying ruler, and a setof relationships marked by coercion.No mysterious new entity called "theState" has come into being. To delude oneself into believing thatterms such as "society," "community," and "state" signify real entities distinct from human beings,their skills, and their relationshipsis to fall for what the philosopher A.N. Whitehead calls, "the fallacy ofmisplaced concreteness."13

It is the individual who thinks.

Certainly, individual minds can interact and stimulate one another, butthought itself demands a particularthinker. It is the individual who initiates purposive action from within.Again, individuals can decide to joinforces and, as we say, "act collectively," but that "collectively actingunit" is not other than or distinctfrom individual human beings, enjoying particular relationships, individually initiating purposive behavior. It is the individual whoperceives, each from his or her ownunique spatio-temporal location. Itis the individual who dreams, hopes,cares, values, chooses, and loves.Lose sight of the individual in somecollective or aggregate or class, andone is in danger of losing contactwith reality. So affirms Individualism.

Social scientists are particularlyprone to start reifying-that is, turning into existing things-collectiveterms. I know no better works elaborating this claim than Ludwig vonMises' Theory and History14 andFriedrich A. Hayek's Individualismand Economic Order.15

Thought through, Individualisminexorably leads to advocacy of thefree market in the free society. Itleads us to affirm, as did our forefathers, that no human being is achattel to be enslaved, debased, ordictated to by another. It leads us tochallenge all dominations and alltyrannies, all bigotries and all priv-


ileged classes, all institutions and allsocial practices, that deny the sacredness of the human spirit.

And it leads us to call deep thanksfor those who, many centuries ago,dug a well in the desert of collectivism and privilege, and dug it deep,and called it a name signifying whatthe word "Individualism" denotes.That well the Philistines havesought to fill and to close. It is for usto start redigging it.

Three wells. Human rights. Private property. Individualism. Thedamage done by the Philistines is notdifficult to see. Nor, however, is ourtask. How best to go about it eachone of us must determine for himselfor for herself. In the meantime, wecan find strength in the knowledgethat there are those whose devotionto liberty we can rely on. I refer, ofcourse to ourselves. @ID

-FOOTNOTES-

IT. H. Green, The Works of Thomas HillGreen, ed. R. L. Nettleship (London: OxfordUniversity Press, 1889).

Martin Ten Hoor

2M. Rothbard, The Ethics ofLiberty (New Jersey: Humanities Press, 1982), pp. 113-119.

3Ibid., p. 113.4Xu Dixin et al., China's Search for Economic

Growth (Beijing: New World Press, 1982), p.122.

5L. Wittgenstein, Philosophical Investigations, trans. G. E. M. Anscombe (Oxford: BasilBlackwell, 1958).

6K. Marx, The German Ideology in Karl Marx:Selected Writings, ed. D. McLellan (Oxford: Oxford University Press, 1977), p. 169.

7V. 1. Lenin, Left-Wing Communism: An Infantile Disorder (New York: International Publishers, 1940), p. 34.

8Cited, The Minor Writings ofJean JacquesRousseau, ed. W. Boyd (New York: Hutchins,1962), p. 13I.

9J. J. Rousseau, Emile (Paris: Garnier Edition, 1935), p. 114.

IOCr. J. K. Williams, "The End of Schooling,"The Freeman (September 1982), pp. 565-73.

llG. W. F. Hegel, Hegel's Philosophy ofRights,trans. T. M. Knox (Oxford: Oxford UniversityPress, 1942).

12Cr. Ludwig von Mises, Omnipotent Government (New Rochelle: Arlington, 1969).

13A. N. Whitehead, Process and Reality (NewYork: Macmillan, 1929), p. 11; idem., Scienceand the Modern World (New York: Macmillan,1929), p. 75.

14Mises, Theory and History (Westport: Arlington, 1969).

15F. A. Hayek, Individualism and EconomicOrder (Chicago: University of Chicago Press,1948).

IDEAS ON

LIBERTY

RESOURCES OF THE SPffilT are like savings: They must be accumulatedbefore they are needed. When they are needed, there is no substitute forthem. Sooner or later, the individual faces the world alone, and thatmoment may overwhelm him if he has no resources within himself....We can escape our physical environment and our neighbors, but we cannot escape ourselves.

A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN

The American Idea

CONGRESSMAN JACK KEMP'S reputation rests mainly on his supply-sidetax legislation, both the Kemp-Rothlaw that has already been passed andthe "fair and simple," or FAST, flattax which he and Senator Kastenhave just introduced. But the moretechnical aspects of fiscal and monetary reform take up something lessthan half the space in the book thatKemp has made out of his collectedspeeches. Called The American Idea:Ending Limits to Growth (The American Studies Center, Washington,D.C., 355 pp.), with a foreword byPresident Ronald Reagan and a preface by Irving Kristol, the book applies the doctrines of the freedomphilosophy to practically every aspect ofgovernment, from foreign andmilitary policy to the protection ofhuman rights, and from the compo-

380

sition of political parties to thechances for an international conference to restore the gold standard.

Kemp speaks of a coming "American renaissance," and he is himselfa modern renaissance man. His college degree was in physical education, and he began his working lifeas a third string quarterback for thePittsburgh Steelers. Later, as a firststring quarterback for the BuffaloBills, he doubled as a labor leader,helping to organize the football players union. When still a footballplayer he chanced upon two books,Friedrich A. Hayek's The Constitution of Liberty and Ludwig vonMises' Planning for Freedom. Thesesaved him from the journey to theLeft that a belief in unionism entailed for many pro-labor partisansin the Walter Reuther period.

THE AMERICAN IDEA 381

From the Playing Fieldto the Political Route

A Californian who might normallyhave preferred to return to the SunBelt after completing a football career in snow country, Kemp was sucha favorite with Buffalo fans that hewas prevailed upon to remain in theNortheast and run for Congress. Heknew that the decline in the steel industry might become his NumberOne political concern. But he alsosaw that protectionism would be nopermanent cure for Rust Belt or"smokestack industry" troubles.

In one of the foreign policyspeeches in The American IdeaKemp says: "Shortly after I becamea congressman 12 years ago, I became increasingly aware that theproblems which afflicted the depressed Buffalo-area district couldnot be solved by local projects. Buffalo was suffering from problems· ofnational scope, which required solutions on a national level."

This perception caused Kemp tobehave more like a Senator than amere Representative. His Buffaloconstituency has forgiven him for hisrefusal to concentrate on "local projects." As an ex-quarterback Kempknew the importance of having acomprehensive game plan. He alsoknew that politics, like football, is agame of margins. Paradoxes had tobe accepted, and some philosophicalinconsistencies had to be excused atleast for the time being.

So Kemp has always upheld theconcept of the Safety Net. He doesnot talk about getting rid of the Welfare State. His political sense tellshim that the best way of reducingwelfare payments is to make themunnecessary. Hence his emphasis onthe supply-side ideas of Jude Wanniski and Art Laffer. The supply-sideproposition, as elaborated by Kempin several of his speeches, is this: letpotential savings and investmentmoney flow back into the productivemainstream by reducing marginaltax rates. With new industries starting up and prosperity spreading, theamount of taxation needed to sustain the Safety Net would shrink.And, with more people taking careof themselves in private industry,the national budget deficit woulddisappear.

The anti-supply-side people, includingmany Republicans, havescoffed at so-called Laffer Curvethinking. So one of Kemp's majortasks has been to wean Republicansaway from their old austerity concepts. "Austerity," says Kemp, "isnot the solution. It is the problem."

Money and the Market

Some of Kemp's speeches that criticize the Volcker monetarists arehighly technical. But, broadlyspeaking, Kemp doesn't think it possible for the monetarists to controlthe supply of money. "Money," hesays, "is not chosen by economists or


government officials. It is chosen bythe market, by the common agreement of millions of individuals."Both the Keynesians and the monetarists, in Kemp's opinion, "haveunderestimated the degree to whichpeople can and do find ingenioussubstitutes for whatever definitionof money the central bankers aretargeting. Witness the explosion ofmoney market funds, overnight repos, and overnight Eurodollars, noneof which are included in MI." Andthere is always the question of thevelocity of money, which cannot bepredicted on the basis ofpast history.

Kemp, in several speeches, hascalled for a return to the gold standard. This would substitute automatic controls that would enable enterprisers to do some long-termplanning. To quote Art Laffer, goldconvertibility would be "a sort of insurance policy for the quality ofmoney." But Kemp, thinking inglobal terms, considers that the return to gold would have to be a decision made at some future BrettonWoods conference of the world's major economies.

While waiting for his flat tax proposals to revive enterprise everywhere, Kemp is pushing his conceptof enterprise zones. The decaying inner cities, he says, would revive ifbusinesses were to get tax breaks forstarting new factories within theirconfines. The idea has already had alimited success in England. It is no

John Chamberlain's book reviews have been a regular feature of The Freeman since 1950.We are doubly grateful to Johnand to Henry Regnery for nowmaking available John's autobiography, A Life with thePrinted Word. Copies of this remarkable account of a man andhis times-our times-areavailable at $6.00 from TheFoundation for Economic Education, Irvington-on-Hudson,New York 10533.

substitute for making the wholeNorth American continent-or, indeed, the world-a huge enterprisezone, but it would bring a certain improvement at the margin. Kempcan't figure out why the House ofRepresentatives majority dominatedby Speaker Tip O'Neill can't see it.

Kemp goes to Japan for corroboration of his ideas. Japan, he says, hasthe lowest tax burden of any industrialized country, "29 percent of theeconomy in 1981, compared with 34percent in the U.S., 46 percent inFrance, and 45 percent in West Germany." Most capital gains in Japanare tax free, and so is the first$12,000 of interest income per person. The personal savings rate inJapan is almost 20 percent.

"Everything depends on incentives," says Kemp. That is the lessonof his book. @J

1985 OTHER BOOKS 383

BEYOND LIBERAL ANDCONSERVATIVEby William S. Maddox and Stuart A. Lilie(Cato Institute, 224 Second St., S.E.,Washington, D.C. 20003), 1984197 pages _ $18.00 cloth

Reviewed by Charles H. Hamilton

YEARS AGO, Albert Jay Nock decried"the managed glossary of politics."It is still with us as terms like "conservative" and "liberal" are used almost exclusively to describe allmanner of political attitude andphilosophy. Adding a multitude ofprefixes-thus inventing new liberals, old conservatives, neo-conservatives, and so forth-has merelyadded to the confusion. The usualtwo-term continuum of the politicalspectrum does not work. They havebecome what Jeremy Benthamcalled "impostor-terms."

Now two political scientists havepresented a more complete perspective. Maddox and Lilie use fourterms based on a person's attitudeon two issues: government intervention in economic affairs and on theexpansion of personal freedom. (Thelatter dimension is the most unsatisfactory, since the authors don'tmake clear whether government involvement expands personal freedom or eliminates it.) In such a matrix, the authors posit, conservativesoppose economic interventionism but

support restrictions on personalfreedom; liberals support economicinterventionism but oppose restrictions on personal freedom; libertarians oppose both economic interventionism and restrictions on personalfreedom; and finally, populists support both governmental intervention in the economy and restrictionson personal freedom.

Using this framework, the authorsfound that the public was made upof 24% liberals; 26% populists; 18%libertarians; and 17% conservatives.The authors are able to explain theapparent contradictions that plagueelection results and opinion polls:John Anderson's impressive supportfrom "liberals" and "conservatives"in 1980, and Gary Hart's perplexingdegree ofsuccess in 1984. Indeed, theimplications of Reagan's victory arebest understood when one views it asan uneasy alliance of libertariansand populists with a minority ofconservatives.

The authors analyze a massiveamount ofpublic opinion survey datausing their four categories. The results are a fascinating reinterpretation of recent political history andof the opinions that Americans hold.The authors show that over the pastcouple of decades there has been anincreasing appreciation for the importance of economic and personalfreedom issues. And their commentson the so-called baby-boom generation suggest that these concerns

384 THE FREEMAN

have the potential for becomingmuch more important in the yearsahead. This is heartening news.

More interesting, and much moreimportant, are some of the implications one can derive from the fourcategories for discussions of politicalphilosophy and values. The "impostor-terms" of the past perpetuate aconfusion about the nature and interrelatedness of freedom. Maddoxand Lilie go a long way in the direction of clarifying the philosophicaland value content of political labels.Because they are limited by the constraints of the survey data they use,they cannot go far enough. Hopefully, surveys in the future will bemore philosophically consistent.

If the authors are right that economic issues may become subordinated to issues of personal freedomin the coming years, then it is es-

Freeman binders

pecially important that the case forthe intimate interdependence of economic and personal freedom beclearly articulated. We cannot haveone without the other. There is greatneed to explain further the key distinction between government intervention in economi~ and personalfreedom issues, and a free market social system dedicated to genuine personal freedom and initiative.

Maddox and Lilie have developeda first-rate framework for using political labels and have analyzed asbest they could how they apply toAmerican political attitudes. Giventhe massive changes in attitudesover the last decade, and the prospect that these will continue, thebook is an invaluable aid in planning how to present the freedom philosophy to a new and eagergeneration.

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