the invisible hand happiness• jurassic mart: digging with the invisible hand • money can buy...

• Jurassic Mart: Digging with the Invisible Hand

• Money Can Buy Happiness

• Confiscating Guns from America's Past

• Learning from the Ancient Greeks

"The greatest obstacle to discovery is not ignorance—it is the illusion of knowledge."

DANIEL J. BOORSTIN

JANUARY 2001

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FEATURES8 Money Can Buy Happiness by Daniel T. Oliver

11 Jurassic Mart: Digging with the Invisible Handby J. Bishop Grewell and Matthew Brown

17 Farm Credit Fraud by James Bovard

21 Working-Family Gibberish by Wilson Mixon and E. Frank Stephenson

23 Confiscating Guns from America’s Past by Clayton E. Cramer

30 Learning from the Ancient Greeks by Kathleen Melonakos

33 Graduation Advice for the Global Economy by Gerald Gunderson

38 Egalitarianism Run Amok by Christopher Mayer

41 Bill Brosnan: Railroad Free-Marketeer by Charles O. Morgret

47 South Africa’s Polarized Politics by Jim Peron

COLUMNS4 THOUGHTS on FREEDOM—Why All the Con Artistry? by Donald J. Boudreaux

15 IDEAS and CONSEQUENCES—Get Rid of the Labels by Lawrence W. Reed

28 POTOMAC PRINCIPLES—Appeasing China, Backing Taiwan? by Doug Bandow

36 THE THERAPEUTIC STATE—Public Schools as Drug Delivery Systems by Thomas Szasz

45 ECONOMIC NOTIONS—More on Marginalism by Dwight R. Lee

53 ECONOMICS on TRIAL—The Imperial Science by Mark Skousen

63 THE PURSUIT of HAPPINESS—What Should One Do? by Walter E. Williams

DEPARTMENTS2 Perspective—Prescription for Disaster by Sheldon Richman

6 Antitrust Benefits Consumers? It Just Ain’t So! by Thomas J. DiLorenzo

51 Capital Letters

55 Book Reviews

The Black Book of Communism: Crimes, Terror, Repression by Stéphane Courtois et al., reviewed by Theodore Balaker; Social Security: The Phony Crisis by Dean Baker and Mark Weis-brot, reviewed by Andrew G. Biggs; Owning the Future by Seth Shulman, reviewed by Joseph S.Fulda; The War Against Boys: How Misguided Feminism Is Harming Our Young Men by Christi-na Hoff Sommers, reviewed by George C. Leef; Fatal Freedom: The Ethics and Politics of Suicideby Thomas Szasz, reviewed by Ross Levatter; Government’s End: Why Washington StoppedWorking by Jonathan Rauch, reviewed by Philip Murray.

January 2001 Vol. 51, No. 1

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

Bill Brosnan

PERSPECTIVEPrescription for Disaster

The level to which public-policy debate hassunk in America is nowhere as obvious as inthe debate over prescription drug benefits.

Today hardly anyone believes he shouldhave to pay for medical care. It’s a right, to bepaid for, somehow, by someone other than thepatient. That’s called “insurance.” But it’s anodd sort of insurance, because the premium,if any, must be purely nominal, bearing norelation to the propensity of an individual toconsume medical services.

The idea that one has a right to what oneneeds fuels an easily exploited resentmentagainst those who are able to satisfy that need.Thus the resentment directed at pharmaceuti-cal companies. I imagine those companiesprice their products to maximize revenues.Who doesn’t? But since these are life-savingproducts in many cases, normal economicactivity is portrayed as monstrous. (If the government didn’t hide the true expense ofdrugs through tax-preferred, employer-pro-vided health insurance and didn’t inflate thecost of developing drugs with regulatorydemands, we’d most likely see lower prices.)

It is easily forgotten that those companiesown the products. They had no obligation torisk the hundreds of millions of dollars it takeson average to bring an effective medicine tomarket. They did it to make money. It is alsoforgotten that without profits, there would beno more life-saving drugs.

No one complains about the price of drugsnot yet developed. Before the development ofthe drugs for which the companies chargetheir “unconscionable prices,” people had toundergo much more costly surgery, or theysuffered or died because nothing could bedone for them. The drug companies havemade our lives incomparably better than theyused to be—which is precisely why they aretreated as oppressors.

There cannot be a right to medical carebecause it has to be provided by someone andslavery is immoral, not to mention illegal andunconstitutional. Any attempt to legislate aright to medical care only serves to expand the

Published byThe Foundation for Economic EducationIrvington-on-Hudson, NY 10533Phone (914) 591–7230 Fax (914) 591–8910E-mail: [email protected] Home Page: http://www.fee.org

President: Donald J. Boudreaux

Editor: Sheldon Richman

Managing Editor: Beth A. HoffmanEditor Emeritus

Paul L. Poirot

Book Review EditorGeorge C. Leef

Editorial AssistantMary Ann Murphy

ColumnistsCharles W. Baird

Doug Bandow

Dwight R. Lee

Lawrence W. Reed

Russell Roberts

Mark Skousen

Thomas Szasz

Walter E. Williams

Contributing EditorsNorman Barry

Peter J. Boettke

Clarence B. Carson

Thomas J. DiLorenzo

Burton W. Folsom, Jr.

Joseph S. Fulda

Bettina Bien Greaves

Robert Higgs

John Hospers

Raymond J. Keating

Daniel B. Klein

Wendy McElroy

Tibor R. Machan

Andrew P. Morriss

Ronald Nash

Edmund A. Opitz

James L. Payne

William H. Peterson

Jane S. Shaw

Richard H. Timberlake

Lawrence H. White

Ideas on Liberty (formerly The Freeman: Ideas on Liberty) is the month-ly publication of The Foundation for Economic Education, Inc., Irvington-on-Hudson, NY 10533. FEE, established in 1946 by Leonard E. Read, is anon-political, educational champion of private property, the free market,and limited government. FEE is classified as a 26 USC 501(c)(3) tax-exempt organization.

Copyright © 2001 by The Foundation for Economic Education. Per-mission is granted to reprint any article in this issue, provided credit isgiven and two copies of the reprinted material are sent to FEE.

The costs of Foundation projects and services are met through dona-tions, which are invited in any amount. Donors of $30.00 or more receivea subscription to Ideas on Liberty. For delivery outside the United States:$45.00 to Canada; $55.00 to all other countries. Student subscriptions are$10.00 for the nine-month academic year; $5.00 per semester. Addition-al copies of this issue of Ideas on Liberty are $3.00 each.

Bound volumes of The Freeman are available from The Foundation forcalendar years 1972 to 1999. The magazine is available in microform fromUniversity Microfilms, 300 N. Zeeb Rd., Ann Arbor, MI 48106. 2Cover sculpture by Brian Cooley. Courtesy of the Field Museum.

coercive power of government. This is partic-ularly scary with medical care. We ignore theMedicare precedent at our peril. Who wantsthe government deciding who gets what drug?Who wants the government doing triage?

* * *

Can money buy happiness? Perhaps not,but people in freer economies are happierthan people in controlled economies. DanielOliver looked it up.

Government not only jeopardizes thefuture; it also jeopardizes the past. By thesame token, capitalism not only protects thefuture, it also protects the past. J. BishopGrewell and Matthew Brown have a reportfrom the world of paleontology.

If the government’s allocation of credit tofailing farmers is any indication of how itmanages financial matters, we shouldn’t besurprised by anything else we’ve witnessed.James Bovard explains.

The political slogans of the last few monthswould have us believe that “working families”have low-to-middle incomes. As it turns out,the richer a family, the more it works. WilsonMixon and E. Frank Stephenson have thedetails.

A hot new book being celebrated in themedia maintains that the early Americans hadlittle interest in guns, rarely owned them, andleft the hunting to professionals. ClaytonCramer says the author must be talking aboutanother America.

Ancient Athens was the most advancedsociety of its day. The government had noth-ing to do with education there. Coincidence?Kathleen Melonakos thinks not.

The world has changed, but advice to col-

lege graduates has not. Gerald Gundersondoes his part to keep this year’s graduatingclass from going astray.

The Securities and Exchange Commissionnow requires that if a company gives anyinformation to anybody, it must give it toeverybody. Is this fairness or egalitarianismrun amok? Christopher Mayer hunts for unin-tended consequences.

Bill Brosnan was a railroad man who mod-ernized his industry and saved it from thegovernment’s maw. Charles Morgret con-tributes a profile of this inspirational figure.

The virulent form of statism known asapartheid is gone from South Africa. Severalyears of rule by African National Congress,however, demonstrate that prosperity andfreedom require more than the mere absenceof overt racial laws. Jim Peron has an up-closelook.

Here’s what our columnists have come upwith: Donald Boudreaux sees government asa con artist. Lawrence Reed suggests alterna-tives to the usual political labels. DougBandow contemplates the U.S. relationshipwith China and Taiwan. Thomas Szasz won-ders why government schools are pushingcaffeine on our kids. Dwight Lee winds up hisdiscussion of marginalism. Mark Skousencelebrates economics’ imperialism. WalterWilliams ponders state servitude. AndThomas DiLorenzo, reading the latest apolo-gy for the antitrust laws, remonstrates, “It JustAin’t So!”

The books that come under review thismonth deal with communism’s crimes, SocialSecurity, patent laws, the way we treat boys,suicide, and government’s shortcomings.

—SHELDON RICHMAN

3

Presumably the 2000 election is now histo-ry. This month, a new resident will move

into America’s premier public-housing pro-ject, and a new Congress—made up mostly ofleftovers from past Congresses—will begaveled into action. Now’s a good time toreflect on the nature of modern politics.

When I lived near Washington, D.C., in thelate 1980s, I often heard a radio commercialthat was unfailingly irritating. The announcerhad one of those “I’m-the-world’s-most-folksy-and-friendly-guy” voices. He spoke ofa coalition of corporations that annuallybrings hundreds of high-school students toWashington “so that they can see democracyin action!” He intoned these words as if hewere announcing that the lucky youngsterswere being given a rare key to radiant truthand eternal bliss. The background music re-inforced the loftiness of bringing students togaze upon the seat of national power.

Of course, touring Washington is utterlyunrevealing of the real nature of the place andits product. Gazing upon that city’s monu-ments and public proceedings taking place onCapitol Hill is not to gaze upon evidence ofmodern democracy’s logic; instead, it is togaze upon props and stage plays. All that is ondisplay in Washington is meant to convey afalse sense of what transpires there. It’s meantto con the public into believing that the politi-cians, bureaucrats, and lobbyists who toilthere are working for some grand and noble

purpose—for “the People” or “society” or“the common good.” But it’s a lie.

Politicians, bureaucrats, and lobbyists do toil.But they toil not for “the People” so much as forthemselves and politically powerful interestgroups. Together, they’re ticks on taxpayers andconsumers. How else to explain governmentsubsidies to corporations to advertise theirproducts abroad? Or government’s payingfarmers not to grow food? Or government’s useof civil asset-forfeiture? Or the Gestapo-esquetactics often employed by bureaucrats toenforce environmental statutes?*

Many readers of even this magazine willaccuse me of being excessively harsh. But Istand by it.

Think about it. Free your mind of theromantic daze created by political pomp,grandiose job titles, and soaring marble mon-uments. Recognize that probably no one withpower in Washington knows you personally.No one there has ever offered a whit of hisown time or money to assist you when youneeded a hand. If tomorrow you were to suf-fer an agonizing death, no one in Washingtonwould grieve. Your misfortune would causeno representative, no senator, no president, nobureaucrat to lose a bite of appetite or amoment of sleep.

Such nonreaction is hardly what you expectfrom people who truly feel deep affection foryou.

Donald Boudreaux is president of FEE.

*For a detailed account of Washington’s predations during the1990s, see James Bovard, Feeling Your Pain: The Explosion and Useof Government Power in the Clinton-Gore Years (New York: St.Martin’s Press, 2000).

4

Thoughts on Freedom

by Donald J. Boudreaux

Why All the Con Artistry?

And yet politicians and bureaucrats rou-tinely trumpet their heartfelt concern for yourwelfare. Indeed, as you think about it, you’llrealize that these people boast that they aremore concerned about your welfare than areyour loved ones, your friends, or even youyourself. Their rhetoric is a torrent of promis-es to assist you in ways that no one else reli-ably will. Each candidate and officeholderassures you that he is that exceptional humanbeing whose principal purpose in life is tohelp you and other strangers to achievegreater happiness—and that he, despite hav-ing never met you, somehow has uniqueknowledge about just how to make your lifebetter.

Why are so many otherwise sensible peopledeluded by this humbug? Each of us wouldslam the door on any nonpolitician strangerwho showed up at our home to announce thathe’s our servant—that he possesses singularinsight into our preferences and circum-stances—that if we only trust him with largechunks of our wealth and liberty, he will usethis wealth and power, not for his own pur-poses, but for ours. Why isn’t every politicianaccorded the same dismissive treatment thatwe give to other con artists?

Skeptics of my analysis will argue thatpoliticians aren’t con artists because peoplechoose them in elections. But this commonrefrain is weak. All con artists are “chosen” bytheir victims because all con artists persuadetheir victims to trust them. That’s the nature ofcon artistry. What is it about political settingsthat lower so many people’s guard against conartistry?

I believe there’s an answer. It’s the fact thateach vote is inconsequential. By “inconse-quential” I mean that no voter incurs anymaterial cost or receives any material benefitas a consequence of how he votes. Many vot-ers get psychic satisfaction from casting a bal-lot for Mr. Jones or Ms. Smith (or against Mr.Jones or Ms. Smith). But for each individualvoter, the material consequences of yanking

lever A or B or C are non-existent. What thegovernment will do after the election is inde-pendent of how any one voter votes.

The consequence of vote-inconsequential-ism is that each voter has an inadequate per-sonal stake in voting wisely. Vote-inconse-quentialism encourages massive carelessnessand imprudence in voting booths. The way ispaved for con artists to achieve politicalpower.

Compare voting to private decision-making. If a stranger taps on your shoulderproclaiming his great affection for you andyours, and promises that, in exchange for alarge portion of your money and a great dealof power over you, he will improve your wel-fare, health, and happiness, you pay him noheed. You immediately recognize him as ascammer. The reason is that you’re in control.Your reaction matters. Your reaction—andyour reaction alone—directly and uncondi-tionally affects the outcome. If you succumbto the scammer’s charms, you’ll suffer. If,instead, you tell him no, you protect yourwealth and liberty. The decision is yours andyours alone. Therefore, you have powerfulincentives to act wisely.

In private settings, con artistry is checkedby each individual’s incentives to avoid beingconned. Scams happen, of course, but theimmense majority of private exchanges andrelationships are on the level because eachperson makes individual choices; privatechoices are consequential. Private choicesmatter. Businesspeople who treat customersas dupes are fast run into bankruptcy.

In political settings, though, con artistry isthe norm. This outcome is just what weshould expect from a system of making deci-sions collectively and in which constitutionalfetters on government power are frayed.

Behind all the marble and pageantry inWashington is nothing more than a cabal ofcon artists out to rob innocent people of theirwealth and liberties. Let’s be on better guardagainst them. �

5

Robert Litan, vice president and directorof economic studies at the Brookings

Institution and a former adviser to Janet Renoon the Microsoft antitrust case, recentlyauthored the stereotypical Washington Posteconomic policy op-ed: virtually void of ele-mentary economic analysis while uncriticallypromoting more and more government inter-vention (“Fair Use of Antitrust,” September13, 2000).

Mr. Litan claims that the antitrust lawsallow companies to “gain dominant positionsin their markets” only “if they do so fairly.”But the word “fairness” appears nowhere inthe antitrust laws; this is a recent invention ofsocialist-minded policy wonks like Mr. Litan.Moreover, it is extraordinarily naïve of any-one calling himself an economist to believethat such a charge would even be a desirablepart of the antitrust laws: Competitors willalways whine and cry about how the price-cutting, product-improving, and customer-satisfying practices of their more successfulrivals are “unfair.” This in fact is the modusoperandi of antitrust: The antitrust laws pro-vide a means by which sour-grapes competi-tors can achieve through politics what theyfail to achieve in the marketplace.

Mr. Litan commits what Hayek called the“fatal conceit” of believing that governmentbureaucrats, rather than entrepreneurs andconsumers, are in the best position to decidewhat constitutes a “legitimate business pur-pose.” Microsoft got into trouble, he argues,because it “ran afoul of this simple maxim.”The maxim is indeed simple, but it isunequivocally false. Neither economists norpoliticians nor policy wonks are capable ofdeciding the most “efficient” size or configu-

ration of any business enterprise. As Ludwigvon Mises once explained, “The question tobe decided is: Who should determine the sizeof the enterprises, the consumers by theirstriving to buy what suits them best or thepoliticians who know only how to tax awayand to spend?”*

By adhering to this false “maxim” antitrustregulators are attempting to supersede theinformed judgment of millions of consumerswith the opinions Janet Reno and her formerantitrust sidekick Joel Klein. Just how damag-ing this has been to consumers is revealed byseveral plain facts. First, in a poll of adultcomputer users taken by USA Today, only 6percent said that “reducing Microsoft’s influ-ence” was a “major issue” to them. Most con-sumers love Microsoft’s products.

Second, as Stan Leibowitz and Steve Mar-golis have shown in their book, Winners,Losers and Microsoft, in virtually any marketthat Microsoft has entered (financial software,spreadsheets, etc.), the effect has been a dra-matic reduction in prices and an expansion ofoutput and innovation. Software products thatdo not compete with Microsoft’s products fellin price by 12 percent from 1988 to 1995, butby 60 percent where there was competitionfrom Microsoft.

Third, the government is clearly uncon-cerned about consumer welfare in its prosecu-tion of Microsoft: In Judge Thomas PenfieldJackson’s November 1999 “Statement ofFact” he devoted a mere five out of 412 para-graphs to the issue of consumer welfare.

Mr. Litan, like his former employer JanetReno, simply ignores that Microsoft has pro-vided incredible benefits to consumers. Herests his case on the lame notion that, in hisopinion, the company’s management had“anticompetitive motives.” Economic analysismay not be Mr. Litan’s strong point, but mind-

6

It Just Ain’t So!

Antitrust Benefits Consumers?

JANUARY 2001

*Ludwig von Mises, “Small and Big Business,” Economic Free-dom and Interventionism (Irvington-on-Hudson, N.Y.: Foundationfor Economic Education, 1990), p. 221.

reading apparently is. He claims that such amalevolent “intent” has harmed Microsoft’scompetitor Netscape by keeping it from com-peting in the Web browser market. In fact,Netscape has distributed more than 150 mil-lion copies of its browser since 1995.

It is typical of government, and its intellec-tual apologists like Mr. Litan, to assume thatbusiness practices they are incapable ofunderstanding—such as exclusive-dealingcontracts—should be outlawed in the name of“fairness” or because of presumed badmotives.

Intel Doing Well?As alleged “proof ” that antitrust regulation

is not harmful, Mr. Litan notes that Intel,which recently settled an antitrust complaint,seems to be doing well. This kind of statementignores the important but unseen effects ofsuch regulation. What is the opportunity costof having to spend millions of dollars in legalfees and diverting management talent awayfrom striving to produce better and cheaperproducts to deal with the blizzard of paper-work typically imposed on a company that isthe victim of an antitrust “complaint”? Mr.Litan ignores such important questions eventhough it is well known to antitrust scholarsthat one effect of antitrust is to induce com-panies to be less successful than they could beout of fear of attracting the attention ofantitrust regulators. It was the official policyof General Motors for many years to never letits market share top 45 percent for this veryreason.

It has been standard knowledge in the fieldof industrial organization for at least 35 years(more than 100 years to Austrian economists)that the mere number of firms in an industry

does not necessarily have anything to do withhow competitive that industry is. Industrialconcentration is usually caused by the factthat one or a few firms in an industry are sim-ply more efficient and/or have a superiorproduct than their rivals do—at least tem-porarily. Mr. Litan ignores this mainstreamthinking by issuing a 1950s-era call for split-ting Microsoft into three companies. The freemarket, guided by the preferences of con-sumers, has given us the current configurationof the computer industry; Mr. Litan’s pro-posed tinkering can only be destructive toconsumer welfare and an affront to the princi-ple of private property.

He also ignores decades of research byChicago school scholars such as the late YaleBrozen and Harold Demsetz, and Austrianschool scholars such as Dominick Armen-tano, who have compiled thousands of pagesof published, documented evidence of howantitrust regulation has been harmful to con-sumers and has impaired economic efficiencyand reduced productivity. “Our economy hasprofited greatly from sound antitrust enforce-ment,” Litan declares, without offering ashred of evidence.

Perhaps the biggest absurdity of all is Mr.Litan’s dire warning that “If you have monop-oly power in our economy, don’t abuse it.” I’lltake him seriously on this point whenever hestarts criticizing the government’s ownmonopoly power, such as the governmentschool monopoly, the old-age insurancemonopoly, the occupational licensure monop-oly, the postal express statutes, cable televi-sion franchising, and myriad other monopo-listic enterprises operated by federal, state,and local governments. �

—THOMAS J. DILORENZO

Loyola College in Maryland

7

Money Can Buy Happiness

by Daniel T. Oliver

Defenders of capitalism often argue that itschief justification is its unparalleled abil-

ity to produce wealth, provide a multitude ofgoods and services, and raise the general stan-dard of living in a society. With the failure ofthe Soviet command economy, there is todaylittle serious doubt that freer economies out-perform less free ones.

Economic Freedom of the World: 2000Annual Report, published by the Vancouver-based Fraser Institute, rates 123 countries onseven factors: the size of government, thestructure of the economy and use of markets,monetary policy and price stability, freedom touse alternative currencies, legal structure andproperty rights, freedom of internationalexchange, and freedom of exchange in capitaland financial markets. It presents overwhelm-ing evidence that countries with the most eco-nomic freedom generally have the higheststandards of living, while those with the leasteconomic freedom tend to have the lowest. Forexample, per capita income in nations rankedin the top quintile is over $20,000 while in thelowest quintile it is a meager $2,000.

Others have defended capitalism on moralgrounds, arguing that it requires people topractice such virtues as rationality, honesty,and uncoerced exchange. But there is anotherreason for advocating capitalism: people arehappier in capitalist societies.

In Happiness in Nations (Rotterdam: Eras-mus University, 1992), Professor Ruut Veen-hoven analyzes survey data on self-reportedhappiness among people in several dozencountries. He finds that four variables—mate-rial comfort, social equality, freedom, andaccess to knowledge—explain 77 percent ofthe variation in happiness among thesenations. Moreover, “economic prosperity isone of the strongest predictors of happiness.”Significantly, Veenhoven argues that differ-ences in cultural understandings of happinessdo not account for variations in reported hap-piness. For example, he notes that althoughGermans have a common cultural history,easterners before unification were significant-ly less happy than westerners. This, he argues,was largely due to East Germany’s lower stan-dard of living.

Are the Free Happy?Intrigued by Veenhoven’s findings, I decid-

ed to compare them to those of EconomicFreedom of the World to see if there is moreevidence that happiness and economic free-dom are related. Economic Freedom measureseconomic freedom on a 1-to-10 scale with 1indicating low freedom and 10 high freedom.Veenhoven’s data is drawn from the WorldDatabase of Happiness, a 50-year longitudinalstudy of 93 nations. Its most commonly askedquestion, “Taking all things together, wouldyou say you are . . . ?” is answered on a 1-to-4 scale with 1 being “not at all happy” and 4

Daniel Oliver ([email protected]) is a researchassociate at the Washington, D.C.-based CapitalResearch Center and a freelance writer.

8

JANUARY 2001

“very happy.” Data on both economic free-dom and self-reported happiness in 1996 areavailable for 49 countries.

As Table I shows, six of the ten countrieswhose citizens report being the happiest arealso among the ten most economically free.(Unfortunately, there is no data on happinessfor the well-known economically free coun-tries of Hong Kong and Singapore.) Addition-ally, the other four countries whose citizens

report the highest levels of happiness are alsowell above average in economic freedom.

Table II shows that of the ten countriesreporting the least happiness, four are amongthe least economically free. And similarly,five other countries reporting low happinessare also among the least economically free.Only Croatia is above average in happiness,although only slightly. Significantly, Russiaand nine other countries in eastern Europe—

9

Ten Economically Freest Countries1 = low economic freedom / 10 = high economicfreedommean average = 6.37

New Zealand 9.1

United States 9.0

Ireland 8.7

Australia 8.6

Canada 8.6

Netherlands 8.5

Switzerland 8.5

Argentina 8.4

Denmark 8.4

Belgium 8.3

Ten Happiest Countries1 = “not at all happy” / 4 = “very happy”mean average = 2.674

Venezuela 3.47

Iceland 3.40

Ireland 3.36

Netherlands 3.34

Australia 3.33

Philippines 3.32

Switzerland 3.31

United States 3.30

Denmark 3.30

Sweden 3.30

Countries in bold appear on both lists.Sources: Economic Freedom of the World: 2000 Annual Report (Vancouver: Fraser Institute, 2000) and RuutVeenhoven, Happiness in Nations (Rotterdam: Erasmus University, 1992).

Ten Least Economically Free Countries1 = least free / 10 = most freemean average = 6.37

Ukraine 4.5

Romania 4.6

Croatia 4.7

Nigeria 4.7

Bangladesh 5.3

Bulgaria 5.3

Russia 5.4

India 5.8

Brazil 5.9

Venezuela 6.0

Ten Least Happy Countries1 = “not at all happy” / 4 = “very happy”mean average = 2.674

Bulgaria 2.33

Ukraine 2.44

Russia 2.51

Slovakia 2.51

Lithuania 2.55

Estonia 2.61

Latvia 2.62

Romania 2.63

Czech Republic 2.67

Croatia 2.69

Countries in bold appear on both lists.Sources: Economic Freedom of the World: 2000 Annual Report (Vancouver: Fraser Institute, 2000) and RuutVeenhoven, Happiness in Nations (Rotterdam: Erasmus University, 1992).

a region that has only tentatively embracedcapitalism—are the ten least happy coun-tries.

The relationship between economic free-dom and happiness becomes more convincingwhen all 49 countries are considered. A Pear-son’s Rank Correlation Coefficient can be cal-culated to measure the degree of associationbetween economic freedom and happiness. Itis an impressive 0.71 at the p < 0.001 level(just one chance in one thousand that the rela-tionship between economic freedom and hap-piness is due to chance), indicating a verystrong statistically significant relationship. Inother words, people in countries with highlevels of economic freedom are more likely toreport high levels of happiness than people incountries with little economic freedom.

Of course, this does not mean that econom-ic freedom causes happiness. But it doesstrongly suggest that economic freedom is avery important foundation (a necessary butnot sufficient condition) for happiness.

This should not come as a complete sur-prise. As Economic Freedom of the Worldshows, countries with freer economies aremore likely to be wealthy, and countries withless free economies poor. Quite simply, it isdifficult to be happy when you’re poor.

Veenhoven notes that “happiness researchhas as yet had little relevance for major polit-ical discussions.” Advocates of a free societyshould ponder that remark. We have used botheconomic and moral arguments to make thecase for capitalism. Perhaps it is time to usethe “happiness” argument as well. �

10 IDEAS ON LIBERTY • JANUARY 2001

Next Month’s Ideas on Liberty:

“Blame Congress for HMOs”

by Twila Brase,

“The Secret Hate in ‘Hate Crimes’”

by Lowell Ponte,

“Tiger-nomics”

by Raymond J. Keating,

and much, much, more.

Don’t miss it!

Jurassic Mart: Digging with theInvisible Hand

by J. Bishop Grewell and Matthew Brown

International acclaim greeted the ChicagoField Museum’s unveiling of the Tyran-

nosaurus rex Sue last May. The best-preserved and most complete skeleton of a T.rex ever found, Sue offers an opportunity tolearn more about where the planet has beenand where it might be going. Unfortunately,unless the rules of the game are changed,more scientific discoveries like Sue will bedestroyed before they are found.

Currently, the Bureau of Land Manage-ment, claiming the authority of the 1976 Fed-eral Land Policy Management Act, requiresthat anyone wishing to dig for fossils on fed-erally controlled land must apply for a permitfrom the Bureau. Furthermore, permits arelimited to professional paleontologists. Withalmost 50 percent of the western UnitedStates in the public trust, there is a lot of landto cover and not enough permitted paleontol-ogists to do it. According to Science maga-zine, “The thousands of amateur dinosaur fos-sil hunters greatly outnumber the 50 or soacademic professional dinosaur paleontolo-gists working in the United States.” TheNational Science Foundation Survey ofEarned Doctorates found only 107 paleontol-ogy doctorates awarded from 1987 to 1991,an average of 21.4 a year. That is hardlyenough professionals to scour the vast area ofpublic lands in the United States for fossils,which is why only a tiny fraction of possible

discoveries are actually made. Unfortunately,in paleontology, delayed discovery ultimatelymeans no discovery.

Erosion helps the field of paleontologyeach year by bringing fossils to the surface.Once the fossils reach the surface, though,erosion no longer works to paleontology’sbenefit. Its corrosive agents, wind and water,begin to whittle away at the newly unearthedrelics. Dinosaur bone or other unearthed fos-silized remains must either be collected by afossil hunter or they will be destroyed by theliberating elements. Outpacing erosion, there-fore, is the main challenge to protecting fos-sils and their scientific, educational, and aes-thetic value. According to the PaleontologicalSociety’s Code of Fossil Collecting, “to leavefossils uncollected assures their degradationand ultimate loss to the scientific and educa-tional world through natural processes ofweathering and erosion.” This is where thegovernment makes matters worse. By limitingthe number of people allowed to collect fos-sils on public lands, the government ensuresthat many fossils will never be collected andmany scientific discoveries will never bemade.

On private lands, it is another story. Anyonecan set up an agreement with a landowner tocollect fossils on private land because fossilson the land belong to the landowner. It is thepotential for personal ownership and profitthat drives the collection of fossils on privatelands. Amateur collectors and private fossilhunters scavenge to find valuable pieces in

J. Bishop Grewell and Matthew Brown are associatesof PERC in Bozeman, Montana.

11

JANUARY 2001

order to keep them or to sell them to other col-lectors and museums. Adam Smith’s powerfulinvisible hand saves many a private-land fos-sil from erosion’s crushing grasp. StorrsOlson of the Smithsonian Institution pointsout that “A lot of this material would never bedug up if it were not for the commercialincentive.” Eric Buffetaut, director of the Lab-oratory of Vertebrate and Human Paleontol-ogy at the University of Paris VI, also notesthe importance of amateur collectors in fight-ing erosion. Buffetaut states that amateursoften find recently exposed fossils in cliffs orsites uncovered by floods, which would other-wise be destroyed by erosion.

The way to protect fossils from weatheringeffects is to increase their chance of beingfound. Allowing private companies and amateurs to share in the bounty with profes-sional paleontologists achieves this goal.Public lands should be opened up for fossil collection to all, not just professionalpaleontologists.

Creating Financial IncentivesAllowing fossils found on federal land to be

bought and sold will create a financial incen-tive that will increase the number of peoplemaking important discoveries. Paleontolo-gists generally work for universities andmuseums, both of which are traditionallystrapped for cash. The private sector can pro-vide the additional financial resources toassure that new equipment, new techniques,and the best-trained personnel are broughtinto the field.

Fossils have a second foe in addition to theeolian and hydraulic forces of nature.Improper removal decreases the fossils’scientific value. The context in which a fossilis found provides important clues regardingthe nature of prehistoric time. According toDavid W. Krause of the State University ofNew York at Stony Brook, a former presidentof the Society of Vertebrate Paleontology(SVP), “Every fossil has a story to tell and ifone isn’t collected right, it loses its context,its story, and essentially becomes an artobject.” Most professional paleontologistswho are against opening up public lands to

private fossil hunters express this view inconjunction with a fear of the fossils’ beinglost to a private collector.

Another member of the SVP, paleontologistMichael Woodburne of the University of Cal-ifornia, Riverside, makes it clear that the SVPdoes not want to cut out amateurs from thecollection process. He says it wants to “edu-cate people that a lot of fossils get destroyedby amateurs” and the members of the SVP“want to increase the ability of amateur par-ticipation in securing fossils.” The best way toincrease the ability of amateurs is training,and that requires financing. At the very least,compensation is required to pay for the pro-fessional paleontologists’ time. One sourcefor funding such an education project is thesector that can profit most from such educa-tion: the private fossil hunters. By increasingtheir knowledge of the product, privatehunters can increase its value to their finalpurchaser whether a museum, university, orprivate collector.

The paleontologists can also gain from thisprocess. First, they receive money for theirefforts, which equates to more equipment andlabor for their own digs. Second, the paleon-tologists benefit from better documentationand dig techniques by private hunters, therebyincreasing the knowledge of the scientificrecord. Third, better interaction between pale-ontologists and private fossil huntersimproves the odds that private fossil hunterswill give scientifically interesting, but com-mercially worthless pieces to the paleontolo-gists in return for paleontological advice fromthe professionals.

Still, it is not clear that the professionals arenecessarily any better in the field than theamateurs and the private collectors. MarionZenker of the Black Hills Institute points outthat professional paleontologists often makemistakes because they are usually highly spe-cialized rather than generalists. Zenker says,“One of the major assets of having commer-cial and amateur paleontologists in the fielddoing reconnaissance and collecting is thatmany more of them are generalists and aremuch more apt to recognize fossils across abroad range of specialties—from inverte-brates to vertebrates as well as from a small


gastropod to a crinoid to a mammal jaw to adinosaur rib bone.” As an example, she citesthe discovery of the world’s second largestand most complete mounted T. rex skeleton,which is on display at the institute. Theskeleton was originally misidentified bya professional collector as “only Tricer-atops” and subsequently left in thefield. It was not until the find wasshown to the institute that the truevalue was recognized.

Out for MoneyRichard Stucky of the Denver Museum of

Natural History, vice president of the SVP,argues that private hunters are only out formoney, which leads to a variety of damage intheir collection processes. He says of a scien-tifically valuable, but monetarily worthlesspiece, “A dealer would probably ignore it, ormight destroy it, looking for commerciallyvaluable bones.” The best way to counter suchactions is to provide dealers with somethingin return for preserving commercially non-viable, but scientifically valuable finds. Gainsfrom trade combat poor dig techniques. Paleontologists increase the value of speci-mens for fossil hunters by improving thehunters’ knowledge of their product as well ashow to extract it with the value intact. Fossilhunters provide the labor and capital for find-ing scientifically, as well as commercially,valuable specimens and sharing their discov-eries with the professional scientists. MichaelTriebold of Triebold Paleontology insists thathe gives away approximately 80 percent of thepieces he finds to museums because theyaren’t valuable commercially. As for the rela-tionship between collectors and paleontolo-gists, Triebold believes, “They use our eyesand ears and time in the field, and we use theirtime and experience in the lab and classroomto educate ourselves.”

Many professional paleontologists lookdown on private firms’ digging for dinosaurs.They claim that the profit motive would lead toquick, poor-quality expeditions that onlyretrieve pieces valued by the market, not thosethat could make important scientific contribu-tions. That way of thinking is behind the times.

A number of joint ventures among muse-ums, universities, and businesses are ensuringthat valuable scientific discoveries are madein paleontology. The Chicago Field Museum’sacquisition of Sue was made possible byfinancial support from McDonald’s, DisneyWorld, and other groups. Because it was dis-covered on private property in South Dakota,the fossil could be sold at auction. Despite thegreat uproar from scientists who didn’t want itput up for sale, the auction of Sue showed thatvaluable scientific discoveries can be distrib-uted through the market. Even if Sue had beenpurchased by a private collector, that collectorwould have had a strong financial incentive toallow scientists to study the fossil, since itsvalue would only increase with each impor-tant discovery.

Paleontologist Robert Bakker, curator ofthe Tate Museum in Casper, Wyoming,

JURASSIC MART: DIGGING WITH THE INVISIBLE HAND 13

Taking cuesfrom the structure

and muscle-attachmentmarkings of Sue’s jaw,

sculptor Brian Cooley wasable to reconstruct what many

of Sue’s victims saw in their lastmoments before death. Cooley used

educated speculation to add the detailsthat bring Sue to life, placing large air sacs in front of

her eyes and completing her formidable countenancewith a pebbly green hide.

(Field Museum)

T. Rex Sue inthe flesh

admits, “There is a class system. We guyswith PhDs think that we have a God-givenright to dictate where and how specimens arecollected. That is narrow minded, and not inthe public interest.” Greg Retallack, a teacherof paleontology at the University of Oregonnotes, “Most professional paleontologists oweat least part of their success to amateurs.”Among the debts owed to amateurs?

• Amateur fossil hunters discovered 21 ofthe world’s thirty T. rex skeletons. Onlyone was found by a degreed paleontolo-gist. One more was found by a paleontol-ogy student.

• All six existing skeletons of the mostancient bird fossil Archaeopteryx werefound by quarrymen in southern Germany.

• A Kenyan farmer discovered the site ofthe fossil ape Kenyapithecus.

• The American Museum of Natural Histo-ry in New York began its dinosaur collec-

tion with contributions from wealthyadventurers who sought them just for fun.

• Most of the major fossil repositories inEnglish museums, including the famedLondon Museum of Natural History, owetheir impressive collections to the workof a single English family, the Annings,that took up fossil hunting to supportthemselves in the early 1800s.

Dinosaurs have captured man’s imaginationever since they were first discovered andthought to be the remains of dragons andmagical monsters. Rather than limiting thediscovery of these magnificent beasts of yore,paleontologists should encourage privategroups to become involved in the process.While it would mean more competition forprofessional paleontologists, more important-ly it would mean an increase in scientific dis-coveries and a greater understanding of theplanet’s past. �


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A t least when it comes to political matters,Americans are hung up on labels. Every-

where you turn, somebody is calling some-body else some name—shorthand for whatthe other person’s political philosophy or ide-ological leanings are perceived to be.

If labels inform, then they can be useful.But when they confuse or distort, they’reworse than useless. Amid the general dumb-ing down of educational standards in recentyears and the resulting degeneration of publicdebate, I confess to a disillusionment with thecommonly used political labels. Most havebecome excuses for people to stop thinking.

Consider the tired, old dichotomy of “liber-al” on the one hand versus “conservative” onthe other. “Liberal” was once an honorableword to describe those who put “liberty” first.Over the twentieth century in America, it flip-flopped into a term for those who would glad-ly trade liberty for a mess of pottage from thestate. Even that meaning rarely applies to anyone person’s view on every issue.

“Conservative” is sometimes used todescribe one who wants to preserve the statusquo, and at other times to describe one whowants to restore a limited role for government(at least in most economic matters), whichtoday is hardly the status quo. The confusiononly worsens when the labelers go to work on foreigners. When Mikhail Gorbachev was

introducing reforms in the old Soviet Union,the American media called him a “liberal”and his old-line Stalinist opponents “conserv-ative.” American conservatives rightly won-dered why their label was always attached tothe figures the mainstream media could easilydemonize, whether foreign communists orhomespun, budget-cutting libertarians.

Quite often somebody attaches an adjectiveto an already-confusing label that rarely clar-ifies anything. “Compassionate” conservative,for example. I know a lot of very generous,caring, self-described conservatives who rou-tinely give far more of their own resources toworthy causes than the most sanctimonious,guilt-ridden “liberals.” These “conservatives”wonder why any adjective is necessary.

And how about that word “moderate”?That’s been sanctified to describe one whooccupies a lofty perch of enlightened andthoughtful objectivity. Look closer and youusually find a person who hasn’t done hishomework and can’t make his mind up. Andwhen he finally does come to a conclusion, it’sstrikingly inconsistent with other half-bakedviews he holds.

Maybe we need a new set of labels. Or per-haps we need to recognize that shorthand justwon’t do the job when talking about howcomplex principles apply to current-dayissues.

In any event, if we must label people this orthat, I suggest we do so in more meaningfulways, with fewer sound bites and single-wordmonikers. That suggests we not use one-size-fits-all descriptions, but rather that we

Ideas and Consequences by Lawrence W. Reed

Get Rid of the Labels

15

Lawrence Reed is president of the Mackinac Centerfor Public Policy (www.mackinac.org), a free-marketresearch and educational organization in Midland,Michigan, and chairman of FEE’s Board of Trustees.

JANUARY 2001

describe traits and tendencies. For starters:Why not differentiate between those who aresatisfied with rhetoric versus those whodemand results?

People who advocate government-financedand government-directed efforts to addressproblems once widely regarded as personal,private, or “civil society” responsibilitiesalmost always settle for rhetoric alone. Per-haps that’s because their handiwork rarelyproduces results worth bragging about. Tothese people, it is usually enough for someoneto simply declare his concern for the poor toprove that he really cares. It doesn’t matterthat government programs to help the poorhave decisively accomplished the very oppo-site, a painful fact that both experience andeconomics should have forecast in advance.

People who advocate nongovernmentalsolutions—changes in attitudes and behavior,strengthening the family, involvement ofchurches and private associations, for exam-ple—are not typically animated by rhetoric.They are focused on results, and they have theincredible story of the American experienceto which they can proudly point. It wasn’trhetoric that carved a great civilization out ofwilderness; it wasn’t self-righteous breast-beating or mere professions of concern thatfed, clothed, and housed more people at high-er levels than any other society ever known inhistory. It was a combination of strong fami-lies, rugged self-reliance, effective volunteerassociations, wealth-creating private initia-tive, and risk-taking entrepreneurship.

Here’s another meaningful way to catego-rize people’s thinking: Those who are happywith short-term answers versus those whoplan for the long run.

Some people think only of the here-and-now, what strikes the eye, the presentmoment. Others see further ahead and recog-nize that quick fixes often yield long-term disaster.

In this regard, those who favor government“solutions” are on the short end of the stick.The primary answer they offer to problemssuch as poverty is to toss the poor a govern-ment check. They observe the subject spend-

ing the check on groceries and conclude thatthey have done good. But those who supportnongovernment solutions know the meaningof the adage “Give me a fish and I eat for aday; teach me to fish and I eat for a lifetime.”

Yet another possible method of drawingdistinctions and applying accurate descrip-tions: Those who exhibit little interest in lib-erty versus those who understand that withoutliberty, little else either matters or is possible.

People who push government to “tax andtax, spend and spend, elect and elect” (in thewords of FDR brain truster Harry Hopkins)are more than willing to sacrifice a little liber-ty for the sake of a handout. More appropri-ately, they are willing to sacrifice the libertiesof everyone for the sake of handouts for a few.Those who prefer private, nongovernmentalmeasures to address problems understand (1)that government has nothing to give anybodyexcept what it first takes from somebody and(2) that government which is big enough togive you everything you want has become bigenough to take away everything you’ve got.

Instead of settling for today’s standard andincreasingly confusing or irrelevant labels, weshould concentrate on explaining that theideas worth supporting are those that are test-ed and found worthwhile because they pro-duce results, not rhetoric; that the ideas worthsupporting are those that do not mortgage thefuture for the sake of the present; and finally,that the ideas worth supporting are those thatdo not treat other people’s liberty as though it were so much scrap paper waiting to becleared away.

Surely, for reasons I’ve already madeapparent, one who values freedom and freemarkets can readily embrace these new crite-ria for pegging political/economic tendencies.We’ll probably have a very hard time, howev-er, getting the other side to go along. But thatfact says volumes about the merits of theirpositions and certainly tells us all a lot morethan the old mainstream mislabels. If insistingon this approach compels a few to dig a littledeeper and learn more than what can fit on abumper sticker, public debate will to somedegree be better informed. �


Farm Credit Fraud

by James Bovard

The federal government has been busyfoisting new billions in loans onto

uncreditworthy farmers. The lending binge isaccelerating and paving the way for anothermassive loan collapse and another taxpayerbailout. The circumstances leading to the cur-rent binge are worth examining in order tounderstand why politicians are completelyunfit to allocate credit.

For 81 days in 1996, federal agents and a group consisting largely of disgruntledfarmers were locked in a standoff outside ofJordan, Montana. While the stranger aspectsof the ideology of the self-proclaimed“Freemen” were widely reported, little atten-tion was paid to the role of the U.S. Depart-ment of Agriculture (USDA) in paving theway to this confrontation.

Ralph Clark, the grade-school dropout whowas the mastermind of the Freemen, and hispartners had received over $650,000 in farmsubsidy payments since 1985.1 In addition,Clark received almost $2 million in federalfarm loans. The federal government gener-ously kept sending him annual payments ofalmost $50,000 to reward him for not growingcrops on land he had bought with governmentloans—long after he effectively defaulted onthose loans.

Why did Clark receive so many govern-ment loans? Because he was uncreditworthy.

According to the Farmers Home Administra-tion (FmHA), this alone made him worthy of a windfall of capital. And since he kept los-ing money year after year, that proved hedeserved new loans. Clark symbolized thetype of farmer favored by USDA: big—with a7,000-acre, government-paid spread—andincompetent. Clark was a poster boy for farmaid lobbyists—portrayed sympathetically inLife magazine, with Geraldo Rivera on ABC’s“20/20,” and elsewhere. But when Clark’sracism and anti-Semitism became evident, his cachet with the Willie Nelson crowd suffered.2

For many farmers, the road to hell waspaved with cheap government credit. FmHAencouraged many struggling farmers to con-tinue farming until they financially destroyedthemselves. According to the agency’s ownrecords, by far the most frequent cause ofbankruptcy among its borrowers is “poorfarming practices.” The General AccountingOffice (GAO) estimated that a quarter ofFmHA bankruptcies occurred because thefarmers received too many subsidized loans.3GAO noted: “In some cases, continuedFmHA assistance has actually worsened thefinancial condition of farmers who haveentered the program.”4

In 1994, the Clinton administration forgave$138 million in losses from 74 farm borrow-ers—almost $2 million per farmer.5 In manycases, federal officials made scant effort tocollect on the loans or to compel borrowers tosurrender other assets to cover the govern-

James Bovard is the author of Feeling Your Pain:The Explosion and Abuse of Government Power inthe Clinton-Gore Years (St. Martin’s Press, Septem-ber 2000).

17

JANUARY 2001

Government

ment’s financial bloodbath. As of early 1996,47 percent of farmers with direct FmHAloans were delinquent—a delinquency ratemore than ten times higher than that of theaverage private bank.6

Clinton and Congress looked at a rurallandscape littered with loan defaults andrushed to provide more subsidized loans.After the Freemen debacle, USDA continuedto give scores of millions to farmers who haddefaulted on earlier federal loans.7 But eachinefficient farmer that the government kept on a tractor made it more difficult for effi-cient farmers to earn an honest living in themarketplace.

The 1996 farm bill authorized the Agricul-ture Department to make over $20 billion indirect and guaranteed loans to farmers in thefollowing six years. Clinton sought evenmore subsidized farm loans, declaring inJuly 1997 that “we should expand eligibilityfor direct and guaranteed loans.”8 In a tele-conference with rural radio stations in July1998, Clinton summarized his ongoingfarm-aid deliberations with Congress: “AndI, finally, asked for a provision that wouldimprove credit ability and modify the one-strike policy for farmers who have had a debtwrite-down.”9 The “one-strike policy” meantthat if a farmer had defaulted on previousfederal loans, he was ineligible for futuresubsidized loans. Characterizing this as“one-strike” makes the policy seem harshand unfair—as if any farmer should be enti-tled to several cracks at squandering a fewhundred grand of other people’s money. Newloans for “socially disadvantaged” would-befarmers were a high priority for Clinton’sUSDA. Unfortunately, there is nothing that aperson learns from being socially disadvan-taged that qualifies him or her to grow wheatefficiently.

Subsidies DoubledThe USDA almost doubled the amount of

subsidized farm loans and loan guarantees itdoled out between 1998 and 1999, reachingalmost $4 billion. Congress authorized thedepartment to make almost $6 billion in sub-sidized loans and loan guarantees to farmers

in fiscal year 2000—the highest amount offederal agricultural lending since the mid-1980s.10 The guaranteed loan limit peruncreditworthy farmer was raised to$700,000. Agriculture Secretary Dan Glick-man testified to Congress on September 17,1999: “Demand for USDA loan assistancecontinues to increase. More and more farm-ers are becoming highly leveraged, with lim-ited equity and low incomes. . . . They areturning to USDA for help. For these farmers,commercial credit sources are not available.. . . Additionally, the recently increased loan

limits for FSA [Farm Service Agency] guar-anteed loan programs is increasing thedemand for guaranteed loan funding.”11 ByGlickman’s logic, the fact that there was astrong demand for free money proved farm-ers were suffering terribly and deserved moreloans.

Clinton’s pro-deadbeat farm policy contin-ued a cycle that goes back to the 1930s. Politi-cians create new programs and then pressurebureaucrats to lend farmers as much money aspossible. Then, when loan default levels reachpolitically embarrassing heights, programsare “reformed,” lending criteria are tightened,and politicians summon bureaucrats to Capi-tol Hill and denounce them for their stupidity.Later, when the agricultural economy goesinto another cyclical downswing, lending cri-teria are “loosened” and politicians againarm-twist bureaucrats to bail out as manypotential voters as possible.12 The federal gov-ernment wrote off $15 billion in bad farmloans between 1989 and 1996.13 None of thatmattered to Clinton and to congressmen whohungered to expand farm lending in the late1990s.

But the Clinton administration did learnsomething from the farm-lending debacle.The name of the Farmers Home Administra-tion was changed in 1995 to the Consolidat-ed Farm Service Agency. The Clintonitesupheld a hallowed tradition: FmHA’s prede-cessor agency, the Resettlement Agency, gen-erated so much bad press that it was rechris-tened the FmHA in 1946. After FmHA woreout two generations of auditors, its name wasretired to the Agricultural Boondoggle Hallof Fame.


Clinton’s Bogus Farm Emergency

Clinton’s farm credit policies were part ofhis campaign to make Americans believe thatfarmers as a class were suffering terribly.From 1995 onwards Clinton ceaselessly pro-claimed his devotion to “strengthening thefarm safety net.”14 In a September 15, 1998,speech to the National Farmers Union, Clin-ton declared that “we have a farm crisis moreextensive than we’ve had in decades. . . .[T]here is suffering on the farm. There isagony on the farm. This is a horrible affront toeverything we have worked so hard to achieveto lift the economy for all Americans.”15 Afew months before, Clinton had proclaimedthat “from the point of view of the farmers,it’s a terrible emergency.”16

Clinton’s farm policy was based on themyth of the deserving needy farmer. In 1998,the bankruptcy rate for farmers was less than.05 percent—less than one farmer in 2,000.17

The bankruptcy rate for all households, bycomparison, was 1.3 percent—roughly one in70.18 Though the bankruptcy rate for allhouseholds was more than 25 times higherthan the rate for farmers, Clinton favoredforcibly transferring more money from aver-age families to farmers.

Clinton justified perpetuating farm subsi-dies because of the supposed uniqueness ofagriculture. Clinton derided subsidy oppo-nents in 1998 for not understanding “theintersection between global impacts on farmprices, the financing challenges that familyfarmers . . . face, and what happens to you justby getting up in the morning if it happens tobe a bad day.”19 Because some farmers feelwoebegone or hung over on Monday morn-ings, Uncle Sam must perennially throwmoney at them. When Clinton signed a farmbailout package on October 23, 1998, hedeclared that he was “pleased about other pro-visions in the bill that address the long-termneed for farmers to get a fair income from themarket.”20 But the legislation flooded specificfavored farmers with cash that they would nothave received from voluntary exchanges withtheir fellow citizens. Clinton’s concept of“fair income” simply meant income providedby politicians.

Politicians profit from government creditprograms not according to the soundness ofthe loans but according to their generosity. In early 1987, the FmHA proposed new regu-lations to rate applicants for loans accordingto the riskiness of the loans. Congress wasoutraged. Representative Byron Dorganexclaimed, “These regulations could effec-tively be used to destroy the mission of theagency, to disqualify from loans exactly thetype of farmers Congress intended the agencyto serve.”21 The FmHA loses money becauseCongress designs the program that way. Youcan’t win votes with programs that don’t doborrowers any favors.

Whenever subsidies are being distributedon the basis of vague or illogical criteria,political pull will soon determine who getsthe handouts. Local and state FmHA officesreceived numerous calls from congressmen’soffices, pressuring them to lend to campaigncontributors and other politically preferredborrowers. The FmHA became a petty-cashdrawer for farm-state congressmen.

Zero-Sum GameFarm credit handouts present a classic case

of self-defeating humanitarianism: Govern-ment cannot help the individual without hurt-ing the group. “One farmer’s good fortune ishis neighbor’s misfortune,” as the old sayinggoes. The more the government helps an indi-vidual farmer to plant, the less all other farm-ers will receive for their harvest. Every timecongressmen say they are helping a farmer,they are subsidizing competition for all theother farmers. Every federal farm loan goeseither to a creditworthy farmer who couldobtain loans elsewhere—or to an uncredit-worthy farmer who is kept on the land to thedetriment of creditworthy farmers.

Congress has created a two-class system of farmers—welfare farmers and self-reliantfarmers. But every dollar of aid the govern-ment gives to welfare farmers makes it moredifficult for self-reliant farmers to prosper andsurvive. Good farmers had to pay inflatedprices to acquire more land because the gov-ernment bombarded bad farmers with cheapmoney to bid up the price of farmland.

FARM CREDIT FRAUD 19

Farm credit policies are among the clearestrefutations of the competence of politicians tomanage the economy better than private citi-zens can. A rational capital-allocation policydirects capital to wherever its returns arehighest and shifts capital away from lower-paying investments. But for decades federalagricultural credit policy has consisted solelyof jamming as many loans into agriculture aspossible, regardless of the effects.

There is a limited amount of capital inAmerica. Every subsidized loan to a near-bankrupt farmer means fewer loans for otherAmericans to buy a house, pay for an educa-tion, or start an independent business.

Wheeler McMillen, author of Too ManyFarmers, observed in 1929 that “if a farmerdoesn’t have enough pride and business abouthim to keep his credit good, certainly no onein the world is going to be able to do much forhim.”22 Though McMillen’s sentiment mayseem harsh in contemporary times, the recordof bankruptcies and delinquencies by govern-ment borrowers vindicates his judgment.Unfortunately, politicians have completelyavoided paying the price for the bad loansthey authorized. �

1. James Brooke, “Freeman Depended on Subsidies,” New YorkTimes, April 30, 1996.

2. Ibid.3. General Accounting Office, “Farmers Home Administration:

Problems and Issues Facing the Emergency Loan Program,” Novem-ber 1987.

4. General Accounting Office, “Farmers Home Administration:Billions of Dollars in Farm Loans Are at Risk,” April 1992.

5. Press Release, “Lugar Urges Drastic Reform of USDA’sFarm Loan Practices,” Office of Senator Richard Lugar, March 21,1995. Lugar’s release was based on GAO analyses.

6. General Accounting Office, “Emergency Disaster FarmLoans: Government’s Financial Risk Could Be Reduced,” March1996.

7. General Accounting Office, “Farm Service Agency-Informa-tion on Farm Loans and Losses,” November 27, 1998.

8. “Remarks Following a Meeting on Agricultural Assistanceand an Exchange with Reporters,” Public Papers of the Presidents,July 23, 1998, p. 1458.

9. “Remarks in a Teleconference with Rural Radio Stations onAgricultural Issues and Farming,” Public Papers of the Presidents,July 23, 1998, p. 1458.

10. Agricultural Income and Finance, Situation and Outlook,Economic Research Service, U.S. Department of Agriculture, March7, 2000.

11. “Dan Glickman Secretary Department of Agriculture HouseAgriculture Farm Crisis,” Federal Document Clearing House, Sep-tember 17, 1999.

12. For details on the farm loan bubble and bust in the 1970s and1980s, see James Bovard, The Farm Fiasco (San Francisco: ICSPress, 1989), pp. 127–53.

13. General Accounting Office, “Emergency Disaster FarmLoans: Government’s Financial Risk Could Be Reduced,” March1996.

14. “Message to the House of Representatives Returning withoutApproval the ‘Agriculture, Rural Development, Food and DrugAdministration, and Related Agencies Appropriations Act, 1999,’”Public Papers of the Presidents, October 7, 1998, p. 2006.

15. “Remarks to the National Farmers Union,” Public Papers ofthe Presidents, September 15, 1998, p. 1796.

16. “The President’s News Conference,” Public Papers of thePresidents, June 25, 1999, p. 1189.

17. Fax from Jerome Stam, USDA Economic Research Servicefarm bankruptcy expert, April 6, 2000.

18. American Bankruptcy Institute statistical table athttp://www.abiworld.org/stats/newstatsfront.html.

19. George Anthan, “Clinton Supports Added Farm Aid,” DesMoines Register, June 30, 1999.

20. ”Statement on Emergency Assistance to Farmers and Ranch-ers,” Public Papers of the Presidents, October 23, 1998, p. 2114.

21. Congressional Record, September 26, 1987, p. H 768.22. Wheeler McMillen, Too Many Farmers (New York: Morrow,

1929), p. 66.


Working-Family Gibberish

by Wilson Mixon and E. Frank Stephenson

Nothing was sillier in the late presidentialcampaign than the political rhetoric

about so-called working families.Politicians of both major parties frequently

invoked working families as the intended beneficiaries of this policy or that program. A typical refrain called for “tax cuts for work-ing families.” Implicit in such rhetoric is the notion that working families are low- or middle-income; Bill Gates does not counteven if he works 100 hours per week. Howev-er, a study of work hours and income byRobert Rector and Rea S. Hederman of theHeritage Foundation reveals the phoniness ofthe working families rhetoric.*

The table on the next page shows thestudy’s findings. Households are sortedaccording to their 1997 incomes. Next, theyare divided into five groups (called quintiles)each containing 20 percent of the households.The lowest quintile contains the 20 percent ofhouseholds with incomes less than $15,396,the second quintile the 20 percent of house-holds with the incomes between $15,400 and$29,200, and so forth.

The table also shows the average weeklynumber of hours worked by the working-ageadults in each quintile. (Focusing on working-age adults controls for the different number ofchildren and retirees in each quintile.) Hours

worked differ substantially across income lev-els. Adults in the lowest quintile work an aver-age of only 14.4 hours per week, less thanone-half of a typical 40 hour workweek. Bycontrast, adults in the top quintile work anaverage of 34.6 hours per week. This differ-ence in hours worked indicates that the trueworking people are not predominantly thelow- and middle-income people as somepoliticians would have us believe. Instead, thepeople in the top quintile actually work themost hours per week rather than enjoyinglives of leisure. Of course, political sillinessnotwithstanding, there is nothing surprisingabout this finding. More hours worked, afterall, lead to more income thereby placing theharder-working household into a higherincome bracket.

Focusing on average hours worked perworking-age adult actually understates thedifference in the amount of work done byfamilies at different income levels. This isbecause, as shown in the table on the nextpage, the number of working-age adults dif-fers across families. On average, householdsin the lowest quintile have less than one work-ing-age adult compared to over two suchadults in the top-quintile households. (Evi-dently two-career couples with teenaged chil-dren who work are common in the upperquintile.) Households in the bottom quintile

Wilson Mixon is Dana Professor of Economics atBerry College. Frank Stephenson is an assistant pro-fessor of economics at Berry College and an adjunctscholar with the Georgia Public Policy Foundation.

21

JANUARY 2001

*“Income Inequality: How Census Data Misrepresent IncomeDistribution” is available at www.heritage.org/library/cda/cda99-07.html.

average less than 13 hours of work per week,while families in the top quintile averagemore than 74 hours of work per week. (Onemight object that this is an unfair comparisonsince some families in the bottom quintilemay consist of retirees. This critique points tothe fluidity of the American income distribu-tion, for most retirees were in higher quintileswhile they were working.) That the families inthe top quintile work some six times more perweek than families in the lowest quintileundoubtedly explains much, though not all, ofthe difference in income.

That higher income people work more thanlower income people does not imply that lowerincome people are morally inferior or lazy.Since work is the means by which people earn

the income necessary to buy goods and ser-vices, the decision to work more or fewerhours amounts to trading off between goodsand services and time spent at home. A personwho works fewer hours may just be someonewith a weak preference for consuming goodsand services or someone who places a highvalue on home-based activities. But whilethere is no reason to cast moral aspersions atthose who work fewer hours, the fact thatsome people have lower incomes because theychoose to work fewer hours does not give thema claim on the higher incomes earned by thosewho choose to work more hours. Hence, thepoliticians should abandon the redistribution-ist pandering and get on with a more mean-ingful discussion of the issues. �


Hours Worked and the Income Distribution

Income Average Weekly Average Working- Average Weekly Hours Worked Per Age Adults Hours Worked Working-Age Adult Per Household Per Household

Quintile Lower Limit Upper Limit

1 — $15,396 14.40 0.89 12.82

2 $15,400 $29,200 26.66 1.22 32.53

3 $29,204 $45,996 28.87 1.60 46.19

4 $46,000 $71,700 33.43 1.93 64.52

5 $71,705 — 34.56 2.15 74.30

Source: Rector and Hederman, Tables A1 and A5, and authors’ calculations.

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Confiscating Guns fromAmerica’s Past

by Clayton E. Cramer

By now you have probably heard about thenew book by Michael A. Bellesiles, pro-

fessor of history at Emory University. ArmingAmerica: The Origins of a National Gun Cul-ture1 is receiving all sorts of positive attentionfrom the usual figures in the academic com-munity and the media. For these reasons, it isimportant to understand what Bellesilesclaims, and why he isn’t just wrong—he isintentionally deceptive.

Before examining Bellesiles’s deceptions,we must understand why Arming America isreceiving such rave reviews from the left endof the political spectrum. For several decadesnow, supporters of restrictive gun control haveargued either that the Second Amendmentwas never intended to protect an individualright, or that the right is obsolete—a leftoverfrom another time, when guns were less dan-gerous than today, our cities smaller, and thesocial problems less severe.

The first claim—that the Second Amend-ment was never intended to protect an individual right—has collapsed under theonslaught of recent scholarship on the sub-ject. Dozens of law review articles on the pos-session of firearms have been published in thelast 20 years, and they overwhelmingly takethe position that the Second Amendment pro-tects an individual right.2 In addition, several

scholarly books about the English origins ofthe Second Amendment, its adoption, andadjudication here in America have been pub-lished since 1984.3

The second claim—that the SecondAmendment is now obsolete—is more com-plex. As social scientists have weighed in onthe effects of gun ownership, many of the tra-ditional assumptions about gun control havebeen found to be incorrect. For example, twocriminologists with a clear preference forrestrictive gun control recently studied theeffects of the Brady Handgun Violence Pre-vention Act and concluded that there was nostatistically significant change in homicide orsuicide rates caused by the law.4

Rewriting HistorySo what is left for the supporters of restric-

tive gun control seeking an intellectual justifi-cation for their position? They are countingon a complete rewrite of American history.Bellesiles’s Arming America is a startlingbook that demolishes many long-held beliefsabout early America concerning violence,guns, and the effectiveness of the militia.Bellesiles argues that the militia was,throughout American history, an ineffectiveforce; that guns were very scarce in Americabefore about 1840; and that few Americanshunted.

The first of Bellesiles’s claims—that themilitia was quite ineffective—is really theleast controversial (at least to historians).

Clayton Cramer (www.ggnra.org/cramer) is theauthor of Concealed Weapon Laws of the EarlyRepublic: Dueling, Southern Violence, and MoralReform (Praeger Press, 1999).

23

JANUARY 2001

History

Many Americans have grown up with a visionof Minutemen running out the door, Kentuckylong rifle in hand, to take on them “Redcoats.”However, historians have recognized for atleast 40 years that for every success of the“citizen soldier” in defending home andnation, there were far more examples of mili-tias turning tail in battle or simply leaving forhome because harvest time had come.

Bellesiles, however, can’t content himselfwith an evenhanded portrayal of the militia’sfailures. He blackens their reputation, appar-ently as part of his campaign to demonstratethat armed civilians simply can’t perform anymilitary function. His reason is to destroy therationale for the Second Amendment.

The Second Amendment wasn’t abouthunting. It wasn’t about individual self-defense—though this was widely assumed tobe a right of Englishmen, and therefore offree, usually white Americans. It wasn’t even,primarily, about militias turning out to defendthe United States from foreign invasion,though even Bellesiles admits that many ofthe framers hoped to avoid the expense of alarge standing army by maintaining a militia.The Second Amendment was about keepingthe government afraid of the masses.

Antifederalists such as Patrick Henry soughtboth a militia and an armed population out offear that a standing army would become theweapon of oppression of the new central gov-ernment. “[T]he President, in the field, at thehead of his army, can prescribe the terms onwhich he shall reign master, so far that it willpuzzle any American ever to get his neckfrom under the galling yoke.”5 If, as Bellesilesoverstates, armed civilians were never a real-istic counterforce to a professional military,then the core reason for the Second Amend-ment evaporates.

Bellesiles is correct that militias were neveras well trained as standing armies, and seldomvery effective in fighting against regulartroops—hence, James Madison’s assumptionin Federalist 46 that a militia 25 times as largeas the standing army would be more than suf-ficient to defeat them in battle.6 Similarly,there was really no realistic alternative to atleast a small standing army, especially on thesparsely populated frontiers. But the ineffec-

tiveness of the militia is really a sideshow inBellesiles’s book. The truly novel part isBellesiles’s claims that guns were scarce inAmerica until nearly the Civil War.

Were Guns Scarce?Why were guns scarce? Because not only

were they expensive, but also “the majority ofAmerican men did not care about guns. Theywere indifferent to owning guns, and they hadno apparent interest in learning how to usethem.”7 Bellesiles claims that marksmanshipwas extraordinarily poor and large numbers ofadult men had no idea how to load a gun orhow to fire one.

To hear Bellesiles tell it, this lack of bothinterest and knowledge was because of thefundamentally peaceful nature of early Amer-ica and that hunting was rare here until themid-1830s, when a small number of wealthyAmericans chose to ape their upper-classBritish counterparts.8 Indeed, he would haveus believe that by the 1830s, a pacifist move-ment, fiercely hostile not only to gun owner-ship, but also to a military and hunting of anyform, was becoming a major influence onAmerican society.9

As I researched my book ConcealedWeapon Laws of the Early Republic, I readthrough dozens of eyewitness accounts of theearly republic. I found that guns and huntingwere common in nearly all regions of theUnited States, and so I concluded that Belles-iles wishfully misread his sources. This,unfortunately, is a problem common to manyhistorians, especially those with a strong ideology.

But Bellesiles wasn’t just wrong. When Istarted checking his sources for the moreamazing claims, I found that they didn’t checkout. He quoted sources out of context, theninaccurately reported what the rest of the sen-tence said. I looked up the sources he listed inhis notes and found that while one page con-firmed his claim, many other pages he listedcontradicted it. In many cases, none of hissources matched his claim.

For example, Bellesiles claims that therewere few firearms in Massachusetts at thestart of the American Revolution, and most of


them were publicly owned. He writes, “Mass-achusetts conducted a very thorough censusof arms, finding that there were 21,549 gunsin the province of some 250,000 people.”Bellesiles claims that this included all private-ly owned firearms.10

His source is an inventory of “WarlikeStores in Massachusetts, 1774.” But when Iexamined the inventory, I found no indicationof the categories of firearms that were count-ed. It included stockpiles owned by towns andat least those guns with which the militiashowed up at musters, both publicly and pri-vately owned.11 But does it include all pri-vately owned arms, as Bellesiles claims?

The only description of this arms censusthat I can find is an order of February 13,1775, telling a committee to inquire “into thestate of the militia, their numbers and equip-ments, and recommending to the selectmen ofthe several towns and districts in thisprovince, to make return of their town anddistrict stocks of ammunition and warlikestores to this Congress.”12 This seems to saythat only military weapons possessed by mili-tia members and publicly owned weaponswere counted. There is no indication that allprivately owned arms were counted.

The evidence from the rest of Bellesiles’ssource for this claim suggests that firearmswere plentiful and that the inventory of “War-like Stores” recorded only a part of allfirearms in the province. A committeeappointed to examine the problem of soldierslacking firearms reported on May 9, 1775(just weeks after Redcoats fired on Minute-men at Lexington), “Whereas, a few of theinhabitants of this colony, who are enlistedinto its service, are destitute of fire arms, bay-onets, and other accoutrements. . . .”13 Not“most of the inhabitants of this colony, whoare enlisted into its service” are withoutfirearms; not “many,” not “some,” but “afew”—and it isn’t clear whether the problemis a shortage of firearms, bayonets, or “accou-trements” (for example, cartridge pouches).

Certainly, it is possible that a person whoused a musket primarily for hunting wouldlack a bayonet. The following paragraphdirects the selectmen of each town to pur-chase or borrow “arms and accoutrements”

for the unarmed militiamen, which soundslike the Provincial Congress thought thatthere were quite a number of privately ownedweapons out there available for purchase. Per-haps the revolutionary government of Massa-chusetts didn’t know how well its own popu-lation was armed—at least, not as well asMichael Bellesiles knows.

There are later discussions of soldiers “whoare destitute of arms,” but there is no indica-tion that this was a problem of great con-cern.14 If there were a serious shortage offirearms or ammunition for the militia, asBellesiles claims, it seems strange that theProvincial Congress on June 17, 1775 (almosttwo months after the Revolution started), rec-ommended to nonmilitia members “living onthe sea coasts, or within twenty miles of them,that they carry their arms and ammunitionwith them to meeting on the [S]abbath, andother days when they meet for public wor-ship.”15 Somehow, there was a shortage ofguns and ammunition for the militiamen, butnonmilitia members still had enough armsand ammunition that they were encouraged tobring them to public meetings.

The Price of GunsWere guns rare in colonial Massachusetts,

as Bellesiles claims? If so, you would expectthe value of guns to be high, especially oncethe Revolutionary War started, and there wasno way to import more guns from Europe.(Bellesiles claims that there were almost noguns made in the colonies.16) The ProvincialCongress of Massachusetts bought weaponsfrom many private owners in the first fewmonths of the war, sometimes purchasing asmany as 100 weapons in a single transaction.The Journals that Bellesiles used show thatthe Provincial Congress purchased at least483 guns, “fire-arms,” and “small arms” fromprivate parties and appraised their value.17

The average value of these weapons wasjust under £2. Perhaps some of those weaponscontained in transactions labeled “smallarms” were actually pikes or swords; let’s giveBellesiles the benefit of the doubt and onlylook at transactions labeled “fire-arms” and“guns,” and assume that none of the “small

CONFISCATING GUNS FROM AMERICA’S PAST 25

arms” are guns. Those transactions (a total of89 weapons) average £2 5 s. 1 d.—not a triv-ial amount of money for the time, but aboutthe same as a sergeant’s monthly wages in theMassachusetts army.18 If guns were scarce, itdoesn’t show up in their valuation.

If the revolutionary government of Massa-chusetts were desperately short of arms, onewould expect them to have used eminentdomain to obtain privately owned firearms.Instead, the private owners were told, “[I]t isstrongly recommended to such inhabitants . . . , that they supply the colony with same.19

A request of June 15, 1775, also seems quitevoluntary: “Resolved, that any person or per-sons, who may have such to sell, shall receiveso much for them, as the selectmen of thetown or district in which or they may dwell,shall appraise such arms at.”20 Desperatetimes often bring on desperate measures, andyet this supposed scarcity of guns seems tohave resulted in polite requests, not demands.

There are dozens of examples in ArmingAmerica where Bellesiles mischaracterizeswhat his sources say. Perhaps the most blatantis his claim that “an examination of 80 travelaccounts written in America from 1750 to1860 indicate that the travelers did not noticethat they were surrounded by guns and vio-lence.”21 I read more than two dozen travelaccounts of the period for my last book, andfour of those were among Bellesiles’s 80. Iknow that for at least those four sources,Bellesiles is not telling the truth. At leastthose four accounts show that the travelerswere surrounded by guns. Two examples ofBellesiles’s dishonesty will suffice.

Not Surrounded by Guns?Bellesiles claims to have read Baynard

Rush Hall’s memoir of 1816 Indiana life andfound that Hall was not aware he was “sur-rounded by guns.” Somehow Bellesilesmissed Hall’s detailed description of howhunting was a common part of life for mostsettlers, done partly for sport and partlybecause it supplied fresh meat at littleexpense.22 Not surrounded by guns? Halldevotes an entire chapter to the joy of targetshooting with rifles, opening the chapter

with: “Reader, were ever you fired with thelove of rifle shooting? If so, the confidencenow reposed in your honour will not beabused, when told my love for that noble artis unabated.”23

Hall also describes target shooting matchesas common and takes pride in participating ina match that he happened upon where theprize was a half-barrel of whiskey. As thepresident of the local temperance society, hisgoal was to win the prize and pour thewhiskey out on the ground.24

The rifle was so common an implement,and target shooting so common a sport, thatwhen Hall went out evangelizing in a sparse-ly settled part of Indiana, one of his fellowpreachers switched in mid-sermon to ametaphor involving rifle matches to sway theaudience. They were becoming restless withanalogies that meant nothing to them—butrifle matches they understood.25 Hall alsodescribes the use of rifles both by settlers pur-suing criminals and by criminals trying toavoid arrest.26

Hunting and target shooting were commonenough that Hall describes nonlethal acci-dents.27 Hall also makes occasional refer-ences to pistols with no indication that theywere either rare or regarded with any particu-lar concern.28 Yet his references to pistols arefar exceeded by mentions of rifles and shot-guns. Hall’s discussions of hunting, use andmisuse of guns, and target shooting take up 41pages of his book—all of which Bellesilesseems to have either missed or disregarded.

Even when Bellesiles admits that there is amention of guns in one of the travel accounts,he distorts what it says. For example, “Simi-larly, Ole Rynning advised his Norwegianreaders to bring ‘good rifles with percussionlocks,’ as such good guns are far too expen-sive in America and can be sold there for a goodprofit. Guns thus had an economic value, butif thought requisite for self-protection, itremained an unstated assumption.”29

But what did Rynning actually say? Hewrote to bring “good rifles with percussionlocks, partly for personal use, partly for sale.I have already said that in America a goodrifle costs from fifteen to twenty dollars.”30

Bellesiles didn’t actually lie and say that the


only possible value of a gun for a Norwegianimmigrant was to sell it here; instead, he mis-leads, by giving the impression that the valueof bringing a good gun to America was to sellit, not to use it yourself. Rynning is clear thatone should bring guns both to sell and for per-sonal use.

I could point to the dozens of other travelaccounts that Bellesiles seems to havemissed—including common works such asAlexis de Tocqueville’s Journey to America—that clearly demonstrate that guns and vio-lence were a common part of American life inthe early republic. Clearly, Bellesiles’s“research” runs from, at best, careless to egre-giously deceptive.

Perhaps Bellesiles is right and dozens ofeyewitnesses and official documents of thetime are wrong. But when a historian repeat-edly mischaracterizes, quotes out of context,or simply ignores sources because they do notfit his claims—well, let’s just say that it’s a bitearly to start revising the textbooks to fit thenew wisdom from Arming America. �

1. Michael A. Bellesiles, Arming America: The Origins of aNational Gun Culture (New York: Alfred A. Knopf, 2000).

2. See David B. Kopel, Clayton E. Cramer, and Scott G. Hat-trup, “A Tale of Three Cities: The Right to Bear Arms in StateSupreme Courts,” Temple Law Review 68 (1995), p. 1178 n.2 for acomplete list through 1995; see www.2ndlawlib.org for more recentscholarly works.

3. Joyce Lee Malcolm, To Keep and Bear Arms: The Origins ofan Anglo-American Right (Cambridge, Mass.: Harvard UniversityPress, 1994); Stephen P. Halbrook, That Every Man Be Armed: TheEvolution of a Constitutional Right (Albuquerque, N.M.: Universityof New Mexico Press, 1984); Stephen P. Halbrook, A Right to BearArms: State and Federal Bills of Rights and Constitutional Guaran-

tees (Westport, Conn.: Greenwood Press, 1989); Clayton E. Cramer,For the Defense of Themselves and the State: The Original Intentand Judicial Interpretation of the Right to Keep and Bear Arms(Westport, Conn.: Praeger Press, 1994); Stephen P. Halbrook,Freedmen, the Fourteenth Amendment, and the Right to Bear Arms(Westport, Conn.: Praeger Press, 1998); Clayton E. Cramer, Con-cealed Weapon Laws of the Early Republic: Dueling, Southern Vio-lence, and Moral Reform (Westport, Conn.: Praeger Press, 1999).

4. Jens Ludwig and Philip J. Cook, “Homicide and SuicideRates Associated with Implementation of the Brady Handgun Vio-lence Prevention Act,” Journal of the American Medical AssociationAugust 2, 2000, pp. 585–91 (jama.ama-assn.org/issues/v284n5/full/joc91749.html).

5. Jonathan Elliot, The Debates of the Several State Conventionson the Adoption of the Federal Constitution, (New York: BurtFranklin, 1888), pp. 59–60.

6. James Madison, Federalist 46, in Jacob E. Cooke, ed., TheFederalist (Middletown, Conn.: Wesleyan University Press, 1961),pp. 320–21.

7. Bellesiles, p. 295.8. Ibid., pp. 314–15, 320–23.9. Ibid., pp. 300–301.

10. Ibid., p. 180.11. Massachusetts Provincial Congress, The Journals of Each

Provincial Congress of Massachusetts in 1774 and 1775 (Boston:Dutton and Wentworth, 1838), p. 756.

12. Massachusetts Provincial Congress, p. 98.13. Ibid., pp. 209–10.14. Ibid., p. 332.15. Ibid., pp. 348–49.16. Bellesiles, pp. 188–91.17. Massachusetts Provincial Congress, pp. 536–37, 584–93.18. Ibid., p. 413.19. Ibid., p. 210.20. Ibid., pp. 336–37.21. Bellesiles, p. 304.22. Robert Carleton [Baynard Rush Hall], The New Purchase, or

Early Years in the Far West, 2nd ed. (New Albany, Ind.: Jonathan R.Nunemacher, 1855), pp. 66, 82, 139–49, 153, 160–63, 375, 448–51.

23. Ibid., pp. 100–13.24. Ibid., p. 104.25. Ibid., pp. 228–30.26. Ibid., pp. 189–90.27. Ibid. pp. 262–63.28. Ibid., pp. 449, 452.29. Bellesiles, p. 339.30. Ole Rynning, Ole Rynning’s True Account of America, ed.

and trans. Theodore C. Blegen (Freeport, N.Y.: Books for LibrariesPress, 1971 [1926]), p. 99.

CONFISCATING GUNS FROM AMERICA’S PAST 27

One of the powers that governments mostjealously guard is that of determining

who visits one’s country. Washington is noto-rious not only for barring people from comingto America permanently, but also for refusingto let people visit who might want to comepermanently.

China goes further, however. It seems tobelieve that it should regulate visitation notonly for itself, but also for other nations. Lastyear the State Department went out of its wayto accommodate China’s criticism of TaiwanPresident Chen Shui-bian’s brief stopover inLos Angeles. As my colleague Ted Galen Carpenter uncharitably observed, “Clintonadministration officials once again have theirlips firmly planted on Beijing’s boot.”

Taiwan is isolated, but not alone. Twenty-nine nations still recognize the Republic ofChina, and President Chen was traveling toCentral America to visit some of Taiwan’sfriends. That meant a stop in Los Angeles.

Naturally, this upset Beijing, which claimsthe island state as its own. Apparently no Tai-wanese—at least, no Taiwanese official ofnote—is supposed to visit America, even for16 hours, unless China approves.

The People’s Republic of China (PRC)made much the same argument six years ago,when President Lee Teng-hui attended areunion at Cornell University, his alma mater.

The administration promised to deny Lee’svisa application, until congressional protestsforced it to retreat. (Then the State Depart-ment assured Beijing that Lee’s visit was “private.”)

On President Clinton’s 1998 visit to Bei-jing, he uttered his famous “three noes”—noU.S. support for a two-China policy, Taiwan’sindependence, or even Taipei’s membership ininternational organizations for which state-hood is required. His effusive support for thePRC undercut Taiwan’s quest to forge a sepa-rate identity.

Now comes President Chen’s visit, which,Beijing declared, could “severely” damageSino-American relations. Although theadministration decided not to declare thenation that claims to lead the “free world” offlimits to the head of state of a vibrant capital-ist democracy, it did go out of its way to quar-antine him.

Reassuring Beijing that the visit was pri-vate was always simple: no administrationofficial need meet with Chen. But the admin-istration attempted to prevent him from meet-ing with anyone else, including congressmen.It reportedly informed Chen that he couldexpect future visas only if he kept this triptotally private.

Even this timorous behavior did not satisfythe PRC. Foreign Ministry spokesman ZhuBangzao expressed his government’s “strongdissatisfaction and firm opposition” after Wash-ington issued Chen a visa. RepresentativeDana Rohrabacher broke through the U.S. cor-don and met with Chen at the latter’s hotel.

Potomac Principles by Doug Bandow

Appeasing China,Backing Taiwan?

28

Doug Bandow, a nationally syndicated columnist, isa senior fellow at the Cato Institute and the authorand editor of several books, including Tripwire:Korea and U.S. Foreign Policy in a Changed World.

JANUARY 2001

Otherwise, Chen might as well have landed inPhnom Penh or Cairo as in Los Angeles.

How could a U.S. president, representingthe most important and powerful nation onearth, so abase himself? America’s policytoward both Taiwan and China is bankrupt.

Good relations with the PRC are important.It is the world’s most populous state; it couldeventually generate the globe’s biggest econo-my. It sits in the midst of the world’s mostdynamic economies.

Thus Washington should encourage thePRC to move in a more liberal direction. Par-ticularly important is allowing private trade toflourish in order to encourage the sort of cul-tural and economic ties that make a freer,more democratic China more likely. Nothingis certain, but more private, and especiallyprofitable private, contact makes more free-dom more likely.

Equally important, America should notdefend the Republic of China. In fact, the cre-ation of a genuinely free society entitles theTaiwanese to chart their own future. But pru-dence requires the United States to exercisecaution in backing that right.

Taiwan exercises a surprisingly powerfulhold on Chinese emotions. More than a cen-tury of domestic weakness and foreign domi-nation are yielding to growing affluence andinfluence. Strong is the desire to use that newpower to reunify a country artificially dis-membered in past years.

Nationalistic feeling toward Taiwan is notlimited to communist officials. It is shared bymany Chinese expatriates. A surprising num-ber of westernized Chinese professionals turninto raving Sino-nationalists when the ques-tion of Taiwan arises.

That Beijing cares, and cares passionately,requires Washington policymakers to takeseriously the possibility that China is willingto use force against Taiwan, is unlikely to treatAmerican threats to intervene seriously, and isready to take what Washington would consid-er to be irrational risks to “recover” Taiwan.

That means a defense guarantee cannot beoffered in the belief that it represents cheap

deterrence, a bluff that will never be called. Tothe contrary, such a step has a disturbingpotential of leading to war between Americaand China, a nuclear-armed state.

Destabilizing GuaranteeIndeed, a perceived American guarantee

would be destabilizing. It would directly con-front Beijing, forcing the leadership to make adecision instead of putting off the issue. Atthe same time, such a policy would encourageTaiwanese political forces, which are alreadypushing toward independence. For instance,Lee Teng-hui has published a new book call-ing for it.

President Chen is so far following a moremoderate course, but members of his ownDemocratic Progressive Party have forcedhim to retreat from his conciliatory endorse-ment of the “one-China” principle. The common belief that the Seventh Fleet willsteam to Taiwan’s rescue in any conflict notonly encourages Taipei officials to be moreassertive, but has caused some voters to sup-port Chen. On election eve last March, onetold the Washington Times: “Beijing will notresort to force carelessly” since the U.S. backsTaiwan.

But the United States should not risk warwhen the interest at stake is not vital. Taipei isan attractive friend, but that alone is notenough. Nor do threats make sense wherethere are alternative means to achieve thedesired end. For instance, permitting U.S.manufacturers to sell weapons to Taiwanwould ensure its deterrent capabilities.

Yet just as the consequences of defendingTaiwan are potentially grave, so are those ofappeasing the PRC. China’s appetite for con-cessions is endless: Last July it sharplyprotested when Great Britain allowed formerPresident Lee to visit. Groveling before Bei-jing will merely generate new demands.

While Washington need not defend othernations’ independence, it must protect free-dom at home, including the right of Ameri-cans to allow others to visit their country. �

29

Learning from the Ancient Greeks

by Kathleen Melonakos

Ihave a five-year-old to educate. Troubledby the high costs, substandard perfor-

mance, dwindling parental involvement, andincreasing violence in government schools,my husband and I have chosen an alternativefor our daughter: a combination of privateschool and homeschool. Before making thisdifficult decision, I not only thoroughly inves-tigated our local options, but also reviewedmany books and articles on the state of Amer-ican education and what to do about it.

In doing this survey, I encountered anexcellent book titled Market Education: TheUnknown History by Andrew Coulson.1 Then,after visiting Greece this year, I reread Plato’sRepublic, along with The Oxford History ofthe Classical World.2 The ancients laid thefoundations for so much of our civilization;can digging into our roots shed light on cur-rent problems? A brief sketch of the educa-tional systems of ancient Sparta and Athenssupports the case for a free-market in educa-tion.

Plato’s Republic is the timeless classic,which, more than any other book with theexception of the Bible, has influenced oureducational ideals. Plato first introduced theidea of state control of schools. But the greatGreek did not have the hindsight that we havenow. Coulson reviews educational systems indifferent times and places in world history inorder to compare the outcomes. He highlights

ancient Greece, early Rome, various periodsin England, the early medieval Middle East, pre-Civil War America, and sectors of modern-day Japan as examples of societieswhere two things have simultaneously flour-ished: free-market education and culturaladvancement. He particularly points toancient Athens, where, without legal compul-sion, parents creatively arranged various waysfor their children to learn. He contrasts it withSparta, whose leaders tightly controlled intel-lectual and cultural life.

Sparta’s Compulsory SystemAthens and Sparta may have had some of

the “shared blood, shared language, sharedreligion, and shared customs” that constitutedhellenikon, or Greekness, as Herodotus tellsus,3 but their systems of government and edu-cation were radically different. By the mid-sixth century B.C., Sparta was an inlandagricultural oligarchy that depended on its peasant-slaves to provide food for its warriorcitizens. After helping Athens to defeat Persiain the 470s and 460s, its leaders then turned tothree major tasks: crushing its constant slaverebellions; trying to conquer other city-states,especially Athens; and forging its new gener-ation into the Spartan mold, using coercionand brute force.

Its “educational system” was part of thetotalitarian military society. The oligarchyrunning the state machine dictated everyaspect of life, including the rearing of chil-

Kathleen Melonakos is a parent and communityactivist in the cause of educational freedom.

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JANUARY 2001

dren. It strictly regulated marriage and pro-creation. A child could only be conceivedwith permission of the rulers, and it had topass their inspection before it was allowed tolive. “Educationists” took children taken fromtheir mothers at age seven and placed them ingovernment boot camps, where they wouldlive in mess halls with other soldiers-in-train-ing until the age of 30. Women trained alongwith men, but in separate barracks. In their20s, young people might be allowed to marryif the elders approved, but men could not livewith their wives. Training consisted of physi-cal exercises and survival skills. Overseersregularly used corporal punishment.

Sparta succeeded in producing fierce war-riors who were widely admired and feared.Many Greek oligarchic city-states allied withit, often out of self-preservation. But Spartawas unique in its stringent state control ofraising children. It became a rigid, insulatedsociety, whose soldiers, Plato believed, werestupid,4 and whose leaders rejected new ideasin favor of the status quo. It had trouble main-taining a replacement-level birth rate. Cre-ative endeavors, like trade, a money economy,free travel, art, architecture, science, philoso-phy, and even written language never devel-oped in Sparta; in fact, its leaders bannedthese activities. Sparta remained one of theleast literate societies of the time. It left noimmortal temples, scientific advancements,written documents, or books. Coulson says“her legacy to modern times is negligible,apart from being a beacon to those advocatingtotalitarian systems of education during theFrench Revolution, nineteenth-century Amer-ica, and the rise of Germany’s NationalSocialist (Nazi) Party.”5 (He provides docu-mented examples.)

Athens Lets Parents DecideIn contrast, Athens embraced trade, ship-

ping, foreign visitors, a diversified economy,and a free exchange of ideas. Karl Popper, inThe Open Society and Its Enemies, said thatthe Athenians began that greatest of all revo-lutions, “the transition from the closed to theopen society.”6 Athens is unimaginable with-out the agora, or marketplace, where mer-

chants met to sell their wares. The agora alsobecame a social center, where interested par-ties met to hear scholars give lectures, engagein debates about current affairs, or hireinstructors to teach their children. Rules regu-lating trade were decided on by democraticcouncils, in which every free-born male citi-zen was expected to participate.

Literacy was not a crime, far from it—oneneeded it to participate in Athenian society.Both the propertied class and the artisansused it for a wide range of activities, from“composing poetry to cursing enemies, fromdisplaying laws to voting, from inscribingtombstones or dedications to writing shop-ping lists.”7 It is estimated that well over halfthe male population could read and write,which meant the Athenians were the most lit-erate people of the time. Women were notencouraged to read, but many of them could.Because slaves were expected to help balanceaccounts and keep records, many could readand write.

Marriage, family, religion, and the educa-tion of children were important duties of par-ents in ancient Athens, not the state. Citizensgave the state due allegiance, as military pro-tection was a critical necessity and primarypurpose of government; however, militarismdid not become an all-encompassing end initself as it did in Sparta. Service in the mili-tary was voluntary, but considered an honor-able obligation. Athens had an effective mili-tary and governing apparatus without statecontrol of education. Pericles contrasted theeducational systems of Athens and Sparta inhis famous funeral oration:

The Spartans, from their earliest boyhoodare submitted to the most laborious train-ing in courage; we pass our lives withoutall these restrictions, and yet are just asready to face the same dangers as they are.. . . There are certain advantages, I think, inour way of meeting danger with an easymind, instead of with a laborious training,with natural rather than state-inducedcourage.

He names other ways in which the city isadmirable:

31

Our love of what is beautiful does not leadto extravagance; our love of things of themind does not make us soft.

And:

In our own homes we find a beauty and agood taste which delight us everyday andwhich drive away our cares. . . .8

Citizens belonged to a number of volun-tary associations, which served specific pur-poses, gave a sense of belonging, and provid-ed education for the young. The village, ordeme, formed the local political unit based ongeography, but just as important was thephratry, a kind of brotherly and religiousassociation composed of relatives and non-relatives, where children were presented tothe group at birth and adolescence in specialceremonies, and young people had specialties to adults. The phratry, and other socialorganizations such as benefit clubs, burialclubs, and clubs associated with specifictrades and activities, provided children andyoung people with opportunities to associatewith peers and adult mentors.

Oswyn Murray of Oxford says organizedschools appear as early as the end of thesixth century and became widespread by theend of the fifth century B.C. Education waspaid for by parents, but the cost was low.Parents either taught children themselves, orsaw that they received instruction, as mostwanted their children to succeed in Atheniansociety. Schooling often began at age seven.For some it continued only until basic skillswere mastered, but for many it continued tenyears or more.9 Except for a mandatory military training for all young men betweenthe ages of 18 and 20, state involvement with education was minimal. And yet train-ing schools for statesmen emerged, such as Isocrates’ school of rhetoric and Plato’sAcademy. These schools, and the services of traveling lecturers from other cities dis-playing knowledge in mathematics, linguis-tics, anthropology, and public speaking,

form the basis for what is now known ashigher education.

Athens Was SmarterThe results of the free exchange of ideas

and parental responsibility for learning arewhat Coulson wants to stress in his compari-son of Athens and Sparta. He thinks weshould re-evaluate our notion of state controlof schools, with its heavy-handed compulsionand forced uniformity. To me it seems ironicthat Plato suggested state control of educa-tion, admiring the Spartan system, when hisown society was the brilliant one. Even moreironic is that many of the supporters of gov-ernment education in America, like BenjaminRush, John Dewey, and various union leaders,have espoused the Spartan idea that “childrenare the property of the state,” therefore contradicting the bedrock principle of theAmerican founding that proclaimed that thefamily precedes the state, and citizens are freeagents with inalienable rights to freedom ofassociation.

More and more we hear of schools becom-ing like jails with metal detectors and armedguards. Are we becoming like Athens or Spar-ta? Athens had unity without uniformity, avoluntary, yet effective defense, extraordinaryachievements, and free-market education.Why can’t we? �

1. Andrew Coulson, Market Education: The Unknown History(New Brunswick: N.J.: Transaction Publishers, 1999).

2. John Boardman, Jasper Griffin, and Oswyn Murray, eds., TheOxford History of the Classical World, Greece and the HellenisticWorld, vol. 1 (Oxford, England: Oxford University Press, 1995[1986]).

3. Ibid., p. 121.4.Desmond Lee, translator’s introduction to The Republic, char-

acterizing Plato’s attitude toward the Spartans based on comments inpp. 359–67 (Middlesex, England: Penguin Classics, 1974 [1955]), p.24.

5. Coulson, p. 50.6. Karl Popper, The Open Society and Its Enemies, vol. 1 (Prince-

ton, N.J.: Princeton University Press, 1971 [1943]), p. 175. Sir Karldefines the closed society as characterized by tribal collectivism,authoritarian rule, and social stasis, as opposed to an open societytypified by equalitarianism, personal responsibility, and socialmobility.

7. Oswyn Murray, “Life and Society in Classical Greece,” inBoardman, Griffin, and Murray, p. 222.

8. Thucydides, The Peloponnesian War, trans. Rex Warner (Mid-dlesex, England: Penguin Classics, 1978 [1954]), pp. 146–47.

9. Murray, p. 222.


Graduation Advice for theGlobal Economy

by Gerald Gunderson

G raduation this spring seems a long wayoff to students, but college administra-

tors are necessarily well into the planningcycle for speakers and honorary degrees.Unfortunately, if the pattern of the recent pastholds, most of those opportunities to slip afew useful insights into the celebration will besquandered. Most of what the audiences havebeen hearing comes from outmoded or, worseyet, destructive notions.

Almost every speech neglects one of thekeys to the world that the graduates will beentering. Markets now organize a majority ofthe world’s economy, and their influence con-tinues to grow. This profoundly changes whatinformation is valuable and how best to com-pile and evaluate it. When governments andbureaucracies predominate, partial bits ofinformation, some of which is intentionallydistorted, rule. But markets are dispassionate-ly honest. The pooled, weighted informationreflected in the price of a product or service ismore accurate than the rules of thumb orjudgments based on selected observations thatindividuals naturally resort to. Contrary to theegocentric predisposition of people to assumethey know what is best, markets mobilizemore useful knowledge about a product orservice than can any participant, no matterhow well situated and informed.

A wise graduation speaker, therefore, willcheck his temptation to offer personal adviceand will instead encourage the graduates tolook to the messages of prices and markets.Learning to infer the changes they reflect,along with the incentives they imply forbehavior generally, is one of the most power-ful skills one can take into the world.

The worst graduation advice is often tied toa mindset that ignores or even denigrates mar-kets as a means to organize human affairs. Inthe more detrimental addresses, speakers tellgraduates that the world is riddled withinequities so glaring that simple justicedemands their immediate confrontation. Suchspeakers skip over the distinctions betweenunsatisfied wants and misallocations on theone hand, and between intentions and resultson the other. After all, who would want suchdetails at a graduation? The unstated implica-tion in such a view of the world is that on itsown it works poorly, requiring active manage-ment by enlightened folks to salvage it.

Another unstated implication is that thosegreater concerns trump the skills you devel-oped in school. You must subordinate whatyou learned and what you would like for goalsthat others see to be overriding. Lending ahand at the soup kitchen is more importantthan what you prepared for in school.

If “the world demands your full energy”graduation speaker goes as far as to offerexamples, the short list will include the envi-ronment and helping the disadvantaged. Theformer likely includes preserving natural

Gerald Gunderson is the Shelby Cullom Davis Pro-fessor of American Business and Economic Enter-prise at Trinity College in Hartford, Connecticut, andeditor of the Journal of Private Enterprise.

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JANUARY 2001

resources by recycling and saving the rain forest—recently upgraded from being calledthe jungle. The latter requires transferringincomes from the rich to the poor whetherwithin the economy or internationally. If therecycling advocates had looked at the evi-dence of markets they would discover thatconsiderable recycling already takes place,having organized itself spontaneously throughthe self-interest of the participants from theearliest that we can ascertain human activity.Markets would also tell objective observersthat the reason recycling does not occur insome materials currently is that the cost inresources is greater than the returns.

Many graduation addresses edge towardcareer guidance. The graduates are advised tobegin to act like adults, in effect, jump-startthemselves to the longer time horizon thatpeople develop as they age. Begin saving now(preferably in a tax-deferred plan). Keepimproving your skills; lifetime learning andreappraisal are crucial. Think of yourselves asa capital asset. Plan your work and trainingafter school to maximize your value. Suchrules of thumb are helpful to discuss, and formany graduates they may well be the best life-time strategies. But they grow out of particu-lar assumptions about the forces that drive theworld. You begin saving early if the (after-tax)

return on savings is greater than your alterna-tive uses. This may be good discipline for asalaried worker who would otherwise betempted to consume that amount, but for oth-ers creating a business or developing skills inthemselves putting capital away could sapmore valuable uses.

More often than not, the stronger, instinc-tive forces that drive markets contradict theadvice given graduates. People naturally seektheir comparative advantage, specializing inone form of production to the exclusion ofothers, in order to gain the most from theircircumstances. Each person benefits by spe-cializing in the work that combines his skillswith the interests of buyers as mediatedthrough markets. The critical corollary is thatyou must specialize, leaving all remainingactivities for others pursuing their own com-parative advantages. So if helping others istruly your first priority, concentrate on whatyou do best, improving the benefits you canthen share with others. That creates a biggerpie for everyone, including the disadvantaged.

Scarcest SkillsSchools attempt to impart a new, more pro-

ductive comparative advantage to their students.In America the scarcest things continue to be the


analytic and adaptive abilities of people, notmanual labor, capital, or natural resources. Inaddition to learning to evaluate and organize,probably the most important capacity is master-ing further skills in response to changes. Thestart-ups building on the new digital technologyare tangible examples, initiated by young entre-preneurs barely out of school—often startedwhile they were still in school.

Meanwhile the graduates continue toreceive advice much like that they would haveheard two decades ago. A typical example is,“If you hope to run your own business some-day learn such building blocks as accountingand financial analysis on someone else’s nick-el, while you work for him.” While such skillsare certainly valuable, change in the econo-my—and, as a consequence, in the students’current comparative advantage—make thatstrategy less attractive now. Not too longago—before the global economy really beganto take effect—you pursued innovation andwealth by simultaneously creating an innova-tion and a business to produce and market it.A successful entrepreneur had to knowenough about such elements as finance, mar-keting, and production to get a business run-ning and to oversee its operations. Now, manyof these jobs can be farmed out to specialists;witness offshore manufacturing, e-commercefulfillment, and venture capitalists. At thesame time, innovation, always naturallyunpredictable, has become even less structured.Digital technology is so all-encompassingthat applications are possible all across theeconomy. Imagination and initiative can nowbe more important than a thorough groundingin that market niche. On top of all this, glob-alization has accentuated the comparativeadvantage of the American economy in inno-vation, as distinguished from production ofestablished goods and services.

What to Do?So what should a smart graduate do? Cut

out the warm-up exercises and jump right intoyour own enterprise. You already have manyof the technical skills, and you can pick upwhat else are necessary as you work. Oppor-tunities have been opened up for improve-

ments everywhere that information, commu-nications, measurements, calculations, andcontrol systems are used—in other words, vir-tually all human activity. Your effort andimagination will pay off more than pausing togear up for a profession that might well bemade obsolete by change in any case.

Self-interest as expressed in comparativeadvantage is working its way in the capitalmarkets as well. The American economy’s dis-proportionately large share of the world’s inno-vations is translated into equity, mostly stock ingrowth firms. That leads to a net inflow of cap-ital as foreigners buy into such enterprises.This is commonly called a trade deficit, andmany see its persistence as a sign of economicweakness that must pull down the economyeventually. In actuality it shows that the rest ofthe world is willing to exchange goods and ser-vices for Americans’ innovations.

Graduation speakers and many parentsemphasize the importance of saving, startingearly and making it automatic to avoid thetemptation of dipping in for “emergencies.”But saving is better done in economies withfewer options for their resources. Americanscan create more opportunities as well asreserves for contingencies by creating wealththrough entrepreneurial efforts rather than thepassive process of not spending. Graduatesmight well expect to earn far more on the timethey invest in a start-up than socking away 10percent of a salary. Just one modestly success-ful entrepreneurial venture among otherwisefalse starts is likely to give an individual moreopportunities than a lifetime of faithful saving.

So if you want to really help the world oryourself—or both, for that matter—follow theprodding of the markets. While others seeproblems in the way the world presentlyworks, you can build new ways that supersedethe drawbacks and provide serendipitousopportunities as well. And while others aredenying themselves now to build security, youcan enjoy creating opportunities that go muchbeyond insurance. Today’s global reach allowsyou to leverage your directed creativity on anunprecedented scale. Set aside the expecta-tions derived in earlier eras in favor of the sur-prising, unprecedented opportunities emerg-ing from the interplay of markets. �

GRADUATION ADVICE FOR THE GLOBAL ECONOMY 35

One of the saddest aspects of America’smonstrous war on drugs is the way drug

warriors justify their sadism and selfishnesswith the rhetoric of protecting “kids.” Ourpublic schools not only fail to educate chil-dren, but also succeed in undermining theauthority of parents as the proper guardians oftheir children’s health and welfare.

School authorities deprive children, againsttheir parents’ wishes, of the self-controlleduse of drugs for which they have genuinemedical need and whose proper use they cancompetently monitor. For example, a 16-year-old high-school student gives her friend twoMidol tablets to ease her menstrual discom-fort. She is suspended for five days for carry-ing prohibited over-the-counter medication inher purse.

At the same time, school authoritiesencourage and force children, often againstthe parents’ wishes, to use drugs for whichthey have no rational medical need. Dispens-ing caffeine in vending machines and com-pelling children to take Ritalin are nowaccepted functions of the public school sys-tem.

Pushing CaffeineGovernment at every level—local, state,

and federal—supports our public schools.Like all public services, the quality of the ser-

vice public schools render deteriorates indirect proportion to the quantity of the fundsthey receive. When no amount of tax moneyseemed enough to satisfy their bulimicappetite for funds, state lotteries were justifiedwith the promise that their revenues wouldremedy the schools’ financial problems. Wenow spend some $500 billion annually on ourschools and, not surprisingly, the experts tellus that our public schools are grievouslyunderfunded. But not to worry, a solution is athand.

Having been thoroughly corrupted by thecourts and politicians, the schools were easyprey for the beverage industry. Companiessuch as Coke and Pepsi offer school districtsa percentage of their sales in exchange for theexclusive right to sell their products. In theDistrict of Columbia, for example, such acontract earns the school system up to$50,000 a month. Hundreds of school districtsacross the nation have chosen Coke or Pepsias their exclusive soft-drink purveyor.

Dan DeRose, a broker of exclusive soft-drink contracts with schools, states: “Eventu-ally every school of any size will have to askthe question: Can we do better in terms of rev-enue with the beverage contracts we nowhave? Does it make sense for us to walk awayfrom the money Coke, Pepsi and the otherswill pay for an exclusive contract?”

Long before the Surgeon General discov-ered it, everyone knew that smoking ciga-rettes is not a healthy habit. Everyone knowsthat bubbly brown water sweetened with sugarand spiked with caffeine is not a health food.

The Therapeutic State by Thomas Szasz

Public Schools as DrugDelivery Systems

36

Thomas Szasz, M.D., is professor of psychiatry emer-itus at SUNY Upstate Medical University in Syra-cuse. He is the author of Fatal Freedom.

JANUARY 2001

If cigarettes are “drug delivery systems,” thenso are cans of Coke, Pepsi, Mountain Dew,and Surge, the latter so named because it haseven more caffeine than the original coladrinks. And so too are the public schoolsthemselves, hooking children on caffeine andRitalin. Now schools encourage the use ofaddicting, mind-altering drugs the govern-ment endorses, while admonishing themabout the hazards of drugs the governmentforbids. As in other aspects of life, adults may miss, or deny, the hypocrisy obvious tochildren.

Is Caffeine a Drug?

Caffeine is the most widely used drug in theworld today. It is a central nervous systemstimulant whose effects range from mildincrease in alertness to jitteriness, hyperactiv-ity, heightened anxiety, and even agitation. Italso depletes calcium in bone and can causediarrhea and increased urination. Its regularuse can be habit-forming, users experiencingwithdrawal symptoms 12 to 16 hours after thelast dose, such as drowsiness, headaches,lethargy, irritability, disinterest in work, anddepression.

The International Olympic Committee listscaffeine as a restricted drug. Urinary levelsabove 12 mg/liter are viewed as achievedthrough a deliberate attempt at doping anddisqualify the athlete from performing.

The American Psychiatric Association’sDiagnostic and Statistical Manual of MentalDisorders-IV list four types of “Caffeine-Related Disorders,” including “CaffeineIntoxication” and “Caffeine-Induced AnxietyDisorder.”

According to the National Soft Drink Asso-ciation, the caffeine content, in mgs per 12-ounce can of soda, is as follows: Afri-Cola,100.0; Jolt, 71.2, Mountain Dew, 55.0; Surge,51.0; Coca-Cola, 45.6; and Pepsi Cola, 37.2.Jolt and Surge owe their popularity to theirhigh caffeine content. A 12-ounce can of non-diet soda contains 120 to 200 “empty” calo-ries. According to statistics from the BeverageMarketing Corporation, in 1970 annual sodaconsumption was 22.4 gallons per person; in

1998 it was 56.1 gallons per person. Child-hood obesity rates are double of what theywere 20 years ago, another golden opportuni-ty for medical statists to flex their muscles.

The War on Drugs Is a War onthe Family

The war on drugs is a pretext for replacingloyalty to family and friends with loyalty tothe Therapeutic State. For example, after lis-tening to an anti-drug lecture, a junior highschool student walks into the police stationcarrying a trashcan bag containing an ounceof cocaine, small amounts of marijuana, andsome pills. By sunrise, her father and motherare arrested and jailed. Then-first lady NancyReagan explained: “She must have loved her parents a great deal.” A 12-year-old girlturns her parents in to the police for growing marijuana and using cocaine. Declares aspokesman for the police: “She did the rightthing. We don’t see this as turning in parents.We would rather view this as someonerequesting help for their parents and for them-selves.” The media report all this as if it wereas ordinary as a weather forecast for a sunnysummer day.

Betraying one’s parents was not enough.When he was the drug czar, William Bennettinstructed high school students to tell on theirfriends: “It isn’t snitching or betrayal to tell anadult that a friend of yours is using drugs andneeds help. It’s an act of true loyalty—of truefriendship.”

Under the pretext of protecting childrenfrom “dangerous drugs,” we jazz them upwith caffeine, calm them down with Ritalin,and tell them to “Just say no to drugs” and yesto betraying their family and friends. The useof Ritalin in toddlers underscores the pointthat, in the view of contemporary mentalhealth experts, the very nature of the youngchild, especially if he is a male, is a diseaserequiring treatment.

As we sow, so shall we reap. When we handour children over to the government at agefive and tell them to pay attention in school,we get what we ask for—they will never real-ly learn when or why to say no. �

37

Egalitarianism Run Amok

by Christopher Mayer

There has seemingly been nothing butebullient praise for the SEC’s new disclo-

sure regulation. Dubbed Regulation FD (for“full disclosure”), the new rule has beenhailed by journalists in financial magazinesand newspapers across the country as a bigwin for the “little guy.” As Washington Postcolumnist Fred Barbash wrote in his Sundaycolumn, “The Securities and Exchange Com-mission’s new ‘fair disclosure’ regulation isdefinitely a plus for the individual investor.The agency deserves our thanks.”

However, on further examination, it doesnot seem that Reg FD is a boon for the indi-vidual investor at all. Rather than creating amore open dissemination of market informa-tion, it will constrict the flow of information.Rather than leveling the playing field, it willfoster opportunities for some professionalsand companies at the expense of many others.

The regulation requires that the intentionalor unintentional disclosure of “material non-public information” to individuals or groupsthat may trade on that information (that is,shareholders or stock market professionals)must also be made available to the public. Ifthe company in question knows ahead of timethat it is going to make such a disclosure, it issupposed to make it available to everyone. Ifit is an unintentional slip, the company is sup-posed to make the information available with-

in 24 hours or before the start of the next trad-ing day, whichever is later.

These public disclosures can be made byfiling a form with the SEC, holding a pressconference or Webcast, or issuing a newsrelease. The regulation does not apply to com-munications made during initial public offer-ings or secondary stock offerings, nor does itapply to “road shows.”

The SEC’s motivation for creating the reg-ulation was clear and is available for all to seeon its Web page:

We have become increasingly concernedabout the selective disclosure of materialinformation by issuers. As reflected inrecent publicized reports, many issuers aredisclosing important nonpublic informa-tion, such as advance warnings of earningsresults, to securities analysts or select insti-tutional investors or both, before makingfull disclosure of the same information tothe general public. Where this has hap-pened, those who were privy to the infor-mation beforehand were able to make aprofit or avoid a loss at the expense ofthose kept in the dark.

The central aim is to prevent a select groupfrom profiting from the ignorance of the massof investors. But let us see how this rule mayshake out and who will benefit.

Some participants in the securities industrybelieve the regulation will result in less infor-mation being disseminated by companies out

Christopher Mayer is a commercial loan officer andfreelance writer. Contact him at [email protected].

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JANUARY 2001

of fear of not complying with the new regula-tion. As analyst Jeff Tryka of RedChip recent-ly wrote, “Most likely some companies willclam up, offering little if any commentary onthe future prospects of their businesses to ana-lysts or institutions much less individuals.Others may continue their current practices,though they may soon tire of filing a Form 8-K every time they talk to an analyst on thephone. The result, especially if corporate legaldepartments have their way, will be a signifi-cant slowdown in the flow of information.”Why? To lessen the risk of liability from aReg FD violation.

Inhibiting AnalysisThis slower flow of information will inhib-

it security analysis by creating more opportu-nities for error. Management teams often tipanalysts on their estimates, managing expec-tations up or down as the case may be. Earn-ings estimates and other forecasting will beeven more of a crapshoot than they are now,especially if management teams are not ableto converse freely with analysts. Rather thanestimates being missed by pennies, errors arelikely to get much wider and create even morevolatility in stock prices.

Of course, as with any new law or regula-tion, the impact will largely depend on how itis enforced. There will likely be a lot of dis-cussion about what is “material.” Indeed, withliterally thousands of conversations takingplace daily between management and the pub-lic, the law may turn out to be virtually unen-forceable. Enforcement will likely be capri-cious and haphazard. Certainly, one group thatalways benefits from any new law or regula-tion is the lawyers; they will be fortified withnew material to litigate and defend against.There will also be increased demand for avariety of communication services.

In part, the reasoning of the SEC mirrorsthe position against insider trading. At thecore of such reasoning is the notion thatinformation of this type ought to be widelydisseminated and that acting on such privateinformation is inherently unfair.

However, investors constantly have infor-mation available to them that others do not

have, whether they are aware of it or not.Locals in Baltimore, Maryland, know moreabout Baltimore-based companies than peo-ple in Seattle, Washington, do. They havefriends and neighbors who work for thesecompanies. They know where the companiesdo business. Local businesses are frequentlycovered in the local papers. With this infor-mation locals have a feel for a company thatsomeone living far away does not have.Should the locals not be allowed to trade oninformation publicly known but not yet putout on a Webcast or in a news release?

Notwithstanding actual information, theability of people to process this information isinherently unequal. Human beings are adiverse lot, with widely differing talents andintellects. Even with all the same information,different investors will have widely differingopinions about the attractiveness of an invest-ment. Is the SEC going to likewise mandatethat we all share our analyses with the publicso as to not profit “at the expense of those leftin the dark”?

There is nothing unfair about unequalinformation. It is a fact of life, one that allhuman beings must deal with in interactingwith others. Buyers and sellers in transactionseverywhere seldom have the same informa-tion. Their experiences and intellect, theirbasic uniqueness as individuals, assure thatthey won’t.

It is well known that both parties to a vol-untary exchange believe they benefit at themoment of the exchange or they would nothave engaged in it. Likewise, the investmentarena is not a coercive exercise. If an investordoes not want to play the game, he doesn’thave to. No one forces him to put his money instocks he feels he knows little about.

Regulations like FD show an unbridledfaith in government, a hatred for money-mak-ing, and a fervor for liberty-killing egalitari-anism. All the while, the powers of theleviathan state are expanded under a murky,fickle regulation.

Disclosure laws in general are well loved byreformers. Yet the result, as with so much gov-ernment regulation, is the opposite of whatwas intended. As analyst Tryka noted, “Indi-vidual investors will not get more information

39

but investment professionals will get less.”Companies will spend more time andresources on compliance; securities analystswill be less useful in guiding their clients; andthe lawyers will be busier. And what of theindividual investor, the “little man”? Review-ing his stock tables, having no more informa-tion than he started with and no edge againstthe professionals in processing what informa-tion he does get, will he be thinking to him-self: “Thanks, SEC”?

The problem with our securities markets isnot that there is too little regulation. Regula-tions in this area have become highly com-plex, requiring expensive legal expertise tonavigate safely. The creative forces of themarket itself will provide solutions to prob-lems of disclosure. The interaction of buyersand sellers will push the investment market to deliver what investors want, as all free markets are pushed to meet the wants of consumers. �


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The Foundations of Morality HENRY

HZ

HENRY HAZLITT

TheFoundationsof Morality

Bill Brosnan:Railroad Free-Marketeer

by Charles O. Morgret

Dennis William (Bill) Brosnan (1903–1985)was a lifelong railroader. He began as an

apprentice track engineer and rose throughthe ranks to become president and chief exec-utive officer of Southern Railway Company,now part of Norfolk Southern Corporation.

In the course of his 46-year career withSouthern, Brosnan, more than any other indi-vidual or group, must be credited primarilywith keeping the U.S. railroad industry underprivate ownership and operation and out ofthe hands of government, unlike virtually allthe world’s railroads in his day. He did so inthree principal ways.

First, at a time when railroads were amongthe least modern and most labor-intensive ofall industries, he led a massive technologicalrevolution that converted them into one of themost modern and least labor-intensive of allindustries. As a key element in that revolu-tion, he built the first of what has become astable of specialized freight cars designed tomeet the varying needs of shippers, instead offorcing them to adapt to the standard railroadboxcar.

Second, by winning a key five-year battle(the “Big John” case) over the Interstate Com-merce Commission (ICC), which had closelyregulated railroads for nearly a century, hebroke the back of government regulation ofpricing, thereby enabling railroads to exercisemore effectively their low-cost pricing advan-tage over other modes of transportation.

Third, he established on the Southern Rail-way the first modern marketing department,which today is a hallmark of railroad salesand services.

Trains magazine of January 2000 rankedBrosnan as the top railroad man of the twenti-eth century. In another leading trade publica-tion, Railway Age, December 1999, he headsa list of 16 “outstanding railroaders” of thecentury.

Trains editors said of Brosnan: “Quicklyand concurrently, he mechanized track main-tenance, centralized car and locomotiverepair, built automated hump yards, and con-solidated operating regions and departments.If a machine to install crossties didn’t exist onthe market, he and his tinkerers invented oneand built it in the company shops.” RailwayAge said “he invested in the first lightweight,mostly aluminum 100-ton coal hoppers, 100-ton ‘Big John’ covered grain hoppers, central-ized computing, radio-controlled helper loco-motives, and microwave communications.”Pointing out that Brosnan was Railway Age’s“Railroader of the Year” in 1964, the editorsquoted Newsweek as saying that Brosnan“changed the economy of the South and ledthe lethargic railroad industry in adoptingmodern methods.”

Recognition of what Brosnan meant to therailroad industry is thus well understood andfundamentally accurate. What is perhaps lessunderstood and appreciated was his equaldedication and role in preserving the nation’scapitalist system and fighting efforts to under-

Charles Morgret’s books on railroads include thetwo-volume Brosnan: The Railroads’ Messiah (1996).

41

JANUARY 2001

mine it. His prime contribution in that regardlay in providing the leadership that kept railroads under private ownership. During theGreat Depression of the 1930s and beforeWorld War II, they were in grave danger ofbeing taken over by government. In the earlyyears of the war, and before, calls for railroadnationalization came from high-ranking gov-ernment officials up to and including cabinetsecretaries and Vice President Henry Wallace.

D. W. Brooks, then the executive vice pres-ident and general manager of the Cotton Pro-ducers Association, in Atlanta, said in 1967:“Except for the fact that Mr. Brosnan cameinto the railroad industry at the critical time,there was a good chance that all railroadswould have moved into government hands.”

Fire Chief FatherBrosnan’s home environment in Albany,

Georgia, was more government-oriented thanbusiness-oriented. His father, the first DennisWilliam Brosnan, was Albany’s international-ly renowned fire chief during Bill’s early yearsand through college. It is perhaps not surpris-ing therefore that Bill’s first job after collegewas as an engineer with the Georgia Depart-ment of Highways. Although the job lastedonly three years, until 1926, it was longenough to convince him that he didn’t want agovernment career. He would take his chancesin private industry. He accepted a job as stu-dent apprentice engineer with Southern Rail-way, a company then of some 8,000 miles ofrailroad, serving primarily the 13 southeast-ern states.

Leaving a secure, well-paying job with thehighway department to take an apprenticeshipwith a struggling railroad seemed to Bill’sfamily and friends to be a step backward. Acouple of years later, when he still had notreceived a promised promotion but insteadhad suffered a 50 percent reduction in take-home pay, their apprehensions grew.

The pay cut was not the result of a rate cutor a demotion. Rather, it was the result ofdeclining business and revenue on Southern,which forced the company to spread the avail-able work by halving the paid working time ofthe employees it wanted to keep.

The policy succeeded in saving jobs duringthe depression that was then beginning. But inBrosnan’s case, it meant having to get by on$50 a month instead of the $100 he had beengetting at the highway department and initial-ly at Southern.

The work that Bill was required to do withSouthern was also far more difficult and phys-ically demanding than the job he left. More-over, on the highway job he had supervisedthe work of others. As a student apprentice onSouthern, he was required to do much of thepick-and-shovel labor of repairing and main-taining the track and roadway himself.

From that physically challenging experi-ence, Bill learned what it was like to breakloose a 200-pound crosstie that had been intrack 40 or more years, with only a sledge-hammer and pick to assist him. There, too, hecame to realize that there had to be a betterway to do such work—and that it would be upto him to find it.

Initially, Bill’s apprenticeship with Southernwas to last only six months. After that, he wasto be promoted to assistant engineer. But aseconomic conditions worsened and jobsbecame harder to find, promotions were haltedand the period of apprenticeship lengthened.

Slowly, almost agonizingly, he was finallyallowed to assume minor engineering respon-sibilities. He started as a rodman, which onthe railroad meant holding the surveying polewhile his partner did the sighting. This wasfollowed by promotion to foreman in chargeof a section gang of five or six men who repairedand maintained a small section of track.

Despite his deep disappointment and impa-tience with his snaillike progress, Bill by thenwas thankful to have kept his job when somany others were let go. But the longer heworked with his hands—still using only thesame basic tools as when railroads began acentury earlier—the more he became con-vinced of the need for bringing railroads, abasic industry then as now, into the twentiethcentury technologically.

Certainly, he reasoned, the opportunity wasfar greater on Southern than it would havebeen at a government job run by bureaucratsand vulnerable to the winds and whims ofpolitical change. Therefore, he tackled the job


with the vigor of one who sensed that only byexperiencing the problems firsthand would hebe able to find better solutions.

Not until October 1931, two years after thestock-market crash and six years after his firstjob with Southern, did Bill receive his first realpromotion. The title change was only fromassistant engineer, maintenance of way, tojunior engineer. But it restored him to full-time.

That was the good news. The bad news wasthat Southern at about the same time hadfound it necessary to order a 10 percent payreduction across the board. It was but the lat-est in a series of belt-tightening measures thathad been forced on Southern’s managementby a severe business decline—which was des-tined to continue for the rest of the decade.

In just three years, from 1929 through1931, Southern’s operating revenues hadplummeted by nearly one-third. Net incomefell from $18.1 million in 1929 to a deficit ofnearly $6 million in 1931. A year later, in1932, the company’s net income deficit soaredto a record of over $11 million, a staggeringsum at the time for a company its size.

Bankruptcy ThreatensThreatened as never before by the stark

specter of insolvency, Fairfax Harrison,Southern’s president of 16 years, gave anorder that was tantamount to preparing to“abandon ship.” He ordered his attorneys toprepare bankruptcy papers, which he held inhis desk drawer expecting any day to have tosign and file them.

Nor was Southern Railway an exception.Among railroads generally, the level of busi-ness between 1929 and 1931 fell by one-thirdand net income plummeted by over 80 per-cent. In 1932 the entire industry reported a netincome deficit of $121.6 million, again a stag-gering figure at the time.

The railroad industry, including Southern,slashed employment by 38 percent, addingover 600,000 persons to the swelling tide ofthose seeking jobs. Even the employees whowere fortunate enough to keep their jobs oftenfound their paychecks cut by ten percent ormore for prolonged periods, for which theywere unwarned and unprepared.

For most of the 1930s, as for the five yearsof World War II that followed, there was littleopportunity for Bill to do more than work ashard as he knew how in middle-level supervi-sory jobs. His first job as a division superin-tendent, at Selma, Alabama, did not comeuntil October 1938. After that he was moved,still as superintendent, first to division head-quarters at Macon, Georgia, and in February1943, to Birmingham, Alabama, then themost critically important division on South-ern’s system.

Because of its strategic location as thesouthernmost division of Southern’s systemconnecting New Orleans and Birmingham, theimportance of the Birmingham division wasnever in doubt. But with the entry of the Unit-ed States into the war, it was almost immedi-ately called on to handle, in addition to its nor-mally heavy volume, the millions of gallons ofoil traditionally shipped daily by tankers andbarges. That water movement from the Gulf ofMexico to the manufacturing centers in thenortheast had been halted by the armadas ofGerman submarines then roaming at will inthe coastal waters from Florida to New Eng-land. As the division’s newly appointed super-intendent, nothing in Bill’s work was moreimportant than to keep the oil flowing

BILL BROSNAN: RAILROAD FREE-MARKETEER 43

Bill Brosnan

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steadily northward by rail.His tenure in that sensitive assignment last-

ed through the end of the war in August 1945.Three months later he accepted assignmentfor a year as chief engineer, Western Lines,with headquarters in Cincinnati. It was in thatjob that he began the work that ultimatelychanged the work of track construction andmaintenance from hand labor performed byarmies of workers equipped only with picksand shovels to the highly mechanized systemused by all railroads today.

But it was not until 1947, when Bill waspromoted to general manager, Central Lines,in Knoxville, that he began what became thesecond of his major technological changes.That was automating the work of freight carclassification and movement in freight yardsand terminals. As with the work on track, ittoo had been a function performed largely byhuman labor operating thousands of switch-ing locomotives.

In 1952, Bill was named vice president,operations, a post he held for eight years. Inthat period, he launched many additionaltechnological changes that, like mechanizedmaintenance and automated freight yards,were quickly embraced by the railroad indus-try. Among these were welded rail, microwavecommunications, computerization of railroadoperations, modern assembly-line shops forfreight car repairs, containerization, and spe-cialized freight cars built to meet customerneeds.

“Big John”One of the new specialized freight cars

became the focus of what would be a five-yearbattle before the ICC and the U.S. SupremeCourt. The outcome of that battle led ulti-mately to deregulation of railroads and therestoration of competitive rate-making. Thecar was the renowned “Big John” for haulinggrain.

Before “Big John” in the early 1960s, grainwas carried in standard railroad boxcars, mostonly 50-ton capacity and as ill-suited for car-rying grain as they were for loading andunloading it. Bill’s “Big John” car revolution-

ized the hauling of grain. Like a bathtub, itwas loaded from the top and unloaded fromthe bottom. And because of its lightweightaluminum, stainless-steel construction, itcould be double the capacity of the standardbox car.

With “Big John,” Bill was able to lowerSouthern’s freight rates on grain by 60 per-cent. But doing so required approval by theICC, which since its beginning in 1887 hadviewed its primary role as protecting othercarriers from railroad competition. It prohib-ited the rate reduction.

Bill finally prevailed after five years andtwo trips to the Supreme Court. By winning,he not only restored free pricing to railroadrate-making, but also began what finallyended anachronistic ICC regulation itself.

By leading the technological and manager-ial revolutions that enabled railroads toremain under private ownership, Bill made hismost important contributions to free enter-prise. He seldom missed an opportunity tomake known his support of freedom. Theoccasions to do so became more frequentafter he became Southern’s president andchief executive officer in 1962.

For example, in 1964 he spoke before thegraduating class at his alma mater, GeorgiaTech. (For that speech, he was awarded theGeorge Washington Honor Medal by theFreedom Foundation at Valley Forge.) Billexpressed the philosophy that had guided hisown life, saying that the erosion of individualfreedom was caused by “herdlike acceptanceof limitations on our rights to be individuals.”“It is important to recognize,” he said, “thatthe right to personal choice can be given awayor voted away in a democracy as well asstolen away by a dictatorship.”

Bill also warned of a growing tendency onthe part of too many young people to place ahigher priority on security than on adventure,challenge, and opportunity. He warnedagainst “the belief that cradle to the graveprosperity can be guaranteed if we turn overall our affairs to government. It gives the falsepromise that we need then have no concernabout our personal contribution to our ownadvancement and welfare.” �


There are so many economic issues thatcannot be understood properly without

recognizing the importance of marginal con-siderations that I could continue writingcolumns on marginalism indefinitely. Indeed,marginal analysis will reappear both explicit-ly and implicitly in my future columns. Butthis month I will wrap up my emphasis onmarginalism with some additional observa-tions on this crucial economic concept.

We have all heard the advice, “If a job isworth doing, it’s worth doing right.” There iswisdom in this advice if we are careful aboutwhat is meant by “doing a job right.” Peoplesometimes suggest that if a job is worthdoing, it’s worth doing perfectly. But thisadvice, by ignoring the importance of margin-al considerations, is a prescription for wasteand inefficiency, as anyone who attempted toput it into practice would soon discover. Nomatter how much time is spent doing a job, itcan almost always be done a little better byspending more time on it. But at some pointthe value of doing the job a bit better is lessthan the value of diverting a little more timeto another activity. So even if perfection werepossible, it would not be sensible. Instead ofdoing any one thing as well as possible, youare far better off doing several things not sowell.

In general, you will accomplish the most by

doing what economist call “equating at themargin.” This means allocating your time overseveral activities so that the marginal valuecreated from more time on each is the samefor all. If your time isn’t being allocated thisway, then the marginal time spent on somethings creates more value than on others. Inthis case, you can create more value in thesame amount of time by shifting time into thehigher-marginal-value activities and out ofthe lower-marginal-value activities. As thisshift takes place, the marginal value of time inthe former activities declines and the margin-al value of time in the latter activities increas-es. Only when the marginal value of time inall activities is the same are you taking advan-tage of all opportunities to create more valuefor the time spent.

So “if a job is worth doing, it’s worthdoing right” is good advice as long as wekeep in mind that doing a job right doesn’tmean doing it as well as you can. “Don’t doyour best at anything, equate at the margininstead” may not be very inspiring, but it’sgood advice. Fortunately, it is advice thatfew need, since it is what we tend to do any-way. It should be emphasized that since allvalue is ultimately based on our subjectiveevaluations, the patterns of activities thatequate at the margin vary enormously overdifferent individuals. But all people’s behav-ior reflects the advantages of doing less than their best at everything they do as they constantly adjust the margins towardequality.

Economic Notions by Dwight R. Lee

More on Marginalism

45

Dwight Lee is Ramsey Professor at the Terry Collegeof Business, University of Georgia, and an adjunctfellow at the Center for the Study of American Busi-ness at Washington University in St. Louis.

Economics

Doing Well in School

Consider the objective of doing well inschool. I often hear my colleagues complain-ing that their students are not taking theircourse work seriously. I often join in thesecomplaints. We are convinced that many ofour students would get more out of our cours-es if they attended lectures and read the textsmore diligently. We are surely right in this, butas economists we shouldn’t be surprised at, orcritical of, our students’ behavior. Being agood student can be important in achievingone’s objectives, but so are lots of other things,such as working part-time, making friends,developing social skills, or just hanging outand having fun. Spending more time on classassignments adds value, but it necessarilymeans less time for other valuable activities.And long before a student has done the bestjob possible in his or her course work, the mar-ginal value of time spent studying will havefallen below the marginal opportunity cost—the marginal value sacrificed in other pursuits.

So the student who did his absolute best inclass is getting less value from the additionalminute spent studying than he would if hespent that minute doing something else. Heincreases the value realized from his time by“equating at the margin”— reducing the timespent studying until study time has the samemarginal value as time spent doing otherthings. Even if the student is a complete nerd,he will still tend toward equating at the mar-gin over his different courses since he willlearn the most by learning less than possiblein each course taken.

Don’t Try to Do Too Much

I need to emphasize that “equating at themargin” only applies when the marginal valueof time in every activity eventually beginsdeclining relative to the marginal value oftime spent in other activities. This is a plausi-ble assumption, as is seen by considering

what people would do if it were not true. If themarginal value of time a person spent, say,bowling increased indefinitely relative toother things, then we would expect to see himspending all his time bowling, since the moretime spent bowling the more valuable anotherminute spent bowling would be compared to another minute doing anything else. Thisobviously doesn’t describe how peoplebehave. Even the most dedicated bowler (orbird watcher, golfer, etc.) eventually takestime out for a beer, a burger, and bed. In otherwords, the marginal value of bowling declinesrelative to the marginal value of alternatives,and the bowler equates at the margin.

But it is important to realize that we getbetter at doing many things as we spend moretime on them, which means that the marginalvalue of time in these activities does increaseup to some point. This suggests that we don’twant to try to do too many things, neverbecoming very good at any of them. There isreal advantage in choosing a relatively fewthings that we have talent for, or which wereally enjoy (talent and enjoyment generallygo together), and developing skill in them,which increases our enjoyment even more.But no matter how much we enjoy an activity,or how good we are at it, eventually the mar-ginal value of doing it begins to decline rela-tive to other things, and so we will want toequate at the margin over a number of activi-ties. And although this means that we will endup doing nothing as well as we possibly could,we can still be extremely good at what we do.

Let me conclude by emphasizing thatequating at the margin is not an excuse forshoddy and careless work. Not doing yourabsolute best at any one thing is quite consis-tent with doing everything you do very well.Furthermore, not doing your absolute best atanything is not the same as not doing yourabsolute best overall. The point is that beingas successful as possible in general requiresbeing somewhat less successful than possiblein everything we do. �


South Africa’s Polarized Politics

by Jim Peron

When Nelson Mandela left prison in1990, the entire world was watching.

This act was viewed as the final nail in thecoffin of apartheid: an odious system of racialsegregation that was combined with statesocialism and called Christian Nationalism bythe National Party (NP) government.

What was apparent long before Mandela’srelease was that, from the ruling party’s per-spective, apartheid wasn’t working. The eco-nomic benefits of interracial trade were toogreat, and market forces were constantlyundermining the state regulations that servedas apartheid’s foundation.

In its last term of office the National Partygovernment had become irrelevant. The pop-ulace knew the government was on the wayout and that reform was inevitable. For thatshort period South Africa became a de factohighly deregulated system. Censorship lawsand the Board of Publications still existed, butthe people ignored the laws, and films andmagazines, long banned, suddenly wereeverywhere. Casinos popped up as well—notVegas-style casinos, but something we mightcall mom-and-pop casinos with a few slotmachines and the like. The various agricultur-al marketing boards were being ignored bythe farmers and collapsed under their own

dead weight. Unlicensed, unregistered, anduntaxed businesses sprang up around thecountry.

The economy, which had generally been indecline from about 1982 to 1992, startedpicking up. In 1993 the country saw anincrease in real GDP, which had declined sixout of the previous ten years. Growth in GDPwas only 1.2 percent in 1993, the year beforeMandela became president of South Africa.But by 1996 it had risen to 4.2 percent. All inall, this wasn’t considered too bad a perfor-mance for a third world country. But in 1997the growth rate almost halved, and in 1998 itdropped again—from 2.5 percent to 0.5 per-cent. By 1999 the economy was once againlosing GDP. Things looked worse on a percapita basis since the population was continu-ing to grow at an annual rate of 2 percent.

The government of Mandela’s AfricanNational Congress (ANC) was imposing pol-icy on the country. The de facto deregulationof the last years of NP rule gave way to the re-regulation of the ANC. Censorship laws thathad been declared unconstitutional wererewritten, and the Board of Publications wasonce again in operation. In some ways itspowers were expanded. The new board canalso place legal restrictions on films, videos,and computer games for material that isdeemed to be stereotypical or prejudicedregarding race, sex, ethnicity, or religion. Themom-and-pop casinos were replaced with afew licensed operations favoring ANC sup-porters. And while the marketing boards were

Jim Peron is the author of Exploding PopulationMyths (Heartland Institute). He is executive directorof the Institute for Liberal Values in Johannesburg,South Africa, and can be reached at [email protected].

47

JANUARY 2001

dead, the ANC had a plethora of new legisla-tion waiting in the wings.

The government decided to concentrate onunemployment and working conditions. Offi-cials thought that high unemployment meantwages were too low. The ANC had to consid-er political realities: its partners in govern-ment were the Congress of South AfricanTrade Unions (COSATU) and the SouthAfrican Communist Party (SACP). The close-ness of this alliance was again made clear at aMay Day rally organized by COSATU. At therally ANC Secretary General Kgalema Mot-lanthe urged workers “to intensely hate capi-talism and engage in a struggle against it.”Responding to press queries, Motlanthe saidthe ANC is “not a bourgeois organization. Thecountry’s leading socialist minds are in theANC. Anyone who argues for socialism willfind allies in the ANC.”

New labor laws were introduced to satisfythe Marxists in all three groups. A keystonemeasure was the Employment Equity Act of1998 (EEA), which bans “unfair discrimina-tion” on 19 grounds including race and sex. Italso reverses the onus of proof and requiresemployers to prove their innocence if accusedof violating the law. The law applies to allcompanies with more than 50 employees orthat has financial turnovers over a specifiedamount. Once a company qualifies for the lawit is required to draw up and submit to gov-ernment its plans for affirmative action, includ-ing the setting of numerical goals for equitable representation of specified cate-gories of people.

Reversion to Apartheid?More than one commentator noticed that

the new legislation was quite similar to theold apartheid laws, with the favored cate-gories changing places with the previouslyunfavored groups. Apartheid legislation hadlight-skinned blacks seeking reclassificationas “coloureds” (mixed-race) and colouredsseeking to be classified as white. Under thenew legislation the racial migration wasreversed. Suddenly very light-skinned Indiansand coloureds publicly called themselvesblack. And many coloureds complained that

while under the previous government theywere “too black,” now under the ANC they are“too white.” The Chinese Association ofSouth Africa has also complained about thelaw, saying that under apartheid laws theywere excluded as nonwhites but are nowexcluded because they are nonblack. WhenPhil Ah Hing applied for a shop at the newEmfuleni Casino her application was rejected.The casino said that at least 30 percent of thebusinesses in the casino had to be blackowned. She commented, “But we didn’t countbefore [under apartheid] and I don’t under-stand why we don’t count now.”

Companies that did not comply with EEAregulations faced stiff fines that could rise toalmost 1 million rands per violation. Othernew laws increased overtime wages, mandat-ed retirement plans for domestic workers, andmade it extremely difficult to fire dishonest ornonproductive workers. The results were pre-dictable: over 1 million jobs disappeared fromthe economy during the first term of ANCgovernance. And in a population of just over40 million this is a sizable drop.

Even the government has recognized thatits labor policies are destroying jobs andrecently said it would investigate “reforming”the laws to exempt small businesses. But sofar the investigation has not borne fruit, andthe raw numbers of jobs continue to decline.Finance Minister Trevor Manuel confessed:“It’s a terrible admission but governmentsaround the world are impotent when it comesto creating jobs.” But they certainly know howto destroy them.

Government Health CareAnother area put under the government’s

spotlight was health care. The ANC announcedthat the most appealing health-care modelwas that of Fidel Castro’s Cuba. Cuban med-ical personnel were imported into SouthAfrica to work with the government, and forthe most part they are still here. One Cubandoctor left the country in a hurry when hisineptness resulted in several deaths, andanother was quickly deported when he mar-ried a South African and asked for politicalasylum.


Mandela announced free health care forchildren, and the government reallocatedresources away from hospitals to rural clinics,which basically offer treatment for splinters,colds, and other minor problems. The resultwas an obvious drop in health-care standardsat all the major government hospitals in thecountry.

Health Minister Nkosazana Zuma decidedthat health care needed a dose of coercion toachieve her goals. She banned smoking in all public workplaces, prohibited tobaccoadvertising and sponsorship of sporting orcultural events, and conscripted medical prac-titioners. When conscription was first pro-posed it was vigorously opposed, and Zumadropped the measure. But she then replaced itwith another measure mandating one year ofservice to the state, this time calling the ser-vice “training.”

Zuma fired hundreds of qualified doctorsfrom their positions and replaced them withstudents fresh out of medical school. At ChrisHani-Baragwanath Hospital in Soweto, 42foreign doctors were fired, including pediatricspecialists, and replaced with inexperiencedgraduates serving involuntarily. Many of thedoctors who were fired had long records andwanted to work in public health care. The stu-dents typically stay for one year and then, bymost reports, a huge percentage of them packup and emigrate permanently. The policyforced doctors who wanted to work in SouthAfrica to leave the country, to be replaced bydoctors who didn’t intend to stay. Dr. ArthurManning, superintendent of Coronation andHelen Joseph hospitals, said: “In a countrywhere we don’t have enough skills, we aresaying good-bye to our medical staff and leav-ing them no option but to go overseas.”

New legislation will conscript pharmacistsand dentists as well. And doctors who stay inSouth Africa will have to apply for permits topractice in specific areas. The governmentwill use the permit process to force doctorsinto working in areas favored by the govern-ment as opposed to areas favored by the doc-tors themselves. The obvious results of suchpolices were completely ignored by the gov-ernment. The medical brain drain continuesunabated, and countries around the world are

now benefiting from the skills of South Africandoctors, nurses, and dentists. In hopes ofreversing the brain drain, Mandela, nowretired, has asked the British government topass a law forbidding South African-trainednurses from working in the United King-dom—some 14,000 have already left thecountry.

Brain Drain: From Trickle to Torrent

The number of skilled South Africans leav-ing the country has been steadily increasing.One business journal wrote: “Five years afterthe dawn of majority democracy and the endof international pariah status, the reservoir ofskilled people is still oozing out of the coun-try. The so-called brain drain, or ‘chickenrun,’ widely believed to have run its course,now appears to have shifted from a trickle toa torrent.”

Data from the United States, Britain, Cana-da, Australia, and New Zealand showed thatfrom 1989 to 1997 some 233,000 SouthAfricans emigrated to those countries. Offi-cial South African statistics showed only athird of that number “officially” leaving thecountry. Emigration attorney Hilliard Kasselsaid: “There is still a net out-flow of skills,and it has increased since 1994. Informationtechnology people are in the forefront. Theyare mostly white, but there are Asians,coloureds and black people as well.”

According to a study by the Trade andIndustry Monitor at the University of CapeTown, “Post 1994 annual immigration of pro-fessionals was 56 percent higher than for1989–94. It is likely that between one eighthand one fifth of South Africans with tertiaryeducation now reside abroad.”

While goodly numbers of skilled workersare leaving, it is mainly the young who arefleeing the country. A British program, whichallowed young people to work there for twoyears, had some 30,000 South Africans applyfor it in 1999 alone. Many use the program asan intermediary step before seeking residencyin the UK. One youth told the press: “Peoplefind it difficult to compete in the affirmative-

SOUTH AFRICA’S POLARIZED POLITICS 49

action job market.” Australian immigrationagent Neil Hitchcock says that many school-aged South Africans are now studying in Aus-tralia: “What’s also happening is that somefamilies who are not yet ready to migrate arehaving their kids educated in Australian ter-tiary institutions, as a preparatory step.” Onereport mentioned a Jewish school in Australiathat has only one Australian student—the restare South African emigrants.

The net losses of skill are compounded bythe fact that capital is leaving the country justas quickly. John Kane-Berman, chief execu-tive of the Institute of Race Relations, said,“Capital continues to leave South Africa ingreater quantities than it arrives.” To makematters worse both trends have been acceler-ating. “Our direct investment abroad was only10 percent higher than foreign holdings herein 1986, the margin had risen to 85 percent in1998,” Kane-Berman said. “One two-yearperiod—1986 to 1988—saw an actual declinein foreign direct investment in South Africa.”He added that 1999 was the sixth year in arow that saw a net loss of people: “This hasnever happened before during the period(from 1924) for which official statistics areavailable.”

PrivatizationThe ANC government early on committed

itself to the privatization of the massiveamount of state assets it inherited. But therhetoric has far surpassed the reality. Oneproblem is that the large element of avowedMarxists within the government opposesthese measures vehemently. What measureswere implemented were processed slowly andoften amounted to nothing more than windowdressing. The state-owned telephone companywas turned into a private corporation ownedby the state, as opposed to a governmentdepartment. Eventually 30 percent was soldoff but the government is still the majoritystockholder. The government-owned SouthAfrican Airways was privatized, but only inthe sense that 20 percent of the company wassold to SwissAir. The remaining 80 percentremains government-owned. In other privati-zation schemes so-called “black empower-

ment” companies (which tend to be owned byformer ANC officials or the trade unions)were given preference, even when their offerswere below those made by others.

International financial bodies and expertstend to believe that privatization is now run-ning at least a couple of years behind sched-ule. One financial columnist noted that gov-ernment pronouncements on privatization are now ignored by the markets because “wehave all heard the same words too often in the past few years.” The government recentlyreleased another plan to step up privatization,but opposition members of Parliament havepointed out that the plan is long on promisesand short on implementation.

While the general climate still leaves muchto be desired there have been some areas ofimprovement. Fiscal and monetary policieshave remained relatively steady. The changein the consumer price index, which had beenin double digits throughout the 1970s, ’80sand early ’90s, is now running in the 6–7 per-cent range. Interest rates, which were quitehigh (up in the mid-20s in 1998) have beendropping and now sit around 14 percent. Buteconomists say that no further drops areexpected and that the rates may begin toclimb. Personal saving, which was 10 percentof personal disposable income in 1985, is nowdown to 1.4 percent.

Indecision and UncertaintyOne problem the ANC has is deciding what

policies to pursue. Its intellectual foundation isfirmly in the Marxist camp. This means thatmost policies, when first announced, tend tobe interventionist, centralizing control in thenational government. Reactions from themedia, opposition parties, and world bodiesusually force them to compromise. But thisoften leads to a policy that is a mishmash ofcontradictory ideas. For instance, the govern-ment recently nationalized all water sources inthe country. Once this was done it announcedthat a market in water was necessary for effi-cient allocation. And since a water marketrequires prices, the government announced itwould impose a price system; the government,not the market, would set prices.


What makes South Africa unique is thekind of debate being conducted in politicalcircles. As noted, the ruling coalition gov-ernment is fundamentally Marxist. Yet theOfficial Opposition in parliament takes a rela-tively libertarian, or classical liberal, stand onmost issues. The Democratic Party (DP),now under the leadership of Tony Leon, wasonce the only parliamentary voice in oppo-sition to apartheid. Today it is vocal in itssupport for free markets, the rule of law, private property rights, and limited gov-ernment. Libertarian-oriented Americanswould find it a far more satisfactory choicethan the Republican Party. For instance, theDP opposes affirmative action and censor-ship. It stands for free-market capitalism, yetit also is the party of choice of the gay community.

The DP is closely identified by many peo-ple with the ideas of the Free Market Founda-tion, the classical liberal Institute of RaceRelations, and the Helen Suzman Foundation.Tony Leon has called his politics “muscularliberalism,” while the ANC has branded it

“mutant liberalism” or “libertarianism.” Butopposition voters have rallied to the DP. In theprevious election the DP held only seven seatsin parliament. In the 1999 election supportincreased, giving the DP a total of 38 seats.However, the ANC still holds two-thirds ofthe seats in parliament.

The National Party, which previously wasthe Official Opposition, saw support collapseas its voters joined the DP bandwagon. Nowthe NP has officially closed up shop, and itsleadership has followed its members into theDP under the new name: Democratic Alliance(DA). The Federal Alliance, a minor partywith two seats, also joined the DA, bringingthe total number of parliamentary seats underTony Leon’s leadership to 68.

In South Africa, politics is dividing intotwo camps. On one side is an alliance domi-nated by the ideas of Marx and Engels. On theother side is an opposition that has read, andto some degree understands, Hayek andMises. Whatever the future may hold onething is guaranteed: South African politicswon’t be dull. �

SOUTH AFRICA’S POLARIZED POLITICS 51

To the Editor:I have followed with much interest the arti-

cles and rejoinders by Richard Timberlakeand Joseph Salerno concerning the role ofinflation in the boom-bust cycle of the 1920sand early 1930s (April, May, June, and Octo-ber 1999 and September 2000), and thought Imight be allowed to get a few words in.

Although I concur with Professor Timber-lake’s view that one ought to give words like“inflation” and “the money stock” their cur-rent, conventional meanings, and agree thataccording to these meanings the 1920s werenot an “inflationary” period, it seems to methat this conclusion does not by itself warrant

rejection of the Austrian claim that Fed policyhelped to fuel a boom-bust cycle. Rather thanobject to standard usage, as Professor Salernodoes, in attempting to defend the Austrianview, I think it more helpful to observe that, inassessing whether monetary expansion hasbeen excessive or not, one ought to look, notat the price level or at any measure of thenominal money stock, but at the behavior ofsome measure of aggregate nominal spending,such as the growth of nominal GNP over time.In principle, even a declining money stock andprice level can be consistent with excessivemoney growth if the velocity of money (theturnover rate of the money stock) and real pro-ductivity (the rate of real output per unit offactor input) are increasing. The proof ofexcess money growth is that the public’smoney balances are growing more rapidlythan their demand for idle money balances.Hence, more money is spent on goods (includ-ing financial assets) and services.

So, what are the facts concerning theprogress of aggregate spending during the

CAPITALLETTERS

Monetary Policy in the 1920sand 1930s

1920s? In 1921, U.S. nominal GNP was$61.763 billion; by 1929, the figure was$90.320 billion—a 46.7 percent increase inless than a decade. If one chooses instead tolook at per capita spending (to allow for thepossibility that some overall spending growthmay have been justified to provide for theneeds of a growing labor force), the corre-sponding figure is 30.4 percent. Either mea-sure represents a substantial increase inunwanted money balances, which failed togive rise to rising prices only becauseincreased expenditures were more thanmatched by improvements in productivity.

Although a letter is no place to try to delveinto the theory (but see my article, “‘ZeroInflation’: A Flawed Ideal,” in the May 1995issue), a strong case can be made that, byallowing such rapid growth in spending,instead of more aggressively limiting moneygrowth (and thereby allowing prices todecline more rapidly), Fed policy gave rise toan excess demand for goods and financialassets, including stock shares, and therebyhelped to fuel the “great bull market.” Whenincreased spending finally began to be reflect-ed in rising factor prices (another set of statis-tics worth taking a look at), euphoria gaveway to panic on Wall Street.

That, at least, is a story grounded in statis-tics and standard terminology, but consistentwith the Austrian theory. Whether the boom-and-crash sequence contributed in a signifi-cant way to the subsequent depression isanother matter which, as Professor Timber-lake rightly points out, is still crying out forconvincing empirical proof.

—GEORGE SELGIN

Department of EconomicsUniversity of Georgia

Smith a Moral Determinist?To the Editor:

A point that I think needed to be discussedin James R. Otteson’s November 2000 essay,“Adam Smith: Moral Philosopher,” is why itis that if “all human beings innately havesomething [Smith] called a desire for ‘mutualsympathy’ of sentiments,” there are so manypeople who lack these big time. Put it differ-

ently, where does evil arise from if good isinnate in us?

Any kind of deterministic conception ofhuman morality must contend with the evi-dent fact that some folks are pretty awful andthat this is not so with other kinds of animalsthat are guided in their behavior by innatemotives (instincts). It does not seem to methat Otteson’s version of Smith makes clearsense of the phenomena of moral evil.

—TIBOR R. MACHAN

Chapman University

James R. Otteson replies:I thank Professor Machan for providing an

opportunity for me to elaborate on an aspectof Smith’s moral philosophy. Smith does notclaim, nor did I say in my article, that “goodis innate in us.” Rather, Smith thinks that thedesire for mutual sympathy of sentiments issimply a motivation to see one’s own senti-ments—whatever they are—reflected in thosearound one. It is not an instinct to be good; itis merely an explanation for mankind’s socialimpulse and the process by which people tendto adopt the behavioral standards of those intheir communities.

I am not sure what Professor Machanmeans by “deterministic conception of moral-ity,” but Smith certainly does not think thatthere is no choice involved in acting on thedesire for mutual sympathy of sentiments oron any other desire. Indeed, Smith championsthe Stoic virtue of “self-command” as thevirtue that gives all the other virtues “theirprincipal lustre.” This shows his understand-ing of and reliance upon the role of free willin human social life.


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: Ideas on Liberty, FEE, 30 S. Broadway,Irvington-on-Hudson, NY 10533; e-mail:[email protected] fax: 914-591-8910.

During the 20th century it was popular to label economics the “dismal science,”

a term of derision coined by the English critic Thomas Carlyle in the 1850s. Carlylelashed out against laissez-faire capitalism,which he defined as “anarchy plus the consta-ble,” for, among other things, being inconsis-tent with slavery.2

But attitudes are rapidly changing as weenter the 21st century. Economics, no longerdismal, has come a long way toward reinvent-ing itself and expanding into new territoriesso rapidly that another descriptive phrase isneeded. Like an invading army, the science ofAdam Smith is overrunning the whole ofsocial science—law, finance, politics, history,sociology, environmentalism, religion, andeven sports. Therefore, I have dubbed 21st-century economics the “imperial science.”

Boulding’s Dream Comes TrueThe father of economics as an interdiscipli-

nary movement is Kenneth E. Boulding, long-time professor at the University of Colorado

in Boulder, who died in 1993. He publishedover 1,000 articles on more than two dozeneclectic subjects, ranging from capital theoryto Quakerism. But Boulding’s vision of everydiscipline borrowing ideas from other disci-plines isn’t exactly what has happened.Instead, economics has started to dominatethe other professions.

The first breakthrough came in finance the-ory. Harry Markowitz, a graduate economicsstudent at the University of Chicago, wrote anarticle on portfolio theory in the March 1952issue of The Journal of Finance. It was thefirst attempt to quantify the economic conceptof risk in stock and portfolio selection. Out of this work came modern portfolio theoryand the “efficient market theory,” whichargues that short-term changes in stock pricesare virtually unpredictable and that it is extremely difficult if not impossible to beatthe market averages over the long run.

These ivory-tower theories were greetedwith scorn by Wall Street professional man-agers, but eventually confirmed by numerousstudies. Index funds, the economists’ favoriteinvestment vehicles, are now the largest typeof mutual fund sold on Wall Street.3

James Buchanan and Gordon Tullock, bothat the University of Virginia, published TheCalculus of Consent in 1962 and foreverchanged how political scientists view public

Economics on Trial by Mark Skousen

The Imperial Science

53

Mark Skousen (http://www.mskousen.com; [email protected]) is an economist at Rollins College,Department of Economics, Winter Park, FL 32789, aForbes columnist, and editor of Forecasts & Strate-gies. His new book, The Making of Modern Econom-ics, will be published in February by M. E. Sharpe.

JANUARY 2001

“I think it is quite likely that we are entering an era of much moreinteraction among the sciences.”

—KENNETH E. BOULDING1

finance and democracy. Today public-choicetheory has been added to every economicsclassroom’s curriculum.

Buchanan and other public-choice theoristscontend that politicians, like businessmen, aremotivated by self-interest. They seek to maxi-mize their influence and set policies in orderto be re-elected. Unfortunately, the incentivesand discipline of the marketplace are oftenmissing in government. Voters have littleincentive to control the excesses of legisla-tors, who in turn are more responsive to pow-erful interest groups. As a result, governmentsubsidizes vested interests of commerce whileit imposes costly, wasteful regulations andtaxes on the general public.

The public-choice school has changed thedebate from “market failure” to “governmentfailure.” Buchanan and others have recom-mended a series of constitutional rules torequire the misguided public sector to actmore responsibly, including requiring super-majorities to raise taxes, protecting minorityrights, returning power to local governments,and imposing term limits.4

Economics Enters the CourtroomIn 1972 Richard A. Posner, an economist

who teaches at the University of Chicago LawSchool and serves as chief judge of the U.S.Seventh Circuit of Appeals, wrote EconomicAnalysis of Law, which synthesized the ideasof Ronald Coase, Gary Becker, F. A. Hayek,and other great economists at the Universityof Chicago. Today centers of “law and eco-nomics” are found on many campuses. JudgePosner states, “Every field of law, every legalinstitution, every practice or custom oflawyers, judges, and legislators, present orpast—even ancient—is grist for the economicanalyst’s mill.”5 Economists apply the princi-ples of cost-benefit and welfare analysis to allkinds of legal issues—antitrust, labor, dis-crimination, environment, commercial regu-lations, punishments and awards. In my Octo-ber 1999 column, I reported on Chicago lawprofessor John R. Lott, Jr.’s new work on therelationship between gun ownership andcrime. He applied the incentive principle to

demonstrate that well-armed citizens detercrime.

Chicago’s Gary Becker has been in theforefront of applying price theory to contem-porary social problems, such as education,marriage and divorce, race discrimination,charity, and drug abuse. Not surprisingly, hecalled his book for the general public TheEconomics of Life. But Becker warned, “Thiswork was not well received by most econo-mists,” and the attacks from his critics were“sometimes very nasty.”6

There are many other cases where econo-mists have made significant improvements inother disciplines—in accounting (see July1999 column on “Economic Value Added,” orEVA), history (see the work of Robert Fogeland Douglass North), religion (Lawrence Ian-naccone and Edwin West have shown thatincreased competition in religions increasesattendance at churches), management (theCenter for Market Processes at George MasonUniversity), and sociology (see the writingsof Richard Swedberg). They’ve even changedthe way Treasury bills are auctioned.

As we enter the 21st century, false theoriesstill prevail in politics, law, history, sociology,and other disciplines. As Lord Acton oncestated, “There is no error so monstrous that itfails to find defenders among the ablest men.”The sooner the principles of market econom-ics enter the fray and attack false doctrines,the better off we’ll all be. �

1. Kenneth E. Boulding, The Skills of the Economist (Cleveland:Howard Allen, Inc., 1958), p. 134.

2. For the complete background of Carlyle’s racism and vileattack on market capitalism, see David M. Levy, “150 Years and StillDismal!,” in Ideas on Liberty, March 2000, and chapter 3 of my newbook, The Making of Modern Economics (Armonk, N.Y.: M.E.Sharpe, 2001).

3. Two excellent books on modern portfolio theory are BurtonMankiel, A Random Walk Down Wall Street, 6th ed. (New York: W. W. Norton, 1996) and Peter L. Bernstein, Capital Ideas (NewYork: Simon & Schuster, 1992).

4. Buchanan and Tullock’s The Calculus of Consent (Ann Arbor:University of Michigan Press, 1962) is still worth reading. For anexcellent summary, see chapter XI, “The Public Choice School: Pol-itics as a Business,” in Todd G. Buchholz, New Ideas from DeadEconomists (New York: Penguin Books, 1989).

5. Richard A. Posner, Law and Literature, 2nd ed. (Cambridge,Mass.: Harvard University Press, 1998), p. 182. A comprehensivesummary of the “law and economics” movement can be found inNicholas Mercuro and Steven G. Medema, Economics and the Law:From Posner to Post-Modernism (Princeton, N.J.: Princeton Univer-sity Press, 1997).

6. Gary S. Becker and Guity Nashat Becker, The Economics ofLife (New York: McGraw-Hill, 1997), p. 3.


BOOKSThe Black Book of Communism:Crimes, Terror, Repression

by Stéphane Courtois et al.; translationby Jonathan Murphy and Mark KramerHarvard University Press • 1999 • 858 pages

• $37.50

Reviewed by Theodore Balaker

My junior high-school English teacheronce presented me with a small gift, a

button bearing the likeness of Mao Zedong. Ina PBS travel video, Monty Python alumMichael Palin gushes about sleeping in Mao’sbed. He nods off reading The Little Red Book.During a CNN profile of Progressive AutoInsurance CEO Peter Lewis, the camera pansthrough Lewis’s office to reveal a large litho-graph of Mao.

Had those cases featured Nazi iconography,there would have been outrage. What if Lewishad displayed a lithograph of Hitler, if Palinhad curled up lovingly with Mein Kampf, if ateacher had given a student a Hitler button? Itsimply would never happen. But somehowMao is inoffensive, even though he is respon-sible for as many as 65 million deaths. We arejustifiably outraged by Nazism; why are we soambivalent about communism?

Black Book offers some thoughtful expla-nations why many Americans have nevertaken communism seriously. “Uncle” JoeStalin was our World War II ally. There was noNuremberg for communist crimes. (Sovietjurists were actually among the prosecutors atthe Nazi trial.)

Public perception was important to com-munism’s expansion. For this reason we areleft with few visuals of communist crimes.Many Americans have associated anti-communism with paranoia. Many Westernintellectuals celebrated the rise of regimesthat murdered Eastern intellectuals. We weretold to overlook communist missteps andremember the promise of utopia.

For many, Nazism’s blatant racism justifiesspecial contempt. Black Book, written by sixformer proponents of communism or fellowtravelers, properly notes that both Nazism andcommunism murdered people not for whatthey did, but for who they were. Both totali-tarian incarnations decreed that certain seg-ments of society were too loathsome to exist.Lenin regarded his enemies as “bloodsuckers”and “noxious insects.” Such language eerilyanticipates Hitler.

Black Book underscores the enormity ofcommunism’s impact. Communism oncestood on four continents, ruling one-third ofhumanity, always poised to expand. There wasa clear line of inheritance from regime toregime. Each received material aid and ideo-logical inspiration from its predecessor. Mostimportant, individuals were as expendable asgrains of sand. According to the authors, thecommunist death toll approaches 100 millionpeople.

The authors’ research offers a rough expo-sition of the crimes of communism: USSR, 20million deaths; China, 65 million deaths;Vietnam, 1 million deaths; North Korea, 2million deaths; Cambodia, 2 million deaths;Eastern Europe, 1 million deaths; LatinAmerica, 150,000 deaths; Africa, 1.7 milliondeaths; Afghanistan, 1.5 million deaths; theinternational communist movement and com-munist parties not in power, about 10,000deaths.

Communism compiled a lengthy enemieslist, which included political parties, clergy,intellectuals, shopkeepers, many ethnicgroups, and other “socially dangerous ele-ments.” Enemies were starved and worked todeath; executed with bullets, shovels, andhammers; devoured by dogs; lit on fire; andmade to kill one another for their capturers’amusement.

More than bodies endured torture. Lan-guage was tortured: concentration campsbecame “re-education” camps. Minds weretortured: executions often followed “confes-sions” of guilt. The list of crimes punishableby death or imprisonment included criticizingthe regime, owning a gun or radio transmitter,stealing a few ears of corn from the collective,and “taking part in commerce.”

55

Black Book puts to rest the odious fictionthat has softened communism’s image for solong: that communism was the salvation ofthe downtrodden. Mao’s “Great Leap For-ward” needed only two years to destroy tensof millions of peasants. Peasants often resist-ed communism more fervently than anygroup. In 1930 alone, nearly 2.5 million tookpart in approximately 14,000 revolts againstthe Soviet regime. Brandishing axes andpitchforks, peasants defended themselvesagainst the Soviet wave. Sometimes theyreclaimed their villages for a few days andquickly worked to reopen churches and mar-kets, break up the collectives, and returnstolen goods.

By meticulously compiling old and newlyavailable information, Black Book offers anaccount of communism so damning that read-ers will add the likes of Mao, Stalin, Lenin,Kim Il Sung, and Pol Pot to their list of histo-ry’s most wicked villains. Black Book should be read by every college student wooed byChe Guevara, every intellectual who equatesanti-communism with kookery, and every vic-tim of communist terror. Never has commu-nism’s black heart been more exposed.

Communism promised paradise for themasses of people who were controlled andmurdered to fulfill someone else’s grand plan.We ought to absorb the ghastly numbers ofcommunism’s death toll, but occasionallyBlack Book’s seemingly endless accounts oflarge-scale atrocities risk obscuring personalsuffering. Perhaps we should focus first oncommunism’s archenemy, the individual. Aswith the intimacy of The Diary of Anne Frank,Black Book is most meaningful when it ismost particular. Consider just one victim ofcommunism—a man whose file was marked“ordinary.” Vasily Klementovich Sidorov, apeasant who lived near Moscow, stoodaccused of “spreading counterrevolutionaryideas.” At the time of his arrest he had a wifeand daughter. He owned one wooden house,one cow, four sheep, and two pigs. On August3, 1938, he was shot and his property confis-cated. Just an ordinary case. �

Theodore Balaker works in network news. He is alsocurrently writing a book on intellectual history withProfessor Daniel Klein.

Social Security: The Phony Crisis

by Dean Baker and Mark WeisbrotUniversity of Chicago Press • 1999 • 152 pages

• $22.00

Reviewed by Andrew G. Biggs

Supporters of the current pay-as-you-goSocial Security system have long been on

the defensive. Social Security will begin run-ning a payroll tax deficit within 15 years.Shortfalls over the years will cut benefits by30 percent, pushing millions of low-incomeretirees into poverty. Americans from allpolitical, ethnic, and gender groups favorreform that lets workers invest their payrolltaxes in personal accounts holding stocks andcorporate bonds.

But to a few old-guard supporters of biggovernment, private investment is heresy. Yetthe only alternatives to personal accounts—payroll-tax hikes, benefit cuts, and increasingthe retirement age—are flatly rejected by thepublic. The solution? Simply deny the prob-lem exists at all. Hence, Social Security: The Phony Crisis, by Dean Baker and MarkWeisbrot.

Baker and Weisbrot, co-directors of theCenter on Economic and Policy Research,concoct a veritable smoke screen of argu-ments, all promoting the idea that SocialSecurity is doing just fine. First, they say,there’s no hurry for reform. Without changinga thing, Social Security can pay full benefitsuntil 2037 by drawing on its trust fund. Sadly,not true. As President Clinton’s own budgetacknowledges, the Treasury bonds in the trustfund “do not consist of real economic assetsthat can be drawn down in the future to fundbenefits. Instead, they are claims on the Trea-sury that . . . will have to be financed by rais-ing taxes, borrowing from the public, orreducing benefits or other expenditures.”Where is that money—an average of $120 bil-lion annually between 2015 and 2037—goingto come from? On this, Baker and Weisbrotare silent.

Second, the authors claim that projectionsof Social Security’s insolvency made by itsboard of trustees are overly pessimistic. If the


economy grows faster, as Baker and Weisbrotbelieve it surely will, wages will increase,payroll tax revenues will rise, and the systemwill be saved. “Using any remotely realisticprojection for the growth of wages and theeconomy,” Baker and Weisbrot assert, “theSocial Security system will be solvent into thestratosphere of America’s science-fictionfuture.” What Baker and Weisbrot don’t mention is that many analysts, including agovernment-appointed panel of economists,actuaries, and demographers, conclude thetrustees’ projections are actually optimistic.Under more reasonable assumptions, wherelife expectancies increase and the retiree pop-ulation grows, Social Security’s long-termdeficit of over $20 trillion would increase byalmost one-quarter.

Moreover, for Social Security to remaintechnically solvent over the next 75 years,wages must grow 2.9 percent annually, 41percent faster than during the 1960s. Eventhen, in 2076, when today’s children are stillalive and well, Social Security would fall offa financial cliff, with an eighth of the federalbudget required just to cover the program’sdeficit. To keep Social Security solvent in per-petuity—that is, into the “science-fictionfuture”—requires permanent real wagegrowth of approximately 6 percent annually.And that assumes the trust fund is a real eco-nomic asset, which clearly is not the case.These sorts of numbers are implausible byalmost anyone’s standards.

Finally, Baker and Weisbrot argue thateven if the Social Security crisis develops,market investment of payroll taxes is no solu-tion. For if economic growth slows, thenstock market returns must fall as well.Specifically, Baker and Weisbrot contend thatstock returns above 3.5 percent are inconsis-tent with the trustees’ projections for eco-nomic growth. But even if they are correct, a3.5 percent annual return would dwarf the 1.4percent projected return from Social Securityover the next 75 years. Moreover, equityreturns have been correlated not with eco-nomic growth per se, but with economicgrowth per capita. Since the trustees’ projec-tions of slower economic growth are foundedalmost entirely on slower growth of the labor

force, per capita economic growth is unlikelyto suffer.

In the end, even without a “crisis,” SocialSecurity is still a lousy deal. The bipartisan1994–1996 Advisory Council on Social Secu-rity estimated that even if Social Securitycould pay full promised benefits forever with-out raising taxes by a penny, a typical singleworker born in 1973 would receive an annualreturn of just 1.7 percent. Personal accountsholding only ultra-safe inflation-adjustedTreasury bonds, currently paying 3.9 percentannually, would more than double workers’retirement incomes.

But the real issue is not about solvency oreven rates of return. It is about people’s free-dom to control their own savings and plan theirown retirements, to have legal right to theirown assets and to pass them on to their heirs.Even if there were no Social Security crisis, asystem of personal retirement accounts wouldconfer these important benefits.

Before the Berlin Wall fell in 1989, thecommunists insisted that life on their side ofthe divide was swell. This led to the obviousquestion: if everything was so great, what didthey need the wall for? The same holds forSocial Security. If Social Security is ashealthy as Baker and Weisbrot claim, theyshouldn’t be afraid to give workers the free-dom to choose where to invest their retire-ment savings. �

Andrew Biggs is Social Security analyst at the CatoInstitute, Washington, D.C.

Owning the Futureby Seth ShulmanHoughton Mifflin Company • 1999 • 240 pages

• $25.00

Reviewed by Joseph S. Fulda

Abook about high technology and thepatent system might not engender expec-

tations of captivating reading, but this bookcommands all the reader’s attention from startto finish. It is a masterpiece, elegantly written,well researched, and brought to life with themany vivid case studies that form the bulk ofthe book.

BOOKS 57

Based on Shulman’s amazing breadth ofknowledge and on a wide variety of both jour-nalistic and scholarly sources, interviews,press releases, and materials available on theInternet, this book is also remarkable for itsrange: It covers medical and surgical proce-dures (including gene therapies), pharmaceu-ticals, plant and animal varieties, agriculturalgenetic engineering, computer software, andcomputer databases—all in depth and in amere 191 pages (plus bibliographic notes andan index).

What concerns Shulman in each of thesedomains are, to quote computer specialistRichard Stallman, first, invalid patents, andsecond, valid patents. The Patent and Trade-mark Office (PTO) has moved away from thevenerable dictum that an idea cannot bepatented, a move presaged by the 1870 aboli-tion of the requirement that physical modelsbe built and submitted with each application,to granting patents freely to ideas with merehints of utility in the future. Notorious amongthese are patents for algorithms—laws ofnature that are not patentable subject matter—cleverly disguised as implementations, whilethe rights that are actually awarded extend toall applications, present and future, of thealgorithm.

The PTO has also long been issuingextremely overbroad patents in other knowledge-based areas—most of which would not standup if challenged in a process that costs mil-lions of dollars and that many small compa-nies find unaffordable. Finally, patents areissued in all those fields where there is sub-stantial “prior art” that has somehow escapedpublication or the notice of the examiners:Many of these, too, would not withstand judi-cial scrutiny. But whether valid or invalid,patent holders build large portfolios of patent-ed ideas (IBM holds thousands upon thou-sands!) and then extort royalties from compa-nies seeking to use well-known ideas whoseutility was only hinted at in the original patentapplication or which were not a part of theoriginal conception. Shulman’s well-justifiedfear is the shrinking of the public domain, asthe use of ideas must increasingly be licensedfrom patent holders.

Most large biotechnology and computer

companies have large patent portfolios—andnever mind that many of the patents areworthless—which are used not only to extractroyalties but also defensively against otherholders of vital patents who would otherwisedemand royalties and now settle for cross-licensing arrangements, and preventatively sothat other similarly situated companies areprevented from acquiring ownership of thisintellectual capital. Thus most knowledge-based companies are in the position of spend-ing a large chunk of their funds applying forand defending patents, fighting off patent-infringement claims by others, and simplypaying royalties or reaching cross-licensingagreements when that is cheapest.

All this is imaginatively and thoroughlydocumented by Shulman in case after caseand leads to the inevitable conclusion that, asinventive as our high-tech economy is, we arestifling innovation and wasting resourcesunder a system originally intended to fosterinnovation. One wonders how much furtheralong technologically we would be without allthis rent-seeking activity.

The book’s rich historical and philosophicalcontext is most welcome, but I find the book’sconceptual framework flawed, although thepresentation has enough depth to enable thereader to reach his own conclusions.

Thus Shulman attributes all the problemsmentioned above to a free market, becauseinformation must be shared to gain valuewhile real and personal property lose value asthey are shared, and information is not deplet-ed by use, unlike tangible properties. Butwhile this is all true, what he has so ablydescribed is definitely not a free market, but asystem of government-sponsored monopo-lies. Whatever one thinks of the framers’ util-itarian basis for intellectual property rights—well-founded or not well-founded—this sys-tem bears little resemblance to theirs.“Functional ideas” or “actionable knowledge”has replaced actual invention as the watch-word: that is, it is discoveries and not inven-tions at all that are being patented. The gov-ernment is just about handing out monopolieson the future applications of thoughts!

Nowhere is the difference in systems moreevident than in the inventions of Thomas


Edison, the record patent-holder with 1,093patents, as compared to the discoveries of the“thinker, not tinkerer” record patent-holder oflate, Jerome Lemelson (over 500 patents, sec-ond only to Edison). This is a story of con-trasts too good to be retold here; it and otherslike it are alone worth the modest price of thisbook.

Owning the Future is a truly importantbook that deserves a wide reading. �

Contributing editor Joseph Fulda is the author ofEight Steps towards Libertarianism (Free EnterprisePress).

The War Against Boys: How MisguidedFeminism Is Harming Our Young Men

by Christina Hoff SommersSimon & Schuster • 2000 • 251 pages • $25.00

Reviewed by George C. Leef

Just when you think you’ve heard every lastcrackpot idea from the meddlers who say

they could vastly improve the world if onlywe’d allow them to put their theories intopractice (at gunpoint), along comes a newone. In The War Against Boys, philosophy pro-fessor and American Enterprise Institutescholar Christina Hoff Sommers identifies thenew kid on the interventionist block. Makethat kids, as she is writing about two dement-ed siblings. One is the notion that Americansociety “shortchanges” and “represses” girls.The other is the notion that we must radicallychange the way we raise boys. Those beliefs,emanating from the usual ivory tower sources,have seeped into the educational system, andthat is cause for alarm.

Sommers first takes up the girls-as-victimsline. Ground zero for this piece of crisis-mongering is Professor Carol Gilligan of theHarvard School of Education. In a 1990 bookshe proclaimed that girls were “in danger ofdrowning or disappearing” into that all-purpose villain “Western culture.” The mediaimmediately and uncritically picked up thestory. Within a short time, Sommers writes,“the allegedly fragile and demoralized state ofAmerican adolescent girls achieved the statusof national emergency.”

Gilligan’s “research” is about as trashy asjunk science gets. She won’t release her data(“too sensitive,” she says) and refuses to playby the accepted rules of scholarship, decryingthem as just another aspect of our “male dom-inated culture.” She brushes aside criticismwith the serene aplomb of all zealots.

Isolated cranks can’t do much harm bythemselves, though. They need help, andGilligan gets it from the media, feministgroups, and politicians drooling for a newissue to exploit. That transmission chainresulted in the 1994 Gender Equity in Educa-tion Act, declaring that girls are an “under-served population” and therefore entitled toall sorts of special treatment. The U.S.Department of Education has awarded mil-lions in grants for studies on the imaginedplight of girls and has promulgated regula-tions to root out “sexual harassment” inschools.

But far scarier than the girls-as-victims cru-sade is the one aiming to change the way weraise boys. Our horribly patriarchal, capitalist,competitive (add as many adjectives of oppro-brium as you wish) society raises boys in badways. For one thing, it promotes violence, andsecond, it makes boys unhappy and malad-justed. On the one hand, we get murderouslunatics like the killers at Littleton HighSchool; on the other, we get brooding, moroseboys who grow up to be brooding, morosemen. Sommers again shows how ridiculouslyfeeble the support for all that is, but still theidea has gained wide acceptance.

Gilligan and allies have a solution to theircontrived problems. As feminist avatar GloriaSteinem says, “We must raise boys the way weraise girls.” To do so, the meddlers have pro-grams to change boys’ “gender schemas” byearly on substituting activities and influencesthat feminists see as “healthy.” Make themplay with dolls. Stay away from competitiveactivities. Reward boys for being (or at leastacting) more “sensitive” and talking abouttheir feelings.

Thanks to our public education system, thispart of the feminist agenda is making head-way. Some schools, for example, havestopped traditional recess and have substitut-ed a “structured recess” where adults make

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sure that the vital work of changing genderschemas is not undone by the outbreak of any-thing competitive or militaristic.

Sommers saves her counterattack for last,strongly arguing that the problem is not patri-archy, capitalism, or anything other than thefact that our educational system has for themost part stopped giving boys what theyneed: discipline, order, and challenges. In theschools where those things are present, boysimprove both academically and behaviorally.On the other hand, schools where the empha-sis is on self-esteem have produced those feral children who kill and terrorize otherswithout compunction. The meddling educa-tional “progressives” have much to answerfor, and Sommers asks why on earth weshould entrust to them even more power toshape our children.

What is really hurting boys—and girls—isthe fact that American education has fallenunder the sway of starry-eyed reformers. Theyhave driven out as “old-fashioned” our formeremphasis on knowledge and moral education,replacing it with the mush of “values clarifi-cation” and “affective learning.” The WarAgainst Boys brilliantly argues for jettisoningpast educational fads and steering away fromthe new “gender equity” being promoted byCarol Gilligan and her ilk.

I regard the book as utterly imperative read-ing. �

George Leef is the director of the Pope Center forHigher Education Policy at the John Locke Founda-tion and book review editor of Ideas on Liberty.

Fatal Freedom: The Ethics and Politicsof Suicide

by Thomas SzaszPraeger • 1999 • 177 pages • $25.95

Reviewed by Ross Levatter

Thomas Szasz and his work need no intro-duction to a libertarian audience. A

physician and psychiatrist, his love of libertyhas always outweighed his love of medicine,and he has become one of the great opponents

of the medicalized loss of liberty known asthe Therapeutic State.

Szasz’s 24th book attacks yet anothersacred cow of the modern worldview thatcrushes personal autonomy under the guise ofexpert therapeutic intervention and mandated“helpfulness.”

Some background: Szasz takes liberty,responsibility, and autonomy seriously. Ifmental illness is, as other psychiatrists tell us,“a disease like any other,” Szasz asks whyimprison schizophrenics against their willwhen we don’t imprison diabetics againsttheir will? Szasz argues vociferously for theliberty of those labeled mentally ill. If, asThomas Jefferson argued, men have as muchright to ingest what they wish as they have tothink and believe what they wish, why, asksSzasz, do we fight an unwinnable war againstdrugs? He has long been an advocate of theright to ingest or inject whatever one chooses(insisting also that those who do so take theresponsibility of any consequences that fol-low). He has, however, not been an advocateof medicalizing the war on drugs, seeing thisas just another effort to aggrandize physicianswhile infantilizing the masses.

In his latest book, Szasz advances hisdefense of autonomy and liberty by speakingout for the right to suicide.

Our final freedom is the fatal freedom, theability to control our deaths, just as weattempt to control (and are typically grantedthe right to control) our lives. Szasz exploresthe history of suicide, from a sinful act to asymptom of mental illness to an alleged“right” under the control and auspices ofmedical experts.

In past centuries, the successful act of sui-cide allowed religious authorities to prohibitreligious burial and political authorities toconfiscate the suicide’s property. More recent-ly, failed suicide justified involuntary confine-ment in a mental hospital. Now the desire forsuicide is alternatively seen as evidence ofdisease if acted on by an individual but as asacred right if handled through the intermedi-ary of a physician.

Szasz will have none of this.Death control, like birth control, requires

medical knowledge but is not a medical mat-


ter. It is a moral matter, and should in a secu-lar society be under the control of the individ-ual. In the twentieth century, birth control wasinitially illegal, then for a time available onlyby physician prescription. Now it is seen as aright, to be handled autonomously, not viaphysician-assisted birth control. Analogously(and for those who have not yet had the plea-sure, be aware that Szasz is the master of anal-ogy), if adults are to be free and autonomous,they need to obtain control of their deaths, notbe placed in the position of medical mendi-cants, trying to please the authorities with theright combination of signs and symptoms,complaints and conditions that “justify”physician assistance in ending their lives.

More darkly, Szasz warns, the “right” tosuicide, if viewed as a medical intervention,can lead—especially in a society where theaccess to health care is controlled by thestate—to unintended consequences. Like theperson held in a mental hospital who wantsnothing more than to leave but is told insteadthat he has a “right” to treatment that will begiven to him like it or not, the elderly and sickin socialist countries risk being told they havea “right” to suicide, like it or not. Hard tobelieve? Read chapter six, “Perverting Sui-cide: Killing as Treatment.”

Though a medical practitioner, Szasz is notin the habit of prescribing for others. A rightto suicide is not an expectation that, as every-one grows old, each is expected to “take careof matters” before they become a nuisance. Itis instead a matter of options and the conse-quences for society of not having options. AsSzasz writes,

Therein lies the most insidious danger ofrelying on external prohibitions to regulatebehaviors that can, in the final analysis, beeffectively regulated only by internal con-trols. If young people believe that they can-not, need not, or must not control how theyprocreate—because assuming such controlis wrong (sinful) and/or because otherswill assume responsibility for the conse-quences of their nonaction—then they arelikely to create new life irresponsibly. Sim-ilarly, if old people believe that they can-not, need not, or must not control how they

die—because assuming such control iswrong (a mental illness) and/or becauseothers will assume responsibility for theconsequences of their nonaction—thenthey are likely to die irresponsibly.

Legally protecting suicide is not synony-mous with advocating suicide, any more thandesiring legal protection for birth controlimplies advocating that people use birth con-trol. Further, legally protecting the right tosuicide no more mandates physician involve-ment in and control over suicide than birthcontrol today, rigidly controlled by physiciansin the early part of the twentieth century,requires continued physician involvement inprescribing it and counseling on its use.Physicians have no monopoly on wisdom intothe human condition, and creating medicalmandarins does not make them wiser. As withmost monopolies, more likely the opposite.

Tom Szasz has written many provocative andcourageous books. He has done so again. �

Ross Levatter is a radiologist in private practice inGreen Bay, Wisconsin.

Government’s End:Why Washington Stopped Working

by Jonathan RauchPublic Affairs • 1999 • 295 pages • $12.00

Reviewed by Philip Murray

Jonathan Rauch is among the keenestobservers of government in the United

States. By “government’s end” he means that“government has become what it is and willremain: a large, incoherent, often incompre-hensible mass that is solicitous of its clientsbut impervious to any broad, coherent pro-gram of reform.” To put it bluntly, big govern-ment is here to stay with all its taxes, bloatedbudgets, and intrusive regulations.

There is much evidence of this. Considerwhat Rauch calls “poor followership.” We cit-izens demand more benefits from the govern-ment without showing any sign of modera-tion. We fail to understand Frederic Bastiat’scharacterization of government as “that great

BOOKS 61

fictitious entity by which everyone seeks tolive at the expense of everyone else.” Our pen-chant for government benefits is also rational.Even though we’d all be better off giving upour favorite programs, why should you giveup yours without knowing whether I’ll give upmine and vice versa?

The bad news is that there is no cure. Thegood news is that we’ll live anyway. Rauchmanages to say that “the end of governmentwill not, I think, be a sad time.” The impetusof this book follows from the late MancurOlson’s idea that special-interest groups andtransfer activity will stifle economic progressand government. Rauch’s contribution is tothoroughly investigate the latter possibility.He states: “This book is about the side effectsof the postwar style of politics, a style thatemphasizes interest-group activism and redis-tributive programs.” These side effects relateto the transfer economy and “demosclerosis.”

An individual can get rich through eitherproductive activity or transfer activity. Whatdo we give up to the extent that many of uslegally steal from one another? We give updollars to pay lobbyists, lawyers, and politi-cians—the agents of the transfer economy, ifyou will. We pay for defense lawyers andinsurance policies that protect us from legaltheft. And we go without the goods that wouldhave been produced in the absence of subsi-dies. For instance, the government can onlyencourage a favored industry like sugar withsubsidies by taxing some other activity likecommunications. We get more sugar butfewer communication services.

Economists figure that these three types ofcosts amount to 5–12 percent of the nation’soutput. Transfer-seeking, in Rauch’s view,

poses a greater threat to government than theeconomy. He states: “ ‘Demosclerosis’—gov-ernment’s progressive loss of the ability toadapt—is a gradual but continuing process.”Among the implications are that existing gov-ernment programs are difficult to modify, letalone terminate, and that trial and error inpublic policymaking becomes impossible.

Actually, Rauch identified demosclerosisearlier and made it the title of a 1994 book.“In this revised version,” he explains, “I’vetaken the opportunity to think about thelessons of the failed reforms, about the possi-ble routes to better success, and about ways inwhich the country can develop a more pro-ductive and less pathological relationshipwith its government.”

The author is pessimistic about “fixing theprocess” by restricting lobbying, imposingterm limits, or reforming campaign finance.He sees more promise in decentralizing andterminating government programs, deregulat-ing the economy, and further opening the U.S. economy to international trade. At thispoint the reader will notice a paradox. “Justhow are we supposed to use competition toweaken lobbies,” Rauch admits, “when thewhole problem is that lobbies are blockingcompetition?”

The answer is that each of us as individualsmust recognize his own complicity in thetransfer economy and demosclerosis. Rauchframes the question this way: “Who financesand sustains the parasite economy?” Hisanswer is: “Look in the mirror.” Government’sEnd is indeed an excellent lesson in public-choice economics, history, and civics. �

Philip Murray is a professor of economics at WebberCollege in Babson Park, Florida.


Let’s do a thought experiment. I’m orderedby the Department of Health and Human

Services (HHS) to perform, without compen-sation, cleaning services at a local retirementhome. I’ve not been found guilty in a court oflaw of a crime for which I’m being punished.I’ve simply been ordered to work at the homein the name of promoting the public welfare.Failure to comply means going to jail.

I might seek a court injunction againstHHS’s edict. But suppose the court rules thatHHS has the authority to order me to performcleaning services. I might take my complaintall the way to the U.S. Supreme Court, onlyfor the Court to rule: yes, under the U.S. Con-stitution’s welfare clause and the authority itgives Congress, I’m compelled as ordered byHHS to perform cleaning services.

My question to you is, now that the courtshave ruled, should I simply comply? Youmight rejoin by suggesting that the questioncannot be answered unless additional infor-mation is supplied such as: Did Congressproperly vote to authorize HHS to order me toclean retirement homes? Did it single me outor are other Americans assigned similartasks? In other words, was there invidious dis-crimination?

My response to your first set of questionsis, what does a vote have to do with the right-ness or wrongness of the mandate? Would a

majority vote determine the rightness orwrongness of rape, murder, theft, and slavery?To the second question, I would also ask, doesthe rightness or wrongness of an act dependon the number of people forcibly used toserve the purposes of another? Was slavery inour country okay because four million blackswere enslaved instead of just one? Doesequality in servitude make servitude just?

One might rejoin by saying, “All thosearguments are neither here nor there; the lawis the law and people should obey.” Balder-dash! South Africa used to have apartheidlaws that strictly controlled where blackscould live, work, and eat. Nazi Germany hadanti-Semitic laws. In the United States therewas the Fugitive Slave Act of 1850. Wouldyou have obeyed those laws?

Would you have sought prosecution of whiteemployers who hired black workers in contra-vention of job reservation laws that were a partof South Africa’s Civilized Labour Policy? InNazi Germany, would you have approved sanc-tions against Germans who were hiding Jewsor assisting them to escape? In the UnitedStates, would you have turned in members ofthe underground railroad who assisted escap-ing slaves? These questions suggest that whendeciding whether or not to obey a law, onealways has to ask whether that law is moral and just. But that’s not quite the end of it. Onemust also ask, if I decide to disobey immoraland unjust laws, whether I am willing to risk suffering at the hands of the state for dis-obedience.

The Pursuit of Happiness by Walter E. Williams

What Should One Do?

63

Walter Williams is the John M. Olin DistinguishedProfessor of Economics and chairman of the eco-nomics department at George Mason University inFairfax, Virginia.

JANUARY 2001

Servitude Through Taxation

You say, “Okay, we’ve gone through yourthought experiment; so what’s the relevance?”Most people would agree that it would bewrong and immoral to force me to cleanretirement homes. They might even say that itwould be a form of constitutionally prohibit-ed servitude. But would they go so far as toaccept the generalization that it is immoraland unjust for one person to be forcibly usedto serve the purpose of another? Saying soand giving just a bit of thought to such a gen-erality would introduce significant difficultiesin today’s America. Why?

While most Americans would agree that Ishould not be forced to clean retirementhomes, no similar consensus would be reachedabout whether it is right to take a portion of myearnings through taxes to hire someone toclean retirement homes. However, there is littleconceptual difference between physically forc-ing me to clean retirement homes and physi-cally forcing me to cough up some of my earn-ings to do the same. In the case of forcing meto spend four hours cleaning retirement homes,I must forgo money I could have earned andused were I not mopping and scrubbing. If I amtaxed, I still must forgo enjoyment I could havereceived from four hours of earnings. Bothmeasures forcibly use me to serve the purpos-es of another under pain of punishment. I’ll befined and imprisoned if I actively disagree withthat use of my earnings. Moreover, if I am tooresolute in my refusal I can suffer death at thehands of the state.

Morally there is only a trivial distinctionbetween forcing me to perform cleaning

services at senior citizen homes and accom-plishing the same through taxation. The taxa-tion form of servitude is less visible andhence more palatable to the ordinary citizen,and as such it makes servitude politicallymore feasible. Not many Americans, I wouldhope, would sanction enslavement of doctorsto provide medical treatment to the medicallyindigent or enslavement of lawyers to providelegal services to the poor. In a moment of reasonableness, they might argue that ifcleaning retirement homes, treatment of themedically indigent, and providing legal ser-vices to the poor is in the public inter-est, then the burden should be borne by allAmericans instead of particular Americans.But distributing the burden through the taxcode simply conceals the immorality of forcing one person to serve the purposes ofanother.

There is nothing in our Constitution thatauthorizes Congress to engage in “charitable”expenditures, and no clearer words were spo-ken about that than those of the U.S. Consti-tution’s “father,” James Madison. In 1792Congress had appropriated $15,000 to assistsome French refugees. Madison disapprov-ingly said, “I cannot undertake to lay my fin-ger on that article of the Constitution whichgranted a right to Congress of expending, onobjects of benevolence, the money of theirconstituents.”

So what is to be done when our governmentmakes immoral or unconstitutional decrees?Is one morally obligated to obey? I think not,but one has to decide whether one wants torisk fines, imprisonment, and death at thehands of the U.S. Congress. �


• Jurassic Mart: Digging with the Invisible Hand

• Money Can Buy Happiness

• Confiscating Guns from America's Past

• Learning from the Ancient Greeks

"The greatest obstacle to discovery is not ignorance—it is the illusion of knowledge."

DANIEL J. BOORSTIN

JANUARY 2001

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