1 FEATURES 8 Why Are Golden Arches Lightning Rods? by Christopher Lingle 10 Safer Living with Chemistry by Angela Logomasini 17 Socialism of the Spirit by Karen Selick 19 The Pernicious Nature of Victimless-Crime Laws by Joseph S. Fulda 21 Phony Food Crisis by Jim Peron 27 But Is There Such a Thing as a Free Breakfast? by Ralph Hood 29 The Failure of Keynesian Economics by Steven Kates 33 E.G. West: Champion of the Market for Education by Charles K. Rowley 38 Market-Based Higher Education by Keith Wade 40 The Private Road to Freedom by Scott McPherson 44 What’s Wrong with Reparations for Slavery by Stefan Spath 48 Businessmen on Business Values by William H. Peterson 50 An Economics Lesson for the Drug Czar by E. Frank Stephenson COLUMNS 4 FROM THE PRESIDENT’S DESK—Amazing Graph by Mark Skousen 15 IDEAS and CONSEQUENCES—A Man Who Didn’t “Grow” in Office by Lawrence W. Reed 25 POTOMAC PRINCIPLES—Tips to Hike Your Taxes by Doug Bandow 31 PERIPATETICS—Stimulate the Catallaxy? by Sheldon Richman 42 ECONOMIC NOTIONS—Government Creates Prisoners’ Dilemmas by Dwight R. Lee 53 THOUGHTS on FREEDOM—An Economist Reflects on Law by Donald J. Boudreaux 63 THE PURSUIT of HAPPINESS—Is Monopoly Good or Bad? by Walter E. Williams DEPARTMENTS 2 Perspective—Fiscal Force by Sheldon Richman 6 Social Security Is Moral? It Just Ain’t So! by Tibor R. Machan 52 Capital Letters 55 Book Reviews The Skeptical Environmentalist: Measuring the Real State of the World by Bjørn Lomborg, reviewed by Jane S. Shaw; The Joy of Freedom: An Economist’s Odyssey by David R. Hender- son, reviewed by George C. Leef: Friedrich Hayek by Alan Ebenstein, reviewed by Bettina Bien Greaves; World War 3.0: Microsoft and Its Enemies by Ken Auletta, reviewed by Barbara Hunter; Bowling Alone by Robert D. Putnam, reviewed by Loren Lomasky; States’ Rights and the Union: Imperium in Imperio, 1776–1876 by Forrest McDonald, reviewed by James Ostrowski. April 2002 Vol. 52, No. 4 Lesson plans for articles are available at www.fee.org. E.G. West William Gladstone

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Page 1: FEATURES › media › 4081 › iol-april.pdf · The Skeptical Environmentalist: Measuring the Real State of the World by Bjørn Lomborg, reviewed by Jane S. Shaw; The Joy of Freedom:


FEATURES8 Why Are Golden Arches Lightning Rods? by Christopher Lingle

10 Safer Living with Chemistry by Angela Logomasini

17 Socialism of the Spirit by Karen Selick

19 The Pernicious Nature of Victimless-Crime Laws by Joseph S. Fulda

21 Phony Food Crisis by Jim Peron

27 But Is There Such a Thing as a Free Breakfast? by Ralph Hood

29 The Failure of Keynesian Economics by Steven Kates

33 E.G. West: Champion of the Market for Education by Charles K. Rowley

38 Market-Based Higher Education by Keith Wade

40 The Private Road to Freedom by Scott McPherson

44 What’s Wrong with Reparations for Slavery by Stefan Spath

48 Businessmen on Business Values by William H. Peterson

50 An Economics Lesson for the Drug Czar by E. Frank Stephenson

COLUMNS4 FROM THE PRESIDENT’S DESK—Amazing Graph by Mark Skousen

15 IDEAS and CONSEQUENCES—A Man Who Didn’t “Grow” in Office by Lawrence W. Reed

25 POTOMAC PRINCIPLES—Tips to Hike Your Taxes by Doug Bandow

31 PERIPATETICS—Stimulate the Catallaxy? by Sheldon Richman

42 ECONOMIC NOTIONS—Government Creates Prisoners’ Dilemmas by Dwight R. Lee

53 THOUGHTS on FREEDOM—An Economist Reflects on Law by Donald J. Boudreaux

63 THE PURSUIT of HAPPINESS—Is Monopoly Good or Bad? by Walter E. Williams

DEPARTMENTS2 Perspective—Fiscal Force by Sheldon Richman

6 Social Security Is Moral? It Just Ain’t So! by Tibor R. Machan

52 Capital Letters

55 Book Reviews

The Skeptical Environmentalist: Measuring the Real State of the World by Bjørn Lomborg,reviewed by Jane S. Shaw; The Joy of Freedom: An Economist’s Odyssey by David R. Hender-son, reviewed by George C. Leef: Friedrich Hayek by Alan Ebenstein, reviewed by Bettina BienGreaves; World War 3.0: Microsoft and Its Enemies by Ken Auletta, reviewed by BarbaraHunter; Bowling Alone by Robert D. Putnam, reviewed by Loren Lomasky; States’ Rights andthe Union: Imperium in Imperio, 1776–1876 by Forrest McDonald, reviewed by James Ostrowski.

April 2002 Vol. 52, No. 4

Lesson plans for articles are available at www.fee.org.

E.G. West

William Gladstone

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Fiscal Force“I know ev’rybody’s income and what

ev’rybody earns; And I carefully compare itwith the income-tax returns;”

—W.S. Gilbert, Princess Ida

April is the cruellest month, for reasonsother than what T.S. Eliot had in mind. Thisis the month in which you must account foryourself to Caesar. The authorities, havingrelieved you of a goodly portion of yourearnings before you even caressed the bank-notes between your fingers, now demandyou show cause why you should not remitstill more.

And in further demonstration of the prin-ciple that the citizen in this beloved democ-racy is the master and the government themere servant, you are requested to affix yoursignature beneath these calming words:“Under penalties of perjury, I declare that Ihave examined this return and accompany-ing schedules and statements, and to the bestof my knowledge and belief, they are true,correct, and complete.”

Those who deem such threats—I meanwords—harsh have clearly not visited thefriendly IRS website. There you will findmuch useful information, including the“truth about frivolous tax arguments.” Theseare the sundry claims that no American citi-zen is legally obliged to pay the income tax.

The first “frivolous argument” is that theincome tax is voluntary: “Proponents pointto the fact that the IRS itself tells taxpayersin the Form 1040 instruction book that the tax system is voluntary.” Considering the source of the argument, it might seemsomething more than frivolous. But, alas, the government subscribes to the Humpty-Dumptian philosophy of language found inLewis Carroll’s Through the Looking Glass:“‘When I use a word,’ Humpty Dumptysaid, in a rather scornful tone, ‘it means just what I choose it to mean, neither morenor less.’”

As the IRS explains, “The word ‘volun-tary,’ as used in Flora [v. United States] andin IRS publications, refers to our system of

Published byThe Foundation for Economic

EducationIrvington-on-Hudson, NY 10533Phone: (800) 960–4FEE; (914) 591–7230Fax: (914) 591–8910E-mail: [email protected] Home Page: www.fee.org

President: Mark Skousen

Editor: Sheldon Richman

Managing Editor: Beth A. Hoffman

Editor EmeritusPaul L. Poirot

Book Review EditorGeorge C. Leef

Editorial AssistantMary Ann Murphy

Contributing Editors

Ideas on Liberty (formerly The Freeman: Ideas on Liberty) isthe monthly publication of The Foundation for EconomicEducation, Inc., Irvington-on-Hudson, NY 10533. FEE, estab-lished in 1946 by Leonard E. Read, is a non-political, educa-tional champion of private property, the free market, and lim-ited government. FEE is classified as a 26 USC 501(c)(3) tax-exempt organization.

Copyright © 2002 by The Foundation for Economic Educa-tion. Permission is granted to reprint any article in this issue,except “Socialism of the Spirit” and “The Pernicious Nature ofVictimless-Crime Laws,” provided credit is given and twocopies of the reprinted material are sent to FEE.

The costs of Foundation projects and services are metthrough donations, which are invited in any amount. Donorsof $30.00 or more receive a subscription to Ideas on Liberty.For delivery outside the United States: $45.00 to Canada;$55.00 to all other countries. Student subscriptions are $10.00for the nine-month academic year; $5.00 per semester. Addi-tional copies of this issue of Ideas on Liberty are $3.00 each.

Bound volumes of The Freeman are available from TheFoundation for calendar years 1972 to 2000. The magazine isavailable in microform from University Microfilms, 300 N.Zeeb Rd., Ann Arbor, MI 48106.

Norman BarryPeter J. BoettkeClarence B. CarsonThomas J. DiLorenzoBurton W. Folsom, Jr.Joseph S. FuldaBettina Bien GreavesRobert HiggsJohn HospersRaymond J. KeatingDaniel B. Klein

Wendy McElroyTibor R. MachanAndrew P. MorrissRonald NashEdmund A. OpitzJames L. PayneWilliam H. PetersonLowell PonteJane S. ShawRichard H. TimberlakeLawrence H. White

ColumnistsCharles W. BairdDoug BandowDonald J. BoudreauxDwight R. LeeLawrence W. ReedRussell RobertsThomas SzaszWalter E. Williams


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allowing taxpayers to determine the correctamount of tax and complete the appropriatereturns, rather than have the governmentdetermine tax for them. . . . [T]he courtclearly states, ‘although Treasury regulationsestablish voluntary compliance as the gener-al method of income tax collection, Con-gress gave the Secretary of the Treasury thepower to enforce the income tax lawsthrough involuntary collection.’” And if oneshould choose not to volunteer to determinethe correct amount of tax and complete theappropriate returns?

But I risk frivolity, don’t I? And we allknow the penalty for that.

* * *

Why do the anti-globalization protestersalways target McDonald’s, but are neverseen publicly melting Nestlé Crunch bars orsmashing karaoke machines? ChristopherLingle has an explanation, and it’s not veryflattering.

Artful exploitation of the news media byanti-capitalist environmental activists hasleft many people with the impression thatmanmade chemicals routinely endanger theirlives. They’d be surprised by the facts,Angela Logomasini writes.

It’s bad enough using the state to appro-priate money from your fellow citizens.Karen Selick says it’s far worse to use it toappropriate character.

Criminalizing certain victimless behavioris not just a matter of attempting to controlpeaceful individuals’ lives. As Joseph Fuldademonstrates, it’s also a policy that by itsnature subverts civilized law-enforcementinstitutions.

Some people refuse to believe—despite allevidence to the contrary—that the world isnot going to run out of food. Jim Peronexplores the good news that is so hard toswallow.

Have you noticed that hotels give moreand more things away for free? They’re notreally free; you just pay for them whetheryou use them or not. Why are they doingthat? Ralph Hood knows.

Alas, too many people still claim Keynesas their favorite economist. Et tu, AlanGreenspan? Steven Kates has the scoop.

No economist has done more to show thatgovernment is not needed to provide educa-tion than E.G. West, who died last Octoberat the age of 79. His friend and colleagueCharles Rowley pens an appreciation of thisdistinguished man.

An important untold story is how privateenterprise is innovating in the provision ofhigher education. Keith Wade relates hisown experience on both sides of the lectern.

The road to serfdom is a state-ownedroad. How about the road to freedom? ScottMcPherson calls for privatization.

A movement is gaining momentum to pro-cure reparations for descendants of slaves inthe American South. Stefan Spath valiantlytries to make sense of the case.

American businessmen line up for corpo-rate welfare and give big bucks to organiza-tions that oppose capitalism. A death wishperhaps? William Peterson wonders.

Americans are spending less on illegaldrugs, and the drug czar celebrates. But holdon, E. Frank Stephenson writes. Economicscan shed some light that won’t please thedrug warriors.

A provocative set of topics emanatesfrom the word processors of our columniststhis month: Mark Skousen ponders howcompetition benefits religion. LawrenceReed pays homage to Gladstone. DougBandow has timely tips on increasing your taxes. Dwight Lee identifies prisoners’dilemmas created by the government. Don-ald Boudreaux compares law and econom-ics. Walter Williams considers the good andbad of monopoly. And Tibor Machan,encountering arguments for the goodness ofSocial Security, remonstrates, “It Just Ain’tSo!”

Books on skeptical environmentalism, aneconomist’s love of freedom, F.A. Hayek,the Microsoft case, the breakdown of com-munity, and states’ rights—these are whatour reviewers report on this month.



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In January 2001, I wrote a controversialcolumn titled “The Imperial Science,” inwhich I argued that the economics profes-sion, like an invading army, is overrun-

ning the whole of social science. I usedexamples in law, finance, politics, history,and sports, concluding that it was high timeto replace the phrase “the dismal science”with the “imperial science.”

Religion is another area where economicresearch has recently made its mark.Lawrence Iannoccone (Santa Clara Universi-ty) is one of a handful of economists whospecialize in religion and economics.2 In thelate 1980s Iannoccone tested Adam Smith’shypothesis that freedom of religion wouldlead to a higher level of attendance in churchservices. Smith believed that competitionbenefits religious groups because they’reforced to learn to satisfy the needs of theirmembers.3 In testing this theory, Iannocconecompared attendance at church and thedegree of religious monopoly in variousProtestant and Catholic countries between

1968 and 1976. His test produced a strikingresult: church attendance varied inverselywith church concentration in Protestantnations. Church attendance among Protes-tants was high in freely competitive nations,such as the United States, and low in coun-tries monopolized by a single Protestantdenomination, such as Finland. In short, themore religious freedom a nation enjoys, themore religious people are (as measured bychurch attendance).4

Soon after Iannoccone’s study was com-pleted, two sociologists applied market prin-ciples to the history of American religionand came to the same conclusion: reli-gion thrives in a free-market environment.Roger Finke (Purdue) and Rodney Stark (University of Washington) found the UnitedStates to be almost a perfect experiment inwhat they termed an “unregulated, free mar-ket, religious economy.” By the start of theAmerican revolution, religious persecutionhad largely ended and tolerance graduallygave way to religious freedom. The largestdenominations sought a tax-supported statereligion, and even formed cartels aimed atpreventing competition, but all efforts failed.Most states followed Virginia’s lead inopposing any state church.

Finke and Stark came to the followingremarkable findings using their explicit mar-ket model in studying religion in America:

First, fierce competition and the constantevolution of new religions in America resulted in a steady rise in church participa-tion over the past two centuries. Amazingly,

Mark Skousen ([email protected]) is president ofFEE. His website is www.mskousen.com.

From The President’s Desk

by Mark Skousen

Amazing Graph


“Both liberal and strictreligious groups are more

dynamic when they have tocompete for members on a

level playing field.”—GARY BECKER1

APRIL 2002

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“America shifted from a nation in whichmost people took no part in organized reli-gion to a nation in which nearly two thirdsof American adults do.”5 (See the figurebelow.)

Rates of Religious Adherence,1776–1980

Source: Finke and Stark, The Churching of America, p. 16.

The Impossible Dream of One FaithThe sociologists found, second, that it is

impossible for one faith to dominate thenation in an environment of relentless com-petition. In colonial times, the Congrega-tionalists and Episcopalians dominated. Butthey could not cope with the fierce competi-tion from the Methodists, Catholics, andBaptists during the frequent revival periodsof American history. Just as no corporatemonopoly lasts forever, so also does it seemimpossible for a mainstream religion to stayon top for long. Finke and Stark concludethat no religion, no matter how successful inthe short run, can convert the whole world.Christians just don’t seem to be content withone church, just as consumers can’t agree onone car model or one type of tennis shoes.Over time, all markets—whether for auto-mobiles, shoes, or religions—tend to show

an increase in quantity, quality, and variety.As Finke and Stark demonstrate, despite theconstant call for all Christian groups to be“as one,” unification efforts have repeatedlyfailed. The conventional wisdom that “allchurches are alike” is inaccurate. Diversity isthe lifeblood of religious life in America.

Third, Finke and Stark discovered thatmainstream churches which compromisedtheir principles and eliminated their “strongdoctrines” invariably experienced wide-spread defection and ultimate failure, whilechurches that maintained high doctrinalstandards, such as the Catholic Church,prospered. In other words, the marketrewards the quality of religious worship.“We argue repeatedly that religious organi-zations can thrive only to the extent thatthey have a theology that can comfort soulsand motivate sacrifice.”7

Fourth, the scholars refuted the popularbelief that urban communities are less reli-gious than country life. Debunking thepreachers’ myth that city life is “wicked andsecular,” Finke and Stark provide evidencethat church attendance rates are higher incities than in rural areas.

In sum, we can see that the principles ofeconomics are universal. Incentives, compe-tition, quality, and choice apply not only tothe material world, but to the spiritual realmas well. �

1. Gary S. Becker and Guity Nashat Becker, The Economicsof Life (New York: McGraw Hill, 1997), p. 16.

2. Another is Robert H. Nelson, author of two excellentbooks, Reaching for Heaven on Earth: The Theological Mean-ing of Economics (Savage, Md.: Rowman & Littlefield, 1991)and Economics as Religion: From Samuelson to Chicago andBeyond (University Park, Pa.: Penn State Press, 2001), both ofwhich deal with economics as religion rather than the econom-ics of religion.

3. See Adam Smith, The Wealth of Nations (New York:Modern Library, 1965 [1776]), pp. 744–48. I discuss AdamSmith’s views on religion in more detail in my book The Mak-ing of Modern Economics (New York: M.E. Sharpe, 2001), p. 27.

4. Lawrence Iannaccone, “The Consequences of ReligiousMarket Structure,” Rationality and Society (April 1991), pp.156–77. See also “Adam Smith’s Hypothesis on Religion,”chapter 10 in Edwin G. West, Adam Smith and Modern Eco-nomics (Hants, England: Edward Elgar, 1990).

5. Roger Finke and Rodney Stark, The Churching of Amer-ica, 1776–1990: Winners and Losers in Our Religious Econo-my (New Brunswick, N.J.: Rutgers University Press, 1992), p. 1.

6. Ibid., p. 32.7. Ibid., p. 5.



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A good many people express incredulitywith the consistent free-market, or lib-ertarian, position. They consider

opposition to the welfare state as somethingbizarre, rejection of unlimited democracy asalmost un-American, and opposition tothings like Social Security as bordering onoutright callousness. For this reason it maybe of some value to illustrate how a libertar-ian may respond to a prominent defense ofSocial Security, the quintessential Americanwelfare-state policy.

A while back in the New York Times,Henry J. Aaron of the Brookings Institution,one of this country’s most prestigious Wash-ington think tanks supporting nearly all welfare-state measures, laid out the case forthe continuation of Social Security. Here ishow he put his case: “Most individuals . . .do not do a very good job of planning for distant or unlikely events like retirementor disability. Moreover . . . since many peo-ple are already exposed to the risks of bigstock market swings through 401(k) pro-grams and Individual Retirement Accounts,there is good reason to maintain Social Secu-rity as a guaranteed benefit in which anyinvestment or economic risks—as well asadministrative costs—are spread across thegenerations and income levels. The wildgyrations in the stock market . . . underscorethe point.” Mr. Aaron then added, “The rea-sons that led the nation to adopt socialinsurance are about as strong now as theyever were.”

This is indeed a standard and familiar wayto defend Social Security and many otherwelfare-state measures. How can the liber-

tarian insist that Social Security is immoral?Here is how.

Perhaps it is true that “most individualsdo not do a very good job of planning fordistant or unlikely events like retirement anddisability.” This fact, if it is one, does notsupport in the slightest the imposition ofvarious costs on other people who in fact dodo a good job. Why should the negligenceand oversight of some people impose bur-dens on others who are prudent and who useforesight? What is the point of being prudentif you are still burdened with the insolvencyand debt of other people? We could justifybank robbery that way too: The saversshould not complain when those who havefailed to save take their money, since thethieves simply did not do a good job of plan-ning. Furthermore, if most people aren’tgood at planning for distant and unlikelyevents, why would most politicians, whomust constantly worry about re-election, orbureaucrats, who need security as much asthe next person, be better at this than therest of us? No reason to think so at all.

What about the other concern, namely,stock-market volatility? This argument isdeceptive because, in fact, over the long haulthe stock market has long paid good returns.Moreover, the government’s management ofwealth is far from a sure-fire guaranteeagainst disaster. (The Social Security TrustFund, for example, is a myth.) But nevermind the mythology of government guaran-tees; what about the alleged propriety ofhaving government force you to avoid takingbad risks?

Government’s FunctionMr. Aaron and others of his persuasion

should be reminded that it isn’t the properfunction of government to be our mommiesand daddies. Government folks are, after all,human beings, no different in wisdom andvirtue from the rest of us. How dare theymake themselves our guardians? It is our

It Just Ain’t So!

Social Security Is Moral?

APRIL 2002


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right to manage our lives as we see fit, evenif there are serious risks involved. (Every-thing we embark on in life entails risk.) Whynot oversee our marriages, sex lives, reli-gious affiliations, and so on? Why not justforget about this “free country” stuff andmake us all wards of the state? What is for-gotten by Mr. Aaron & Co. is that citizensare not children and the less they are trustedwith their own lives, the more inept theybecome not only at living life, but also at figuring out who should hold political office.Dumbing down America is what the Aaronpolitical economy amounts to, nothing less.

In general terms, the libertarian thinksmore of human beings than many people

think of themselves, probably because hediscounts much of what is implicit in Amer-ican public education, where kids are mostlytreated as units in a rather dumb herd. Thelibertarian holds on to the conviction thatfree men and women can—and often do—deal with life better than the ruling elitethinks they can.

To be sure, there are risks associated withliving as free men and women. But they arenot so great as the risks involved in allowingbureaucrats to violate our rights to free judg-ment and action, to life, liberty, and the pur-suit of happiness.


([email protected])Chapman University


Register online forthe FEE National Convention!


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Why Are Golden ArchesLightning Rods?by Christopher Lingle

I t is obvious that anti-globalization forcessuffer from a myopic fixation on symbolsrather than offering arguments based onsubstance. The clearest evidence of this is

the widespread attacks on McDonald’s out-lets and other iconic symbols of Americana.

Perhaps these protesters have poor powersof observation or simply lack fertile imagi-nations to seek out some new symbol ofprotest. It does seem curious that there areno known complaints about the global reachof karaoke or the invasions of Asian cuisinesthat have swept the world.

Surely, there are more karaoke bars inmore cities around the globe than there areMcDonald’s restaurants. And what aboutthe scourge of Latino songs that havestormed the music world like wildfire? Orthings Korean that charm a growing numberof admirers among Asians? And whoaccounts for the sins of Sony and Mercedes?

As it is, would-be activists have cut theirteeth on breaking into or tearing downstructures adorned with the Golden Arches.Jean Bove, a self-styled French farmer whospends more time on the barricades than onhis fantasized farm, was catapulted into star-dom by vandalizing one of those hamburgerjoints. Ironically, no one paid attention tothe fact that his act destroyed job opportuni-ties in a rather depressed part of France.

Now McDonald’s has become the targetof choice of those who would express out-rage against the U.S. retaliatory actions for terrorism directed at the Taliban,Afghanistan’s wannbe government. In neigh-boring Pakistan, unruly crowds trashedMcDonald’s in Islamabad and Karachi.Demonstrators in Indonesia have beenslightly more tame with outlets in variouscities being cordoned. As if to show theirresolve and to make up for their temperedrage, protesters also set upon Pizza Hut out-lets and implored diners to stay away.

Although multinational corporationsmake an easier target for registering com-plaints about globalization, ubiquitousbrands certainly are not limited to the Unit-ed States. As suggested above, it is simplywrong to portray globalization as a form ofcultural imperialism by America or the West.(The favorite target of the predecessors ofmodern anti-globalists was the Swiss compa-ny Nestlé.) Indeed, globalization involves amore complex process of modernizationcombined with internationalization. Thosewho would pretend it is otherwise are play-ing a dangerous game.

Attempts to mischaracterize globalizationas an American or Western conspiracy res-onate of social theories that supported ruinouseconomic policies in much of the postwar period. Generations of Latin American dicta-tors, African despots, and communist com-missars condemned their countries to grindingpoverty by thinking along these lines.

Christopher Lingle ([email protected]) isglobal strategist for eConoLytics.com and authorof The Rise and Decline of the Asian Century.

APRIL 2002


Current Issues

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Causing generations to suffer from eco-nomic stagnation is bad enough. Now theirmodern-day fellow-travelers are encourag-ing a divisive view of the world that is inhab-ited by a virtuous “us” and an evil “them.”Under this banner, the downtrodden victimsare acting righteously in tilting against thewindmills of multinational corporations.Unwittingly perhaps, this fuels the fire thatburns in the gut of terrorists.

Granted, there is an apparent convergencetoward certain norms or rules that are com-mon to Western cultures, especially as theyrelate to economic transactions. However,this convergence is the outcome of a naturaland evolutionary procedure that arises fromvoluntary choices by citizens and their gov-ernments to engage in worldwide markets.Most of these individual or collective choic-es are made with the aim of promotinggreater prosperity. Consequently, as morecountries have opened their economies toglobal markets, they have found a need toestablish certain legal arrangements thatoversee contractual agreements.

Part of this trend should be welcome tothose who oppose authoritarianism. Forthere is an unmistakable movement towardinstitutions that protect individuals andaway from authority-based institutions thatprotect state power. Critiques of global-ization are little more than another round in the struggle between conservatism andmodernism.

Biggest LosersIf protests and vandalism are successful in

undermining global branding, the biggestlosers will be consumers, especially those inpoorer countries. Whatever the complaints

against corporations with global reach, thepresence of these brands benefits consumersby lowering information costs. Wishing toprotect brands, companies will insure a highlevel of standardized quality and nondis-criminatory treatment of customers.

The good news is that larger multination-als are unlikely to withdraw completely evenfrom the most threatened markets. They canbuy up or into local brands or diversify intoproducts with names that may not indicatethe geographic origin of the company.

In all events, the success of branding hasspawned imitators in developing countries.In the Philippines, a local burger brandnamed Jolly Bee bested McDonald’s salesbefore moving into regional markets and afew outlets in California. Another fast-foodfranchise operation in Guatemala based onchicken products, Pollo Campero, outsellsall competitors despite the presence of all themajor chains.

It is a gross misrepresentation to depictglobalization as the outcome of a conspiracyof anonymous and mysterious foreignforces. The globalizing impulse is to a largedegree the result of preferences for importedproducts or services that are better or cheap-er than what is produced locally.

In this sense, globalization is not merelybenign. It reflects an expanding freedom ofexpression for citizens acting as consumers.Those who oppose these results reveal theirown elitist loathing for their fellow citizensand their right to express their choices.

Message to anti-globalists: Your distastefor Big Macs or American policies gives youneither the right nor obligation to stop oth-ers from enjoying their Happy Meals. Espe-cially when it causes someone else to lose his job. �


The apple icon identifies articles that are appropriate for teaching students sever-al major subjects—including economics, history, government, philosophy, and currentissues.

We also provide sample lesson plans for these articles on our Web site www.fee.organd in written form. Professors, teachers, and homeschooling parents need only to visitour Web site or request written lesson plans to take advantage of this unique service.

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Safer Living with Chemistryby Angela Logomasini

Back in 1651 Thomas Hobbes describedlife in the state of nature as “nasty,brutish, and short.” But even in civi-lized society during his lifetime, most

people lived under what we would considerwretched conditions. At that time, you werelucky if you lived past 30; our notion ofbasic sanitation didn’t exist; people used city streets to dispose of their trash; plagueswere not uncommon; food supply was oftenshort and very basic; and rudimentary home-heating systems using wood or coalmade indoor air pollution a serious healthhazard. While many of the problems wereenvironmental, few people had the time orleisure to worry about “the environment” asa public issue. Most simply worried aboutday-to-day survival.

But dramatic changes in the quality of lifehave occurred in recent history. Global lifeexpectancy in the last century climbed from30 to around 60. In the United States, lifeexpectancy has reached 76. So many of thethings we take for granted—hot and coldrunning water, health care, and a stable foodsupply were unknown to mankind through-out most of history.

Why is it that in the last couple of cen-turies things have changed so rapidly, when

for thousands of years life remained a strug-gle for survival? For one thing, free-marketeconomies emerged, based on the principleson which the United States was founded.John Locke spoke of these principles as theunalienable rights to “life, liberty, andestate.” Later Thomas Jefferson echoedthese sentiments and helped make them cen-tral to the American way of life. Such basicliberties mean that we in America have theright to self-determination and the right toprofit from our own ingenuity. From theonset of government based on fundamentalrights, free-market economies emerged,wealth increased profoundly, and our quali-ty of life improved by leaps and bounds.

Among the many achievements was thedevelopment of manmade chemicals, whichhave revolutionized how we live. They makepossible such things as pharmaceuticals, safedrinking water, and pest control. Yet popu-lar perception is that manmade chemicalsare the source of every possible ill from can-cer, ozone depletion, and infertility to braindamage. Ignoring that nature produces farmore chemicals in far higher doses and thatmost chemicals are innocuous at low doses,activists capitalize on these fears. They scarethe public by hyping the risks to ensure thatthe government passes volumes of laws andregulations all focused on the elimination ofchemicals, thus jeopardizing our freedomwithout much regard for the tradeoffs.

Advocates of such limits say that we needto make sure every chemical is safe before

Angela Logomasini ([email protected]) is direc-tor of risk and environmental policy at the Com-petitive Enterprise Institute. The article is drawn inpart from a section in CEI’s new book, The Envi-ronmental Source.

APRIL 2002



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exposing the public. In his recent book,Pandora’s Poison, Greenpeace’s Joe Thorn-ton calls on society to follow the “precau-tionary principle,” which says we shouldavoid practices that have the potential tocause severe damage, even in the absence ofscientific proof of harm. Thornton advo-cates a “zero discharge” policy, which callsfor the elimination of all “bioaccumulative”chemicals. In particular, he has long calledfor the elimination of chlorine, about whichhe noted in Science magazine (July 9, 1993):“There are no known uses for chlorinewhich we regard as safe.” More recently,perhaps in recognition that this standard is politically untenable, he suggested that we continue using chlorine for “some phar-maceuticals” and some “water disinfec-tion,” but only until other options becomeavailable.

Promoting such “precautionary policies”could mean halting all industrial activity,because nothing can be proven 100 percentsafe. Hence, such policies carry dangeroustradeoffs. While chemicals may create newrisks, they have been used to eliminate oth-ers—many of which wreaked havoc on civi-lization for centuries. As the CompetitiveEnterprise Institute’s Fred Smith notes:“Experience demonstrates that the risks ofinnovation, while real, are vastly less thanrisks of stagnation.” Indeed, he asks, whatwould the world be like if we had neverintroduced penicillin because we could notprove it was 100 percent safe?

Essential ChemicalsWhile we don’t think much about it, man-

made chemicals are essential to almosteverything we do. They make our cars run;they clean everything from our teeth to ourdishes; they reduce illnesses by disinfectingeverything from our bathrooms at home tothe operating rooms in our hospitals; theyare used on food products such as poultry toeliminate E. coli and other deadly pathogens;and they keep our computers, televisions,and other electronic products running. Con-sider just a few of the critical functions theyperform in making our lives better:

• Chlorination of water supplies hassaved millions of lives. For example,since local engineers and industry intro-duced chlorination in 1880s, water-borne-related deaths in the United Stateshave dropped from 75 to 100 per100,000 people to fewer than 0.1 deathsper 100,000 annually in 1950.1 Ratherthan curtailing the use of chlorination asThornton suggests, we should beexpanding access. According to theWorld Health Organization (WHO), inthe developing world diarrheal diseases(such as cholera and dysentery) killabout two million children under fiveevery year because of such things aspoor sanitation and unsafe drinkingwater. Nearly 85 percent of pharmaceu-ticals that we now use require chlorinein their production.

• Thanks to chemicals used for pharma-ceuticals, combination drug therapy hasreduced AIDS deaths by more than 70percent from 1994 to 1997.2

• Fifty percent of the reductions in heart-disease related deaths between 1980 and1990 (total death-rate decline of 30 per-cent) are attributable to medicines andthe chemicals that compose them.3

• Chemicals called phthalates (there areseveral kinds) are used in PVC—vinylused for medical tubing, blood bags,and numerous other products. Whileenvironmentalists have tried to banthese,4 vinyl medical devices providemany life-saving benefits. PVC is a safe,durable, sterile product that can with-stand heat and pressure, and producestubing that doesn’t kink. It’s particular-ly beneficial for vinyl blood bagsbecause it stores blood twice as long asthe next best alternative and doesn’tbreak like glass alternatives. In times ofblood shortages, PVC blood bags are anessential tool in maintaining and trans-porting supply.

• Thanks to modern farming with chemi-cals, food production has outpaced pop-ulation growth—providing people inboth developed and developing coun-tries with more food per person. Per


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capita grain supplies have grown by 27percent since 1950, and food prices havedeclined in real terms by 57 percentsince 1980. The use of herbicides to con-trol weeds decreases the need for tillingsoil, which in turn reduces soil erosion50–98 percent.5

Disregarding such benefits, most of thekey U.S. environmental regulatory statutesfollow the lead of groups like Greenpeace,focusing on the elimination of chemicalswithout much regard to the dangers of nothaving these technologies. The Clean WaterAct (1972), for example, made this unattain-able pledge: “it is the national goal that thedischarge of pollutants into the navigablewaters be eliminated by 1985.” While wecan meet reasonable clean-water goals, wecan’t meet a zero discharge without forciblyhalting industrial processes that bring us life-saving medicines, a safe food supply pack-aged to resist spoilage, and even clothing.

Likewise, regulations that the EPA issuedunder the Safe Drinking Water Act (1974)actually set zero as the goal for certain chem-ical contaminants in drinking water—some-thing that is virtually impossible and totallyunnecessary for public-health purposes.With such goals, drinking-water standardsfor chemicals are extremely stringent. Forexample, one standard for a contaminantdemands that drinking water not containany more than 0.03 parts per trillion. Thehigh costs of such onerous standards meanthat financial resources are diverted fromother more essential needs.

The Manmade Cancer MythWriting in the Journal of Clinical Oncolo-

gy last year, researchers from the Universityof Alabama Schools of Medicine and PublicHealth noted that “A typical commentaryblamed ‘increasing cancer rates’ on ‘expo-sure to industrial chemicals and run-awaymodern technologies whose explosivegrowth had clearly outpaced the ability ofsociety to control them.’”6 But their researchfinds: “There is no denying the existence ofenvironmental problems, but the presentdata show that they produced no strikingincrease in cancer mortality.” They con-clude: “When the mortality from all smoking-related cancers is excluded, the decline inother cancer from 1950 to 1998 was 31 per-cent (from 109 to 75 deaths per 100,00 per-son years).” Hence the increase in cancer atthat time was not related to the use of syn-thetic chemicals or pollution, but to person-al lifestyle choices.

The most recent report from the NationalCancer Institute confirms that: “Cancer inci-dence for all sites combined decreased from1992 through 1998 among all persons in theUnited States, primarily because of a declineof 2.9 percent per year in white males and3.1 percent per year in black males. Amongfemales, cancer incidence rates increased 0.3percent per year. Overall, cancer death ratesdeclined 1.1 percent per year.”7 Canceramong woman increased slightly onlybecause of better detection, which is goodnews because it means doctors are findingand curing more cancers among woman.

Ideas on Liberty • April 2002


While we don’t think much about it, manmade chemicals areessential to almost everything we do. They make our cars run;they clean everything from our teeth to our dishes; they reduceillnesses by disinfecting everything from our bathrooms at hometo the operating rooms in our hospitals; they are used on foodproducts such as poultry to eliminate E. coli and other deadlypathogens; and they keep our computers, televisions, and otherelectronic products running.

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In their landmark 1981 study of the issue,Sir Richard Doll and Richard Peto set out todetermine the causes of preventable cancerin the United States.8 According to Doll andPeto, pollution only accounts for 2 percentof all cancer cases. They do note that 80 to90 percent of cancers are caused by “envi-ronmental factors.” But while activists oftentrumpet this figure as evidence that industri-al society is causing cancer, Doll and Petoexplain that “environmental factors” simplymeans factors other than genetics. It doesnot mean pollution alone. Environmentalfactors include smoking, diet, occupationalexposure to chemicals, “geophysical fac-tors” such as naturally occurring radiation,manmade radiation, medical drugs and radi-ation, and pollution. Tobacco use accountsfor about 30 percent of all annual cancerdeaths, and dietary choices account for 35percent of annual cancer deaths.

With so few cancers caused by pollution,how many could environmental regulationeliminate? With each regulation the EPAclaims to save thousands from dying fromcancer. Together, these would likely add upinto the millions. But scientist MichaelGough demonstrates why we should consid-er such EPA claims suspect.

Gough analyzed the findings of the Doll-Peto study along with estimates of cancerrisks in the EPA’s report Unfinished Business.He came to conclusions similar to that of Dolland Peto. Gough noted that between 2 and 3percent of all cancers could be associated withenvironmental pollution. Determining suchnumbers helps us understand what exactlythe EPA can expect to accomplish when regu-lating pollutants. Gough says that EPA actioncould only address a small percentage of can-cers: “If the EPA risk assessment techniquesare accurate, and all identified carcinogensamenable to EPA regulations were complete-ly controlled, about 6,400 cancer deathsannually (about 1.3% of the current annualtotal of 435,000 cancer deaths) would be pre-vented. When cancer risks are estimated usingthe more realistic method employed by theFood and Drug Administration (FDA), thenumber of regulatable cancers is smaller,about 1,400 (about 0.25%).”9

Faulty Rodent TestsGiven these realities, how does the EPA

justify its claims? Many of the findings onchemicals and cancer relate to faulty teststhat entail administering massive amounts ofchemicals to rodents bred to be highly sus-ceptible to cancer. Then researchers extrapo-late the possible effects of such chemicals on humans, who may be exposed to small amounts of the same chemical duringtheir lives.

We should ask: Why are the impacts onrodents relevant to humans? Doll and Petonote that some chemicals found to be car-cinogenic in humans have not produced can-cerous tumors in rodents. In fact, for manyyears, cigarette smoke failed to producemalignant tumors in laboratory animalsalthough tobacco is a leading cause of cancerin the United States. These discordant effectsof chemicals in animals and humans under-line the difficulty of relying on animal resultsto estimate human risks.

Moreover, Bruce Ames and Lois SwirskyGold demonstrate why we need not be con-cerned about low-level exposure to “rodentcarcinogens.”10 They found that such chem-icals pose no more of a risk than that posedby many natural, unregulated substancesthat are common and accepted parts of ahealthy diet. While 212 of 350 of the syn-thetic chemicals examined by various agen-cies were found to be carcinogenic at themassive doses given to rodents, 37 out of 77of the natural substances tested were alsofound carcinogenic in rodent studiesemploying the same methodology. The aver-age intake of natural rodent carcinogens inplant foods is about 1,500 mg per personeach day, while the average intake of man-made pesticides is .09 mg per day.11 Naturalrodent carcinogens exist in apples, bananas,carrots, celery, coffee, lettuce, orange juice,peas, potatoes, and tomatoes at levels thou-sands of times greater than exposures foundin drinking water.12

The free use and development of chemi-cals have proven a key to human progress,and ill effects on health from low-level expo-sures are small, if detectable at all. Contin-

Safer Living with Chemistry


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ued progress demands the continuation of anunfettered marketplace in which firms candevelop new products without having tomeet an impossible or nearly impossiblezero-risk standard. Such allegedly more“precautionary” approaches of the environ-mental activists actually risk a return to theworld of Thomas Hobbes. �

1. Michael J. LaNier, “Historical Development of Munici-pal Water Systems in the United States, 1776 to 1976,” Journalof the American Water Works Association, April 1976, p. 177.

2. Frank J. Palella et al., “Declining Morbidity and Mor-tality among Patients with Advanced HIV Infection,” The NewEngland Journal of Medicine, March 26, 1998.

3. M.G. Hunink et al., “The Recent Decline in MortalityFrom Coronary Heart Disease, 1980–1990,” Journal of theAmerican Medical Association, February 19, 1997, pp. 535–42.

4. Bill Durodie, “Poisonous Propaganda: Global Echoes ofan Anti-Vinyl Agenda” (Washington, D.C.: Competitive Enter-prise Institute, July 2000).

5. Dennis Avery, “Saving the Planet with Pesticides,” in

Ronald Bailey, ed., The True State of the Planet (New York:Free Press, 1995), pp. 52–54.

6. Brad Rodu and Philip Cole, “The Fifty-Year Decline ofCancer in America,” Journal of Clinical Oncology, January 1,2001, pp. 239–41.

7. Holly L. Howe et al., “Annual Report to the Nation onthe Status of Cancer (1973 through 1998), Featuring Cancerswith Recent Increasing Trends,” Journal of the National CancerInstitute, June 6, 2001, pp. 824–42.

8. Richard Doll and Richard Peto, “The Causes of Cancer:Quantitative Estimates of Avoidable Risks of Cancer in theUnited States Today,” Journal of the National Cancer Institute,June 1981.

9. Michael Gough, “How Much Cancer Can EPA RegulateAway?” Risk Analysis 10, no. 1 (1990), pp. 1–6; and MichaelGough, “Estimating Cancer Mortality,” Environmental Scienceand Technology 23, no. 8 (1989), pp. 925–30.

10. Bruce Ames and Lois Swirsky Gold, “Too Many RodentCarcinogens: Mitogenesis Increases Mutagenesis,” Science,August 31, 1990, p. 970.

11. Ibid.12. National Research Council, Committee on Comparative

Toxicology of Naturally Occurring Carcinogens, Carcinogensand Anticarcinogens in the Human Diet: A Comparison of Nat-urally Occurring and Synthetic Substances (Washington, D.C.:National Academy Press, 1996), Appendix A.

Ideas on Liberty • April 2002


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Seven miles north of Escanaba in Michi-gan’s Upper Peninsula sits a little townwith a very big name. More than a hun-dred years after the death of the town’s

namesake it’s unlikely that many of today’s5,000 residents of Gladstone could tell youmuch about him. But in the nineteenth cen-tury and for a long time thereafter, he waswidely considered to be one of the world’sgreatest statesmen.

Gladstone, Michigan, wasn’t always sonamed. It was originally christened “Min-newasca,” the Sioux Indian word for “WhiteWater,” in 1887. Shortly thereafter, a localbusinessman pushed to rename the town afterBritish Prime Minister William Ewart Glad-stone. A nearby railroad was partially fundedby British capital and area residents appreci-ated the resulting economic development.

Just who was this son of Scottish parentswho read 20,000 books in his lifetime andcould speak Greek, Latin, Italian, andFrench, in addition to English? BiographerPhilip Magnus wrote that “at the time of hisdeath [1898] he was . . . the most veneratedand influential statesman in the world.”Another biographer (who currently sits inBritain’s House of Lords), Roy Jenkins,declares that Gladstone “stamped the Victo-rian age even more than did [Queen] Victo-ria herself, and represented it almost asmuch.”

No individual in history had a longer ormore distinguished career in the British gov-ernment: 62 years in the House of Com-mons; in charge of the nation’s finances asChancellor of the Exchequer for 14 budgetsin four administrations; leader of a majorpolitical party (the Liberals) for almost 40years; four times prime minister, for a totalof 12 years. Gladstone was 84 years oldwhen he retired as P.M. in 1894, the oldestprime minister in British history. He washailed as the “Grand Old Man” for his lead-ership and stature and as “England’s GreatCommoner” because he was not of royalblood and refused to accept any titles ofnobility. When he died, a quarter million cit-izens attended his funeral, one of the largestthe country ever saw.

What made Gladstone both great andmemorable was what he accomplished whilehe served in government. Biographer Mag-nus says that Gladstone “achieved unparal-leled success in his policy of setting the indi-vidual free from a multitude of obsoleterestrictions.”

Today, when a citizen gets elected to makegovernment smaller but ends up doing theopposite, the conventional wisdom creditshim with having “grown in office.” Glad-stone’s philosophy evolved, but in preciselythe opposite direction—from a hodgepodgeof statist notions to principled liberty. Heentered Parliament at age 22 in 1832 as a protectionist, a defender of the tax-subsidized Church of England, and an oppo-nent of reform. The eminent British histori-an Thomas Babington Macaulay described

Ideas and Consequences by Lawrence W. Reed

A Man Who Didn’t“Grow” in Office

Lawrence Reed ([email protected]) is presidentof the Mackinac Center for Public Policy (www.mackinac.org), a free-market research and educa-tional organization in Midland, Michigan.

APRIL 2002


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him as “the rising hope of the stern andunbending Tories.”

Ardent Free TraderBy 1850 he had become an ardent free

trader and by 1890 he was largely responsi-ble for reducing Britain’s tariffs from 1,200to just 12. He slashed government spending,taxes, and regulations. He ended tax subsi-dies for the Church of England in Ireland.He pushed through reforms that allowedJews and Catholics to serve in Parliamentand that extended the vote to millions oftaxpaying workers. He extolled the virtuesof self-help and private charity.

Gladstone’s administrations were notparagons of unqualified libertarianism. Indomestic policy he sometimes supportedinterventionist measures. But it is undeni-able that Britons were considerably freerwhen he died in 1898 than their fathers and grandfathers had been at the start of the century.

It wasn’t the instruction he received whilea student at Oxford that converted Glad-stone to the liberation of the individual.Indeed, he offered this observation in lateryears: “I trace in the education of Oxford ofmy own time one great defect. Perhaps itwas my own fault; but I must admit that Idid not learn when at Oxford that which Ihave learned since—namely, to set a duevalue on the imperishable and inestimableprinciples of human liberty. The temperwhich, I think, too much prevailed in acade-mic circles was to regard liberty with jeal-ousy.” Anyone familiar with the prevailingorthodoxy of today’s academia would haveto conclude that in this respect, the morethings have changed the more they’ve stayedthe same.

It was as president of the Board of Tradein the ministry of Sir Robert Peel in the1840s that a young Gladstone came tochampion free trade. The disastrous Irishpotato famine was a powerful argumentagainst laws forbidding the importation ofgrain for a starving populace. Gladstonebefriended the Anti-Corn Law League’s John

Bright, became convinced of the logic of freetrade, and secured the repeal of the protec-tionist Corn Laws over the objections ofmany in his own Conservative, or Tory,Party. The measure split the Conservatives,which paved the way for Gladstone and others a decade later to give birth to the Liberal Party.

Gladstone’s conversion to free trade madehim a big name in liberal circles in Britainand a rising star abroad as well. His interna-tional reputation soared in 1851 when, aftera visit to Naples, he revealed to the worldthe appalling conditions in Neapolitan pris-ons. Reformers there were being locked upfor speaking out on behalf of freedom. Glad-stone’s vigorous denunciation reverberatedaround the globe and later prompted theItalian patriot Garibaldi to credit the Britishparliamentarian with having “sounded thefirst trumpet call of Italian liberty.”

In foreign policy, with a painful exceptionor two that he mostly later regretted, Glad-stone practiced retrenchment. He opposedthe imperialist policies of his archrival Ben-jamin Disraeli. He said he preferred theGolden Rule over intervention. He foughthard but failed to secure Home Rule for Ire-land; if Parliament had been as wise as he onthat issue, Ireland today might still be a partof the United Kingdom.

In February 1893, in his 83rd year, hedelivered what one biographer terms “alucid and brilliant speech” upholding thesanctity of sound money and the gold standard.

Gladstone often urged the British peopleto look to the ideas of America’s FoundingFathers for inspiration. “I was brought up todistrust and dislike liberty; I learned tobelieve in it,” he told a friend in 1891. “Iview with the greatest alarm the progress ofsocialism at the present day,” he said.“Whatever influence I possess will be used inthe direction of stopping it.”

Today, in little Gladstone, Michigan, aportrait of the Grand Old Man hangs in CityHall. The residents there can and should bevery proud that their town’s name didn’tstay “Minnewasca” for long. �

Ideas on Liberty • April 2002


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Socialism of the Spiritby Karen Selick

Obesity is approaching epidemic pro-portions in Canada, studies tell us.Predictably, some busybodies havestarted promoting the idea of a “fat

tax” on snack foods such as chips and cook-ies, comparable to the “sin taxes” currentlyimposed on alcohol and tobacco.

A surprising percentage of the populationseems willing to entertain this idea. Accord-ing to the Globe and Mail, 48 percent of therespondents polled agreed either “strongly”or “somewhat” with it. Coincidentally, 48 isexactly the same percentage of the popula-tion that experts classify as overweight orobese.

Unfortunately, the pollsters didn’t corre-late respondents’ opinions with their waistmeasurements, so we don’t know whether itwas only thin people who voted yes to thetax, or perhaps even only fat people—bothwithin the realm of possibility. My guess,though, is that the numbers didn’t breakdown quite so neatly—that there was proba-bly a mix of fat and thin people on bothsides of the issue.

That’s always the way it is with “moral-ity” laws like this. There are plenty ofsmokers who say they’re glad the govern-ment forces them to look at hideous pic-

tures on their cigarette packages. Take apoll at a casino or racetrack and you’resure to find some patrons who think gam-bling should be outlawed. Many drinkersthink taxing booze is wise public policy,and plenty of men who’ve patronizedhookers think prostitution should beseverely punished.

I can understand to some degree the men-tality of those who don’t indulge in a partic-ular vice and want to legislate others out ofdoing so. In this day and age, when we’re all chained together through the tax systemand socialized medicine, we have an interestin preventing our fellow chain-gang crew from self-destructing and burdening us even further.

However, I’m skeptical about whether thiscan be accomplished by taxing vices. Mostvices already have their own form of punish-ment built in. I mean, if the possibility of aheart attack or the humiliation of not beingable to fit your enormous bulk into a busseat isn’t enough to scare you away fromovereating, are a couple of extra dollars aweek in taxes going to do the trick? Arefinancial incentives really the only form ofreward and punishment that human beingsrespond to?

What I really can’t understand is the men-tality of those who do engage in a particularvice, but nevertheless tell pollsters thatthey’d like to see their vice either heavilytaxed or completely outlawed. What hap-pens to these people the moment they get off

Karen Selick ([email protected]), a formerlawyer, is a writer in Canada. This originallyappeared in the November-December 2001 issueof Canadian Lawyer magazine. Copyright 2001 byKaren Selick.

APRIL 2002


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the phone with the pollster? Do their back-bones instantly turn to jelly?

If overeaters really think a tax on fattyfoods is a good idea, they can stick a piggybank in the kitchen and deposit a loony(dollar) or two every time they open therefrigerator and sin. When the bank is full,they can donate the money to their localhospital. Why involve the rest of us in thisscheme?

Of course, the answer is that it’s easy tomuster enough will power for a one-timetelephone poll or a one-time vote for a politi-cian who promises to punish you later foryour own good. It’s a lot harder to musterthe will power to discipline yourself eachand every time you feel the urge to sin.

So what these people would really like todo is borrow a little backbone from otherpeople. They’re like Ulysses, asking to belashed to the mast so they’ll be able to resisttemptation later on.

If they would only confine themselves toborrowing backbone from willing lenders,there’d be no problem. Borrowing backboneis what people do in self-help groups likeAlcoholics Anonymous. When they’retempted to sin, they call up another memberwho lends them the will power to resist. Inreturn, they commit themselves to do thesame for their fellows. It’s voluntary and it’sreciprocal—a great system.

Backbone TheftBut asking for new taxes or restrictive

laws to help you control your vices is equiv-alent to trying to steal backbone, not borrowit. New laws would affect everybody—thinand fat, occasional drinkers and chronicalcoholics, the disciplined and the undisci-plined. Someone who likes the occasionalcookie, the occasional drink, or the occa-sional evening’s entertainment at the casinowould get punished for the sake of otherswho recklessly and habitually overindulge.

Canadians as a society have become soaccustomed to the idea of redistributingwealth that we don’t utter a peep—indeed, wemay not even recognize what’s happening—when we are confronted with a proposal toredistribute an intangible form of wealth:strength of character. We’re willing to imposelaws on those who don’t need them—ineffect, expropriating the sense of virtue thattheir behavior should rightfully earn them—in order to dole out a phony sense of accom-plishment to those who haven’t earned it.

I call this socialism of the spirit. Torephrase Karl Marx, it’s: “From eachaccording to his strengths, to each to indulgehis weaknesses.” And just as material social-ism undermines a country’s material produc-tivity, so does spiritual socialism sap its pro-duction of character. �

Ideas on Liberty • April 2002


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The Pernicious Nature ofVictimless-Crime Lawsby Joseph S. Fulda

Laws creating victimless crimes are par-ticularly pernicious laws. Their associat-ed evils are essential rather than acci-dental; that is, their destructive proper-

ties stem from their very nature as victimless.It will soon become clear why federal judgescommonly write and speak of “the drugexception” to search-and-seizure (FourthAmendment) jurisprudence, why doubleagents lead double lives as members in goodstanding of both the law-enforcement com-munity and drug underworld, why vicesquads are notorious for taking bribes andfor crossing the thin line between observerand participant, and why the whole enter-prise of enforcing laws against this class ofcrimes smacks of smarmy agents doing ques-tionable acts in the middle of the night atpoorly lit harbors of criminal activity wheremost decent folks will not ever venture.

Let me begin with a short account of acrime that had a victim. In the height of theDinkins-era crime wave in New York City,*I arose early one morning and decided aftersaying my prayers to have a breakfast ofbagels. Since the bagel shop was only aboutfive blocks from where I lived, I put on mycoat, walked out the door, and started mywalk. At the corner, two youths appeared asif out of nowhere; one held the blade of a

knife palpably to my throat and demandedmy money—which, not being foolish, Iquickly surrendered. The incident left meangry and humiliated and after regaining mycomposure, I immediately hailed a policecar. The officers and I patrolled the arealooking in vain for the youths who hadmugged me; then they took me to the stationhouse to view mug shots.

I realized then why eyewitness testimonyis so often flawed: While I was sure I couldhave identified the youths on the street hadwe passed them in the car, the task of iden-tifying them from the mug shots was hope-less. I just could not do it with any degree ofconfidence. I left the police precinct housedejected, dejected because the only hope forthe criminals’ capture had been that ride inthe patrol car. The victim’s early identifica-tion—when what was stolen was cash andwhen the weapon was an ordinary knife—was the last, best chance of the police’s mak-ing the arrest. I was both their first recourseand their last hope. I went away from thestation house knowing that even if they wereto be caught later for another offense, theywould never be charged for the indignity andhumiliation they had visited upon me.

This is, in essence, how it is with mostcrimes: The victim’s ability to identify thecriminal by sight, sound, or even smell; thevictim’s wounds and marks, if any; andtraces of fibers and dropped materials in theContributing editor Joseph Fulda ([email protected])

is the author of Eight Steps towards Libertarian-ism (Free Enterprise Press). Copyright © 2002 byJoseph S. Fulda.

APRIL 2002


*David Dinkins was mayor of New York City from 1990through 1993.

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victim’s surroundings provide the best shotat catching the criminal. In other words, thevictim’s active help is critical to an arrest anda successful prosecution. (In the case of mur-der, the victim has stand-ins—his family andfriends.) The victim also provides the pushfor an arrest and successful prosecution.Rarely are crimes solved without the cooper-ation and impetus of the victim, althoughthere are, of course, exceptions.

Therein lies the problem with victimlesscrimes. Since there is no complainant, noone whom the outlawed behavior has violat-ed, how is it to be reported and detected?How are misfeasors to be brought before thecourt, and how is the prosecution to be car-ried out? What impetus is there for a prose-cution?

The answer historically has been twofold.First, the rules for the police have beenrelaxed—the drug exception to search-and-seizure procedures. Second, the governmenthas stepped in in the place of the victim, act-ing as a willing participant in the crime onlyto turn on the other party later. These arewhat are called “sting” operations, andmostly they are used for victimless crimes.But the officers participating in the sting arenot true victims; they have not been harmed.Indeed, they collect a paycheck.

The problems this leads to are legion.These officers have dual loyalties for thesake of which they may play the governmentfor the fool as often as those involved in the

drug trade. This begins with the practicalnecessity of alliances in both worlds andends with the very real allegiances to and inboth worlds. Officers may take bribes; theymay participate in crimes—justifying it tothemselves and sometimes their superiors bythe necessity of establishing a rapport withthe criminals they are after or with theirorganizations. Sometimes they even partici-pate in real (non-victimless) crimes or watchsilently as their confederates knock off eachother or innocent others. They justify thisparticipation or silence to themselves or theirsuperiors by the need to stay quiet till theycan identify and arrest “the big guys”—eventhough the non-victimless crimes are com-mitted on the street by the little guys. Casebuilding of this sort takes a lot of time andmany officers because the moment the offi-cers blow their cover and make a series ofarrests, they lose the ability to track anddetect future (victimless) crimes, to makefuture arrests, and to prosecute further cases.So the emphasis is always on casting a wideand deep net that will ensnare as manyimportant perpetrators as possible. Themany sordid things that happen while cast-ing this net are among the costs of goingafter victimless crimes.

Victimless crimes, in summary, invite graftand corruption of all sorts and the suspen-sion of civil liberties, because these are theonly effective ways of combating this speciesof “crime.” �

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Phony Food Crisisby Jim Peron

Green icon Paul Ehrlich is widelyknown for his absurdly inaccurateprojections regarding population andfood. Rarely does a doomsday projec-

tion pass by without his embracing it. Butmost of his previous false claims are forgot-ten, or ignored, by the anti-capitalist coali-tion of today.

After all, Ehrlich made those claims in1968, and that was a long time ago. But in1990 he published The Population Explo-sion, a sequel to his first bestseller.1 Yetagain time has proven that Ehrlich’s premis-es, on which his projections are based, areseverely flawed. If an excess of three decadesworth of statistics contrary to his theories donot dent his reputation, then Ehrlichdeserves the title Teflon Prophet.

It is not the facts that compel Ehrlich’ssupporters as much as a fanatical adherenceto his solutions: global central economicplanning more ambitious than anythingMarx ever dreamed of. Ehrlich says he“can’t really see any truly insuperable barri-ers to reorganizing our society so that virtu-ally everyone could lead a more pleasant,productive, satisfying life.”2 As he sees it,our choice is to abandon the market for an“orderly, planned way to a sustainablehuman life-support system or to be brutallyforced into that shift by nature.”3 When he

wrote so wistfully about “reorganizing oursociety” did he envision himself as one of thereorganizers?

Ehrlich recognizes that reorganizationwould mean “giving up many things that wenow consider to be essential freedoms.”While the costs would be great, so would thesupposed benefits, which include “avoidingthe total collapse of civilization and the dis-appearance of the United States as we knowit.”4 Ehrlich is serious, and he’s taken seri-ously by the anti-capitalist coalition. Hisperceived sainthood rests not on acumen oraccuracy, but on the fact that the solutionshe offers are ideologically in tune with hissupporters.

The most recent major study to disprovethe theories of Ehrlich came from the Inter-national Food Policy Research Institute(IFPRI). In its book Global Food Projectionsto 2020, the IFPRI looks back at the last 30years of world food production—coinciden-tally the period since the publication ofEhrlich’s first book. With the advantage ofhindsight the Institute finds “that mostregions have made substantial inroadsagainst poverty and averted widespreadfamine in recent years.”5 The result has beena significant drop in the numbers of mal-nourished children. In high-risk developingcountries malnutrition rates declined from“an aggregate rate of more than 46 percentin 1970 to 31 percent in 1997.” That trans-lates “into an absolute decline of 20 millionmalnourished children since 1967.”6

Jim Peron ([email protected]) is executive direc-tor of the Institute for Liberal Values in Johannes-burg, South Africa.

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In 1990 Ehrlich had a very different viewof Latin America. He lamented: “Since1981, per-capita food production has alsobeen lagging” there and that “populationgrowth is already outstripping food produc-tion.” Yet the IFPRI says that per capitacereal production increased from 225.3 kilo-grams in 1967 to 253.4 kilograms in 1997.During the period of 1990–1997 cereal pro-duction was growing at an annual rate aver-aging 1.9 percent, compared to a populationgrowth rate of 1.7 percent.7 Ehrlich’s bookwas already wrong by the time it was print-ed: per capita food production, instead oflagging, grew by 11 percent over the nextdecade and cereal production increasedfaster than the population.

What the IFPRI has to say is good news allaround, but more so for the developingcountries. Instead of heading toward globalfamine, food supplies are increasing for thevast majority of the world’s population. TheIFPRI found:

• “caloric availability per capita rose indeveloping countries between the 1960sand the early 1990s by 400 kilocalories,reaching nearly 2,700 kilocalories perday by 1997”;8

• per capita cereal production, from 1967to 1997, “rose substantially”;9

• per capita gains in cereal production“rose from 176 kilograms in 1967 to 226kilograms in 1997, an increase of 28 percent.”10

No Malthusian CrisisThe IFPRI is not alone in its conclusions.

Tim Dyson, professor of population studiesat the London School of Economics, wrotein the British Medical Journal that “a globalmalthusian crisis is unlikely to occur duringthe next few decades.”11 Dyson surveyed thevarious regions of the world and found ahealthy scenario regarding food and popula-tion. He said that famines on the Indian sub-continent “will be things of the past” pro-vided the region remains politically stable. InChina he found “no cause for alarm,” andboth “Latin America and the Middle East

have a record of progress in feeding theirpeople and this is likely to continue.”12

Ehrlich, who projected massive famines inhis first book, ignored his original projec-tions in his second book. Instead of admit-ting he was wrong he wrote: “Of course, [asif he knew this all along] food productionworldwide has continued to increase some-what faster than the population for the lastfour decades.” But while some peoplebelieve this will continue for the foreseeablefuture, he says, “all signs point in the oppo-site direction.”13

Dyson wrote that the trend, instead ofreversing, has continued unabated: “Foodproduction should be able to keep up withthe growth in world population that is pro-jected to occur over the next 25 years. Animportant reason for this is that the world-wide growth in cereal yield shows no sign ofslowing down.”14

Data from the U.N. Food and Agricultur-al Organization (FAO) shows worldwidecereal yields to have increased from just overone ton of cereal per hectare in the early1950s to about 3 tons by the late 1990s.15

And worldwide averages are significantlybelow those of the developed world, imply-ing room for a great deal of growth.

Areas that Ehrlich once said were hopelessare today feeding their own people. In his1990 book Ehrlich claimed that food pro-duction in India, which had increased con-trary to his prior warnings, had finally “lostmomentum.” But the IFPRI data showsEhrlich to be inaccurate yet again. Instead oflosing momentum, rice production in Indiagrew from 3.7 metric tons per hectare in1990 to 4.2 in 1997. In addition, wheat pro-duction increased from 2.2 tons to 2.6, andmaize increased from 1.5 tons to 1.7 tons.16

India, which was importing over 9 millionmetric tons (mmt) of cereals in 1967 wasexporting almost 2 mmt by 1997.

Ehrlich had even less hope for the entireSouth Asia region. Yet the Institute’s datashow that its food production increasedthroughout the ’90s and surpassed India’s inpercentage terms. In 1990 Erhlich said Viet-nam, once “a rich food exporting region,”was suffering from ecological destruction.17

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In 1967 Vietnam imported 1.5 mmt of cere-al. By 1982 imports were down to 0.6 mil-lion, and when Ehrlich’s book was released,Vietnam was exporting 1.2 mmt. By 1997exports were up to 2.8 mmt.18

There are two fundamental reasons thatEhrlich has consistently, and substantially,erred with his projections. All his calcula-tions are based on two false factors: heassumes food production must decreasewhile population growth rates remainsteady. As we’ve seen, food production hascontinued to increase for the three decadessince he first sounded his warnings. ButEhrlich felt such declines were inevitable andsaid the “tragedy” would be compounded bythe fact “that the world population seemscommitted to a growth rate of closer to 2percent for the next few decades.”19 While“few” is indeterminate, it is safe to assumehe meant more than a couple; say, 30years—until 2020.

But instead of remaining near 2 percentpopulation growth rates had alreadydeclined by the time Ehrlich wrote his book.Population growth peaked around 1970 at2.1 per cent. By 1980 it was down to 1.73percent, and when Ehrlich’s book was pub-lished it had dropped to 1.7 percent. In 1995the Institute for Demographic Studies saidthe rate had declined even further, to 1.5percent.20 And it continued to plummet sothat by 2000, at 1.3 percent, it was closer to1 percent than to Ehrlich’s projected 2 per-cent. Even the United Nations, which usual-ly overestimates population growth, saysthat growth levels by 2015 will be down to1.03 percent.21

Point of AgreementThere is one area on which Ehrlich,

Dyson, and the Institute all agree: sub-Saharan Africa. There cereal-productionrates declined almost from the day the colo-nial powers pulled out until today. In 1967per capita cereal production was 127.9 kilo-grams but by 1997 it had dropped to 124.6kilograms. This production rate is only one-fifth that of the developed countries and isabout half the average for the developing

countries. In spite of being the least populat-ed continent, perhaps partially because of it,Africa’s per capita food production is signif-icantly lower than that of South Asia, thenext poorest region in the world.22

In August 2000 the FAO warned that 17countries faced severe food shortages, all insub-Saharan Africa.23 But what is clear isthat in the majority of these cases, 12 coun-tries by my count, political problems andwar are the main cause of food shortages.

Almost all the “basket cases” of the worldfrom 30 years ago are now well on their wayto feeding themselves, but not Africa. Thatraises the question why. If we look at thesuccesses we see some dramatic changes.From 1958 to 1962 an estimated 30 millionChinese starved to death under an artificialfamine created by socialist economic andagricultural policies.24 Market reforms wereinstituted after Mao’s death, and food sud-denly became more plentiful. The late politi-cal scientist David Osterfeld noted that afterreforms, food production increased by 40percent.25 Since the early ’90s, when Oster-feld wrote his book, cereal production inChina has increased by a further 17 per-cent.26 In addition, market reforms havevastly increased the wealth of nonfarmers inChina, making it relatively easy for them toafford to import the surpluses of food beingproduced in much of the rest of the world.

India, which Ehrlich had written off, hasalso turned into a food exporter. Again mar-ket reforms predated the rise in production.The late Julian Simon noted in AtlanticMonthly that “Most price controls were lift-ed, and price supports were substituted forcontrols. Indian farmers had a greater incen-tive to produce more, so they did. Theyincreased production by planting more cropsa year, on more land, and by improving theland they had. They also introduced higher-yield strains and improved fertilizers.”27

Since Simon wrote those words cereal pro-duction in India has increased 50 percentfurther.28

But Africa has continued down the roadof state intervention. What market reformshave been instituted have been half-measuresand often repealed later. In many cases, such

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as Zimbabwe, the government has wagedwar on private markets intentionally, under-mining private property rights and the incen-tives to produce. Reforms in Africa havebeen so half-hearted that the IFPRI produceda paper on the subject titled The Road HalfTraveled.29

Throughout Africa state marketing boardsoften hold a monopoly on critical foodstuffs.Frequently these boards will pay farmersbelow-market rates and then sell the produceon the world market with all profits going tothe government or to individuals in the gov-ernment. It remains true that Africa is a bas-tion of state control over agriculture. But itis not enough that the state withdraw fromagricultural matters. The rule of law and thesovereignty of individual property rightsmust be upheld. It is difficult for any busi-ness, let alone farmers, to plan for the futureif they cannot enter into secure contracts orif they have no legal claim to the propertythey use.

Other factors that undermine agriculturalproduction include the periodic influx of“food aid” to Africa, which destroys localproduction. Often such aid is given to thecentral government and is used to expandstate activities that attract human capitalfrom the private sector.

Paradoxically, one factor in Africa’s lackof development may be that the continent,on the whole, is underpopulated. Agricultur-al production needs to get to markets, andfor that to happen, infrastructure is needed.But infrastructure cannot be built if thenumbers of people it will serve are few. Onesimply does not build multimillion dollarhighways to villages of 200 people.

The battle to feed humanity is not over.And while the fight is still being waged, itdoes appear that, contrary to Ehrlich,humanity is winning. Throughout the world,market forces have vastly expanded the abil-ity of mankind to feed itself. And as a result,food per capita has continued to grow forthe last few decades. Nations that only a fewdecades ago were pronounced hopeless nowproduce surpluses because of market

reforms. Endemic starvation is essentiallylimited to one corner of the world wheremarkets are not embraced and where privateproperty is not secure. Of course, this doesnot stop the anti-capitalist coalition fromblaming capitalism. Nor does it prevent thecoalition from suggesting new forms ofsocialism, on a global scale, as the solution.

But the evidence, which grows daily, indi-cates that the fight over food is more illu-sionary than real. Substantial progress isintentionally ignored and starving childrenare used as propaganda to persuade theworld to adopt global economic planning. Aphony crisis is being invented in the hopethat it will persuade people to adopt a coun-terfeit solution. �

1. Paul and Anne Ehrlich, The Population Explosion (Lon-don: Hutchinson, 1990).

2. Ibid., p. 184.3. Ibid., p. 44.4. Ibid., p. 181.5. Mark Rosegrant et al., Global Food Projections to 2020

(Washington, D.C., International Food Policy Research Insti-tute, 2001), p. 3; www.ifpri.cgiar.org/pubs/books/globalfood-projections2020.htm. See also Bjørn Lomborg, The SkepticalEnvironmentalist: Measuring the Real State of the World. (NewYork: Cambridge University Press, 2001), chapter 9.

6. Ibid., p. 4.7. Ibid., pp. 5, 8.8. Ibid., p. 5.9. Ibid.10. Ibid.11. Tim Dyson, “Prospects for Feeding the World,” British

Medical Journal, October 9, 1999, p. 988.12. Ibid., p. 989.13. Ehrlich, p. 68.14. Dyson, p. 990.15. Ibid.16. Rosegrant et al., p. 22.17. Ehrlich, p. 73.18. Rosegrant et al., p. 10.19. Ehrlich, p. 109.20. Jim Peron, Exploding Population Myths (Chicago:

Heartland Institute, 1995), p. 35.21. Per Pinstrup-Andersen, Rajul Pandya-Lorch, and Mark

Rosegrant, The World Food Situation: Recent Developments,Emerging Issues and Long-Term Prospects (Washington, D.C.:International Food Policy Research Institute, 1997), p. 28.

22. Rosegrant et al., p. 5.23. Report can be read at www.fao.org/WAICENT/faoin-

fo/economic/giews/english/eaf/eaftoc.htm.24. Jasper Becker, Hungry Ghosts: China’s Secret Famine

(London: John Murray, 1996).25. David Osterfeld, Planning versus Prosperity (New York:

Oxford University Press, 1992), p. 64.26. Based on data in Rosegrant et al., p. 22.27. Julian Simon, “The State of World Food Supplies,” The

Atlantic Monthly, July 1981, pp. 72–76.28. Based on data in Rosegrant et al., p. 22.29. Mylène Kherallah et al., The Road Half Traveled: Agri-

cultural Market Reform in Sub-Saharan Africa (Washington,D.C.: International Food Policy Research Institute, n.d). It canbe found at www.ifpri.org/pubs/pubs.htm#fpr.

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Taxes are due and refunds are flowing.What’s a good tax hiker to do? Keephis ill-gotten gains or give them back?The New York Times Magazine fea-

tures a column titled “The Ethicist.” It isbasically modern liberalism meets Ann Lan-ders. As rebate checks were being cut, Ms.Tamar Kotelchuck, a resident of Somerville,Massachusetts, wrote in to inquire: “Istrongly oppose the tax cut recently passedby Congress. But I’m not wealthy, and I canuse the refund check the I.R.S. is sendingout. Is accepting it a passive endorsement ofa policy I believe will damage the country,particularly low-income individuals? Must I, in protest, refuse to use the money for personal gain, perhaps by donating it tocharity?”

The columnist naturally said no. Accept-ing the rebate doesn’t mean endorsement ofthe tax code, any more than paying one’staxes does so: “Obeying the tax laws is sim-ply a civic obligation.”

The columnist does suggest giving awaythe cash as a protest. It could help the pooror fund “political candidates who wouldunseat those who backed the tax bill.” Nat-urally, one should also write political leadersto protest. But The Ethicist’s bottom linewas simple—“it is not dishonorable to keepyour rebate.”

How . . . liberal. Why should anyone haveto live with the consequences of his opin-

ions? It’s fine to be against tax cuts—and tocash your rebate check or, presumably, col-lect your refund.

In fact, people who don’t believe in taxcuts should give back the money. Just writea check or send a money order to Uncle Sam.

If tax hikers want to be a bit fancier, theycould help pay off the national debt by fol-lowing the lead of Senator Robert Byrd, thebig-spending porker who does so much tocreate the pressure for high taxes, and tag itfor Gifts to Reduce the Public Debt. Anyonedoing so, of course, should not take a deduc-tion on his taxes the next year.

But tax enthusiasts should do more. Theyshould lead by hiking their own taxes. If youthink taxes are too low, then prove it by rais-ing your own.

It’s really quite simple. Pick up the stan-dard 1040 form. Although it might seem alittle strange to declare more income thanappears on the W-2, that should pose littleobstacle to doing what is right.

Add some extra interest. Make up somesums from a couple of banks. Create namesfor nonexistent ones. Do the same for ordi-nary dividends. The IRS won’t mind.

Add some alimony. Toss in some pensionpayments, if you’re retired. Put down a littleunemployment compensation. There’s evena line for other income. This includes prizesand awards (imagine being honored forbeing an insufferable social engineer andfriend of overbearing government), gam-bling winnings (don’t worry—the IRS isn’tgoing to work to disprove that you won),jury duty fees (be reasonable, since you don’t

Potomac Principles by Doug Bandow

Tips to Hike Your Taxes

Doug Bandow, a nationally syndicated columnist,is a senior fellow at the Cato Institute and theauthor and editor of several books.

APRIL 2002


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get much for such service), state tuition ben-efits (so what if you have no kids?), andreimbursements for expenses previouslydeducted (who will know any better?).

Create some business income. Indeed, awould-be tax-hiker should get maliciouspleasure out of posing as a greedy capitalist.

File a schedule C or C-EZ, and toss insome imagined revenue. Keep the expensesto a minimum, since you wouldn’t want toreduce too much the taxes due.

But inflating income is only the start. It’salso important to cut the adjustments toincome. Forget the IRA deduction—whyshould the government subsidize people whowant to save for their own retirements?Same thing with the self-employed SEP,SIMPLE, and other retirement programs.

Forget the interest deduction for studentloans—obviously a subsidy primarily formiddle-income and wealthy students. Noself-respecting “liberal” would take a deduc-tion for a medical savings account: after all,the government should be providing allhealth care!

Ignore other deductions and credits. Afterall, people’s earnings really belong to thegovernment, so why cut its take?

Itemized DeductionsMost important, forget all of those ridicu-

lous itemized deductions. Spend a lot onhealth care? Just grin and bear it. Are your state and local taxes high? They shouldbe. Why should that reduce your federalobligation?

Same with real estate taxes, which areusually financing the failing governmentschool system. Then there’s mortgage inter-est. But why should you get to deduct moremoney if you have a bigger, fancier, moreexpensive house?

No reason to take off charitable gifts,since that is obviously government’s job.

Casualty and theft losses don’t warrant adeduction, since the perpetrator was proba-bly a victim. Unreimbursed business expens-es should go undeducted, since they helpedyou make money, a dishonorable act. Taxpreparation fees—heck, the more you spend,the less you deserve to take anything off.And forget the other miscellaneous deduc-tions. Actually, it would be simplest to takethe standard deduction. Why should yourmisfortune or generosity be used as anexcuse to starve poor old Uncle Sam? Weknow he needs the money more. There arealso a host of credits that every good taxhiker should forgo. Drop the foreign taxcredit and credits for child care and theelderly. Forget education, child, and adop-tion credits.

Now we come to figuring your tax. If yourtotal isn’t up to snuff—come on, don’t begreedy!—add some other taxes. You mighthave to file an extra schedule or two, but gofor it: self-employment, Social Security andMedicare taxes on tips, taxes on retirementplans and other accounts, advance earnedincome credit payments, and, one thatshould thrill every good “liberal,” householdemployment taxes. For the latter, double thenumber of servants that you actually have.

If all of this doesn’t increase your taxesenough, go back and inflate your incomenumbers a bit more. Or simply write UncleSam a check and say it’s to pay off thenational debt. In fact, Governor Mike Huck-abee of Arkansas has established the “TaxMe More” Fund for any residents who wantto pay more. Alas, so far it has had only min-imal success: apparently people prefer to taxother people rather than themselves.

Anyone who thinks taxes are too low,objected to the minuscule Bush tax cut, orvoted for Al Gore should hike his own taxes.The Ethicist to the contrary, people whowant the rest of us to pay more should vol-untarily pay more themselves. �

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But Is There Such a Thing asa Free Breakfast?by Ralph Hood

Back in the mid-eighties I participated ina conference of small business owners.(Very small—my own multinationalcorporation consists of me, my wife,

and a dog. The dog is part-time.) One work-shop leader explained that we could nolonger deduct 100 percent of business travelmeals. Henceforth, we could only deduct 80percent (that dropped quickly thereafter to50 percent, where it remains to this day).

Since we are a traveling group, this newruling was important to us. It meant that wecould fly first class, stay in a four-star hotel,and ride the limo to and from the airport. Allof that was 100 percent tax-deductible. If,however, we ate a cheeseburger at McDon-ald’s, we could only deduct half of it.

According to media and press reports, thisruling would increase government income bya certain amount—an amount calculated byassuming that business would continue tospend on business meals exactly what theyhad spent in the past.

Ah, but a funny thing happened on theway to the restaurant. The market does reactto any change in the fiscal environment, andthat includes changes in taxes.

Almost immediately, hotels and motelsbegan to advertise “free” breakfast with aroom. It was not “free,” of course, but it wasincluded—hidden, you might say—in theprice of the room.

Aha, said I. Because the price of the roomis 100 percent deductible, this means that Iam actually deducting 100 percent of mybreakfast charges. That is a good deal forme, and I will do business with motels thatengage in this practice.

Ralph Hood ([email protected]) is a writer inHuntsville, Alabama.

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When business finds a way to provide thecustomer something that is worth more tothe customer than it costs the business, that“something” will proliferate, and this wasno exception. The free breakfast spread likegossip on a party line. At first it was justdoughnuts and coffee, but competitionforced improvement. Today I can get a fullbreakfast—often including a made-to-orderomelet—just about anywhere.

Certainly no motel advertised the freebreakfast as a way to avoid taxes, but wewho spent the money knew. And we spent.

The inevitable came to pass. Somewhere inthe offices of a motel chain, the powers thatbe said, “Hey, what else can we provide thatis deductible if we spend the money but notnormally deductible if the customer spends

the money?” “Booze?” someone asked. Thuswas born the “free” cocktail hour.

The free cocktail hour had an even biggerbenefit for the customer on the expenseaccount. Not only could the business traveler not deduct booze, but the boss would-n’t reimburse for it, either. But when booze is“free” the boss needn’t even know about it.

Has this idea grown? Recently I checkedinto a moderately priced motel in Mississip-pi. In the lobby was a washtub filled withbeer on ice. What, I asked, is the deal on thebeer? That, I was told, is our redneck happyhour. Help yourself. It’s free.

Where will this all end? I wonder.In the meantime, do you suppose the

government wonders what happened to allthat money it was going to collect? �

Ideas on Liberty • April 2002


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The Failure of Keynesian Economicsby Steven Kates

That anyone can still believe Keynes’sGeneral Theory holds any answers tothe world’s economic problems is oneof those sad facts that make one realize

just how difficult it is to gain headway in thedismal science. An article on John MaynardKeynes in the Washington Post late last year,which argued that “Keynes’s work on theGreat Depression was remarkably relevantto the dilemma Bush and Greenspan facenow,” is a reminder of just why our eco-nomic difficulties seem to multiply ratherthan diminish.

That Alan Greenspan thinks of the Gener-al Theory as his font of economic knowledgeonly adds to the depressing quality of thisarticle. There it said that “the Fed Chairmanhas been known to rise from his chair mid-conversation and read aloud relevant pas-sages from that 65-year old book for visi-tors.” It is anyway quite clear from theactions he takes that Greenspan does thinkthis way, but it is only one more indicationof just how deeply ingrained Keynesian the-ory has unfortunately become.

Even the simplest distinction betweenpublic spending and tax reductions seemstoo difficult. It is all stimulus, and in thestructure of a Keynesian model it all comesto the same thing. Yet the two could not bemore different. Tax cuts move expenditure

out of the hands of the public sector and, solong as the budget remains in surplus, addsto the momentum of the economy.

In contrast, unproductive public spendingpulls an economy down with a relentlessnessapparently impossible for any Keynesianeconomist to fathom. Such public spending,especially if it takes budgets into deficit,inevitably makes matters worse.

Keynes’s only interest in writing the Gen-eral Theory was to encourage greater levelsof public spending. He had been an advo-cate of higher spending for a period goingback more than a decade by the time hismagnum opus was finally published in1936. There is nothing Keynesian about taxcuts. Tax cuts were never on Keynes’s agen-da, and to infer that lowering taxation is inany way a “Keynesian” approach is ananachronism read backwards into whatmight have been said instead of what actu-ally was said.

And we have an example of such Keynes-ian expenditure policy before us, if anyonewould care to look. Japan has suffered underthe effects of Keynesian demand stimulationfor almost a decade now. The effect has beento take the relatively mild slowdown experi-enced internationally at the beginning of the1990s and turn it into an ongoing, ever-deepening recession that shows not theslightest sign of retreat.

Japan is the paramount example of whathappens through public-sector spending.There have been no end of pseudo-explana-

Steven Kates is the chief economist of the Aus-tralian Chamber of Commerce and Industry inCanberra, Australia.

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tions for what has been an unexampled dis-aster. The rise in public-sector spending andthe rise in the level of public debt has left theJapanese economy floundering. There will beno escape until the Japanese recognize thenature of the problem and bring their budgetback into surplus and start to wind the levelof public spending back.

Such a profound demonstration of theincapacity of Keynesian theory to provideuseful policy guidance ought to have kindledsomewhere a recognition that the theoriesnow propagated in one textbook afteranother leave something to be desired. Thatthis is not so only presents yet one moreinstance of how beliefs will persist even inthe face of no evidence that they describereality.

To find that the head of the FederalReserve in the United States is a devotee of

Keynes should be a further example of howpoorly based monetary policy is. That weare now in serious risk of a global recessionis largely related to the decisions of the Fedover the past two years. Other central banksthroughout the developed world have fol-lowed the same processes, which have led tothe same sorry outcome.

It is the modern Keynesian model thatprovides the theoretical advice that leadseconomies one after the other to adopt poli-cies that do not work. We can keep applyingthese theories year in and year out if we like,but if we do, the hope must be that at somestage it will be recognized these policies con-tinuously lead us into outcomes entirely dif-ferent from those that were supposed tooccur and that alternatives to the currentmismanagement of economies everywhereare possible and need to be put in place. �

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Last fall and winter’s brouhaha over theso-called economic stimulus packagegot me thinking about how far off targetmost people are when they talk about

“the economy.” To hear the politicians andcommentators tell it, the economy is a bigmachine located somewhere in Washington,D.C. That machine requires a skilled opera-tor, and elections are more or less occasionsfor choosing that operator. Sometimes themachine slows down and needs a stimulus—perhaps an infusion of cheap credit, or gov-ernment spending, or even tax cuts. At othertimes it risks overheating and needs to becooled down—perhaps higher interest ratesor a tax increase.

This misapprehension is helped along by agood part of the economics profession, manyof whose members see themselves as theaspiring mechanics.

To state the obvious: an economy isn’t amachine. The term is an abstraction, even ametaphor, and we always get ourselves intotrouble by taking metaphors literally. AsF.A. Hayek was fond of pointing out, theword “economy” has its roots in the Greekword for household. (Remember those home-economics courses?) Even though a house-hold is composed of individuals, it can use-fully be thought of as a unit in the sense thatits financial affairs are largely arrangedaround a single set of ends. (There’s a limit,of course, to how far that can be taken.) Wego astray the moment we apply this descrip-

tion to larger collections of people. As soonas we begin talking about the city’s, state’s,or nation’s economy we have severed ourmoorings from reality because those group-ings do not have a single set of ends.

That is why Hayek preferred the word“catallaxy” to “economy”; it comes fromthe Greek word for “exchange.” A catallaxyis “not a single economy but a network ofmany interlaced economies” (Law, Legisla-tion, and Liberty, volume 2).

Another economist and Nobel laureatewho is sensitive to this matter is JamesBuchanan, one of the pillars of the PublicChoice school of political economy. Hisconcerns are collected in the Liberty Fundvolume What Should Economists Do? Inthe title essay (originally an address given in1963) Buchanan identifies what can only bedescribed as the central collectivist premiseof most economics, namely: some entitylarger than the individual—usually thenation—must allocate scarce resources.Many heavyweights in twentieth-centuryeconomics—not just socialists—regrettablylet that premise stand, Buchanan points out:Lionel Robbins never identified the alloca-tor; Frank Knight attributed economicactivity to the “social organization”; andeven Milton Friedman held that (Buchananquoting) “economics is the study of how aparticular society solves its economic prob-lem.” Not that those men did not realizethat groups consist of individuals. But aseconomists, Buchanan fears, they too readi-ly left the impression that economics dealswith a collective’s solution to an allocation

Peripatetics by Sheldon Richman

Stimulate the Catallaxy?

Sheldon Richman ([email protected]) is editor ofIdeas on Liberty.

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problem. It’s a short step from a collectiveto a machine.

That’s not how Buchanan sees economics.In contrast to the view that the economy is a“means of accomplishing the basic econom-ic functions that must be carried out in anysociety,” he believes “The market or marketorganization is not a means toward theaccomplishment of anything. It is, instead,the institutional embodiment of the volun-tary exchange processes that are entered intoby individuals in their several capacities.”He adds: “This is all that there is to it.”

Contemplate how different this concep-tion of economy is from the general impres-sion. As Buchanan writes, “Individuals areobserved to cooperate with one another, toreach agreements, to trade. The network ofrelationships that emerges or evolves out ofthis trading process, the institutional frame-work, is called ‘the market.’ It is a setting, anarena, in which we, as economists, as theo-rists (as onlookers), observe men attemptingto accomplish their own purposes, whateverthese may be.”

In such a conception of economy, where isthere room for words like “overheated,”“cooled down,” and “stimulus”?

Economic SubjectivismIn another essay in his book, “General

Implications of Subjectivism in Economics,”Buchanan flaunts his affinity with the Aus-trian school of Hayek and Ludwig vonMises. Here he writes, “The principle thatexposure to economics should convey is thatof the spontaneous coordination [of individ-uals] which the market achieves. The centralprinciple of economics is not the economiz-ing process.” And he warns that economicswill “become applied mathematics or engi-neering” if its practitioners think it is.

Subjectivism in economics is the recogni-tion that economic phenomena emerge fromwhat human beings believe, think, and do,and not from data they may know nothingabout or rarefied statistical aggregates andaverages. Subjectivism is good insurance

against seeing the economy as a machine andthe government as its vital attendant. Or asBuchanan puts it, “to the extent that subjec-tivism tends to concentrate attention on theinteraction among persons and away fromthe ‘economic problem,’ an understanding ofthe principle of order is facilitated ratherthan retarded.”

Subjectivism can be seen most starkly in the notion of costs. Much economic theo-rizing (and bureaucratic meddling) regardcosts as objective. That perspective encour-ages social engineering. After all, if thosewho would move us about the nationalchessboard had to confess that they cannotknow the costs of their maneuverings, theywould have a harder time justifying theirpower.

But they cannot know those costs. “Thecosts that influence ‘choice’ are purely sub-jective and these exist only within the mindof the decision-maker,” Buchanan writes.When one confronts two alternatives, one isreally confronting two mental projections ofwhat the world might be like in the future.Either or both projections could be wrong.At best they are educated guesses. And sinceone of those imagined worlds will never berealized, the chooser will never know if hewas wrong about that one. But that worldforgone is the true cost of the alternativechosen because that’s what the choosergives up to achieve it. We often think ofcosts as money paid. But while money isindispensable for making calculations, itdoes not express the true opportunity costof a choice. No one wants money for itsown sake, but only for what it can buy nowor later.

An economy is people cooperating to bet-ter their situations. Thus a “stimulus pack-age” is fundamentally objectionable notbecause of anything that may be in the bill.(Tax cuts are always welcome.) It is objec-tionable because of its rationale. Govern-ment should endeavor to stay out of the wayof productive activity at all times, not justwhen various numbers are deemed too highor low. �

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E.G. West: Champion of theMarket for Educationby Charles K. Rowley

(Editor’s Note: Professor E. G. West, thedistinguished economist and historian ofeducation, died last October 6 at the age of79. His most recent articles in this magazine,“The Spread of Education Before Compul-sion: Britain and America in the NineteenthCentury” and “Classical Libertarian Com-promises on State Education,” appeared inthe July and October 1996 issues, respec-tively. What follows is an appreciation of hislong career by a friend and colleague.)

Eddie West was born on February 27,1922, at Goldthorpe in Yorkshire, Eng-land, where his father ran the local cin-ema. The family later moved to Exeter

in Devon, where Eddie attended Hele’sSchool. After leaving school during the Sec-ond World War, he worked for the Ministryof Transport in Exeter until 1946, when heentered University College, Exeter, success-fully completing a bachelor of science degreein economics in 1948. He then spent threeyears as a schoolteacher in Staffordshirebefore becoming a lecturer in economics at Guildford College of Technology in 1951.In 1956, he moved to the Oxford College of Technology as senior lecturer in eco-nomics. To strengthen his academic cre-dentials, Eddie enrolled for the degree ofmaster of science as an external student at

the University of London, graduating in 1959.In 1962, at age 40, he was appointed to a

lectureship in economics at the University ofNewcastle upon Tyne by Stanley Dennison,one of only a handful of senior free-marketeconomists in Britain at that time. This washis first university appointment. Evidently,he had hoed a very long and difficult row inorder to achieve his lifetime ambition fromrelatively modest beginnings.

Very quickly, West began to offer insightsinto the enduring relevance of free-marketeconomics for the wealth of nations. Nowenrolled at the University of London as anexternal doctoral student under the supervi-sion of Lionel Robbins, he commenced workon his magnum opus on the relationshipbetween education and the state, completingthe degree successfully in 1964. His firstscholarly article, published in 1964 in theJournal of Political Economy, analyzing theclassical economic dispute on the relevantroles of the public and the private sectors ineducation caught the eye of Milton Fried-man. Within a year West was off to the University of Chicago as a postdoctoral fel-low, on his way, we now know, to interna-tional recognition as a major contributor toclassical-liberal political economy.

His one-year stay at Chicago coincidedwith the apogee of the Chicago School,focused on the fruitful tension provided bythe interactions between Milton Friedmanand Harry Johnson over issues of monetarytheory and the emerging scholarship of the

Charles Rowley ([email protected]) is DuncanBlack Professor of Economics at George MasonUniversity and general director of the Locke Institute.

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Chicago School in social economics (GaryBecker), transaction-cost economics (HaroldDemsetz), the economics of regulation(George Stigler), and law and economics(Ronald Coase). This visit opened avenues ofintellectual exploration that had been entire-ly closed down by the xenophobic Keynes-ianism that then still dominated a backwardeconomics profession in the United King-dom. It all but guaranteed that West’s returnto Britain in 1966 as reader in economics atthe trendy leftist University of Kent at Can-terbury would be extremely controversial.

I first encountered Eddie West in 1966 inCanterbury, where we occupied adjoiningoffices in Eliot College. Although I fortu-nately had avoided the extremes of Keynes-ian economics, and had the benefit as anundergraduate in reading the writings ofMilton Friedman, George Stigler, and Ken-neth Boulding rather than those of PaulSamuelson, Alvin Hansen, and Joan Robin-son, I was not fully conversant at that timewith the exciting new scholarship in mone-tary economics, law and economics, andPublic Choice that had been initiated at theuniversities of Chicago and Virginia. In amatter of weeks the scales had fallen frommy eyes as Eddie educated me in the newpolitical economy that would become anabiding part of my own scholarship.

Seminal BookWest’s return to England was rendered

particularly controversial because his semi-nal book Education and the State had beenpublished in 1965 by the Institute of Eco-nomic Affairs (IEA). Prior to this book, theconventional view of nineteenth- and mid-twentieth-century education in Britain wasthat of the Hammonds, the Webbs, and theColes, to the effect that democracy and edu-cation were inescapable partners. A freesociety could not be orderly unless it was lit-erate. A self-governing society could notprogress unless it was educated. Privateschooling could not provide the quantity andquality of education required by these goals.Therefore, universal, compulsory and “free”state-provided education was necessary. The

Forster Act of1870, which pur-ported to initiatesuch an educationsystem, and theEnglish EducationAct of 1944,which consolidat-ed it, therefore,were both entirely justified.

By a process of meticulous andoriginal research, West demonstrated thatthis conventional wisdom was historicallyunsupported. He chronicled the significantgrowth of literacy in Britain during the firstthird of the nineteenth century and the hos-tile reactions of successive governments thatobstructed the development of the free pressby fiscal and legal sanctions. By 1838, 87percent of children could read and 53 per-cent could write at least to some extent.These statistics, certainly for the ability toread, compare favorably with those for theUnited States at the turn of the 21st centuryif the requirement is literacy in the Englishlanguage.

Prior to 1870 education in England andWales was provided primarily through pri-vate and parochial church schools financedby fee-paying parents and by church philan-thropy. This education was supplemented by the Sunday schools and by a wide rangeof private institutes and literary and philosophic societies. The principle of statesubsidies to schools had been accepted onlyin 1833, by which time the above-mentionedhigh levels of literacy had already beenachieved. “It seems reasonable, therefore, toinfer that when the government made itsdebut in education in 1833, mainly in therole of subsidizer it was as if it jumped intothe saddle of a horse that was already gal-loping,” West wrote.1

There is no evidence that the Forster Actaccelerated the rate of growth of educationservices, as measured in terms of schoolattendance or literacy, although it effectivelyinitiated the displacement of private andparochial schools by state alternatives.

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According to West, the percentage of nation-al income spent on schooling children under11 years of age in 1833 was approximatelythe same as in 1965.

The left-wing intelligentsia was agitatedby West’s challenge to the historical record.It was infuriated by his willingness to coun-tenance the complete dismantling of compul-sory, “free” and state-provided schooling inBritain and to allow parents a free choice, interms of willingness to pay, whether or not,and how to educate their children. This rad-ical reaction provoked The New Statesman,then under the far-left editorship of PaulJohnson, to libel West, claiming essentially,that he was a fascist.

The IEA sued for libel, and on July 22,1966, The New Statesman published a min-imal apology. Forced to go further or faceHigh Court sanctions, the magazine apolo-gized in more detail on July 26 for what itnow described as its “unjustified attack” onWest and the IEA. The review, it now admit-ted, gave a “totally misleading impression ofWest’s arguments.” It is noteworthy thatJohnson, who later converted from near-Marxism to Thatcherism and who subse-quently wrote about the arrogance of left-leaning intellectuals,2 has never acknowl-edged his own unjustified left-leaningintellectual arrogance with respect to Educa-tion and the State.

In any event, Education and the State hasbeen a huge success, constituting as it does“the single most outstanding intellectualchallenge to public education.”3 It wasrepublished with additions in 1970 and onceagain in 1994 in a beautiful, revised, andexpanded version by Liberty Fund. It isEddie West’s finest work. Its arguments areas convincing now as they were 35 yearsago: “It is today, as it was in 1965, anappropriate point of departure for thinkingabout the future justification for governmentschools, compulsory education, and a hostof other issues pertaining to educationalreform.”4 Together with West’s companionvolume, Education and the Industrial Revo-lution,5 it provides a devastating refutationof all preceding scholarship from the latenineteenth century onwards that attempted

to rationalize public education provision as anecessary condition for economic progress.

Eddie West was aware that any disman-tling of public education provision, despitethe tax reductions that would become avail-able, might leave the children of the poor ina disadvantaged position regarding access toeducation. For this reason, he became aforceful advocate of public-finance subsidiesin the form of education vouchers thatwould enable parents to purchase privateeducation for their children at schools oftheir choice. A sequence of papers developedarguments in favor of the voucher proposaland countered the paternalistic arguments ofcritics who had no respect for the ability ofparents to secure the education interests oftheir offspring. Voucher proposals remain aserious policy option in the United States atthis time, although the federal governmenthas never mustered the courage to ignore thesustained lobbying of the teachers unions infavor of continued public provision.

The political economy of education provi-sion would remain a central feature ofWest’s research agenda for the remainder ofhis career, with important contributionspublished in such leading journals as theJournal of Political Economy, Philosophy,Journal of Law and Economics, SouthernEconomic Journal, Western Economic Jour-nal, Economic History Review, PublicChoice, Canadian Economic Journal, Histo-ry of Political Economy, and American Eco-nomic Review. Yet this was but one of sev-eral classical-liberal research programs thathe felt compelled to pursue.

Classical Economics ResuscitatedA second major research program resusci-

tated writings by such giants of classical eco-nomics as Adam Smith and John Stuart Mill,and launched long-discarded economic logicwith devastating effect against the smugsocialist doctrines of mid and late twentieth-century Western political economy. In thisrespect, West’s works on Adam Smith areparticularly important. His biography,Adam Smith: The Man and His Works,6 wasadopted by the Conservative Book Club of

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America and became an academic bestseller.It was reprinted by Liberty Fund in 1976.

His seminal works on the relevance ofSmith’s economics for the late twentieth cen-tury and beyond, Adam Smith and ModernEconomics: From Market Behavior to PublicChoice7 and Adam Smith into the Twenty-First Century,8 delighted in hypothesizinghow Smith might have approached the diffi-cult policy options facing modern society.West was not afraid of quarreling with Smith“whenever he considered it necessary.”9

By the 1990s West had become soimmersed in the mindset of the maestro thathe effectively became the Adam Smith of ourday. Indeed, in 1994 The Region actuallyinterviewed West as Adam Smith. West’s sig-nal contribution was to demonstrate thatSmith’s ideas are not restricted to the lateeighteenth and early nineteenth centuries,but rather are relevant for all times. It wasalways a privilege to meet and to talk withEddie West during the 1990s and to feel thatone was gaining insights into the mindprocesses of Adam Smith himself.

Of course, Eddie West was aware that hemust communicate Smith’s views throughthe medium of modern economics. To thisend he published essays on Smith’s ideas inleading economics journals, notably, Eco-nomica, Oxford Economic Papers, Journalof Economic Issues, History of PoliticalEconomy, Canadian Economic Journal, andJournal of Money, Credit and Banking. In awider sense, of course, almost everythingthat he wrote communicated the views ofAdam Smith.

It should not be thought that Eddie West’scareer was devoted exclusively to classical-liberal political economy. He was a first-ratepublic-finance scholar who wrote extensivelyon technical issues in that literature, publish-ing substantive theoretical and empirical arti-cles in such journals as the Journal of Politi-cal Economy, Kyklos, Economic Inquiry,Public Choice, Southern Economic Journal,Canadian Journal of Economics, Economet-rica, American Economic Review, PublicFinance, Public Finance Quarterly, and Jour-nal of Public Economics. Two of EddieWest’s most recent papers were published in

the American Economic Review, the world’smost highly ranked economics journal, aslate as 1999 and 2000. This was an entirelyfitting finale for a distinguished economistwho never retired from his life’s work.

One of my great personal and profession-al disappointments was the brevity of mycollegial association with Eddie. The Univer-sity of Kent at Canterbury became anincreasingly hostile intellectual environmentfor both of us during the late 1960s as facul-ty and students combined to demonstrateincreasing disdain for individual liberty, pri-vate property rights, limited government,and the rule of law.

For a time, Eddie encountered consider-able difficulty in making himself heard inundergraduate lectures as students attempt-ed to drown out his voice by beating theirdesks with their shoes, Khrushchev-style.The mere utterance of such neutral econom-ic terms as “markets,” “speculation,” and“capitalism” was enough to set off the alien-ated sons and daughters of Surrey stockbro-kers into a frenzy.

Eliot College, where we resided, appearedto be little more than a people’s republic ofMarxists, fellow travelers, and Fabiansocialists. The economics program itself (inconformity with leftist thinking there wereno departments) was dominated by thethought of the more extremist Cambridgedisciples of Keynes and by the command-economy doctrines of Kenneth Arrow, JohnKenneth Galbraith, and Paul Samuelson.

Of course, neither Eddie nor I wouldallow such dirigistes to extinguish our stillsmall candle of liberty. However, we wereboth well aware of Karl Popper’s warningabout the closed society: “Once we begin torely upon our reason, and to use our powersof criticism, once we feel the call of personalresponsibilities, and with it, responsibility ofhelping to advance knowledge, we cannotreturn to a state of implicit submission totribal magic.”10

West to CanadaAs anti-capitalist campus violence erupted

during the late 1960s, periodically closing

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down teaching and research throughout theuniversity, it became clear that the Universi-ty of Kent at Canterbury had ceased to be an institution of scholarship. In the autumnof 1970 we both resigned. Eddie left for Carleton University in Canada, and I depart-ed for the University of York, the oneremaining bastion of free-market economicsin the United Kingdom.

Carleton University proved to be a perfectfit for Eddie West. His large corner office inthe Loeb building became a magnet for theeager and receptive minds of faculty and stu-dents, anxious to obtain exposure to hisideas on free-market economics. By the timethat he formally retired in 1992, he hadbecome one of the university’s most distin-guished and revered members. Retirement,of course, did not change his way of life. Hecontinued to work productively from hisoffice in the university until his death.

Right until the end, he traveled regularlyto meetings and conferences. Accompaniedby his family, he accepted visiting professor-ships at the University of California atBerkeley (1974), at Virginia PolytechnicInstitute and State University (1975–77), atEmory University (1983–84 and during thespring semesters 1985–88), at the Universityof Western Australia (1991), and at the Uni-versity of Kentucky (1995). Many of thesetrips to warmer locations were designed nodoubt, to mitigate the harshness of theCanadian winters for one who had livedmuch of his life in a more temperate climate.

He was a long-time member of the MontPelerin Society; he was active in Liberty Fundcolloquia; and, for over a decade, he servedas a judge for the Atlas Economic ResearchFoundation’s prestigious Sir Antony FisherInternational Memorial Awards. He was agreatly valued member of the AcademicAdvisory Board of the Locke Institute fromits inception in 1990 until his death.

Eddie was much more, however, than adistinguished scholar. He enjoyed life to thefull. He remained a mean tennis playeralmost to the end of his life. He was a devot-ed husband to his wife, Ann, whom he mar-ried in 1959, and a loving father to his threechildren, John, Sarah, and Caroline, all ofwhom survive him. The last time that mywife and I spoke to him, at a conference, hewas hurrying home to his family, includingby then his grandchildren, cheerfully tellingus that he could not bear to be away fromhome for long because he was caught up in“the tender trap.”

He bore his lengthy illness with courageand dignity, telling only his intimate friendsthat he was unwell. As one of his closest col-leagues at Carleton University, StanleyWiner, noted at his remembrance ceremony:“Professor West, the happy political econo-mist, did what he wanted to until the end.”11

Those of us who knew Eddie West willalways treasure our time with him. His work stands as his testament. His passingwas blessedly peaceful: “God’s fingertouch’d him, and he slept” (Alfred LordTennyson). �

1. E.G. West, Education and the State (London: Institute ofEconomic Affairs, 1965), p. 138.

2. Paul Johnson, Intellectuals (New York: Harper & Row,1988).

3. Myron M. Lieberman, back-cover quotation, in E.G.West, Education and the State: A Study in Political Economy,Third Edition Revised and Expanded (Indianapolis: LibertyFund, 1994).

4. Liberman, “Introduction,” ibid., p. xx.5. E.G. West, Education and the Industrial Revolution (Lon-

don and Sydney: B.T. Batsford, Ltd., 1975).6. E.G. West, Adam Smith: The Man and His Works (New

York: Arlington, 1969).7. E.G. West, Adam Smith and Modern Economics: From

Market Behavior to Public Choice (Cheltenham and Brookfield:Edward Elgar, 1990).

8. E.G. West, Adam Smith into the Twenty-First Century,The Shaftesbury Papers, 7, The Locke Institute (Cheltenhamand Brookfield: Edward Elgar, 1996).

9. Stanley Winer, “Remembrance of Edwin West,” Econews,Carleton University, November 2001, p. 7.

10. Karl R. Popper, The Open Society and Its Enemies, Vol.1 (Princeton: University of Princeton Press, 1971 [1945]), p. 200.

11. Winer, p. 7.

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Market-Based Higher Educationby Keith Wade

A s experience continues to prove thatprivate industry can do things morecost effectively and with better cus-tomer satisfaction than governmental

entities, debate has shifted to what functionsare appropriately in the government’s realm.Over the past several decades various insti-tutions have arisen to challenge the notionthat higher education is among the activitiesthat government can perform better than theprivate sector.

I should disclose my biases. I am a prod-uct of—and a strong believer in—a tradi-tional liberal arts education. I completed mymaster’s degree at the University of Phoenix(a for-profit university) and am currentlyworking on my doctor of business adminis-tration at Argosy University (a for-profit uni-versity). Finally, I am an adjunct facultymember at Webster University (a private butnot-for-profit university).

It is probably worth noting that the privatesector has the odds stacked against it in thearena of higher education. First, public edu-cation is highly subsidized by the taxpayers.Second, through many years of this subsi-dization, public institutions have built hugeinfrastructures to facilitate their educationaldelivery and research projects. Third, govern-ment jobs—including those in higher educa-tion—often pay better and offer better bene-

fits than do those in the private sector. Final-ly, both because of some “bad apples” and asmear campaign, “nontraditional” is oftenthought to mean “shady” or “nonaccredit-ed,” as opposed to what it truly means: inno-vative, new, creative, and market-driven.

Yet through knowing their market; apply-ing the market principle “location, location,location”; emphasizing value-added services;and operating according to a differentstaffing model, these institutions have indeedbeen able to compete.

In researching my own doctoral program,I confirmed my suspicion that private insti-tutions (both for-profit and not-for-profit)were indeed more expensive than publicinstitutions. Yet many people opt for themore expensive private version.

At least in my case, this decision was notbased on perceived quality. The Universityof South Florida, the public option reason-ably near my home, has worldwide recogni-tion as a quality school. While my researchhas been casual and completely anecdotal, ithas better name recognition than the schoolI chose.

Rather, my decision was based on therealities of my life: I have a full-time job thatpays my mortgage, car payment, grocerybills, and the rest. I cannot be a full-time student, which precludes my going to theless-expensive public university with itsweekday classes.

The market abhorring a vacuum, Argosyoffers a mix of nonresident tutorial courses

Keith Wade ([email protected]) is vice presidentof administration and chief financial officer atFlorida Cypress Gardens.

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and short residency weekend courses. Simi-larly, both the University of Phoenix andWebster University offer classes that meetbut once a week and at night, making themaccessible to those who have full-time jobsand family responsibilities.

Because both the campus I teach at andthe one I take classes at offer graduate pro-grams geared toward working professionals,many of the trappings of traditional cam-puses are missing. There are comfy chairs,sturdy tables, high-quality video equipment,fresh coffee, and support staff that works 5to 10 p.m. Missing, however, are dormito-ries, sports fields, and other things that con-tribute to the cost—but not necessarily thequality—of graduate education.

Not only are the facilities geared towardthe needs of the customers, the class offer-ings are as well. The campus I teach at offersfour degrees, all at the master’s level. That’sit. Such specialization allows for precise andrapid delivery of the instruction the studentswant.

Location, Location, LocationI did my graduate work at the Colorado

campus of the University of Phoenix andteach at the Lakeland, Florida, campus ofWebster University, one of dozens of “satel-lite campuses” around the world. Unlike thesprawling (and not always convenientlylocated) campuses of bygone days, today’sprivate institutions go where the studentsare, instead of asking the students to come tothem.

The latest manifestation of this—Web-based delivery—enables one to take courseswith few, if any, visits to the campus. Manyprivate institutions make it possible to com-plete an entire bachelor’s program online.

I have spent the last several hours usingthe Argosy library to do research for one ofmy doctoral courses. I did this in mybathrobe while drinking my morning coffee.While this may not be a pretty scenario, it isindeed convenient. Argosy, like many otherinstitutions, does not maintain a researchlibrary at each of its campuses (an exceed-ingly costly proposition). Rather, like Web-

ster, it maintains a massive research libraryonline and accessible to its students 24 hoursa day, from anywhere in the world. Unlike attraditional libraries, nothing is ever unavail-able. Librarians are there to help online orby toll-free telephone. Webster is delightedto ship via UPS media that do not lend them-selves to online delivery.

The campus bookstore is also virtual.Offering competitive prices and next-daydelivery, it is also more convenient than thetraditional bookstore. An added benefit—perhaps an unintentional one—is that byforcing instructors to list textbooks by ISBN,comparison shopping is especially easy.

As illustrated, the nongovernment univer-sity has a good deal of flexibility. Part of thisflexibility lies in its staffing model.

Like the other instructors at my campus, Iam a Webster University employee completewith a W-2 form, a boss, performance eval-uations, and other trappings of employment.We are, however, part-time employees whodo not receive insurance benefits, participatein the retirement plan, or get paid when weare not teaching.

No insurance benefits! Only paid whenworking! Am I being exploited? Quite thecontrary. I am well paid and love what I do.It is a part-time job, and like most it is struc-tured on the presumption that its holdereither has traditional benefits (such ashealth, dental, and retirement) throughanother employer or does not need them.

Unlike the terrific economic burdenimposed by full-time employees, thisarrangement allows my employer to get aworking professional—when needed and asneeded—to teach courses within his field ofexpertise. And it enables me to enjoy teach-ing, earn a little extra money, and keep thesecurity of my full-time job.

We see yet again that private enterprisecan be relied on to give consumers whatthey want. Notwithstanding that educationfor profit and alternative education are rela-tive newcomers to the higher-educationarena, and notwithstanding that the playingfield is highly tilted in favor of state-runeducation, private enterprise is indeed mak-ing its mark. �


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The Private Road to Freedomby Scott McPherson

There is not a state in the union thatdoes not struggle from year to year tobuild and maintain roads in somethingresembling an efficient, timely, or com-

petent fashion. State legislatures and citygovernments raise only a chuckle from theirconstituents when suggesting that this time,this budget, they will get it right. In themeantime, private alternatives to the currentbureaucratic nightmare that defines mosttransportation infrastructures are ignored.

The idea of privately owned, for-profitroads is one of the most revolutionary everput forward by advocates of limited govern-ment. Nevertheless, it should not be dis-missed as a mere utopian musing. Decadesof government control of roads have ledmany to throw their hands up in despair andresign themselves to constant frustrationwith civic leaders. The time is ripe to intro-duce new arguments on this front.

Streets, highways, interstates, and turn-pikes should, first, be understood in theirproper context. Government exists to pro-tect individual rights—specifically, it exists

to provide protection for individual citizensagainst acts of force or fraud. Nowhere inthis relationship is there room for govern-ment to involve itself in the travel needs ofthe people. Some claim that governmentsbuild roads to promote individual “freedomof movement,” but this is a misapplicationof the concept of individual rights: the “rightto bear arms” does not mean the govern-ment should buy you a gun, nor does “freespeech” imply an obligation to furnish apublishing company.

Like food, shelter, clothing, guns, andnewspapers, roads should be treated asproducts of the marketplace.

Such a suggestion is admittedly a radicaldeparture from conventional wisdom, andcritics of the market will be quick to say thatsome things just can’t be handled throughfree enterprise. Yet it should be rememberedthat in Soviet Russia the thought of privategrocery stores replacing bread lines was dis-missed as impractical as well.

There is no logical reason why roadscould not have private owners and be oper-ated for profit. Ideally, government wouldnever have been in the road constructionbusiness in the first place. As a result, the

Scott McPherson ([email protected]) is afreelance writer in Tulsa, Oklahoma.

APRIL 2002


“Traffic jams are minor inconveniences to a government bureau;to a private corporation, they mean the loss of a small

fortune in potential customers.”—DAVID FRIEDMAN, “Sell the Streets”

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arrangement in place would already be pri-vate, and drivers would be experiencing thesame kinds of quality and innovation thatconsumers take for granted in truly market-oriented fields.

The difference that drivers would see undera private system of roads is impossible tostrictly determine. Many roads would proba-bly be abandoned as unnecessary, others asunprofitable, and the charging system couldvary from city to city, or even within a city.Most likely, highways would price accordingto demand, with the cost rising at the busiesttimes of the day to minimize congestion. (Theunintended positive effects would be feweraccidents and lower emissions.)

The condition of roads would also likelyimprove. If a road owner allowed his thor-oughfare to deteriorate to a degree unac-ceptable to those driving on it, they wouldpromptly find another route to their desti-nation. Ultimately, drivers-as-consumerswould be able to vote on a daily basis theirapproval or disapproval of the condition,policing, and safety of any given street orhighway by granting or withholding theirpatronage. Unlike government-owned ser-vices, however, road providers would haveto remain ever mindful of customer satisfac-tion if they hoped to stay in business.

For example, after Buffalo, New York,was blanketed with nearly seven feet ofsnow last winter, the governor ordered outthe National Guard, and RepresentativeJack Quinn even requested federal aid tohelp dig the city out. What private roadcompany could sit by while its profitsdropped to nil because a snowstorm ren-dered its streets and highways so completelyimpassable? California reported that an esti-mated 37 percent of its roads are in “poor”condition—imagine the fate of any privatebusiness that received such a rating fromover a third of its customers.

How to Make the TransitionMany concerns will inevitably arise if the

idea of private road ownership is ever taken

seriously. Would interested companies beallowed to bid for parcels or entire citywidenetworks? Could an individual homeownerbe granted title to the piece of street outsidehis house? And how would current ease-ments and rights-of-way be secured?

These are all valid questions, and theonerous task of city councilmen and statelegislators would be to address them in amanner least disruptive to the citizenry. Awise first step might be to enlist the supportof organizations like Toll Road InvestmentPartnership II, which built and maintains the14-mile Dulles Greenway Toll Road outsideof Washington, D.C. Sound advice couldalso likely be gleaned from our Canadiancousins. A private highway north of Toron-to is run by 407 International, Inc., a con-sortium of Spanish and Canadian firms.

The government might even look overseasfor guidance on private road constructionand ownership. Finland currently has280,000 kilometers of private roads, whileSydney, Australia, uses a number of privatetollways and actually raised some of the capital to build them through public stockofferings.

Opponents of private roads will be wontto point out the imperfections of any planproposed, but they should quickly bereminded that government created this prob-lem. As economist David Friedman observedin his essay “Sell the Streets”: “Certainlythere are practical difficulties in transferringthe present system . . . to private hands. Thecost of negotiating private contracts . . .would be considerable. So are the costs ofthe present governmentally owned system.”(The essay appears in Friedman’s book TheMachinery of Freedom.)

For most, it is accepted as a simple fact oflife that we will always pay a burdensometax rate for substandard streets and high-ways. If we truly want change, though, weshould stop doing what we’ve always doneand try the only fresh approach—get gov-ernment and its bureaucracy out of the wayand let private initiative satisfy Americans’driving needs. �


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Government actions are commonly jus-tified as necessary to overcome pris-oners’ dilemmas—situations in whichcollectively irrational outcomes result

from choices that are individually rational.Supposedly, without being forced to pay forpublic goods, reduce pollution, and respectproperty rights, few (if any) of us would dothese things even though we would all bebetter off if we did. This argument is subjectto serious qualifications. First, marketarrangements arise that do a far better jobmotivating voluntary solutions to these pris-oners’ dilemmas than commonly realized—as discussed last month. Second, as a practi-cal matter, even when market responses are not perfect, government action is not necessarily an improvement. Governmentattempts to solve some prisoners’ dilemmasinvariably create additional prisoners’ dilem-mas that can be worse.

For government to help people overcomeprisoners’ dilemmas, it must acquire infor-mation from consumer/taxpayers on theirpreferences. It is one thing to force people topay for a public good, for example, andquite another to force them to pay for onlythat amount worth more than it costs at themargin. Voting is surely the best way for thegeneral public to transmit information topolitical authorities on the value of govern-

ment services. But voting itself puts voters(or potential voters) into a number of pris-oners’ dilemmas.

First, consider that citizens would be bet-ter off collectively if they all became wellinformed on the issues and candidates beingvoted on. Suppliers, whether politicians orused-car dealers, provide better service atlower cost when their customers are wellinformed. But becoming politically informedis costly, and unlike becoming informed on aprivate purchase, no matter how informed avoter is, his choice at the polls will not affectthe bundle of government services hereceives or how much he pays for it. This istrue no matter what he thinks other voterswill do, unless they split their votes evenly(highly unlikely), in which case his vote isdecisive. So avoiding the cost of becomingpolitically informed is the rational choice foreach even though the resulting “rationalignorance” leaves citizens vulnerable to thepolitical exploitation of special interests, aswill be discussed. As the theory predicts,polls indicate that people are poorlyinformed on political issues.

Second, even if information were freelyavailable and citizens were fully informed,they would still be in a voting prisoners’dilemma. Taking the time to register to voteand go to the polls is costly. Those costs arenot large, but they are much larger than anyprivate benefits realized by shifting politicaldecisions in the direction the voter prefers, abenefit that is effectively zero, given theminuscule probability that any one vote willbe decisive. So although it is collectively

Economic Notions by Dwight R. Lee

Government CreatesPrisoners’ Dilemmas

Dwight Lee ([email protected]) is Ramsey Pro-fessor at the Terry College of Business, Universityof Georgia, and an adjunct fellow at the Weiden-baum Center on the Economy, Government, andPublic Policy at Washington University in St. Louis.



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rational for all informed voters to vote,keeping politicians more responsive to thegeneral concerns of the public, voting is irra-tional (at least for the purpose of affectingthe outcome) for each voter. This prisoners’dilemma is commonly referred to as “ratio-nal apathy.”

A natural response is that rational apathycannot be a serious prisoners’ dilemma.Since many people do vote, they must realizepersonal benefits from voting even whentheir votes don’t affect election outcomes.This argument has merit, but it tells us thatvoters who avoid the prisoners’ dilemma ofrational apathy do so by becoming entangledin a third prisoners’ dilemma.

There is an expressive benefit from votinghaving nothing to do with the election’s out-come: People feel good about expressingsupport for, or opposition to, particularpolicies and candidates. And since no onevote is likely to affect the outcome, it costs avoter effectively nothing to achieve expres-sive satisfaction by voting. So if a personfeels good about expressing support for“helping the poor” or “protecting the envi-ronment,” he can vote for government pro-grams that claim to accomplish these noblegoals (or for candidates who support them)at almost no personal cost, no matter howmuch these programs will cost him in highertaxes if they pass.

Of course, when a majority of the votersengage in “expressive voting,” all taxpayersend up paying much higher tax bills thanany of them would vote for if their individ-ual votes were decisive. But, because of theprisoners’ dilemma that expressive votingcreates, each voter sees the personal advan-tage in “expressive voting” no matter howhe thinks others will vote.

The Politics of PlunderOnce voters empower government to take

more of their money for noble purposes,they create yet another prisoners’ dilemma.Ensuring that tax revenue is spent to actual-ly accomplish what they voted for at reason-able cost requires that voters monitor how

politicians and bureaucrats spend that rev-enue. Although taxpayers would be collec-tively better off if all contributed to the costof monitoring, each taxpayer is better offnot contributing, no matter what he thinksothers will do.

This lack of follow-up means that once anoble-sounding government program hasbeen approved, organized interest groupsworking behind the scenes will make surethe program does more to benefit them thanto accomplish the noble purpose. Becausethese groups are relatively small, they canovercome the prisoners’ dilemma that pre-vents taxpayers from effectively organizingpolitical action.

Politically influential interest groups arealso in a destructive prisoners’ dilemma. It istempting to plunder the wealth of others(particularly if it can be done legally) whenthe plunderers are few and the victims many.But before long, more and more groupswant to get in on the booty, and politicsbecomes an increasingly destructive processin which everyone attempts to becomewealthy by plundering from one another.*Everyone would be better off if all interestgroups reduced their political plunderingand returned to productive efforts, but nogroup is motivated to do so. Who wants tospecialize in wealth creation when surround-ed by specialists in theft?

The argument is not that all governmentactions cause more problems than theysolve. A few government activities can createmore value than cost by enforcing propertyrights and defending us against foreignaggression—both of which facilitate marketexchange. The important question isn’twhether we should have some government,but how much government, and what itshould do. If we look only at the advantagesof government’s addressing some prisoners’dilemmas, while ignoring ones it creates,then we will always err in the direction oftoo much government. �


*Or as Frédéric Bastiat famously wrote, “The state is thegreat fictitious entity by which everyone seeks to live at theexpense of everyone else.” Selected Essays on Political Economy(Irvington-on-Hudson, N.Y: Foundation for Economic Education,1995), p. 144.

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What’s Wrong withReparations for Slaveryby Stefan Spath

There has been much debate recentlyabout reparations for slavery. Accord-ing to its proponents, the federal gov-ernment should award Americans of

African descent financial damages solelybecause slavery, as an institution, existed inthe United States from the founding untilalmost a century later.

Three principal arguments are offered: (1) The legacy of slavery has hindered theeconomic progress of blacks in America; (2) reparations would serve as a damageaward that would rectify a historical wrongcommitted by the United States; and (3)reparations would give poor blacks moredisposable income, which would increasetheir living standards and lift entire blackcommunities.

On the surface, these arguments seem tohave a modicum of legitimacy. However,because of the potential divisiveness that theissue is sure to have, it is important to close-ly examine the premise on which these argu-ments are based. To do that effectively, wemust first look at the institution of slaveryitself from a historical perspective.

Slavery as an institution existed on everyinhabited continent of the earth for at least4,000 years of recorded history.

Slavery was a truly global phenomenon:Europeans enslaved other Europeans; Asiansenslaved other Asians; Africans enslaved

other Africans; and Native Americansenslaved other Native Americans. In fact, theorigin of the word slavery itself comes fromSlav, as in the Slavic people of easternEurope and the Balkans. During the middleages and throughout the early stages of the Ottoman Empire, Slavic villages inwhat is modern-day Yugoslavia (Serbia) andCroatia were regularly raided by Barbarypirates, Arab slave traders, and Ottomanconquerors in search of men, women, andchildren to enslave. During the eighteenthcentury it wasn’t uncommon for up to halfthe slaves for sale on the island of Zanzibar,an Arab colony off the east coast of Africa,to be Caucasian. In short, people of all races,not just blacks, have been enslaved, and virtually every culture in the world has agrievance.

The only thing unique about slavery in theWest is that it was abolished here. One ofthe earliest anti-slavery documents was PopePius II’s 1462 condemnation of slavery as a“great crime.” British abolitionists, who forthe most part were evangelical Christians,championed the legislative revolution thatbrought about manumission in Britain andher colonies.

In the West, once the abolitionist momen-tum was underway, there was no turningback. This was especially the case in theUnited States, where the ideological under-pinnings of a constitutional republic made itincreasingly difficult rationally to denyslaves their rights. The abolition of slavery in

Stefan Spath ([email protected]) is FEE’s executivedirector.

APRIL 2002


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the United States marked a historically sig-nificant moral high point, not only for thiscountry, but also for the entire world. By theend of the nineteenth century, slavery as aninstitution was non-existent in the West andonly existed in small pockets of Africa, Asia,and the Middle East.

Has Slavery Hindered the Economic Progress of Blacks?

Economist Thomas Sowell, in his seminalwork Civil Rights: Rhetoric or Reality, con-cluded after exhaustive statistical researchthat the vast majority of whites and blacksbelieve there are a higher percentage ofblacks in poverty than there actually are.Indeed, when surveyed, most whites andblacks believe three-quarters of black Amer-icans live below the official poverty line,when in reality only one in four do, accord-ing to the 2001 Census.

Why is there so much confusion? Part ofthe problem is the perception that “black”and “poor” are synonymous. In the 1960s itwas politically expedient to associate thestate of being poor, uneducated, andoppressed with being black. The civil rightsestablishment found this association rhetori-cally necessary to focus public attention onthe plight of southern blacks and to engagethe emotions of the white majority againstovert southern racism.

However, this political strategy had anunexpected impact on the emerging blackmiddle class. According to the black-equals-poor logic, when the black middle classachieved more opportunity and becamemore educated and affluent, it essentiallybecame less “black.” This perhaps explainsthe black establishment’s attitude towardSupreme Court Justice Clarence Thomas andnational security adviser Condoleezza Rice.Essentially, black identity was hijacked andfrozen during the 1960s.

Unfortunately, the image of poverty-stricken blacks in need of government hand-outs to get by is still perpetuated by racedemagogues like Jesse Jackson and Al Sharp-ton, who stand to gain politically by foster-ing that stereotype. It is a truism of politics

that charlatans in search of political powerwill always benefit from having a con-stituency with a chip on its shoulder.

Is there a legacy from slavery that hashindered the economic progress of blackstoday? Let’s consider the numbers. Majormarketers have long constructed a black“gross national product” (GNP) from gov-ernment statistics to gauge the financialpower of black Americans. This is actuallya misnomer since it tries to measure thetotal products and services consumed, notproduced, by the black community. Thisstatistic is often cited by black politicalleaders to persuade corporate America toproduce more goods suited to the prefer-ences of blacks. It turns out that if blackAmericans constituted their own country,they would have the 11th largest economyin the world.

In addition to being a wealthy demo-graphic group (richer than 90 percent of thepeople in the world), blacks in America havea longer life expectancy than African andCaribbean blacks, as well as whites in manyparts of Eastern Europe and Latin America.Black Americans have higher rates of litera-cy and achieve more postsecondary degreesas a percentage of the population thanblacks in Africa. Black Americans’ upwardmobility from Reconstruction to the presentis a testament to their creativity and abilityto adapt. Reparations are not only unneces-sary as a financial corrective, but they wouldalso be an insult to the multitudes of suc-cessful black Americans who lifted them-selves out of poverty before and after thecivil rights movement.

Who Gets What?If the proponents of reparations take to

the courts, it will be interesting to see theirprinciple for determining who is entitled towhat. For many reasons that will be a Her-culean task.

Because of centuries of migration, con-quests, and intermixing, racial purity is moreof a social construct than a biological fact.Intermarriage between whites and blacks inAmerica over the past two centuries has pro-


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duced a large population of individuals whodefy the stark dichotomy.

Racially mixed populations in other partsof the world, such as in Latin America, havecreated classifications to describe themselvesbased on racial portions as small as aneighth. However, the practice of racial classification has evolved differently in theUnited States.

In an effort to deny inheritance rights toillegitimate progeny born by slave women,racist plantation owners in the antebellumSouth created the dreaded “one-drop rule” todiscourage the courts from calling their mis-cegenational offspring anything but Negro.The nomenclature of this racist practice hassurvived to this day and is embraced by bothblacks and whites, who for the most part areunaware of its discriminatory beginnings.Consider how Vanessa Williams and ColinPowell are labeled black despite their interra-cial heritage.

With so much racial intermixture, willthose who dole out the potential reparationsdemand certificates of racial purity? Thethought is preposterous.

Another quagmire in paying reparations isthat a small percentage of blacks were freebefore slavery ended, having bought theirfreedom or having had it bequeathed tothem by sympathetic slave owners. Are theirdescendants eligible for reparations?

In antebellum New Orleans it wasn’tuncommon for freemen of color to ownslaves. That blacks owned slaves has been ahotly debated point. It is true that a vastmajority of blacks who bought slaves did soto emancipate relatives and friends. Howev-er, there are several well-documented casesof black slave owners in Louisiana who kepttheir slaves in servitude for life.

Black slave ownership poses a seriousconundrum in the equitable distribution ofreparations. Few Americans, white or black,are familiar enough with their genealogies toknow, with any certainty, significant detailsabout what their ancestors were doingalmost two centuries ago.

Then there is the case of African andCaribbean émigrés from the post-Civil Warera. It is estimated that this subgroup of the

black community comprises between 3 to 5percent of the total black population in the United States. Will they pay or receivereparations?

More Reparations?In some respects one could argue that

reparations for slavery have already beenpaid. These implicit reparations, the argu-ment goes, have taken the form of directmonetary transfers such as welfare paymentsor nonmonetary benefits such as hiring andadmission quotas. Indeed, policies based onracial preferences such as affirmative actionhave allowed hundreds of thousands ofblacks to enter universities and obtainemployment based on criteria different fromthose applied to other groups of people.

It should not be overlooked that the great-est irony of American slavery is that thedescendants of those brought across theAtlantic from Africa are demonstrably betteroff than the descendants of those whoremained. Sub-Saharan Africa is home tosome of the poorest countries with some ofthe most appalling living conditions in theworld. Disease, war, and famine are com-monplace, and corrupt governments led bymilitary dictators and kleptocrats insure thateconomic growth and development for themasses is a low priority. In his book Out ofAmerica: A Black Man Confronts Africa,American reporter Keith Richburg concludesthat black Americans should consider them-selves lucky to have escaped the squalor ofwhat is contemporary Africa.

Not only blacks, but all Americans shouldfeel lucky to be born in the society with themost opportunities for advancement. TheAmerican dream is not a myth but a reali-ty—so attractive that tens of thousands ofpeople from across the world try to make itto our shores every year. The benefits of liv-ing in the United States weaken, if notdestroy, the foundation of the argument infavor of paying blacks group compensationfor what happened to their ancestors.

In a system where politicians steal fromPeter to pay Paul, the politicians, as GeorgeBernard Shaw once pointed out, can always

Ideas on Liberty • April 2002


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count on the support of Paul. But does thisredistribution of wealth leave anyone betteroff? Yes. The people who receive the hard-earned money confiscated from the taxpay-ers will undoubtedly be materially better off.However, to judge whether such a policy issound, one must look beyond the immediateeffect and try to discern the impact on othergroups.

In that respect, reparations would not bean economic stimulus because wealth wouldmerely be shifted from its producer to some-one else—no new wealth would be created.Applying the wisdom of Frédéric Bastiat inlooking for what is unseen in public policy,we could say that the economic benefits ofreparations are countered by the taxpayers’invisible opportunities compulsorily for-gone. Put in this context, how could oneargue that the expenditure of reparations byblacks would be an economic stimulus?

An economist as such cannot make nor-mative judgments about a policy and remaintrue to his discipline. He cannot tell us howto correct the historical crime of slavery(assuming it can be corrected at this latedate). What economics can teach us is thatif policymakers appropriate the wealth ofone group to pay reparations to a secondgroup because a third (dead) group didnasty things to a fourth (dead) group 150years ago, it would create a plethora ofproblems. Chief among them would beracial animosity and the festering of a trulydebilitating mentality of “victimization”among black youths.

Are Current Taxpayers Culpable?Of the three primary arguments for repa-

rations, the argument for damages is themost irrational. Though slavery was wide-spread in the southern United States, slaveownership was not. It is estimated that lessthan 10 percent of whites owned slaves. Thevast majority did not; they had neither finan-cial nor agricultural resources to warrant

slave labor. Slave ownership was restrictedto a highly concentrated group of wealthysouthern elites—the landed aristocracy.

Today we live in a country with a popula-tion of 285 million people. Because of immi-gration, it is safe to argue that the majorityof white people in this country are descend-ed from post-Civil War immigrants who hadnothing to do with slavery.

Many ethnic groups that arrived on Amer-ican shores in the early twentieth century,including the Irish, European Jews, and Chi-nese, were subject to severe discrimination.However, with every passing generation,ethnic groups developed the occupationalskills, knowledge, and cultural norms neces-sary to fully assimilate and rise to highersocioeconomic levels within the mainstreamAmerican culture.

Why, then, should the descendants ofthese groups, let alone first-generationAmericans, be financially liable to blacks asa group? In the American legal system, dam-ages hinge on the principle of cause andeffect—one pays for the damage one causes.In the case of slavery, there is no culpableperson alive to pay for the crime.

Perhaps the most important error madeby those who argue for reparations is noteconomic at all but philosophical. The ideaof achieving justice by taking money fromone group to pay another for an act thatwas neither committed nor suffered by theparties is a collectivist affront to the Ameri-can ideal of individualism. People are notinterchangeable pawns but individualsresponsible for their own actions. Slavesand slave owners are dead, and we cannotbring them back.

Our Constitution provided the frameworkfor legal equality for all individuals, andlater legislation eliminated remaining race-based government barriers to freedom,assuring that blacks, like whites, can be ben-eficiaries of this great system. Thus the onlysolution to the race problem in America is acommitment to individualism. �

What’s Wrong with Reparations for Slavery


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Businessmen on Business Valuesby William H. Peterson

ACato Institute report issued last Octo-ber estimates corporate welfare at$87 billion in 2001. That’s 30 percentbigger than Cato’s previous 1997 cor-

porate welfare estimate of $65 billion. Wel-fare for business? Business in bed with thestate? What goes on? (See Stephen Slivinski,“The Corporate Welfare Budget: BiggerThan Ever,” Cato Policy Analysis No. 415,October 10, 2001.)

True, President Bush stoutly sought cor-porate welfare cuts of about $12 billion ayear ago, notably in such programs as theOverseas Private Investment Corporation,Export-Import Bank, Small Business Admin-istration, and Maritime Administration’sguaranteed loan program. Somehow theseproposed cuts vanished with September 11and the Hill politics of budgetary “stimulus”at a recessionary hour. Comments the Catoreport on some of the “worst” corporatewelfare programs: “They subsidize large,profitable corporations at the expense oftaxpayers for projects that already receive,or could receive, adequate funding from theprivate sector.”

Amen.The Cato report notes how hard it is for

business and members of Congress to over-come their incestuous relationship. Such wasthe problem congressmen faced in shutting

down military bases—and jobs—in theirhome districts, bases declared surplus by theDefense Department itself. Years passed tillcooler heads in the House and Senate hit on the winning military-base-closure-commission idea. Cato urges an analogouscorporate-welfare-reform commission: itwould propose a list of corporate welfareprograms for repeal by Congress, whichwould hold an up-or-down vote on the entirepackage.

A personal confession: As a young inno-cent some 50 years ago setting out in gradu-ate economics at New York University, Isaw businessmen as born defenders of thefaith, natural trustees of free markets—savefor some renegade protectionists milking thesystem. Then I met visiting NYU ProfessorLudwig von Mises, who set me straight byhaving me look up this passage in the Eng-lish edition of his Socialism (1951, p. 503;original German edition 1922): “The entre-preneur, the man who seizes the opportunityof the moment, has little interest in the issueof a secular struggle of indefinite duration. . . . To fight on principle for the maintenanceof an economy based on private property inthe means of production is no part of theprogram of organized entrepreneurs.”

Corporate PhilanthropyThis Mises point on corporate expediency,

on getting along by going along, is seen inwork by the Capital Research Center, based,

Contributing editor William Peterson ([email protected]) is an adjunct scholar with the Her-itage Foundation.

APRIL 2002


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like Cato, in Washington, D.C. Check itsannual series, Patterns of Corporate Philan-thropy, on the widespread business habit ofhanding over responsibility for corporategiving to a philanthropic managerial classhardly in sympathy with the workings of afree economy. The 2001 Patterns, using free-market criteria, gives an “A” to no large firmfor its corporate philanthropy; a “B” to butone big firm, Cigna; a “C” to eight largefirms, including Weyerhaeuser and Bristol-Myers Squibb; a “D” to six large firms,including Merrill Lynch and Procter andGamble; and an “F” to five large firms: PNCBank, Sara Lee, May Department Stores,Target Stores, and Freddie Mac.

Nationally syndicated columnist MonaCharen, who wrote the preface in the 2001Patterns, finds Big Business weak-kneed instanding up to intimidation and shake-downs. She refers, for example, to JesseJackson’s prevailing on major Wall Streetfirms to come across with nice contributionsto him and his friends “on pain of lawsuits,boycotts, and other forms of protest.”

Henry Ford II, on quitting the Ford Foun-dation as a trustee in 1976, told an associate itwas a “madhouse,” explaining that the foun-dation is “a creature of capitalism, a statementthat, I’m sure, would be shocking to manyprofessional staff people in the field of philan-thropy.” As the late William E. Simon, presi-dent of the John M. Olin Foundation and for-mer secretary of the treasury, wrote in thepreface to the 1992 edition of Patterns: “Cap-italism has no reason in this world to under-write its enemies, but it does have a reason—in fact, a duty—to support individuals and

institutions dedicated to preserving Westerncivilization and the economic and politicalinstitutions that have given America the high-est standard of living, the greatest prosperity,and, most importantly, the greatest individualfreedom ever known to man.”

Antitrust FaultsAntitrust is another area where corporate

rectitude falls short. The broad theory of theSherman Antitrust Act of 1890 is to safe-guard consumers by safeguarding competi-tion. Sure. But look how, for example, U.S. District Judge Thomas Penfield Jacksonand the U.S. Justice Department pursuedMicrosoft on grounds of “monopoly.” Thereal litigants turn out to be not so much con-sumers represented by a noble U.S. govern-ment, but hard-driving, privilege-seekingMicrosoft competitors like Sun Microsys-tems, Netscape, Oracle, and other corporateloathers of competition that bites them inthe pocketbook. Surely businessmen andinvestors in general should return to firstprinciples, rethink the role of governmentand business in a free society (avoiding porklike poison), re-examine their corporate phil-anthropy programs, and support more heav-ily pro-free-market organizations.

Business—and personal—integrity is thething, a beacon that shines across the worldwhether you read the Bible or the Koran. AsPolonius advises Laertes:

This above all: to thine own self be true,And it must follow, as the night the day,Thou canst not then be false to any man. �


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An Economics Lesson for the Drug Czarby E. Frank Stephenson

A few years ago I heard a news reportthat then-drug czar General BarryMcCaffrey considered it “good news”that Americans’ spending on illegal

drugs had fallen to $57.3 billion in 1995from $91.4 billion in 1988. The implicationof the report was that the reduction was evi-dence of a successful anti-drug policy, pre-sumably one that reduced drug usage. Ele-mentary economics suggests otherwise.

The total expenditure on a product equalsthe number of units sold times the sellingprice. Other things equal, a lower sellingprice increases the number of units sold.Reduced expenditures on a product can becaused either by a lower price accompaniedby a smaller percentage increase in quantitysold or by a lower quantity sold accompa-nied by a smaller percentage increase inprice.

Which of the two scenarios applies to ille-gal drug usage? Illegal drugs, like the dread-ed cigarette, can be habit-forming. Hence theamount people purchase probably does notrespond strongly to changes in price. Thusthe former scenario, in which total expendi-ture on illegal drugs falls because the unitprice falls more than the quantity consumedrises, is correct. Consequently and contraryto what the drug czar wanted us to believe,

the decrease in drug expenditure suggeststhat drug usage has increased.

If the drug czar can estimate the expendi-ture on drugs (no one willingly reports thesetransactions), he can certainly estimate drugusage. And if he can calculate drug con-sumption, then he could use the consump-tion data to directly report a decrease indrug usage (if one has actually occurred)rather than indirectly (and probably incor-rectly) inferring a decrease in drug con-sumption using the expenditure estimate.(As an aside, McCaffrey suggested that the$57 billion spent on drugs could be used tosend one million people to college; somewould suggest that this might increase drugusage.)

In fairness it should be noted that otherthings may not be equal. It is possible thatsome external factor such as an advertisingcampaign has reduced the quantity of drugsdemanded at each price, thereby reducingboth the selling price and the number ofunits sold. Again, while this may be true, theexpenditure data do not imply this conclu-sion. The drug czar’s evidence would bemuch more persuasive if he cited actual con-sumption data rather than expenditure data.

May Lessen CrimeAlthough the decrease in spending on ille-

gal drugs suggests drug usage has increased,there was a bright spot in the drug czar’sexpenditure numbers. Since the spending

E. Frank Stephenson ([email protected]) is assistant professor of economics inthe Campbell School of Business at Berry Collegein Rome, Georgia.

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decline suggests that the price of drugs hasdecreased even if drug usage is up, the lowerprice of drugs reduces addicts’ need for drugmoney and as a result may lessen the crimecommitted to finance drug habits. Paradoxi-cally, an increase in drug usage may beaccompanied by lower crime.

This is not what the drug czar had in mindwhen he trumpeted the reduction in drug

expenditure as good news. However, morethan anything about the success of WhiteHouse drug policy, what he revealed is apoor grasp of elementary economics. Per-haps even more depressing, the mediareported the drug czar’s expenditure num-bers without an iota of critical thought and,in the process, displayed its own woeful lackof economic knowledge. �


HUMAN ACTION: 4th Revised Editionforeword by Bettina Bien Greaves

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To the Editor:I was reading the December issue of Ideas

on Liberty and came across Mark Skousen’sremarks on “The Case for Religious Compe-tition.” I believe that you understate thepresence of “Christians” in the Middle East.In Egypt you neglected to mention theCopts—who are thriving despite persecu-tion. Some 8 or 9 million Egyptians areChristian, some 13 percent of the popula-tion. And there are Western missionaries inEgypt. They do not enter the country underthat title (they have other legal employment)but they are recognized by their sendingchurches as missionaries.

Lebanon is still better than 30 percentChristian, more than one million people.Syria is 5 percent Christian, close to a mil-lion people. All statistics are from “Opera-tion World” by Patrick Johnstone and JasonMandryk, published by Operation Mobiliza-tion. On the subject of Egypt it says: “Theofficial figure for Christians is 6 percent, butChristians claim up to 20 percent. The truthis probably in between.”


by e-mail

Mark Skousen replies:You make a good point. There are mil-

lions of Christians in the Middle East. Nev-ertheless, they are everywhere a persecutedminority, and Christian missionaries are officially banned, even in Israel. Thus reli-gious competition—like economic and polit-ical competition—is severely restricted inthis dangerous part of the world. And thatcan mean only one thing: a lower quality oflife.



Christians in Egypt

We will print the most interesting andprovocative letters we receive regardingIdeas on Liberty articles and the issuesthey raise. Brevity is encouraged; longerletters may be edited because of spacelimitations. Address your letters to: Ideason Liberty, FEE, 30 S. Broadway, Irving-ton-on-Hudson, NY 10533; e-mail:[email protected], fax: 914-591-8910.

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I graduated from law school ten years ago.During that decade I’ve often reflected onthe differences between my experiences inlaw school and those as an economics

graduate student.The most obvious difference is that earning

my Ph.D. was vastly more interesting and funthan earning my J.D. I am not criticizing mylaw professors and fellow law students; theywere generally excellent. Rather, I mean onlyto report that my love of economics is so all-consuming that no other subject can possiblyrival it. While I liked studying law—andeven, on occasion, became exhilarated byit—I have always been and will remainabsolutely captivated, charmed, entranced,intrigued, and thrilled by economics. So Iknew I would enjoy law school less thangraduate school in economics.

Several other differences come to mind.For example, a good number of my fellowlaw students were there simply because theirparents expected them to be there. Not so ineconomics. Relatedly, many of my fellowlaw students hailed from elite backgrounds.In stark contrast, all of my comrades in eco-nomics graduate school were, like me, fromeither working-class or middle-class families.And, of course, most of my fellow law stu-dents aimed to earn big bucks after gradua-tion. No one studies economics with the aimof earning a fortune.

One of the biggest and most importantdifferences was, as expected, in the materialcovered. I often criticize my fellow econo-mists for going much too far in formalizingthe discipline—for forgetting that modelingand abstract reasoning are valuable only ifthey enable us to better understand reality.Economics should not be about what econo-mists do; it should be about the world.

But as dry and irrelevant as some parts ofeconomics have become, at its core it contin-ues to impart an utterly fundamental truth:The complex and productive economicarrangements that make possible our pros-perity and, indeed, our very civilization—theenormous division of labor and the intricateexchange relationships that accompany it—are the unplanned yet happy consequencesof millions upon millions of individuals eachmaking his own consumption and produc-tion decisions within the context of privateproperty rights and guided by market prices.

Different economists describe this truthdifferently. And they differ also in theirunderstanding of the finer points of theanalysis. Ludwig von Mises had a slightlydifferent understanding of the way marketsfunction than Milton Friedman—who, inturn, has a slightly different understandingthan Gordon Tullock, who has a slightly dif-ferent understanding than Vernon Smithwho. . . . You get the idea. While there aredifferences among great economists inunderstanding, emphasis, and expositionalstyle, all emphasize the vital importance ofdecentralized decision-making guided by

Thoughts on Freedom by Donald J. Boudreaux

An Economist Reflects on Law

Donald Boudreaux ([email protected]) is chair-man of the economics department of GeorgeMason University and former president of FEE.

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market prices that emerge only in a regimeof private property rights.

In brief, all good economists understandthat productive economic arrangements are(to use a phrase that F.A. Hayek was proper-ly fond of) the results of human action butnot of human design. Economics graduateschool is, ultimately, an attempt to impart tostudents a deep understanding of the logic of this decentralized, unplanned marketprocess.

Law by DesignLaw school is totally different. The reign-

ing conception of law in today’s legal acade-mies is Law by Design. The prevailing atti-tude among both faculty and students is thatof the central planner. The question thatmotivates the great bulk of legal analysistoday is, “What should the law be?”

By this description, I don’t mean that thetypical law professor or law student asksgeneral questions such as “should the lawprotect private property rights?” or “shouldcontracts be enforced?” These legitimatequestions are indeed asked. (Incidentally,one worthwhile consequence of studying lawis the appreciation it imparts of the complexdetails that must be grappled with inanswering such questions.)

Instead, I mean that today’s typical lawprofessor and student predominantly ask,“How can we use the law to engineer societyso that it looks like what we professors andstudents feel it should look like?” To extendan analogy that I first read in a book byRichard Epstein, legal scholars today aren’tcontent to discover and describe the rules ofthe road and to understand the process thatgenerates them. Instead, too many legalscholars want to determine the specific con-tent, direction, speed, and pattern of thetraffic. Legal scholars today fancy them-selves as the central planners of law and,through this process, as central planners ofsociety itself.

Many outcomes that emerge from thepeaceful, voluntary choices of individualsare condemned by legal scholars today fornot measuring up to their own imaginaryutopias. For example, if a greater number ofwomen than men choose to sacrifice careersto raise children at home, an entire cadre oflaw professors pontificates about the result-ing larger proportion of men in senior man-agement positions. These professors propose“laws” to “solve” this “problem.” Or if con-sumers insist on patronizing big-box retail-ers such as Wal-Mart, another cadre of lawprofessors loudly laments what they (wrong-ly) imagine to be the crassness of commercialsociety and propose specific legislation torestrict consumers’ choices of where to shop.

If economics graduate school were analo-gous to law school, economics studentswould spend much less time learning howmarkets work and far more in the futile—actually, absurd—quest of determining thespecific price of steel or the number ofbushels of pears that should be annually produced.

The notion of trying to determine suchfacts abstractly rather than relying on actualcompetitive market processes to generateand reveal them was never a major programfor economists. And those relatively feweconomists who did conceive such calcula-tion to be the task of the economist aretoday historical curiosities.

In contrast, legal scholarship remainsprimitive. Unlike economists, most law pro-fessors have yet to discover spontaneousorder. Law for them is only what someauthority declares it to be rather than theevolved product of countless human interac-tions. The idea that law need not be central-ly planned—or, certainly, the idea that lawought not be centrally planned—never occursto the typical legal scholar. For him, the lawand the state are one and inseparable.

Thank goodness that economists havenever seriously entertained such a crudenotion about economic phenomena. �

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BOOKSThe Skeptical Environmentalist: Measuring the Real State of the Worldby Bjørn LomborgCambridge University Press • 2001 • 515 pages • $65.00 hardcover; $28.00 paperback

Reviewed by Jane S. Shaw

B jørn Lomborg has shaken up the worldof environmentalists. Describing himselfas “an old left-wing Greenpeace mem-

ber,” the Danish statistician has produced abook that undermines most of the apocalyp-tic scares that keep Greenpeace afloat. TheSkeptical Environmentalist makes a persua-sive case that the environment is improving,not getting worse, and that most of the prob-lems that Greenpeace and other activistgroups call imminent crises such as acid rainand global warming are, instead, manage-able problems.

At first, Lomborg’s book was greetedenthusiastically, and, as a vegetarian back-packer, he was hailed as a charming curiosi-ty. Writing in the New York Times,Nicholas Wade found it “a surprise to meetsomeone who calls himself an environmen-talist but who asserts that things are gettingbetter . . . and that even global warming isnot as serious as commonly portrayed.”

But then the long knives were drawn.Prominent individuals, including scientistswho have taken hard-line positions on envi-ronmental topics, apparently felt attacked byLomborg’s impressive 515-page tome. Theyturned on him. An almost hysterical reviewby ecologists Stuart Pimm and Jeff Harveyasked why Cambridge University Press“would decide to publish a hastily preparedbook on complex scientific issues which dis-agrees with the broad scientific consensus,using arguments too often supported bynews sources rather than by peer-reviewedpublications.”

When one actually looks at the book, it isdifficult to see how anyone could honestlymake such charges. To begin with, The Skep-

tical Environmentalist is written in athoughtful, conversational manner, with lit-tle dogmatism and plenty of humility. Thediscussions are backed by solid data, oftencarefully organized into graphs and tables.For anyone who has scrutinized these issuesdispassionately (as I have tried to do in pre-vious writings, as have many others, such asJulian Simon, Ronald Bailey, Joseph Bast, P. J. Hill, Wallace Kaufman, Gregg Easter-brook, and Michael Sanera), Lomborg’s con-clusions are reasonable and well-supported.

Lomborg’s chief goal is to identify broadtrends, some strictly environmental (such aswhether 40,000 species are becoming extincteach year, as some claim) and others relatingmore directly to human conditions (such aswhether food production is outpacing popu-lation). He explains that one could “easilywrite a book full of awful examples” or,alternatively, a book “full of sunshine sto-ries,” but both would be “equally useless.”In addition to assessing global trends, heanalyzes specific environmental hazards.

For the most part, Lomborg relies onwidely accepted source materials (whichmakes the Pimm/Harvey complaint ludi-crous). These are respected (although imper-fect) collections of data from organizationslike the Food and Agriculture Organizationand the World Health Organization. ForU.S. data, Lomborg relies on sources such asthe Environmental Protection Agency andthe Department of Agriculture. What hiscritics are loath to admit is that these main-stream sources tell a story of steadyimprovement in human conditions and less-ening of environmental risk. (In the case ofglobal warming, which involves not so muchfactual material as predictions based oncomputer models, Lomborg relies on theIntergovernmental Panel on Climate Change[IPCC], the best-known scientific organiza-tion dealing with global warming.)

Sometimes Lomborg takes issue with hissource material—specifically, he questionssome of the IPCC decisions—but for themost part he accepts the conclusions of gov-ernmental and U.N. organizations. Forexample, when the EPA claims that 15,000to 22,000 people are dying in the United



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States each year from radon seeping intotheir homes, he does not dispute it, althoughmany have. Rather, he points out that suchindoor air pollution is often ignored under awelter of worries about far less serious prob-lems such as fears of cancer from pesticideresidues on foods.

Undoubtedly, some of the reaction to TheSkeptical Environmentalist stems from Lom-borg’s criticism of a few luminaries amongenvironmental doomsdayers, such as LesterBrown of the Worldwatch Institute and PaulEhrlich of Stanford. Lomborg shows howBrown misuses short-term trend data so thatthey appear to support his pessimisticclaims. For example, Brown selected thebeginning and ending point of a recent his-torical period to give the impression thatgrain yields are falling. In fact, the longertrend shows them rising. Lomborg’s critiqueof Brown is unassailable, and he is not thefirst to level it. But Brown’s friends have cho-sen to circle the wagons. Perhaps because thebook is such an impressive collection of sta-tistical data, they feel they must knock itdown if they can.

Eventually, the brouhaha will subside andThe Skeptical Environmentalist will take itsplace on our shelves as a useful reference.Indeed, the book is already being cited as asource. For those more interested in factsthan rhetoric, it will be valuable for years tocome. �

Jane Shaw is a senior associate of PERC—TheCenter for Free Market Environmentalism—inBozeman, Montana, and coauthor (with MichaelSanera) of Facts, Not Fear: Teaching ChildrenAbout the Environment.

The Joy of Freedom: An Economist’s Odysseyby David R. HendersonPrentice Hall • 2001 • 361 pages • $27.00

Reviewed by George C. Leef

Growing up in a fairly poor family in ruralManitoba, David Henderson wouldhave seemed an unlikely candidate for

the authorship of one of the most resounding

libertarian books to come along in years. Butan innate sense that there was somethingvaluable in having the freedom to live one’slife according to one’s own choices kept theyoung man from being trapped in the bog ofenvy and egalitarianism that prevails in Cana-da. At a propitious moment Henderson laidhis hands on a copy of Ayn Rand’s The Foun-tainhead. From that point on he was hooked.The Joy of Freedom is Henderson’s story ofhis discovery of the importance of liberty andthe dour consequences for human beingswhen it is taken away.

Although the book has autobiographicalaspects—its subtitle is An Economist’sOdyssey—it isn’t so much an autobiographyas an impassioned brief for a society shornof coercive governmental meddling. Unlikemost autobiographies, in which the authorindulges in the narcissistic belief that thedetails of his life are fascinating to others,when Henderson writes about himself, it isalways incidental and useful to his purposeof trying to convince the reader that freedomworks.

In that endeavor he succeeds wonderfully.His odyssey in the discovery of freedom isone that anyone could take, not necessarilywinding up with a Ph.D. in economics fromUCLA, service on the President’s Council ofEconomic Advisers, and, currently, a fellow-ship at the Hoover Institution, but in comingto understand the fantastic potential of freepeople to make progress and solve problems.Most of the book is devoted to disputesbetween advocates of liberty and statists—the “distribution” of income, minimumwage, property rights, health care, taxation,and so on—and in issue after issue, Hender-son cogently, unequivocally advances thelogic and morality of the libertarian side.

His technique is to weave into his discus-sion strands of individual stories (sometimeshis own experiences, sometimes other peo-ple’s), good economic analysis, statistics,and statements by defenders of governmentintervention. In doing so, he creates chapterafter chapter of sharp libertarian argumenta-tion. People unfamiliar with the case for thesuperiority of freedom over statist interven-tion will find themselves saying, over and

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over, “Well, I hadn’t ever thought of that.”And those of us who are veterans of the waragainst incessant government encroach-ments on our liberty and property will dis-cover much that is new, ready for incorpora-tion into our arsenals.

Here’s a good example of Henderson atwork. Labor unions try to cultivate theimpression that they are the champions of“the little guy” and have only the interests ofthe workers at heart. It would be hard forany objective reader to continue to hold thatidea after Henderson is done with it. He usesthe words of a union official to do much ofthe demolition work.

The episode is the infamous attempt bythe garment workers’ union to preventwomen from knitting ski caps, scarves, andsimilar items in their own homes. That activ-ity constituted lower-cost competition, andthe union wanted it stopped. Naturally, itturned to the U.S. Department of Labor toenforce blatantly authoritarian regulationsforbidding homework. While Hendersonwas working for President Reagan, hearingswere held on those regulations. A union offi-cial named Alex Rose testified that home-work should be banned so that workerswould then turn to factory jobs with all theunion “benefits” (and, of course, dues pay-ments as well). Henderson asked Rose, “Doyou know of a woman named Cecile Duf-fany?” “No,” he said curtly. “Mrs. Duffanyhas acute arthritis in her hips and she can’twork in a factory. If this ban stays, Mrs.Duffany will be out of work. What wouldyou have her do?” “If she can work in herhome, she can work in a factory!” the offi-cial snapped angrily.

Henderson is also dynamite on education.He argues that “One of the biggest snowjobs that advocates of government schoolshave successfully pulled is to convince thepublic to think of ‘schools’ and ‘learning’ or‘schools’ and ‘education’ synonymously.They are not synonymous. Schools don’thave a monopoly on learning. They don’teven have a large market share.”

Henderson observes that much of whatpeople need to learn, they learn at home, onthe job, or in other nonschool environ-

ments, then follows up by writing,“Observers have marveled at how well oureconomy does—that is, how well individualworkers in that economy do—in spite of ourlousy education system.” Advocates of gov-ernment schooling often say that the factthat the economy is strong is proof that theschools must be pretty good, but Hendersonwon’t buy it. “What it really shows is thatthe U.S. school system is only one of manyinputs into people’s learning.” He maintainsthat government schools are in fact doing amiserable job and that “one of the mainresources that the government school sys-tem wastes, one that is rarely talked about,is children’s time.” Right!

David Henderson wrote The Joy of Free-dom to help advance the cause of freedom.He has done an excellent job, and I urgereaders to aid in that project by putting the book into the hands of as many educa-ble people as possible. Graduations are just around the corner. The book would be a great gift for high school and collegestudents. �

George Leef is the book review editor of Ideas onLiberty.

Friedrich Hayekby Alan EbensteinSt. Martin’s Press • 2001 • 403 pages • $29.95

Reviewed by Bettina Bien Greaves

In this first full-length biography ofFriedich Hayek—economist, thinker,Nobel laureate, and political philosopher

of the rule of law, liberty, and limited gov-ernment—Alan Ebenstein offers a veritableintellectual travelogue of Hayek’s journeythrough life. As a student, we learn, Hayekwas mildly socialist. However, Austrianeconomist Ludwig von Mises’s devastatingcritique, Socialism (1922), “fundamentallyaltered [his] outlook.” Through continuedstudy, Hayek became an Austrian (and free-market) economist and, in time, the philoso-pher of liberty.

To obtain insight into Hayek as a person,scholar, and philosopher, Ebenstein, himself



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an economist and author of six previousbooks on economic and political thought,read and re-read Hayek’s works, andresearched his life thoroughly, including let-ters to and from Hayek, articles about him,and interviews with him and his friends.Then Ebenstein wove all that materialtogether to describe Hayek’s intellectual“travels.” Separate chapters are devoted topersons important in Hayek’s intellectuallife: John Stuart Mill, Mises, Lionel Robbins,John Maynard Keynes, Karl Popper, andMilton Friedman.

Mises encouraged Hayek’s studies of theimportance of competitive market prices,which led to his major contributions. Hisconcept of the market’s “spontaneousorder” came from his understanding ofprices and demonstrated that, as Ebensteinwrites, “absent an orderer, human societycan achieve great orderliness.” Too littleemphasis, Hayek wrote, “has been placed onthe fragmentation of knowledge, on the factthat each member of society can have only asmall fraction of the knowledge possessed byall, and that each is therefore ignorant ofmost of the facts on which the working ofsociety rests.” Hayek explained how marketprices help to alleviate the knowledge prob-lem by transmitting widely dispersed, non-verbal knowledge.

In 1920 Mises argued that a socialist soci-ety—in which property was collectivized, nofactors of production were traded, and henceno market prices existed—would be unableto function because socialists would beunable to perform economic calculations. Tothis argument Hayek added that, withoutthe knowledge market prices impart, theplanners would lack the very informationthey needed to formulate a plan.

In England Hayek taught at the LondonSchool of Economics, wrote several books,and gained a reputation as a technical econ-omist. He debated John Maynard Keynes.Hayek said he was then considered “one ofthe two main disputing economists. Therewas Keynes and there was I.” Keynes died inApril 1946 and became “a saint.” But, Eben-stein writes, Hayek discredited himself acad-emically by writing a book for popular con-

sumption, The Road to Serfdom, and “wasgradually forgotten as an economist.”

As a young man, Hayek saw his nativeAustria drift toward socialism. And again inEngland during World War II he witnessedBritain drift in that direction. The Road toSerfdom portrayed German Nazism andSoviet socialism as essentially the same.Socialism and liberty were incompatible, hemaintained. The most effective way to assurefreedom and individual rights was not cen-tral planning, but market competition with-in a “carefully thought-out legal frame-work.” “[A] policy of freedom for the indi-vidual is the only truly progressive policy.”The “socialists of all parties,” to whomHayek dedicated the book, were apoplecticand responded with vehemence, but rarelycame to grips with Hayek’s arguments.

The book’s fame soon crossed theAtlantic. Through the efforts of the London-based Institute of Economic Affairs, its dev-astating critique of socialism gained notori-ety and later political influence during theadministrations of Prime Minister MargaretThatcher in England and President RonaldReagan. The book also “revolutionized”Hayek’s life, Ebenstein notes, transforminghim from economist to political philosopher.

In 1950 Hayek moved to the University ofChicago’s Committee on Social Thought.His next two major works, The Counterrev-olution of Science (1952) and The Constitu-tion of Liberty (1960), enhanced his stand-ing as a political philosopher. The formerdemonstrated that positivists and histori-cists, by applying the methods of the physi-cal sciences to economics, were laying thegrounds for socialism; the latter presentedhis philosophical defense of liberty. Hayek’sbasic thesis throughout his life, appearingmost prominently in his later writings, wasthat “[t]he most important institutional safe-guard of individualism is the rule of law.”“Where not laws, but men rule,” he main-tained, “no one is free and great coercion isinevitable.” Hayek was adamant that noth-ing had contributed more to the prosperityof the West than the “relative certainty ofthe law.”

Hayek’s three volumes, Law, Legislation

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and Liberty (1973, 1976 and 1979), plus asummary volume, The Fatal Conceit (1988),established his well-deserved reputation asthe philosopher of liberty.

According to biographer Ebenstein, “Hiswriting will serve as a beacon to enlightencenturies.” We are indebted to this authorfor his excellent work in illuminating thelong and productive life of this great advo-cate for liberty. �

Bettina Greaves was a senior staff member andresident scholar at FEE for more than fourdecades. Now a resident of North Carolina, she isa member of FEE’s Board of Trustees.

World War 3.0: Microsoft and Its Enemiesby Ken AulettaRandom House • 2001 • 438 pages • $27.95

Reviewed by Barbara Hunter

Journalist Ken Auletta’s book about theMicrosoft antitrust case is not just another Microsoft-bashing diatribe. On

the contrary, World War 3.0 is a remarkablyevenhanded investigation of this infamouscase, providing some good insights into thebasis (or lack of it) of the now-nullified judi-cial order to break Microsoft into two com-panies. Unfortunately, the book doesn’tprobe far enough into the villainies of thecase or provide the reader with grounds forskepticism about the whole antitrust enter-prise.

Auletta deals at length with what he con-siders to be the immaturity of Microsoft pres-ident Bill Gates. He describes in minute detailhis firsthand observations of Gates’s temperand resentments—a theme that recursthroughout the book. One eventually won-ders why the personality of a corporation’sCEO should be relevant to judicial decisionsconcerning the company’s future. In whatfield of law other than antitrust could execu-tive personality traits be important?

The author also points out that the keyplayers against Microsoft—Joel Klein, headof the Justice Department’s antitrust divi-sion; David Boies, the government’s lead

attorney; Thomas Penfield Jackson, the trialjudge; and even Attorney General JanetReno, without whom the case would neverhave proceeded—were computer illiterate.Worse still, they had no comprehension ofthe computer market and contrived a ridicu-lously narrow definition of the market inorder to justify the case—but Auletta doesnot discuss that important point.

The first stage of the trial, together withJudge Jackson’s Findings of Fact, receivedextensive attention from the press, especiallyon television. The government’s handlersused a three-hour Gates deposition to maxi-mum advantage by airing snippets of it,together with carefully chosen parallel snip-pets of e-mails and reports of alleged meet-ings, to paint a picture of a rapacious,immoral, law-breaking corporation in needof a comeuppance. The radio, television, andprint media hung on every word and gath-ered on the courthouse steps each afternoonto hear what the antitrust lawyers had pre-pared for them—to the point whereMicrosoft was in danger of being con-demned in the court of public opinion longbefore any real court was close to a verdictof any kind. To his credit, Auletta doesn’ttake up the “Microsoft is evil” chorus; heshows instead that the public image craftedby the government and Microsoft’s rivalswas just a giant PR operation.

The Findings of Fact took an almostincredible turn. In effect, Judge Jacksonmade it plain that he believed and acceptedeverything the government’s witnesses hadto say and disbelieved and rejected every-thing Microsoft’s witnesses had to say.Auletta highlights this point when he titlesthe chapter “Judge Jackson’s ‘Facts’” andexpresses the view that “Jackson’s viewsabout the future were not so much deducedas asserted.” It was not surprising that thejudge commended Microsoft’s competitorsfor proposing to split the company and thathe himself issued such a ruling. From thestart, the case had the odor of rivals usingthe law to disable a competitor. The Courtof Appeals subsequently chastised JudgeJackson, in some of the harshest terms tocome from one court to another, for his



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interviews and speeches both during andafter the trial, in which he likened Microsoftto criminals and mobsters.

Auletta’s book provides both lively read-ing and an excellent background on this(sadly) still-continuing case. What is missing,though, is any insight into the essential prob-lems of antitrust enforcement. He seemsoblivious to the economic damage that isdone when government lawyers, eager topolish their reputations, gang up with cov-etous rivals to punish successful firms forbehavior that can be called “predatory” or“monopolistic.” On the contrary, Aulettagives his readers the conventional view thatfollowing the Civil War “corporationsrapidly consolidated and flaunted theirwealth and power in the Gilded Age, whichin turn spurred a backlash against corporatearrogance.” If he had familiarized himselfwith the free-market critique of antitrust, hecould have written a much deeper book.

Readers of World War 3.0 will learn a lotabout the minutiae of the Microsoft case,but it should definitely not be the only bookone reads about it. �

Barbara Hunter is a computer specialist in a largelaw firm.

Bowling Aloneby Robert D. PutnamSimon & Schuster • 2000 • 541 pages • $26.00

Reviewed by Loren Lomasky

Many afternoons my junior high schoolfriends and I assembled at the Bloom-field (Connecticut) Bowling Alley to

plunk down our quarters for shoe rental andthen to bowl a few strings. So as not to makethat four-mile bike ride in vain, we sched-uled our outings to avoid conflict with thevarious leagues that had priority. I don’tknow if today’s adolescents care for bowl-ing, but according to sociologist Robert Put-nam, they need not much worry about pre-emption by league bowlers. Americansincreasingly are abandoning league bowling,just as they are withdrawing from othersorts of recreational, charitable, fraternal,

and civic organizations. Do these retreatsmatter? According to Putnam, yes.

Face-to-face group activities are valuablebecause they help breed social trust. Cooper-ation is unlike an ordinary consumer goodwhich, once expended, is gone. Rather, itmore resembles capital assets that yieldongoing dividend flows. Accordingly, Put-nam employs the term social capital to referto enduring trust relations. Social capital is anear kin to what economists have dubbedhuman capital: those personal capacities thatafford continuing returns.

Some investments in human capital, suchas apprenticeship in a craft or long hourspracticing the flute, enable their possessorsto perform one particular kind of activity.Other kinds of human capital can be prof-itably deployed in many arenas; such is thetheory behind an education in the liberalarts. But whether narrowly or broadlyfocused, human capital is a kind of propertythat brings benefits to its owner. Thus, thereis no mystery about why people invest inaccumulating human capital; they do so forthe same kinds of self-interested reasons thatmotivate them to buy mutual funds or wash-ing machines.

Social capital, however, is not similarlyassignable. That is because it is manifested inpersistent relationships within interactivecommunities. Whether I am able to takeadvantage of opportunities for profitabletransactions with my fellows does notdepend so much on whether I am content tocooperate with them as it does on whetherthey are inclined to trust me (and others) aspotential partners in joint activities. If we areall mutually suspicious, then we will tend towall ourselves off from one another and leadcramped, parched lives. Conversely, if wecustomarily accord each other the benefit ofthe doubt, then our chances of gain fromcooperative interaction are good. General-ized social trust, therefore, has the nature ofa public good, one available to many if avail-able to any.

How a social order secures for itself anadequate supply of public goods is one of themost persistent conundrums confronted byeconomics and political philosophy. When

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benefits are indiscriminately enjoyed by all,there is a powerful incentive to withholdone’s own contribution in the hope of free-riding on others. The customary remedy iscoerced subscription. More often than not,that approach leads to overpayment or buy-ing the wrong things entirely.

Putnam offers a different approach to theproblem of accumulating social capital. It isthe product, he maintains, of repeated inter-actions among individuals engaged in pur-poseful activity. More specifically, it is abyproduct. Without ever consciously aimingat the establishment of trust relations, that iswhat joiners and doers achieve. Moreover, ifthey genuinely cherish their lodges, volun-teer fire departments, and bowling leagues,they achieve it painlessly, with no perceptionof sacrifice.

The author supplies a wealth of data indi-cating that since the 1960s American socialcapital has been significantly depleted. Thematerial served up in Bowling Alone goesdown so easily that readers are apt not torealize how much information they arereceiving. Interpretation, though, is oftendouble-edged. For example, are virtual con-versations in Internet chat rooms betterunderstood as manifestations of connected-ness or instead as a further atomizing ofAmericans? If millions of women have exit-ed their clubs and charities for roles in theworkplace and soccer-mom service, can webe confident that the transformation consti-tutes a net diminishment of social capital?

Even the book’s title is problematic.Leagues may have dwindled, but a visit toyour local bowlarama will reveal that theirplace has been taken by groups of friendsout for a good time, not one-to-a-lane soli-tary keglers. Because the waning of old orga-nizational forms is more readily observablethan the gestation of new ones, Putnam’sverdicts may be overly pessimistic.

It is easy to identify vulnerable patches inBowling Alone, but that fact should notovershadow the book’s considerable merits.Free markets are central to the thriving of aliberal order, but so too, Putnam reminds us,are the nonmarket relationships we freelytake on. No contemporary theorist has so

comprehensively and eloquently under-scored the importance to a society’s healthof rich networks of voluntary association.He may perhaps be faulted for insufficientlyattending to the ways in which the welfarestate has displaced the functioning of privateassociations, but the clear thrust of Putnam’smessage is pro-freedom. As such, BowlingAlone makes a substantial addition to theintellectual capital of liberalism. �

Loren Lomasky is professor of philosophy atBowling Green State University.

States’ Rights and the Union Imperium in Imperio, 1776–1876by Forrest McDonaldUniversity Press of Kansas • 2000 • 296 pages • $29.95

Reviewed by James Ostrowski

Historian Forrest McDonald has pro-duced this fine survey of how the idea ofdivided sovereignty has played out in

American history. “Imperium in Imperio”means “sovereignty within sovereignty, thedivision of sovereignty within a single juris-diction.” They said it could not be done—that sovereignty could not be divided. In1789, however, the Americans tried it any-way and with mixed results. The people ofthe states created a regime that divided sov-ereignty—supreme authority—between thefederal and state governments.

That being the case, it seems silly to ask,“Which came first, the states or the federalgovernment?” Abraham Lincoln asked thisquestion and answered, “the federal govern-ment”; and McDonald skewers him. Mem-bers of the Continental Congress “werethere as agents of existing political societies,and in the nature of things, agents cannotauthorize their principals to do anything.”

For a while, the original vision held true,and the size and power of the federal gov-ernment was restrained. Yes, there was thatpesky Federalist era, but when they tookpower in 1801, the radical Republicans did“strive to strip down the machinery that



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Hamilton and the Federalists had put inplace, and to some extent they succeeded.”Taxes were axed. The Alien and SeditionActs expired and pardons were issued. Theyreduced the army to a mere 3,350 men.

When war with England came in 1812,the United States was unprepared with itssmall army and small treasury. AlthoughPresident Madison called up the militias ofthe states, New England refused to comply.McDonald believes this war showed thedefects in the militia system. However, mili-tias are designed to defend the homeland,not to attack foreign countries. Thus, foreigncountries do not feel threatened by them.

Paradoxically, McDonald cites New Eng-land’s reaction to the War of 1812 as evi-dence of the weakness of the Jeffersoniansystem. That region sat on its hands duringthe war in a virtual state of secession, if nottreason. The Yankees “conducted a lucrativetrade with the enemy.” Lincoln’s hero,Daniel Webster, decried conscription pro-posals. Sounding like Jefferson, he asked,“Where is [conscription] written in the con-stitution?” The New England states met inconvention to discuss secession. That talkfizzled, but the resolution they passedavowed that state governments may inter-pose themselves between their own citizensand arbitrary federal power.

Before the Civil War, the states’ rights fac-tion was “triumphant.” Andrew Jackson“resisted efforts by Congress to extend thescope of the federal government and workeddiligently to reduce the activities in which itwas already engaged.” He cut the nationaldebt and eliminated the Bank of the UnitedStates. By the time Jackson left office, thefederal government had become “virtuallynonfunctional.”

With sectional differences acute, olddebates about the nature of the Republicwere revived. William H. Seward counteredthe states’ rights view with his own: theunion was of the whole people, not of thestates. If true, this would make the right ofsecession implausible. Southerners did notagree. They were too busy reading ThomasPrentice Long’s analysis of the disparateimpact of the federal tariff. He concluded

that the North took about $250 millionfrom the South as the result of the tariff andother federal fees. Whether the ultimatecause of the war was the tariff, slavery, orthe preservation of the union, McDonalddoes not purport to resolve.

Without opposition from the South, Lin-coln enacted Henry Clay’s American System:high tariff, internal improvements, and infla-tion. McDonald graciously describes Lin-coln’s attitude on civil liberties this way: hewent “beyond the bounds of the Constitu-tion as it had been understood.” Lincoln’speople hijacked an election in Maryland.Over 13,000 political prisoners were taken,and newspapers were suppressed. He resort-ed to conscription to fight a war retroactive-ly defined as against slavery. The citizens ofthe North and border states had to be forcedto force the South to have a “new birth offreedom.”

Strangely, McDonald does not view theNew Deal as an all-out assault on state pre-rogatives. The measures were mostly “eco-nomic” in nature and did not interfere withtraditional state “police powers.” To justifythis, however, we must follow McDonald’suse of the term “property relations” as notinvolving “economic” activity, which is astretch. He is on sounder ground in describ-ing World War II as involving an “expan-sion of government [that] dwarfed any thathad taken place before.” The postwar yearswere not good ones for the cause of states’rights, associated as that concept was at thetime with racial segregation by law. Andunder Lyndon Johnson, federalism com-pletely collapsed. His “Great Society”destroyed the notion that there were certainareas of policy reserved to the states.

It is not always apparent where ProfessorMcDonald stands on the battle between theJeffersonians and Hamiltonians, between theproponents of states’ rights and the nation-alists. That may be due to his evenhanded-ness as a scholar. Or maybe his view lies inthe middle. �

James Ostrowski is an attorney at law in Buffalo,New York, an adjunct scholar with the Ludwigvon Mises Institute, and a columnist at LewRock-well.com.

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Monopoly is nearly always seen assomething undesirable. Courts havewrestled with monopoly for ages,sometimes defining it as “the power

to control prices and exclude competition,”“restraining trade,” or “unfair and anticom-petitive behavior.” Should monopolisticpractices be condemned and outlawed? Let’slook at anticompetitive behavior and prac-tices, but let’s not confine ourselves towhat’s traditionally seen as monopoly.

The marriage contract is essentially amonopoly document. It represents a legallysanctioned collusive agreement between twoparties to exclude competitors and restraintrade. It closes the market to competition, orat least it is supposed to. This collusion hasbenefits as well as costs. Because I haveexclusive rights to her affections and proper-ty rights to a stream of highly valued domes-tic services, I place a higher value on myspouse, making me willing to share with hera greater percentage of my wealth. Myspouse receives a comparable set of benefitsfrom this collusive arrangement.

This monopolistic arrangement has a costside and perhaps some inefficiencies as well.Neither one of us is as attentive as we werebefore we made our contractual arrange-ment. For my part, I don’t open the car doorfor her as often, don’t use breath freshenersand colognes as frequently, am not nearly asconsiderate and gentlemanly as before our

marriage some 42 years earlier. The reasonis simply that before marriage I was compet-ing against other men and therefore could illafford to act as a monopolist.

Read the Old Testament’s Book ofDeuteronomy, Chapter 5, where God gaveMoses the Ten Commandments. The firstcommandment, and presumably the mostimportant is, “Thou shalt have none othergods before me.” The second is, “Thou shaltnot make thee any graven image, or any like-ness of any thing that is in heaven above.”Then there’s, “Thou shalt not bow down thy-self unto them, nor serve them: for I the Lordthy God am a jealous God.” If a corporationmade a similar decree regarding its services, itwould find itself in the sights of the U.S.Department of Justice for gross violations ofthe antitrust provisions of the Sherman andClayton Acts. The Ten Commandmentsdecree exclusive dealing and mandate neithersubstitutes for nor competition with God.

For one to condemn all monopolistic prac-tices as evil, at least for consistency, hewould have also to condemn marriage andthe basic tenets of Christianity. I condemnneither marriage and the monopolistic tenetsof Christianity nor business and labor unionmonopolies. The only moral argument thatcan be used to condemn and outlaw monop-oly is when it is created through fraud,threats, intimidation, and coercion.

Our nation has a number of government-sponsored, -created, or -protected monopo-lies and collusions in restraint of trade. Oneof the more egregious examples is the U.S.Postal Service. The federal Private Express

The Pursuit of Happiness by Walter E. Williams

Is Monopoly Good or Bad?

Walter Williams is the John M. Olin DistinguishedProfessor of Economics at George Mason Univer-sity in Fairfax, Virginia.

APRIL 2002


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Statutes, Sec. 310.2 “Unlawful carriage ofletters,” says, “(a) It is generally unlawfulunder the Private Express Statutes for anyperson other than the Postal Service in anymanner to send or carry a letter on a postroute or in any manner to cause or assistsuch activity. Violation may result in injunc-tion, fine or imprisonment or both and pay-ment of postage lost as a result of the illegalactivity.” The Private Express Statutes havethe full effect of saying, “Thou shalt havenone other deliverers of first-class mailbefore the USPS and we shall visit great painon he who disobeys this commandment.”

The U.S. Postal Service is a government-owned monopoly; however, there arenumerous privately owned monopolies andcollusions in restraint of trade. In fact,nearly every federal agency is an enforcer ofmonopolistic collusive agreements. Untilthe 1980s the Interstate Commerce Com-mission and the late Civil AeronauticsBoard enforced price-fixing agreements inthe trucking and airline industries. Deregu-

lation brought an end to those collusiveagreements.

Thriving monopolistic agreements, at thefederal level, are enforced by agencies suchas the U.S. Department of Labor, NationalLabor Relations Board, Department of Agri-culture, Federal Communications Commis-sion, Department of Education, and Depart-ment of Commerce. The rule of thumb todetermine whether effective collusion existsis to see whether there are mandated mini-mum prices, license-to-practice provisionsand other restrictions on entry, and, finally,techniques to enforce compliance among thecolluding members, such as revocation oflicense or permit to practice, fines andimprisonment, and other sanctions.

The free market, including free interna-tional trade, is the most effective protectionagainst monopolistic abuses. In fact, in a freeand open market, monopolistic companiescan retain their monopoly power only if theydo not fully exploit it; otherwise other com-panies will enter. �

Ideas on Liberty • April 2002