the

FreemanVOL. 22, NO. 12 • DECEMBER 1972

Back to Basics-Fable of the Berry Pickers W. A. Paton 707

An expert recurs to basic principles for light on some of today's complex problems.

The Argentine Inflation ,Alberto Benegas Lynch, Jr. 715Another sad chapter in the long list of the failures of fiat money.

Six Ideas to Keep Us Human (Part II) Edmund A. Opitz 718How free will, rationality, self-responsibility, beauty, goodness, and a sense ofthe sacred may restore man.

Are You Getting Your Money's Worth? W. M. Curtiss 727Questioning the faith that human errors could be avoided if only the governmentwere in total control of our lives.

The Founding of the American Republic:17. Principles of the Constitution Clarence B. Carson 734

The concepts of federalism, republicanism, separation of powers, limited govern-ment, and transformation of empire.

APerfect System of Government? Ludwig von Mises 747Government is indispensable because men are not faultless, but it can never beperfect.

Book Reviews: 753"The Essential Paul Elmer More -,- a Selection of His Writings" edited by Byron C.Lambert"Enterprise Denied: Origins of the Decline of the American Railroads, 1897-1917"by Albro Martin"The Growth of Economic Thought" by Henry W. Spiegel"The Evolution of Economic Thought" by W. E. Kuhn"An Economist's Protest" by Milton Friedman

Index for 1972 761

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

tt1e

FreemanA MONTHLY JOURNAL OF IDEAS ON LIBERTY

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Back to Basics-.. :.~

FABLE Of THE BERRYPICKE~'.:

w. A. PATON

ACHIEVING and maintaining an in­telligent awareness of the eco­nomic process - the means andmethods by which man makes aliving on this rugged planet - re­quires understanding, and firmlygripping, a few fundamentals.Only in this way, I've long be­lieved, can even the observing andthoughtful individual develop animmunity to economic nonsense,avoid being hoodwinked and mis­led by proposals and programs pre­sented by politicians and pseudo­reformers, in bright colors, thatrange from the downright fraudu­lent to emotional daydreaming.

As the first fundamental to beconsidered in beginning the sys­tematic study of economics I pro­pose the truism: The total amountconsumed can't exceed the total

Dr. Paton is Professor Emeritus of Account­ing and of Economics, University of Michigan,and is known throughout the world for hisoutstanding work in these fields. His currentcomments on American attitudes and behaviorare worthy of everyone's attention.

am,ount produced. This is an indis­putable fact of life if we rule outmanna from heaven and eithertake in· the whole race or assumea self-sufficient group, large orsmal1.1 It has the special merit, asan initial stepping stone on thepath to knowledge and understand­ing, of being applicable to anycommunity or society, howevermade up, whatever the productionmethods and kinds of output,whatever the form of governmentand other institutional arrange­ments, and without regard to cus­toms, habits, attitudes, religiousviews, and so on. Thus it holds inthe case of a primitive tribe (ig­noring the story-book case of find­ing food by merely stretching outa hand ·while lolling comfortably

1 Not to deny, of course, the possi­bility of a level of consuming in excessof output in a specific time-period, bytapping stores. Some will recall the ac­count of the seven lean years followingseven fat years in Egypt, long ago.

707

708 THE FREEMAN December

on a sandy beach or on the grassin the pleasant shade of a palmtree), and is also valid in the com­plex type of economy, endowedwith an advanced technology, withwhich we are familiar. This propo­sition should perhaps be regardedas an adaptation of Say's law,which proclaims the equality­and identity - of supply and de­mand in the aggregate, and is like­wise a universal truth, not to begainsaid, anywhere, in any econ­omic framework.

Basic Proposition One is soplainly in view to any intelligentmind that calling for its stressingmay seem to be hardly necessary.In today's cloudy atmosphere, how­ever, I feel that there is amplejustification for explicit statementand restatement of this inescapa­ble limitation on the many schemesdesigned to banish poverty - asofficially defined - that are beingcurrently proposed. To puncturethe dreams of pie-in-the-sky with\vhich the air is filled - to counterpolitical promises to provide thisor that level of living for every­body - there is surely need for re­newed emphasis on the point thatthe total amount we can eat de­pends on the size of the pie ratherthan the cutting pattern.

Production Is Primary

Here I come to an importantcorollary of Proposition One: pro-

duction, not cons10nption, deservesrecognition as the primary sectorof economic activity. This positionconflicts with the widespread andpersistent tendency to be con­cerned with the consumer's needsand problems - a tendency thathas currently found expression ina wave of governmental interfer­ence in producing and marketingprocesses, and a lot of popularclamor for more of the same. Theultimate objective of economic ac­tivity, of course, is to providegoods to meet consumer needs.This is just as true in an economyequipped with an elaborate struc­ture of factories and machines, andyielding a wide range of consum­able commodities and services, asin a primitive community subsist­ing on the results of hunting andfishing. We don't use machinessimply to make more machines.But since the level of consuming,in total, depends on the level ofoutput it may well be urged thatmaintaining and enhancing pro­ductive efficiency is the matter ofprime importance, and worthy ofbroad popular support. Thus thelong history of opposition to tech­nical advance, and the currentslackening of concern as to dili­gence and workmanship on the as­sembly line and elsewhere, are atodds with Proposition One, socan't be justified in terms of over­all welfare and progress. Preoccu-

1972 FABLE OF THE BERRY PICKERS 709

pation with "consumerism", to theneglect of improved use of avail­able resources, and expansion ofproductive capacity through capi­tal accumulation, does not repre~

sent praiseworthy public policy.The campaign to "protect" theconsumer by government actionbecomes especially objectionablewhen it reaches the point - as itnow has - where business firms aresubjected to a degree of harass­ment that clearly impedes opera­tion and increases costs. Indeedthis state of affairs is truly omi­nous, and should be viewed withalarm rather than acclaim. Thewheels of production don't keep onrolling automatically, without anencouraging overall climate andthe efficient participation of allhands - attendants and operatives,technicians, managers, and fundfurnishers.

Opening the Door on Problems

Acceptance of Proposition One,with the accompanying view ofeconomic activity as a dichotomyof producing and consuming, solvesno problems. But recognition ofthis axiomatic, universally appli­cable, feature of economic lifedoes provide a useful approach, agood starting point, for furtherstudy; it serves to open the doorto an examination of importantissues and problems.

The bare statement of Proposi-

tion One leaves untouched the cri­teria of "producing" and "consum­ing" and further inquiry is neededto ascertain the essential char­acter of these broad divisions ofeconomic activity, particularly inan economy where specializationand exchange are highly developedand a myriad of consumer com­modities and services flow from acomplex array of plants and equip­ment. What are the earmarks ofproductive conduct versus nonpro­ductive action? It's easy to saythat producing consists of makinga contribution somewhere alongthe production pipeline but thisdoesn't tell us much. For onething we must distinguish be­tween economic and noneconomicgoods (the latter being ratherhard to find these days, when eventhe air breathed may not be en­tirely free of cost to the user orsomeone else). And who or whatdetermines the composition of theoutput either in a particular enter­prise or for the whole economy?Proposition One, as such, leavesthis important question unsettled.

The problem of drawing a linebetween the producing and con­suming stages, and distinguishingresources employed in producing("capital goods") from end prod­uct ("consumer goods"), is lessimportant, but perhaps deserves afew comments. Where does produc­tion end and consumption begin?

710 THE FREEMAN December

For example, is the housewife's ac­tivity in preparing the family mealand setting the table in the pro­ducing sector or a step in the proc­ess of consuming? Are the orangesin the picker's basket, or in a pack­age or pile in the supermarket, oreven on a shelf in the pantry, to becounted as resources devoted toproduction? The fussy folks insistthat the true consumable is noteven the glass of orange juice onthe breakfast table but the satis­faction derived from drinking it.This line of inquiry becomes ofsome consequence in periodic eco­nomic measurement in the case ofconsumer durables such as cars,washing machines, and residences.

Proposition Two

The second underlying proposi­tion that should be stressed - as Isee it - in launching systematicstudy ·of economics may be phrasedas follows: the indiv'idual (or fam­ily unit) has the inherent right toconsume or otherwise dispose ofwhat he (or the unit) produces­a restatement of the old sayingthat the worker is entitled to the"fruits of his labor". This funda­mental can hardly be regarded asa truism, and certainly is not anarithmetic axiom. Its support mustbe found in human nature andmotivation, with an eye open tothe limitations imposed on con­suming by the amount of output

available. Undoubtedly there is atleast a trace of a sense of fairnessand justice in most people andsome degree of acquiescence in themerit of this second proposition.It is indeed a dull child who doesn'tpromptly see the distinction be­tween his toys and those of a play­mate, and who will fail to protestwhen his sand castle is demolishedby someone other than himself.Close observation of human be­havior, moreover, currently andhistorically, brings to light muchevidence of blighting effect on theproductive effort of the individualof the seizure by others of all orpart of the results of such effort.

Acceptance of Proposition Twohas always been widespread in theprimitive and simple situation,and we don't need to go back toRobinson Crusoe to bring this factto light. On the current scene, inthe midst of all the confusion andfolly with which we are beset,there are few who would proposeor attempt to justify despoilingsomeone of the product that plain­ly results from his personal effort.Thus we see no campaign to com­mandeer for the use of others theproduct of the chap who has plant­ed and tended a garden patch, orbuilt a raft to use out at his cot­tage on the lake, or made a coupleof rustic chairs for the porch. Butthe same people· who show a will­ingness to go along with this prin-

1972 FABLE OF THE BERRY PICKERS 711

ciple in these elemental, clear-cutcases, often become confused andchange their stance completely,when confronting the complex re­quirements of a modern economy,with its elaborate structure of di­vision of labor and exchange, pour­ing forth a fantastic variety ofcommodities and services. And itis not difficult to become a bit be­wildered by our intricate networkof methods and techniques andmaze of related markets, with theirmany millions of interdependentparticipants, coupled with an im­pressive array of business organi­zations and an all-pervasive webof monetary and credit facilities.Indeed, the only way for the in­telligent layman to avoid being be­fuddled, and victimized by theclever humbug peddlers, is to ac­quire a solid understanding of afew ever-present fundamentals, asI've already pointed out.

Tom and Dick as Berry Pickers

As a means of bringing outsharply this familiar lack of in­sight and consistency of attitude Ioften employed in my classes anexample that I labeled the "Fableof the Berry Pickers" (along withmuch other illustrative material).While a boy on the farm I spentliterally hundreds of hours, overa period of years, picking wildraspberries for my mother, andbecame quite expert as a picker.

And this experience undoubtedlyaccounted for my use of this fablein my teaching. I'll outline thestory here, as I recall presentingit in my beginning course in "prin­ciples of economics".

Assume a big swamp, with manyacres of wild red-raspberry bushes,to which no one claims title ormaintains any financial interest.On a particular summer day twoneighbor boys, Tom and Dick,equally equipped with pails andboth physically fit, spend ten hoursin the swamp picking berries, asdirected by their respective moth­ers. Tom is a careful, persistent,systematic picker, with a strongurge to make a good showing.Dick, in contrast, is a carefree andcareless lad, who likes to roamaround among the bushes, pickingsloppily here and there. At day'send Tom has sixteen quarts ofclean, ripe berries, while Dick hasabout twelve quarts of a mixtureof green, overripe, and good ber­ries, with a liberal sprinkling ofleaves and small twigs throughout.With this condition, I'm sure youvlill all agree, Dick cannot reason­ably lay claim to a share of Tom'sberries, and I don't believe thatmany of you would object to Tom'sconduct if he should reject theidea of pooling and dividingequally the results of the day's op­erations, if Dick - or anyone else- should propose such action.

712 THE FREEMAN December

Tom and Dick in the Berry Plant

Now let's move on a few yearswith our berry story. Tom andDick have grown up and both areemployed by a company that hasbeen established in the neighbor­hood and is engaged in growingand canning berries for the mar­ket. Diligent Tom has moved upthe ladder to the position of oper­ating manager of the plant, butDick has not advanced beyond thestatus of sweeper and handyman.Each is paid weekly by check forhis services and the amount ofTom's check is about four timesthat of Dick's. What are the equi­ties, the respective rights, in thissituation? Should a substantialslice of Tom's money income beseized by taxation or other formof coercion for use to supplementDick's earnings, or render assist­ance to some other person or per­sons regarded as needy poor, orexpended in some other way with­out Tom's consent? Many peopleseem to be willing to approve sucharbitrary action, including most ofthose who would not support tak­ing part of the berries Tom pickedas a boy and awarding them to hisinefficient fellow-picker, Dick.

If it be assumed that the re­spective contributions of Tom andDick to the output of the plant atwhich they are employed are beingaccurately determined it followsthat Tom is just as fully entitled

to spend the money income he re­ceives as plant manager as he seesfit as he had a right to consume orotherwise dispose of all the wildberries he personally picked in theswamp, years before.~ The twocases, with this assumption, areon all fours, and anyone who holdsotherwise is throwing logic andcommon sense to the winds. Thosewho don't agree with this conclu­sion either fail to grasp the basicidentity of the two situations, ordon't mind being inconsistentwhen it suits their convenience oris in line with their prejudices.

There is a possible out, however,for persons who give lip service,at least, to the need for fair-mind­edness, consistency, in thinking

2 The intervention of the money andcredit mechanism, a necessary instru­ment to facilitate specialization and ex­change, should certainly not be allowedto obscure the basic facts, althoughmany people at times seem to be blindedby fixing their attention on the flowof cash or equivalent rather than serv­ices or other economic contributions forwhich payment is being made. I'm re­minded of a tussle on our city councilone evening years ago,· during my five­year experience as a member, when afellow councilman proposed that one ofour firemen be dismissed because helived in a community outside our citylimits, and spent "his entire salary" inhis home neighborhood rather thanwhere he worked. I had some trouble ingetting support for the point that themain question for us was not where orhow the chap got rid of his cash but thevalue of the services he provided to ourfire department.

1972 FABLE OF THE BERRY PICKERS 713

and conduct. They may challengethe assumption that the contribu­tions of Tom and Dick to the out­put of the berry plant are fairlyand accurately determined; theymay urge that in practice - in reallife - the Toms are overpaid andthe Dicks underpaid. In the sys­tem as it stands, they may contend,common labor is exploited andmanagers and owners are on thegravy train. There is certainlywidespread expression of opinionto this effect.

(There should perhaps be men­tioned here, parenthetically, theview that the more efficient andproductive individuals should beforced to share the results of theirefforts with their less capablebrethren, and currently this ex­treme position has a great deal ofsupport. The advocates of thisstance are of course refusing toacknowledge the validity of Propo­sition Two, as well as ignoring orminimizing the probably adverseeffect on total output of large­scale and persistent seizure anddiversion of the contributionsmade by the more energetic andcompetent individuals.)

Measuring Productivity and Awards­Major Alternative Systems

Via Propositions One and TwoI have now come to the crucialmeasurement problem and issue:How is the contribution of the in-

dividual participant to be deter­mined in a complex economy suchas that in which we find ourselveswhere a host of individuals joinhands, so to speak, in operating anelaborate, highly mechanized, pro­ductive process or system? Andshould any limitation be placed onthe right of the individual to con­sume or otherwise dispose of theamount of his contribution, validlymeasured?

The study of economics consistsessentially in searching for an an­swer to these questions. It is pre­cisely at this point that the battlebetween competing isms and ideol­ogies is joined. In the existingsituation the determination is stilllargely made by. the forces of anintricate structure of markets, andhence systematic economic inquirymust include an intensive exami­nation of the price-making forcesof the market, and their results,at all levels. Such an examination,including a survey of historicalevidence, will undoubtedly providea substantial backing for the con­clusion that a broad and free mar­ket structure, registering auto­matically and impersonally the netimpact of the attitudes and reac­tions of many buyers and sellersto changing conditions, has longsince proved itself as a truly amaz­ing instrument for directing pro­ductive activities and awardingshares of output to participants in

714 THE FREEMAN December

the process. Unfortunately ourmarkets are now so heavily ladenwith interferences and restric­tions, especially through govern­mental intervention and control,that a free market structure, withstrong competitive pressure pres­ent throughout, no longer exists,and this condition constitutes anobstacle in analyzing and apprais­ing the performance of a marketsystem under more favorable cir­cumstances.

In any event, no fair and firmjudgment can be reached, as to themerit and potency of a market ap­paratus in measuring contribu­tions to production, slicing up theoutput pie for the Toms and Dicks,without giving careful attentionto the limitations of this instru,..ment at the best, as well as underconditions of substantial interfer­ence. The fact that ingrainedsuperstition, traditions, taboos,and other attitudes and traits,may make the development ofa suitable market structure dif­ficult if not almost impossible,should also not be neglected.Some "consideration, moreover,must be given to the proper meansto be employed to relieve acuteeconomic distress in a humane so­ciety, even if the market is gen­erally relied upon to guide bothproduction and distribution of final

output, with adequate recognitionof the inclination of the Toms totake steps - voluntarily - to ameli­orate the hardships of the Dicks.

The major alternative to reli­ance on the market for economicguidance, I'm sure we'll all agree,is statism, collectivism, some formof governmental, bureaucratic,compulsion. And I strongly believethat the study of economics, in col­leges or elsewhere, should includea careful, thoroughgoing examina­tion of the case for this alterna­tive, as it has been made by theoutstanding defenders and advo­cates of socialistic programs, in­cluding the dictatorial system rep­resented by modern communism.The route to sound conclusions isnot by way of glorification of themarket and wholesale condemna­tion - without study - of the so­cialist approach. Taking some­thing for granted in this world isseldom advisable.

This brief statement, I shouldmake it plain in conclusion, is in­tended to do nothing more thanprovide a crutch on which the in­telligent and inquiring laymanmay lean, and outline a useful ap­proach - push open the door - tothe crucial measurement problemsand issues which deserve inten­sive study. ~

Reprints available, 10 cents each.

TheArgentine InflatiALBERTO BENEGAS LYNCH, JR.

THE ARGENTINE political and eco­nomic evolution seems so closelycorrelated with her monetary situ'::ation that it may be said that thehistory of this nation is principallythe history of its currency.

The period of national organiza­tion following emancipation fromSpain in 1810 until adoption of theConstitution of 1853 was markedby internal struggles and long pe­riods of despotism and anarchy,interspersed with times of relativepeace and progress. One of thefirst measures taken by the na­tional government was to establishthe gold content of the "hardpeso." Thus in 1812 a "hard peso"weighed almost two grams ofpure gold. In 1822 the first officialbank was founded: the Bank ofBuenos Aires, entrusted with theissue of the first bank notes, calledArgentine pesos, which were ex­changed by the public at the rateof 1.8 grams of minted gold. In1823 conversion was suspended by

Doctor Alberto Benegas Lynch, Jr. is pro­fessor of Public Finance in the Universidaddel Museo Social Argentino and professor ofPolitical Economy in the Argentine NavalIntelligence Service.

decr~e';for the first time becausehe/government issue of notes ex­ee'd~d the stock of gold. Converti­ilJfy was restored in 1825. The',lowing year saw a relapse into

the bad policy of increasing thecurrency without backing and thepeso again became inconvertible.On this occasion, it was mistakenlysaid that in this way the war withBrazil could be financed "morecomfortably." The resultant infla­tion brought with it political andeconomic instability and seventeenyears of tyranny and barbarity,demolishing what had been achievedwith difficulty in the immediatelypreceding years.

This situation of moral and eco­nomic prostration lasted untiladoption of the Argentine Consti­tution in 1853, described by oneof its most important authors andproponents, Juan B. Alberdi, asthe document under which respectand guaranties for private prop­erty were commanded.

In a second period we may in­clude almost a century, from 1853to the rise of Peron in 1943, a pe­riod of enviable economic progress

715

716 THE FREEMAN December

which brought Argentina to eighthplace among the civilized nationsof the world. Within the first 75years we enjoyed, almost withoutinterruption, the advantages of theclassical gold standard, a banknote being exchanged for 1.7grams of gold. We say almostwithout interruption because in1876, at the same time as the es­tablishment of the National Bank,and at intervals until 1890, thecurrency was again issued withoutbacking, conversion being tempo­rarily suspended as a consequence.In 1891 the finances were againput to rights and convertibilityrestored at a rate of 1.42 Nationalpesos to a gram of gold. In thecourse of time, however, therewere successive devaluations untilconvertibility was prohibited en­tirely in 1928, at which time 5.16National pesos exchanged for agram of gold.

In 1932, instead of restoring the·Conversion Board and returningto the classical gold standard, Ar­gentina turned to that sadly re­nowned bankers' bank: the CentralBank. This period, which lasteduntil 1943, was still one ofprog..ress owing to the strict limitsplaced on the authority of thebank and to the reliability andprudence of the government au­thorities of the time. But evenwith the best intentions, the es­tablishment of the Central Bank

laid the foundations of the Statecontrol of the currency which in­evitably followed.

From the military coup of Peronin 1943 until he was overthrownin 1955 marked the darkest mo­ments of Argentine history. Theentire banking system was re­formed. The Central Bank wastransformed from a relatively in­dependent body into the lackey ofthe government, thus allowing cap­ricious control over currency andcredit. The policy of deficit spend­ing became the rule; open marketoperations were carried out sys­tematically in order to inj ect"fresh money" into circulation;rates of interest were manipulatedat will; bank reserve requirementswere constantly lowered by gov­ernmental action. In addition tosuch monetary policy, compulsorymembership in trade .unions wasimposed, the level of taxation be­came exorbitant, internationaltrade was totally controlled throughhuge bureaucratic organizationswith their various tariffs andquotas and subsidies. To completethe governmental interference inthe market, price controls wereimposed throughout the economy.This suicidal policy provoked anunprecedented economic situation:Argentina was reduced to one ofthe lowest rungs among the so­called "under developed nations."Monetary reserves were sadly de-

1972 THE ARGENTINE INFLATION 717

pleted; international trade fell toa quarter of its earlier volume;real incomes and salaries con­tracted sharply; indebtedness in­creased; agriculture and cattleraising, so basic to Argentina'seconomy, were largely despoiled;many subsidized and protected in­dustries were created as a furtherburden on the people; all in themidst of a terrible moral corrup­tion.

Unfortunately, the Peronist eco­nomic policy of socialistic tenden­cies has persisted to a greater orlesser extent up to this day in Ar­gentina. The cost of living indexin 1972 is· 360 times what is wasin 1943! The peso, once one of theworld's strongest currencies, isnow the one which is depreciatingmost rapidly. The cost of livingprobably will double this year.Levels of saving have fallen notice­ably, and as a result the rate ofcapital formation is ridiculouslylow. Real income and salaries arealways below the cost of the "fam­ily basket." The distribution ofwealth does not depend on one'sefficiency in meeting the consum­er's needs but~ to a large.extent,on the favors of bureaucrats andtheir irrational monetary policy.The flight of national and foreigncapital is terrible. Malinvestmentand waste are accentuated in linewith the directives of the plannersof the day. The United States dol-

lar which exchanged for 3.50 Na­tional pesos in 1943 was selling inSeptember 1972 at 1,400 pesos onthe black market. This, in spite ofthe depreciation suffered by thedollar owing to the tendency of theUnited States government to imi­tate Argentina's folly-the bastionof the free world also bowing tosocialist policies.

Today, perhaps the strongestcurrency is the Swiss franc, al­though currencies such as the Jap­anese yen have promising pros­pects. It is interesting that arecent lead article in a widelycirculated Japanese periodical rec­ommends a return to the goldstandard at a rate of 0.78 gramsper yen. This is precisely what Ar­gentinaought to do in currencymatters. The foreign exchange re­maining .in the hands of the Cen­tral Bank should be used to buygold in the London free marketand add it to Argentina's existingstocks, dividing the total by thenotes in circulation and fixing thecorresponding relationship to gold,restoring convertibility. Theoniyway to put ahrake on :inflation,although it ,may appear tobeatruism, is for governments to stopinflating. For that purpose, amonetary standard is required tomake people independent of thestate manipulation we have heredescribed. ~

EDMUND A. OPITZ

as to make us Iluman(Part Two)

PART ON;E of this essay presents adiagnosis of the present malaisein terms of a loss of contact withsix vital ideas. The ideas whichkeep us human may be summar­ized as follows:

• 1. Free Will. Man's gift offree will makes him a responsiblebeing.

• 2. RationaMty. Man is a rea­soning being who, by takingthought, gains valid truths abouthimself and the ·universe.

• 3. Self-responsibility. Eachperson is the custodian of his ownenergy and talents, charged withthe lifetime task of bringing him­self to completion.

• 4. Beauty. Man confrontsbeauty in the very nature ofthings, and reproduces this visionin art.

• 5. Goodness. Man has a moralsense, enabling and requiring himto choose between good and evil.

718

• 6. The Sacred. Man partici­pates in an order which trans­cends nature and society.

It is no secret that a great manyphilosophers and scientists denyfree will and affirm determinism;it is also a fact that no one canreally bring himself around to be­lieving that he is an automaton. Aphilosopher who announces him­self as a determinist presumes tooffer us a conclusion he has ar­rived at after observation, aftermarshalling the relevant evidence,after reflection, and as the end re­sult of a chain of reasoning. Eachof these steps reflects the action ofa free being, and these free actionscan never be pieced together so asto contrive an unfree result. Man'swill is free; it is so free that itcan deny this freedom!

Take the case of Baruch Spin­oza. If any man ever lived free itwas Spinoza; he was th~ "inner

1972 SIX IDEAS TO KEEP US HUMAN 719

directed" man par excellence. ButSpinoza's own experience clashedwith the new world view of Mech­anism - the notion that the uni­verse is constructed along the linesof an intricate piece of clockwork.Ideology overcame experience andSpinoza denied that his will wasfree. I quote from PropositionXLVIII of his Ethics:

There is in no mind absolute or freewill, but the mind is determined forwilling this or that by a cause whichis determined in its turn by anothercause, and this one again by another,and so on to infinity.The mind is a fixed and determinedmode of thinking, and therefore can­not be the free cause of its actions,or it cannot have the absolute facultyof willing and unwilling; but for will­ing this or that it must be determinedby a cause which is determined by an­other, and this again by another,etc. Q.E.D.l

Free Will

If the individual does not havefree will, then he is not at libertyto reject determinism! But wherewill a man find a position fromwhich he might judge whether hiswill is indeed free, or not. Theanswer is: Only as he looks withinhimself, at the workings of his in­ner life; by introspection, in other

1 Spinoza, pp. 74-5 of the Everyman'sLibrary edition of Ethics, (New York: E.P. Dutton & Co., 1925).

words. Now introspection is ratherfrowned upon today as a means ofgetting at the truth, as not beingin accord with scientific technique.Early science viewed nature fromthe standpoint of the external ob­server, as a theater goer views aplay. The man occupying the seatin the first row of the balcony isobserving the drama unfold uponthe stage ;he is detached from theaction, is not involved in the play,his standpoint is objective. Theworld view that grew out of sci­ence is assumed to be the way theuniverse looks to an outsider whois not part of the action, merelylooking in upon it.

Once this approach is adopted,what follows? Let me answer byquoting from Jacques Barzun'sgreat book, Science: The GloriousEntertainment: "Pure science wasengaged in sketching, bit by bit,the plan of a machine - a giganticmachine identical with the uni­verse. According to the vision thusunfolded, every existing thing wasmatter, and every piece of matterwas a working part of the cosmictechnology."2 Thus emerged theideology bearing the label Mecha­nistic Materialism, and human be­ings schooled in this ideology cometo think of themselves as merecogs in the world machine. And

2 (New York: Harper & Row, 1964)p.21.

720 THE FREEMAN December

just as every gear and cog in .themachine is moved by another, sois every human action the mereeffect of a previous cause, and soon. Observe a man's actions fromthe outside and you see only hisbody and limbs in motion; nothingthat you can see from the outsidegives you any assured knowledgeof what is going on inside him.You cannot observe his will fromthe outside, nor his mind. Youmight guess what's going on, butthat's the best you can do.

A HiddenlnnerLHe

There is one region of the uni­verse which will always be beyondthe ken of the external observer,and that is the region. of the innerlife. Each man's inner life is con­cealed from all the world; healone has access to it. Millions ofpeople can view the same eclipseof the sun, but only one personcan know your inner life, and thatis you. Truth about the will in ac­tioncan be known by introspec­tion only; it will never be disclosedto those who adopt the standpointof the external observer and re­fuse· to shift their perspective. Ifthere is indeed freedom of the will,this is a truth which, in the na­ture of the case can be known onlyas each person knows it first handin himself. Let a man look withinhimself and he knows with solidassurance that he is capable of

exerCISIng freedom of choice insituations where real alternativesare open to him. Which of us hasnot wrestled with dilemmas of thetype: "I want to do this; but Iought to do that"? We know, inthis context, that the will is free.

There's an old story about Gali­leo, who assured one of his con­temporaries that the ring aroundJupiter was composed of satel­lites; "I've seen them through mytelescope; take a look and see foryourself." The friend had figuredout that the ring was solid and re­fused to put his eye to the glass,the only posture from which hecould test his theory. The freewill, if it operates at all, operatesonly within, and those who are sowedded to the standpoint of theexternal observer that they refuseto look within, effectively barthemselves from ever obtaining~ny knowledge of the matter.

The consequence of this state ofaffairs is unfortunate. It is "un­scientific," the average man is ledto assume, to believe he has freewill, and that decisive .action onhis part can make a real differencein life. He is taught that he is de­termined by heredity, or environ­ment, or race, or childhood trau­mas, or poverty, or by some otherfactor· that limits his capacity forfree choice; and his ability tochoose is impaired because hethinks he doesn't have it! The ini-

1972 SIX IDEAS TO KEEP US HUMAN 721

tiative is giv~n over to environ­ment and man only reacts; hedoesn't act. Adjustments to theenvironment, comfort, and easethen come to be the goals of life.If we accept the dictum of a greateconomist that "the end, goal oraim of any action is always therelief of a felt uneasiness," thenwe have given up on life, for we'llnever rest easy until we're dead!To live is to strive for greater in­tensity of life, and this means thatwe may choose adventure, hero­ism, suffering, and maybe evendeath.

The issue of free will consti­tutes a battleline of first impor­tance. A people among whom theflame of life has burned so lowthat their philosophers preach de­terminism will be severely handi­capped in the game of life. Theywill find it difficult to put theirtrust in reason and, as we mightexpect, reason itself is now underattack from several quarters.

Rationality

The second of the big ideaswhich make man man is this: Manis a reasoning being who, by tak­ing thought, gains valid truthsabout himself and the universe.The attack on the rational mindcomes from several quarters. Phil­osophical materialism and mech­anism assumes that the ultimatereality is nonmental; only bits of

matter or electrical charges orwhatever are, in the final analysis,real. If so, then thought is but areflex of neutral events. "Ourmental conditions," wrote T. H.Huxley, "are simply the symbolsin consciousness of the changeswhich take place automatically inthe organism."

Evolutionism, popularly under­stood, is materialistic and mechan­ical. So viewed it conveys the ideathat living things began as a stir­ring in the primeval ooze and be­came what they are now by ran­dom interaction with the physio­chemical environment, moved byno purpose, aiming at no goal.Darwinism offers an account oforganic change which has no needof intelligence to .. guide it.

From popular psychology comesthe notion that reason is but ra­tionalization, that conscious men­tal processes are but a gloss forprimitive and irrational impulseserupting from the unconsciousmind. Psychoanalysis discreditsmind by subordinating intellect tothe id.

From Marxianism comes the no­tion that class interest dictates aman's thinking. There is one logicfor the proletariat and another forthe bourgeoisie; and the mode ofproduction governs the philosoph­ical systems men erect, and theirlife goals as well. The unfortu­nately placed middle class forever

722 THE FREEMAN December

gropes in darkness, unable toshare the light revealed to Marxand his votaries.

Convictions about the reality ofreason and free will develop in thecontext of our vision of the ulti­mate nature of things. And here Ibring up again the ideology ofMechanistic Materialism. Thereare several kinds of Materialism,the most prominent today beingDialectic Materialism, the officialreligion of Marxianism. However,the several brands of Materialismdiffer only in nonessentials; theyagree that all forms of conscious­ness arise, develop, and disappearwith changes in the materialworld. Every variety of Material­ism downgrades mind; it makesmind an offshoot of matter, a de­rivative of material particles, anepiphenomenon.

IIMan is but the outcome of

accidental collocations of atoms"

Let Bertrand Russell tell us inhis own words: "Man is the prod­uct of causes which had no pre­vision of the end they were achiev­ing; his origin, his growth, hishopes and fears, his loves and hisbeliefs, are but the outcome ofaccidental collocations. of atoms.... Brief and powerless is Man'slife; on him and all his race theslow, sure doom falls pitiless anddark. Blind to good and evil, reck­less of destruction, omnipotent

TIlatter rolls on its relentless way."3Of course, if matter is the ulti­

mate reality, mind is discredited.But if this discredited instrumentis all we have to rely on, how canwe put any confidence in its find­ings? If untrustworthy reasontells us that we cannot trust rea­son, then we have no logicalground for accepting the conclu­sion that reason is untrustworthy!Well, I don't trust the reasoningof people who champion the irra­tional, and I do know that ourreasoning powers may be - likeanything else - misused. But whenhuman thought is guided by therules of .logic, undertaken in goodfaith, and tested by experienceand tradition, it is an instrumentcapable of expanding the domainof truth. Reason is not infallible,but it is infinitely more to bet rusted than nonreason!

Self-Responsibility

The third great truth is thateach man is the custodian of hisown energy and talents, chargedwith bringing himself to comple­tion and having a lifetime to dothe job. Gifted with reason andfree will, the human being musttake himself in hand in order tocomplete his development; most

:~ From the essay "Free Man's Wor­ship." Reprinted in Selected Papers ofBertrand Russell (New York: ModernLibrary, 1927) pp. 3, 14.

1972 SIX IDEAS TO KEEP US HUMAN 723

animals, on the other hand, simplymature, brought to full term byinnate drives. Human beings arenot thus programmed, and occa­sionally we have to act against in­clination and instinct and inertiaif we would achieve our goals.This is simply illustrated insports, where the successful per­former forces himself to traineven on those days when he'drather be doing something else.The bike club I ride with held acentury run over a six mile course.A couple of youngsters turned upin full regalia and rode off, onepacing the other, looking very pro­fessional. Quite a few miles laterI noticed that one of the youngmen had dropped out; so I askedthe other what happened.

"I train every day whether Iwant to or not," he replied, "hejust goes out when he feels likeit."

There you have it on a smallscale, but the same principle ap­plies to life. "That wonderfulstructure, Man," wrote EdmundBurke, "whose prerogative it is tobe in a great degree a creature ofhis own working, and who, whenmade as he ought to be made, isdestined to hold no trivial place inthe creation."

The persistent downgrading oflife, during recent centuries hasreduced man to a cosmic accidentinhabiting a fourth rate planet,

lost in the immensities of spaceand time, in a materialistic uni­verse devoid of values. This dubi­ous vision has not been vouchsafedto the birds and the beasts, butonly to human beings. Only manamong all the creatures of theplanet has been able to take alltime and all space within his pur­view and draw conclusions of anysort. And it is a perverse kind ofsilliness for a creature gifted withthe ability to understand and ex­plain to bemoan his littleness inthe face of the unimaginable vast­ness of the cosmos. Whose mind isit that comprehends all this? Whatcreature controls an enlarging do­main? Man confronting the uni­verse as astronomer, physicist, ge­ologist, engineer, is entitled tostand tall; would that he might doas well in other departments!

Beauty

In the area of aesthetics, forexample, to illustrate the fourthvital idea. Here man confrontsbeauty in the very nature ofthings, and reproduces his visionin art. In a materialistic age itcomes to be believed that particlesof matter in motion are the onlyrealities; which means that beautyis unreal. "Beauty," we are told inthe familiar phrase, "is in the eyeof the beholder." How did it getthere? we want to know, unlessloveliness - as every great artist

724 THE FREEMAN December

has taught us - is real, and outthere waiting to be experienced.

What shall a painter resort towhen the ideology of the age con­vinces him and his potential publicthat matter is the ultimate realityand beauty a mere illusion? LetPicasso answer:

When I was young I was possessedby the religion of great art. But, asthe years passed, I realized that artas one conceived it up to the end ofthe 1880's was, from then on, dying,condemned, and finished and that thepretended artistic activity of today,despite all its superabundance, wasnothing but a manifestation of itsagony.

As for me, from cubism on I havesatisfied these gentlemen (rich peoplewho are looking for something ex­travagant) and the critics also withall the many bizarre notions whichhave come into my head and the lessthey understood the more they ad­mired them.... Today, as you know,I anl famous· and rich. But when Iam alone with my soul, I haven't thecourage to consider myself as anartist. 4

One more quotation, this timefrom Joseph Wood Krutch, gen­eralizing about modern artists:

They no longer represent anythingin the external world, because theyno longer believe that the world which

4 Quoted by Joseph Wood Krutch inAnd Even If You Do (New York: Wm.Morrow & Co., 1967) p. 186.

exists outside of man in any wayshares or supports human aspira­tions and values or has any meaningfor him.')

Art once celebrated the great­ness of the human spirit and man'saspiration for the divine; greatart reconciled man to his fate."We are saved by beauty," wroteDostoevsky. Art now is the reach­ing out for bizarre forms of self­expression by more or less inter­esting personalities; or it becomesoutright buffoonery and charla­tanism.

Goodness

The fifth big idea has to do withethics; it is the conviction thatmoral values are really embeddedin the nature of things, and thatmen have the capacity and are un­der the necessity of choosing thegood and eschewing evil. Given arevival of belief in reason and freewill I am confident that ethicalquestions will be brought withinthe human capacity to resolve. Butif we succumb to the attacks onreason and free will, and if weaccept the ideology of Materialismwe will seek in vain for some sub­stitute for ethics. We reduce mor­ality to legality; we confuse whatis right with what works; or whatadvantages us, or what pleases us.These things, including utilitari-

5 Ibid., p. 185.

1972 SIX IDEAS TO KEEP US HUMAN 725

anism and relativism, boil downto ethical nihilism, for if nothingis really right, then nothing isreally wrong either.

The Sacred

The sixth big idea pertains tothe human experience of thesacred - a dimension which tran­scends the workaday world. Thisencounter evokes awe, reverence,a sense of the sublime; and it pro­duces - in the intellectual sphere-the philosophy known as Theism.Theism is the belief that the uni­verse is not merely brute fact, butthat a mental/spiritual principleis at the heartof things; the finitemind in each of us is somehowgrounded in an infinite Mind. Inone perspective, Theism encom­passes all the other ideas; and inanother perspective, if our think­ing is right on the previous fiveideas, Theism is an immediateinference.

We res,ist the word "God" be­cause for most people the notionsof their childhood still cling to it,and these notions they have out-i

grown while they have not per­mitted their ideas of God to growwith them. But if one rejects theidea of God, he has no logical stop­ping place short of the idea ofMaterialisim; and if he goes thisfar, he has embraced an ideologywhich shortchanges his own men­tal processes. Mind, reason, logic,

and God are all bound up together.Santayana was once referred to asan atheist, and he replied, "Myatheism, like that of Spinoza, istrue piety towards the universe,and rej ects only gods fashioned bymen in their own image, to beservants of human interests."Genuine Theism demands that webe "a-theistic" toward the falsegods.

Theism 'contends, as a minimum,that a Conscious Intelligence sus­tains all things, working out itspurposes through man, nature,and society. This is to say that theuniverse is rationally structured,and this is why correct reasoningpans a few precious nuggets oftruth.

Acceptance of the Creator re­minds men of their own finitude;no man can believe in his ownomnipotence who has any sense ofGod's power. And finite men,aware of their limited vision, havea strong inducement to enrichtheir own outlook by cross fertili­zation from other points of view.

When theistic belief is absentor lacking in a society, men arebeguiled by the prospect of estab­lishing a heaven on earth. Theyvainly dream that some combina­tion of political and scientific ex­pertise will usher in utopia, andthey use this future possibility asan excuse for present tyranny.lJnder Theism, they modestly seek

726 THE FREEMAN December

to improve themselves and theirgrasp of truth - thus making thehuman situation more tolerable,more just, more enjoyable - confi­dent that the final issue is in God'shands.

But won't men perversely useTheism as in excuse for intoler­unce and even persecution, as in­deed has happened in history? Ofcourse they will, for there is nogood thing that cannot be mis­used. But reflect on the deadlinessof the alternative as exhibited byregimes which make atheism offi­cial. Communism, during its firstfifty years in several countries,has taken a toll of at least eighty­four million lives!

What is Man? the creature fromMars might ask. And our answerwould be that man is a being withan anthropoid body and six ideas.What if he loses contact with oneor more of these ideas? our ques­tioner continues. In that case, weanswer, his humanity is therebythat much diminished.

Diminished man has come to thefore at an accelerating rate duringthe past century. In statecraft, hewas unable to resolve minor dif­ferences between Western nationsand thereby prevent them fromtearing each other to pieces in thecycle of wars which began in 1914.In religion, we have a split be­tween the "death of god" trend,on the one hand; and, on the other,

an emphasis on push-button sal­vationism. In education, there isagreement on one point only, thatthere is a crisis in the schools; butthere's no consensus as to causeand cure. Philosophers have aban­doned the great tradition in phi­losophy to embrace one fad afteranother; positivism, linguisticanalysis, existentialism. Thenthere is the "treason of the intel­lectuals," many of whom havefound communism and socialismirresistible; who resolved thatthere should be no more war inthe Thirties but decided a fewyears later that war was a wonder­ful thing. And in personal life, ata time when the male is giving hisworst performance, unable to re­concile women to their roles inlife, the female wants liberationso she can imitate the' male!

It goes without saying that asI list a portion of the indictmentagainst modern man, I have inmind statesmen, artists, philos­ophers, theologians, intellectuals,as well as ordinary men andwomen, who have kept the faith,who have not lost their heads. Iam not certain that the madnessfrom which we suffer has run itscourse, and that we've turned thecorner, but I am enough of anoptimist to have confidence thatthe corner is within sight, andthat there is sufficient health in ust.o make it. ~

Ar.e You Getting

YourMoneys Worth?

W. M. CURTISS

IN TERMS of personal income andits purchasing power, one mustconclude that Americans never hadit so good! With the great stridesin technology and the tremendousinvestment in the tools of produc­tion, workers are fantastically pro­ductive. And, in a general way,one's income is based on what oneproduces, as valued in the marketplace.

In a free economy, one may ex­change his money or property forthings or services he values morethan the money or property hegives up. Thus,both the buyer andseller benefit from the exchangeand each is better off, in his judg­ment, than before.

But what are you getting for

Dr. Curtiss is Executive Secretary and Di­rector of Seminars at The Foundation for Eco­nomic Education.

your money today? How much ofyour spending is for things you'drather do without if the choicewere entirely yours!

One might argue that we alwaysspend our money in the way wechoose, given the alternatives. Wepay a dentist to relieve a tooth­ache, not because a trip to thebeach wouldn't be more fun. butbecause it is less painful to visitthe dentist. If we lived in a dryclimate we might avoid the pur­chase of an umbrella. If we livednear our work we might avoid buy­ing a second car. If we lived inMaine, we might not buy an airconditioner. And so on throughmany choices like these, where noone else is forcibly influencing ourdecision.

Even under coercion, we still

'7?'7

728 THE FREEMAN December

choose among alternatives. We maygive our wallet to an armed rob­ber, under the circumstances. Mostof us grudgingly pay our taxes,rather than face the consequencesof refusing to pay. But thesechoices, the alternatives we chooseunder duress, differ from ourpurely voluntary spending. And inorder to know whether we've "everhad it so good," we ought to con­sider those expenditures which areforced upon us, for things we'drather do without.

Crime Costs

An example is the cost of crime.Government is essential for theprotection of life and property,and most people will willingly payto be protected from the few per­sons who have no respect for thelife and property of others. Butthe mounting incidence of crimein our affluent society calls forfurther consideration of the costsand possible causes.

How do you feel about the costof installing a burglar alarm sys­tem in your home? Or having neartamper-proof locks put on youroutside doors? Or the extra costof a buzzer to make certain youremove your auto keys? Or theextra cost of taking a taxi be­cause you're afraid to ride a sub­way?

These are just a few of the manyexamples of the rising costs of

crime over recent decades. Moredirect costs, of cOllrse, includelosses of life and property by per­sons who are objects of the bur­glary or perhaps just innocent by­standers. Mounting also are thecosts of prevention, detection, andpunishment, including the hiringof extra police, additional courtcosts and the like. Attempts havebeen made to estimate such costsbut who can say, and with whataccuracy? What is certain is thatthe money one is forced to spendeither to prevent crime or to re­pair the damages is money thatcannot be spent voluntarily forother things.

No doubt, the people of theUnited States are among the mostproductive and affluent in theworld. We have a very high levelof living in automobiles, color tele­vision sets, the quality of food weeat, education, medical services,housing, leisure, travel, and a hostof other things.

But our level of living also in­cludes a few items we mightchange if we could. The costs andconsequences of crime are amongthese items.We can take littlecomfort in knowing that our crimecosts per capita may be the highestin the world! Much of the cost isburied in the total expenditures bygovernmental units - federal,state and local- the total supportof which takes some 40 per cent of

19'72 ARE YOU GETTING YOUR MONEY'S WORTH? 729

our very high productivity. So, wemay say that our affluence sup­ports the most costly governmentin the world. But, if we had our"druthers," is this the "level ofliving" we would buy?

Why Crime Increases

Much of the crime, especially inour larger cities, is tied to the in­creasing use of illegal drugs. Thedaily cost of supporting a drughabit far exceeds what many auser is able to earn legally. Manyaddicts thus turn to robbery, pros­titution, "pushing" drugs onothers, and various sorts of or­ganized criminal activity.

Why does this happen? If aproduct or service is forbidden bylaw, and if some people want theproduct or service badly enough,someone will undertake to providethe illegal item, usually at a priceto cover the risk of getting caughtbreaking the law. A classic· ex­ample comes from the "prohibi­tion era" following World War I,with the resultant high cost ofbootlegging, gang wars, and at­tempted law enforcement activi­ties.

Prohibition eventually was ac­claimed a failure and was repealed.Whether the morality of the peo­ple was improved or diminishedby the experiment is not the sub­j ect of this inquiry. Nor is thequestion of whether the govern-

ment should attempt to legislatemorality. We are merely pointingout the tremendous costs involved,costs forced upon individuals whomight rather have spent theirmoney in some other way.

Not repealed, however, is thegovernmental attitude toward al­coholic beverages. Instead of di­rect prohibition, there is now a"prohibitive" tax on liquor. Like­wise, "cigarettes may be hazard­ous to your health," and areheavily taxed. These taxes and thehigh costs of enforcement are apart of today's high cost of living.

These three examples - drugs,cigarettes, and liquor - illustrateproblems which arise l~rgely outof government intervention, andthen have to be controlled, to someextent, at very high costs to tax­payers. In any event, when thetotal cost of government becomesas burdensome as it is in thiscountry, the incentive to cheat isstrengthened, as anyone couldtestify who either files or fails tofile an income tax return. There isa strong temptation to get "apiece of the action" by governmentworkers who handle "publicmoney," award contracts, purchaseitems for government use, and thelike. And even the rare few whooccasionally expose such cheatingmust be sorely tempted not to doit. Who wants to be a model of in­tegrity in a den of thieves!

730 THE FREEMAN December

Welfare Costs

Government welfare activitiesare another source of corruption.Such programs- have grown byleaps and bounds in the past quar­ter century at a time when the na­tion was never more affluent. Thereasons are many and often com­plicated. Many social workers andother government employees seemto measure their success by thenumber of cases handled and theamount of money distributed. So­cial Security offices, for example,post notices in local papers sayingin effect: "Are you getting all theSocial Security you are entitledto? Come in and let us help you!"Workmen's Compensation clientsare officially advised not to dealwith employers but to come di­rectly to the Board.

Aside from the outright cheat­ing, one of the causes of the risingcost of welfare, a cause which thewelfare client cannot change, isminimum wage legislation. Wages,set higher by law than they wouldbe in a free market, increase un­employment. The unemployablesare especially the young, the old,and members of minority groups.Whether for lack of skill, or ofeducation, or whatever the rea­sons, unemployment rises sharplyin such categories whenever mini­mum wages are raised by law. In­creasing unemployment means in­creasing welfare costs.

Respect for Property

Part of the problem is the break­down of respect for property. Andespecially is this true of the grow­ing volume of "unowned" or "pub­lic" property. Consider, for in­stance, the breaking of windowsand other destruction of schoolproperty. The problem is seriousenough that some schools havegone to the considerable expenseof installing "unbreakable" glass.Some new school buildings are be­ing built without windows.

College buildings and groundsare prime targets for vandalism;public parks and playgrounds alsoare used and treated with disre­spect. It seems that what belongsto everyone belongs to no one. Thecost to those who must pay forsuch vandalism and destructionlowers their level of living, de­prives them of alternative waysthey would spend their money.

Governmental efforts at "con­sumer protection" go far beyondcuring us of the "bad habits" ofdrugs, alcohol, and tobacco. Thegovernment also tries to do to uswhat is "good" for us. An illustra­tion is the requirement that vari­ous grocery and other items bepriced by weight so that shopperscan more easily compare productsof different distributors, differentsize packages, and the like. How­ever, after sellers have gone to theexpense of doing this (which con-

1972 ARE YOU GETTING YOUR MONEY'S WORTH? 731

sumers pay), few shoppers payany attention to it.

Similarly, when consumers bor­row money, or buy on install­ments, shouldn't they know theirinterest costs expressed as a sim­ple rate per year? How else canthey compare different sources ofcredit? So, the revealing of thesefigures is required by law andadds to the cost for the consumerwho is to be protected. Again,there is evidence that few con­sumers use this new service theyhave paid for.

One of the most absurd of allconsumer protection items is thecompulsory addition of seat beltsto autos. Why should I have to becompelled to pay for seat belts toprotect me in an auto accident? IfI think seat belts are useful, I willhave them installed and will usethem! Who is likely to be more in­terested than I am in protectingme from inj ury? Upon discoverythat only one-third of the driverswere using the seat belts they hadbeen forced to pay for, all driverswere then subjected to the costs ofinstalling buckle-up buzzers andlights and other educational de­vices.

Other consumer protection itemssuch as air bags, more effectivebumpers, and other gadgets will becompulsory additions before longand the cost of automobiles to theconsumer is bound to reflect the

additional expense. It is estimatedthat by 1975 the cost of these ad­ditions, which the consumer didnot order, will be more than thetotal cost of a new car when Amer­icans were less affluent than today.This might be a part of your "levelof living" you would do withoutif you had a choice.

Most "consumer protection"plans show a complete lack offaith in two very important as­pects of the market. One is thewisdom of the consumer in look­ing after his own interest and. theother is the power of competitionbetween suppliers in an unfetteredmarket to serve the consumer ashe wishes.

Gambling

The attitude of governmentstoward gambling is a curiousthing. At times, it has appearedthat governments have consideredgambling to be immoral and havetried to ban it completely. Morerecently, governments have per­mitted gambling in some places,but not in others; You may be per­mitted to bet on a horse race atthe race track but not elsewhere.You may indulge in games ofchance if they are conducted bychurches licensed by the state. So,perhaps gambling is not really amoral problem at all!

In recent years, in their questfor new sources of revenue, more

732 THE FREEMAN December

and more states are permittingand encouraging gambling so longas the state gets a substantial cutof the proceeds. In New YorkState, you need not go to the trackto bet on the horses if off-trackbetting is more convenient. Statelotteries also are gaining in popu­larity and respectability, with alarge "take" going to the state.

Still, the state is partly in andpartly out of the gambling busi­ness. Many types of gamblingsuch as the "numbers" game, bet­ting on human athletes or teams,and other games of chance are stillillegal. It would be difficult if notimpossible to estimate the amountof money which governments spendunsuccessfully to enforce gamblingor anti-gambling laws - anotherexample of spending your moneyin a way you might not spend ityourself, given a choice.

The Problem

Most of the economic problemsthat are left to the market aresolved without great fanfare. Weeither buy, or refrain from buy­ing, and thus send a meaningfulsignal to the producer. It doesn'trequire a committee or a govern­ment commission, or a popularityvote to make the decision. Ifenough people object to tail finson their autos, the manufacturerwill soon get the message. And ifthe decision of the market goes

against the lover of tail fins, herarely makes much of a fuss. Butlet the decision be made by a gov­ernment bureau, or even a Harvardprofessor, and a feeling of disen­franchisement is certain to arise.

Practically all of the majoreconomic problems that seem sotroublesome are the result of someactivity of government when it hasgone beyond its principled role ofprotecting life and property. Oneof our most serious, with ramifi­cations in many areas of life, isinflation. Inflation is simply the re­sult of the Federal governmentspending beyond its means andexpanding the supply of money tosupport its profligacy.

School problems, involving suchquestions as how to finance them,who should run them, who shouldattend them, and what should beoffered in them, are largely prob­lems which arise because govern­ment has assumed much of thisresponsibility. Little choice is of­fered those concerned.

The problem of housing, espe­cially in urban centers, is largelya result of the intrusion of govern­ment into urban renewal, rent con­trols, construction codes, and otherrestrictions.

Consumer protection wouldcause no difficulties if it were avoluntary thing between buyer andseller. Auto manufacturers wouldghidly supply seat belts to those

1972 ARE YOU GETTING YOUR MONEY'S WORTH? 733

who want them and are willing topay for them - just as radios aremade available. The problem ariseswhen motorists who neither wantnor use them are compelled by lawto pay for them.

Just now, control of pollution ofair and water is being promotedby a few vocal individuals, organi­zations, and an imaginative press,In haste to respond to such pres­sures, governments are certain tofurther add to their already over­extended activities.

Are you getting your money'sworth? The question finally boils

Freedom

down to whether you are primarilyinterested in freedom of choice forthe individual - your choice withyour own money - or "full securityand protection" by government inevery last detail.

True, some consumers will makea lot of mistakes, as judged by youand me, in their choices as to howto spend their money. But farmore serious than the combinederrors of individuals is the mastererror - a belief that such mistakescould be avoided if only the gov­ernment were in total control ofour lives. t)

IDEAS ON

LIBERTY

FREEDOM CAN WELL BE LOST to us through misinterpretation of

it. When we think it gives us the right to another man's harvest,

or entitles us to an honor we are unwilling to earn, we place our­

selves in a bondage that curtails our true growth in every way.

Through the privilege of choice our way is opened for us to

become what we will. The wise use of this faculty brings out the

best that is in us, and thereby places us in positions and circum­

stances that are compatible with our abilities and much to our

liking ... Freedom does not mean that each shall have the same

thing, or even express in the same way; for it is every man's

right to discover the path to his highest good. But how we use

this priceless heritage of choice decides what we become. True

freedom is· experienced as we· earn it through thought and deed.

LA VERNE BOWLESFrom the "Daily Guide to Richer Living" forSeptember 15, 1960, appearing in Science of Mind.

CLARENCE B. CARSON

THE

FOUNDING

OF

THE

AMERICAN

REPUBLIC

17Principles

of the Constitution

734

THE QUESTIONS at issue in the con­stitutional convention were rarely,if ever, philosophical in nature.The men gathered at Philadelphiain 1787 were practical men, by andlarge, going about the practicalbusiness of proposing how powerwould be disposed, arrayed, anddistributed in the United States.Nor is the Constitution a treatiseon philosophy; except for the pre­amble, the document deals exclu­sively with the practical and themundane. Nonetheless, the debateswere informed by principles, asremarks and occasional flights oforatory indicate, and the Consti­tution is based on high principles,which we may know both fromanalysis and an examination ofthe apologies for it.

These principles follow, if notinevitably then naturally enough,from the Founders' understandingof human nature. The same humannature which made governmentnecessary, they thought, made cer­tain principles appropriate to itand essential if it was to endurefor any extended time. Govern­ment is made necessary becauseman is not perfect. James Madisonput the matter succinctly:

If men were angels, no government

Dr. Carson recently has joined the faculty ofHillsdale College in Michigan as Chairman ofthe Department of History. He is a noted lec­turer and author, his latest book entitledThrottling the Railroads.

1972 PRINCIPLES OF THE CONSTITUTION 735

would be necessary. If angels were togovern men, neither external nor in­ternal controls on government wouldbe necessary,!

Obviously, Madison thought menare not angels; on the contrary,man is a flawed being, needingrestraints whether he belongsamong the governed or the gov­ernors at any particular time.

Human Nature Is Suspect

There is no indication that anyof the other Founders thoughtotherwise. Alexander Hamilton de­clared that "men are ambitious,vindictive, and rapacious." 0) Norcould he see that human ~aturewas more dependable because thebeings involved lived in republicsrather than under monarchs:

Has it not ... invariably beenfound that momentary passions, andimmediate interests, have a more ac­tive and imperious control over hu­man conduct than general or remoteconsiderations of policy, utility, orjustice? Have republics in practicebeen less addicted to war than mon­archies? Are not the former admin­istered by men as well as the latter?Are there not aversions, predilec­tions, rivalships, and desires of un­just acquisitions that affect nationsas well as kings? Are not popularassemblies frequently subject to theimpulses of rage, resentment, jeal­ousy, avarice, and of other irregularand violent propensities?3

Hamilton's low estimate of humannature is well known, but thegentle spoken Benjamin Franklindid not rate it much higher. Hedeclared that when you "assemblea number of men to have the ad­vantage of their joint wisdom, youinevitably assemble with thosemen, all their prejudices, theirpassions, their errors of opinion,their local interests, and theirselfish views." He predicted thatthe government they were provid­ing for in the convention "can onlyend in Despotism, as other formshave done before it, when the peo­ple shall become so corrupted asto need despotic Governmentbeing incapable of any other."4 Afair interpretation of this latterstatement would be that man hasan ingrained downward bent. Thepolitical implications were spelledout by Madison in this way: "Inframing a government which is tobe administered by men over menthe great difficulty lies in this: YO~must first enable the governmentto control the governed; and inthe next place oblige it to controlitself.";'

Capable of Reason

It does not do j llstice to theFounders' conception of humannature simply to emphasize theflawed side. Man is a rational ani­mal, they thought, i. e., capable of

736 THE FREEMAN December

reason. He loves liberty, and needsit for the fulfillment of his pos­sibilities. He is self-interested­a trait that can be turned to gooduse - but he is also capable ofconceiving a general interestwhich embraces others as well ashimself. He is an active, responsi­ble being, capable of invention,construction, concern, and whatgoes by the name now of crea­tivity. Put power in his hands overothers, however, and he must becarefully watched..This was thecornerstone of their political faith.

With these views of human na­ture, the Founders combined anunusual mixture of hope and resig­nation about the government theywere contemplating, hope that theycould contrive a system that wouldbe lasting but resigned to thelikelihood that it would foundersooner or later on the· shoals ofthe lust for power of those whogoverned and the bent to corrup­tion of the governed. Many of thedebates of the convention hoveredaround the question of whethertoo much or two little power wasbeing conferred and whether thosewho would exercise it would havesufficient leeway to act energeti­cally or be sufficiently restrainedto prevent arbitrary and despoticaction. The debates reflected theseconcerns; the Constitution em­bodied their conclusions. The con­vention was the forge; the Consti-

tution was the finished and tem­pered metal. The following are itsmost salient principles:

) . federal System of Government

The federal system of govern­ment, as we know it, was inventedat Philadelphia in 1787. Diction­aries, encyclopedias, and textbooksnow define a "federal government"as one in which there is a divisionof powers between a general gov­ernment, on the one hand, andlocal (or state) governments, onthe other, both governments hav­ing jurisdictions over the citizenrywithin their bounds. A confedera­tion is now held to differ from thisarrangement in that under it theindividual states retain the soleauthority to use force on individ­uals. No such distinction appearsto have existed in 1787. The onlyperceivahle distinction was agrammatical one. "Confederation"was the noun form used to de­scribe the organization of thestates into a unit. "Federal" wasthe adjective form of the word"confederation." For example,Richard Henry Lee, who was op­posing ratification of the Consti­tution, said that the "object hasbeen all along to reform our fed­eral system. ~ . ."6 He could onlyhave been referring to the systemunder the Articles of Confedera­tion as "federal." In adjoiningsentences, Hamilton employed the

1972 PRINCIPLES OF THE CONSTITUTION 737

words as if interchangeable inmeaning. 7 Initially in the conven­tion, those who favored a generalgovernment with sanctions re­ferred to it as "national." Theydid not, however, get the systemthey had .. conceived, and in thecourse of the debates "national"had odium attached to it. Thosewho favored adoption of the Con­stitution referred to themselves as"federalists," and to the govern­ment as a "federal" one, 8 in part,one suspects, to minimize the ex­tent. of the innovation. Clearly,what they had wrought was not aconfederation, and it came to becalled a :'federal" government.

I t made sense, once the Amer­ican system had been devised, touse the words "federal" and "con­federation" to call attention tostructural differences in systems,but this development in languagehas tended to obscure the inven­tion that took place. Occasionally,however, it has been pointed out.A present-day writer notes thatthe "United States is regarded bymany students as the archetype ofa federal system. . . . Even gen­eral definitions of the term seemto derive from the Americanmodel."o James Madison wroteone passage, too, in which hecalled attention to the new char­acter of what they. had devised:

The proposed Constitution ... is, in

strictness, neither a national nor afederal Constitution, but a composi­tion of both. In its foundation it isfederal, not· national; in the sourcesfrom which the ordinary powers ofthe government are drawn, it ispartly federal and partly national;in the operation of these powers,it is national not federal; in theextent of them, again, it is fed­eral, not national; and, finally inthe authoritative mode of introduc­ing amendments, it is neither whollyfederal nor wholly nationa1.10

It is a brilliant description of thecomplex arrangements in the Con­stitution, but, unfortunately,Madison is speaking in an un­known tongue so far as present­day Americans are concerned. Notonly did the distinction between"federal" and "confederation" takeplace, but in contemporary usage"federal" is employed almost ex­clusively to refer to the generalgovernment and has, thus, becomea synonym of "national." Whereas,Madison used "federal" to referto those things in the Constitu­tion in which the states retainedtheir force and vigor.

At any rate, the main feature ofthe federal system of governmentis that the power of governmentwas divided between the generalgovernment and the state govern­ments. Such a division has theappearance of being a division ofsovereignty, something which poli­tical theorists have said could not

738 THE FREEMAN December

be done. The Founders disposedof the theoretical problem byignoring it in that they did notvest any such absolute authorityas is described by sovereignty inany government. A political scien­tist has put the matter correctlyin this discussion of the Americangovernment: "Sovereignty, in theclassic sense, has no meaning;divided as power is, the elementof absoluteness which is essentialto the concept of sovereignty isnot present."ll The Constitutionacknowledges the existence of thestates and vests some of thepowers of government in theUnited States. Power is dispersedrather than concentrated, and eachof the co-ordinate (not levels of)governments has its own jurisdic­tion.

The Role of the States

Both the general and the stategovernments are independent ofeach other to a degree but are alsodependent on one another. Theserelationships are provided for byintricate arrangements. All elec­tions take place within states andunder their auspices. The Consti­tution was only to go into effectafter the ratification by conven­tions held state by state. The se­lection of the personnel for thebranches of the general govern­ment involved the states to greateror lesser degree depending upon

the office involved. The House ofRepresentatives was to be com­posed of members chosen fromdistricts within states, and thenumber allotted to each state wasto be based on population. Eachstate, on the other hand, has twoSenators, providing for an equal­ity of the representation of statesin the upper house. This wasworked out in what is sometimescalled the Great Compromise ofthe convention, or the ConnecticutCompromise. The President isselected by an electoral college,each state having as many electorsas it has Representatives and Sen­ators. The members of the courtswere to be appointed by the Presi­dent with the advice and consentof the Senate. The Senate was alsogiven major powers in the ap­proval of other appointments andin treaty making. The states re­tained a large role both becauseof the pre-eminence of the Senateand that everything having to dowith popular election is done byand within states.

The general government wasclearly given control over the mas­sive use of force and the stateswere left with the preponderantauthority to use force ordinarily.The general government is author­ized to raise and maintain armedforces and may call into action un­der its authority any state mili­tary force. Laws made in pursu-

1972 PRINCIPLES OF THE CONSTITUTION 739

ance of the Constitution are de­dared to be the supreme law ofthe land. The states retained mostpolice powers, courts dealing withmost civil and criminal matters,and much that has to do with theprotection of life, liberty, andproperty. The general governmentis charged with protecting thestates from foreign invasion andfrom one another. The line be­tween the powers of the states andthose of the general governmentwas not marked by great detail;it was, no doubt, expected thatthey would contend with one an­other over various jurisdictionsand thus limit one another. Suchcontentions were expected to coun­ter-balance the extensive use ofpower by any government.

To say that federalism was anAmerican invention is not to im­ply that it sprang from the headof Zeus fully clothed at Philadel­phia in that summer. Actually, theFounders were encompassing atradition when they devised thefederal system. There were ele­ments of federalism in the Britishcolonial system. Each colony hadits own government to deal withlocal matters. The British govern­ment exercised the type of powersover the colonies that were now tobe vested in the general govern­ment. Moreover, the Congress un­der the Articles of Confederationhad much of the authority which

was now vested in the generalgovernment, even if it lacked thepower for the full exercise of it.Most of the innovation was in thewresting of a pattern from an im­perial system and installing it ina republican setting.

2. Republican Form of Government

There are two basic require­ments which must be met if agovernment is to be styled a re­public: (1) it must be popular inorigin, Le., draw its authorityfrom an extensive electorate; and(2) power must be exercised byrepresentatives. It is distinguishedfrom an· hereditary monarchy inthat it is based on popular elec­tion and from democracy in thatpower is wielded by representa­tives. Those who favored the newConstitution took pains to showthat the government it providedfor was republican in character.

James Madison showed that itspowers were derived from the peo­ple by this explanation:

The House of Representatives, likethat of one branch at least of all theState legislatures, is elected immedi­ately by the great body of the people.The Senate, like the. Present Con­gress and the Senate of Maryland,derives its appointment indirectlyfrom the people. [The Senate waschosen by state legislatures until theratification of the 17th Amendment.]The President is indirectly derivedfrom the choice of the people, accord-

740 THE FREEMAN December

ing to the example in most of theStates. Even the judges, with all otherofficers of the Union, will, as in theseveral States, be the choice, thougha remote choice, of the people them­selves.12

As they understood the differ­ence between a republic and a de­mocracy, it was a republic, not ademocracy. Though it was basedon the people, the people actedthrough representatives. Populardecision went through a series offiltrations, as Madison put it, be­fore it became government action.

The United States was not amonarchy, and safeguards wereintroduced to prevent its becom­ing one, as Madison said:

Could any further proof be requiredof the republican complexion of thissystem, the most decisive one mightbe found in its absolute prohibition oftitles of nobility, both under the fed­eral and State governments; and inits express guaranty of the republi­can to each of the latter.l3

3. Separation and Balance 01 Powers

If there was one principle uponwhich the Founders were agreedmore than any other it was thatof the separation of powers. Mon­tesquieu had taught them that itwas a requisite of good govern­ment. Both they and Montesquieu

knew the separation of powers inprinciple from the British ex­ample. State governments alreadyincorporated the principle, how­ever imperfectly. Once it was de­cided that the power to coerceindividuals would be lodged in theUnited States government therewas little doubt that a system ofchecks and balances must be lq­cated in the system. If the indi­vidual could be coerced by it thenthe government must be re­strained by checks and balances.

For this to be done, there mustbe several branches to limit oneanother. The branches, as con­stituted, made it a mixed govern­ment.· This idea is not so wellknown anymore, for it comes fromclassical theory, which no longeris the basis of our studies as itwas for the Founders. The ideais that there are three possiblepure modes of rule: they are,monarchy, aristocracy, and democ­racy. In this sense, neither theUnited States nor the states havea pure form of government; theyare, instead, mixed. In the UnitedStates government, the Presidentis based on the monarchical prin­ciple, the Senate the aristocratic,and the House the democratic(both because it has more mem-bers and is directly elected). Itwas not monarchy,aristocracy, ordemocracy, but rather drawn from

1972 PRINCIPLES OF THE CONSTITUTION 741

principles of each of them as aform, Le., from rule by one, ruleby a few, and rule by the many.

The Founders had considerabledifficulty devising a mixed gov­ernment from a constituencywhich contained no fixed classes.As they saw it, it was very im­portant that each of the branchesbe distinct from the other in themanner of its selection. A mixedgovernment was desirable, in thefirst place, because there were dif­fering functions of governmentwhich could best be entrusted toone, to a few, or to many. But, ifthe functions were best performedin this way, the division shouldnot be watered down by having allthe branches chosen by the sameelectorate. Perhaps it would bemost accurate to say that theypartially solved the problem. Themembers of the House were di­rectly elected, and the number ofthem apportioned according topopulation. The Senate was to beelected by the state legislatures.This was natural enough and didbase the choice on two differentrealities. But they never hit uponany comparable reality from whichthe President could be chosen.Having him elected by an electoralcollege was an artificial expedientwhich, while it did give him anindependent basis of selection, didnot provide him with one that wasorganic to the country.

Three Branches of Government

There was much talk in theconvention of making each of thebranches independent of the other,and much was done to achieve thisprinciple. The branches were· notonly given different sources ofelection but also were providedprotections from one another. Thehouses of Congress make theirown rules, are judges of the elec­tions of their members, and joint­ly set their pay. They have a con­stitutionally established regulartime of meeting, and may adjournby agreement one house with theother. The President can protecthimself by the use of the veto andby his powers of patronage. More­over, he is commander-in-chief ofthe armed forces as well as havingat his disposal the Federal con­stabulary. The members of thecourts are to be paid according toa regular schedule, their salariesnot to be reduced during theirtenure, which is for life or duringgood behavior.

But there is no denying that thebranches are also interdependentand entwined in their operation.All legislation must pass bothhouses of Congress on the way tobecoming law. Even appropria­tions, which must originate in theHouse, must still pass the Senatebefore they can go into effect. ThePresident can veto acts of theCongress; in which case, such an

742 THE FREEMAN December

act can only become law by beingpassed by at least two-thirds ma­jorities in each of the houses. ThePresident and the Senate are par­ticularly entwined in the appoin­tive and treaty making powe'lts,.,Amendments to the: Constitutionnot only regularly involve bothhouses of the Congress but thestate legislatures as well. The ef­fect of all thi.s interdependence isto require government by a con­sensus of the branches and, inthe case of constitutional amend­ments, of the states also. Themore important the decision, thebroader the base for its approvalmust be for it to be put intoeffect.

4. Limited Government

The crowning principle of theConstitution is limited govern­ment, for all the other principlestend toward and are caught up inthis one. The federal system ofgovernment, the republican formof government, the principle ofseparation all place procedural lim­its on the powers of the govern­ments. The independence of thebranches, one of another, and ofthe state and general governmentsprovides them with a base fromwhich to check and limit oneanother. Their interdependencemakes the concurrence of branch­es and governments necessary foraction to be taken.

The Constitution provided notonly for procedural limits on gov­ernments but for substantive onesas well. One way in which the gen­eral government is substantivelylimited is by enumerating its pow­ers. This is done most directly insetting forth the legislative pow­ers of the government, which pow­ers are all vested in the Congress.They are contained in Section 8of Article I, and read, in part, asfollows:

The Congress shall have Power tolay and collect Taxes....

To borrow Money on the credit ofthe United States;

To regulate Commerce with foreignNations, and among the severalStates, and with the Indian Tribes;

To establish an uniform Rule ofNaturalization .

To coin money .To establish Post Offices and post

Roads; ....To declare War, grant Letters of

Marque and Reprisal, and make Rulesconcerning Captures on Land andWater....

To have placed all legislative au­thority in the Congress was alimitation on the other branches.To have enumerated the powersimplied that those not listed werenot included. Discussions withinthe convention bear this out. Forexample, the question was raisedas to whether or not the general

1972 PRINCIPLES OF THE CONSTITUTION 743

government ought to be grantedthe authority to construct canals.The idea was rejected on theground that this would involve thegeneral government in projectswhich would be mainly beneficialto the people of particular states.The point, however, is that theywere operating on the assumptionthere that if the power were notlisted it was not granted.

But it is not necessary to con­clude only from the enumeratedpowers that the general govern­ment is limited by the Constitu­tion. There are specific limitationscontained in it. The Constitutionrequired that all direct taxes beapportioned on the basis of popu­lation. (This prohibition was laterremoved by the 16th Amendment.)Other taxes must be levied uni­formly throughout the UnitedStates. All taxation must be forthe common defense and generalwelfare of the United States,which should be conceived as amajor limitation. Specific restric­tions on the general governmentare listed in Section 9 of Article I,of which the following is a partiallist:

The Privilege of the Writ of Ha­beas Corpus shall not be suspended,unless when in Cases of Rebellion orInvasion the public Safety may re­quire it.

NoBill of Attainder or ex postfacto Law shall be passed....

No Tax or Duty shall be laid onArticles exported from any State....

No Money shall be drawn from theTreasury, but in Consequence of Ap­propriations made by Law....

No Title of Nobility shall begranted by the United States.

State governments were alsolimited in the Constitution in sev­eral ways (Section 10, Article I).The following is an example:

No State shall enter into anyTreaty, Alliance, or Confederation,grant Letters of Marque and Re­prisal; coin Money, emit Bills ofCredit; make any thing but gold andsilver Coin a Tender in Payment ofDebts; pass any Bill of Attainder orex post facto Law, or Law impairingthe Obligation of Contracts, or grantany Title of Nobility.

Some delegates to the conven­tion were heartily in favor of aspecific prohibition being placedin the Constitution against theUnited States government emit­ting bills of credit (Le., issuingpaper money). Others said thatoccasions might arise, such asduring the late war, when the is­suance of paper money might benecessary. The upshot was a silentcompromise. Congress is not au­thorized to emit bills of credit, butneither is it specifically prohibitedto do so. (The going assumption,however, was that if it was notgranted it was prohibited.)

744 THE FREEMAN December

Curbing the Majority

The other main limitation inthe Constitution was the tacitlimitation on the powers of thepeople. There was much concernexpressed both in the constitu­tional convention and in the stateratifying conventions about limitson the people. The Founders per­ceived that a majority may betyrannical; it may work its wayso as to intrude on the rights ofindividuals, which rights wereconsidered to be the premier ones.Alexander Hamilton said: "Thevoice of the people has been saidto be the voice of God; and, how­ever generally this· maxim hasbeen quoted and believed, it is nottrue to fact. The people are turbu­lent and changing; they seldomjudge or determine right."14 MosesAmes, speaking in the Massa­chusetts convention which wasconsidering the ratification of theConstitution, said: "It has beensaid that a pure democracy is thebest government for a small peo­ple who assemble in person.... Itmay be of some use in this argu­ment ... to consider, that it wouldbe very burdensome, subject to fac­tion and violence; decisions wouldoften be made by surprise, in theprecipitancy of passion, by menwho either understand nothing orcare nothing about the subject; orby interested· men, or those whovote for their own indemnity. It

would be a government not bylaws, but by men."15 James Madi­son declared that "on a candidexamination of history. we shallfind that turbulence, violence, andabuse of power, by the majoritytrampling on the rights of theminority, have produced factionsand commotions, which, in repub­lics, have more frequently thanany other cause, produced despo­tism."16

The people were limited by theoriginal Constitution in that theycould act only through represent­atives, that except for the Houseof Representatives the brancheswere indirectly chosen, and thatthe courts were most remote frompopular control. Both the govern­ment and the people are limited bythe vesting of effective negativepowers on any legislation in eachof the houses, of a veto in thePresident, and the establishmentof a Supreme Court which, it wasunderstood, would have a finalnegative. Positive action requiresa concurrence of the branches;while several of them have thepower of negation. The directpower of the people is also limited'by the staggering of the terms ofoffices. The House of Representa­tives is chosen every two years.The terms of Senators are for sixyears, and approximately one-thirdof them are chosen every twoyearS. The President's term is for

1972 PRINCIPLES OF THE CONSTITUTION 745

four years, and the members ofthe courts serve during good be­havior. This provided both forstability in the government and asafeguard against the people'sworking their will over the gov­ernment while they were underthe sway of some temporarypassion.

5. The Transformation of Empire.

One of the least appreciatedprinciples of the Constitution isthat contained in the provisionwhich makes it possible to dis­solve an empire periodically byadding new states to the union.The United States had an empirefrom the beginning; indeed, writ­ers and speakers frequently re­ferred to the United States as anempire. At the least, however, theUnited States had a vast territorywest of the Appalachians and tothe north and west of existingstates. It was of considerable in­terest at the convention what pro­vision should be made for thefuture of this territory. Should itbe carved into provinces which,when anyone of them becamepopulous enough,_ would be ad.,.mitted on equal terms with theolder states. Gouverneur Morris,among others, argued vigorouslythat this should not be the case.He feared that in time the west­ern states would outnumber theeastern states; "he wished there-

fore to put it in the power of thelatter to keep a majority of votesin their own hands." He summedup his case in this way: "Thebusy haunts of men not the remotewilderness are the proper schoolof political talents. If the Westernpeople get the power into theirhands, they will ruin the Atlanticinterests. The back members arealways averse to the best meas­ures."17

On this occasion, however, Mor­ris was outpointed by the leadersof the Virginia delegation. GeorgeMason said: "If the WesternStates are to be admitted into theUnion, they must be treated asequals and subjected to no degrad­ing discriminations. They willhave the same pride and otherpassions which we have, and willeither' not unite with or willspeedily revolt from the Union, ifthey are not in all respects placedon an equal footing with theirbrethern." Edmund Randolph de­clared that it was entirely "inad­missible that a larger and morepopulous district of Americashould hereafter have less repre­sentation than a smaller and lesspopulous district." Madison joinedin the colloquy by saying that"with regard to the WesternStates he was clear that no un­favorable distinctions were admis­sible, either in point of justice orpolicy."IS

746 THE FREEMAN December

The Constitution simply statesthat "New States may be admit­ted by the Congress into this Un­ion ...", followed by some protec­tions of the territory within exist­ing states. The manner of provid­ing for representation, however,assured that new states would beon a par with the original thirteenwhen they came into the union.The effect of this has been thedissolution of empire by the ad­mission of new states. In short,the Constitution provided for thetransformation of empire intostates which joined the union asfullfledged members of an expand­ing United States.

The state delegations presentand voting in the convention atits close gave unanimous approvalto the Constitution. Only a veryfew individuals refused to signthe handiwork of the convention.The document was submitted tothe Congress, from whom it wasto go to the states which wereasked to hold ratifyingconven­tions. As the signing was takingplace, Benjamin Franklin madethe last public remarks recordedfor the convention. James Madi­son. described them this way:

Whilst the last members were sign­ing it Doctor Franklin looking towardthe President's Chair, at the back ofwhich a ... sun happened to be paint­ed, observed to a few members nearhim, that Painters had found it diffi-

cult to distinguish in their art a ris­ing fron1 a setting sun. I have, saidhe, often and often in the course ofthe Session, and the vicisitudes of myhopes and fears as to its issue, lookedat that behind the President withoutbeing able to tell whether is was ris­ing or setting: But now at length Ihave the happiness to know that it isa rising and not a setting sun.!D

All who would having signed,the convention adjourned sine die.

~Next: The Bill of Rights.

• FOOTNOTES •1 James Madison, Alexander Hamilton,

and John Jay, The Federalist Papers(New Rochelle: Arlington House, n. d.),p. 322. Hereinafter referred to as TheFederalist.

:! Ibid., p. 54.:{ Ibid., p. 56.4, James Madison, Notes of Debates in

the Federal Convention of 1787, AdrienneKoch, intro. (Athens, Ohio: Ohio Univer­sity Press, 1966), p. 653.

3 The Federalist, p. 322.6 Richard W. Leopold, et al, eds.,

ProbleTfLs in American History (Engle­wood Cliffs: Prentice-Hall, 1966), p. 134.

7 The Federalist, p. 114.8 See Hamilton's argument in The Fed··

eralist #9, for example.n Richard H. Leach, American Federal-

ism (New York: Norton, 1970), p. 2.10 The Federalist, p. 246.11 Leach, op. cit., p. l.I~ The Federalist, p. 242.13 Ibid.14 Elliot's Debates, Bk. I, Vol. 1, p. 422.13 Ibid., Vol. 2, p. 8.Hi Ibid., Vol. 3, p. 87.17 Charles Warren, The Making of the

Constitution (New York: Barnes andNoble, 1937), p. 594.

18 Ibid., pp. 594-95.In Madison, Notes, p. 659.

APerfect Systenl of Government?LUDWIG VON MISES

THE "SOCIAL ENGINEER" is the re­former who is prepared to "liqui­date" all those who do not fit intohis plan for the arrangement ofhuman affairs. Yet historians andsometimes even victims whom heputs to death are not averse tofinding some extenuating circum­stances for his massacres orplanned massacres by pointing outthat he was ultimately motivatedby a noble ambition: he wanted toestablish the perfect state of man­kind. They assign to him a placein the long line of the designersof utopian schemes.

Now it is certainly folly to ex­cuse in this way the mass murdersof such sadistic gangsters asStalin and Hitler. But there is nodoubt that many of the mostbloody "liquidators" were guidedby the ideas that inspired fromtime immemorial the attempts ofphilosophers to meditate on a per­fect constitution. Having oncehatched out the design of such an

Dr. Mises needs no introduction to Freemanreaders. This article is reprinted by permissionfrom The Ultimate Foundation of EconomicScience (Princeton, New Jersey: Van Nostrand,1962) pp. 94-101, now out of print.

ideal order, the author is in searchof the man who would establish itby suppressing the opposition ofall those who disagree. In thisvein, Plato was anxious to find atyrant who would use his powerfor the realization of the Platonicideal state. The question whetherother people would like or dislikewhat he himself had in store forthem never occurred to Plato. Itwas an understood thing for himthat the king who turned philos­opher or the philosopher who be­came king was alone entitled to actand that all other people had, with­out a will of their own, to submitto his orders. Seen from the pointof view of the philosopher who isfirmly convinced of his own infalli­bility, all dissenters appear merelyas stubborn rebels resisting whatwill benefit them.

The experience provided by his­tory, especially by that of the lasttwo hundred years, has not shakenthis belief in salvation by tyrannyand the liquidation of dissenters.Many of our contemporaries arefirmly convinced that what isneeded to render all human affairs

'1L1'1

748 THE FREEMAN December

perfectly satisfactory is brutalsuppression of all "bad" people,Le., of those with whom they dis­agree. They dream of a perfectsystem of government that - asthey think - would have alreadylong since been realized if these"bad" men, guided by stupidityand selfishness, had not hinderedits establishment.

A modern, allegedly scientificschool of reformers rejects theseviolent measures and puts theblame for all that is found want­ing in human conditions upon thealleged failure of what is called"political science." The naturalsciences, they say, have advancedconsiderably in the last centuries,and technology provides us almostmonthly with new instrumentsthat render life more agreeable.But "political progress has beennil." The reason is that "politicalscience stood still."l Political sci­ence ought to adopt the methodsof the natural sciences; it shouldno longer waste its time in merespeculations, but should study the"facts." For, as in the natural sci­ences, the "facts are needed beforethe theory."2

One can hardly misconstruemore lamentably every aspect ofhuman conditions. Restricting ourcriticism to the epistemological

1 N. C. Parkinson, The Evolution ofPolitical Thought (Boston, 1958), p. 306.

2 Ibid., p. 309.

problems involved, we have to say:What is today called "political sci­ence" is that branch of historythat deals with the history of poli­tical institutions and with the his­tory of political thought as mani­fested in the writings of authorswho disserted about political insti­tutions and sketched plans fortheir alteration. It is history, andcan as such never provide any"facts" in the sense in which thisterm is used in the experimentalnatural sciences. There is no needto urge the political scientists toassemble all facts from the remotepast and from recent history,falsely labelled "present experi­ence."3 Actually they do all thatcan be done in this regard. And itis nonsensical to tell them thatconclusions derived from this ma­terial ought "to be tested by ex­periments."4 It is supererogatoryto repeat that the sciences of hu­man action cannot make any ex­periments....

That every human action has tobe judged and is judged by itsfruits or results is an old truism.It is a principle with regard towhich the Gospels agree with theoften badly misunderstood teach­ings of the utilitarian philosophy.But the crux is that people widelydiffer from one another in theirappraisal of the results. What

o I bid., p. 314.4 Ibid.

1972 A PERFECT SYSTEM OF GOVERNMENT? 749

some consider as good or best isoften passionately rejected byothers as entirely bad. The uto­pians did not bother to tell us whatarrangement of affairs of statewould best satisfy their fellowcitizens. They merely expounded

'what conditions of the rest ofmankind would be most satisfac­tory to themselves. Neither tothem nor to their adepts who triedto realize their schemes did it everoccur that there is a fundamentaldifference between these twothings. The Soviet dictators andtheir retinue think that all is goodin Russia as long as they them­selves are satisfied.

But even if for the sake of argu­ment we put aside this issue, wehave to emphasize that the conceptof the perfect system of govern­ment is fallacious and self-con­tradictory.

The Human Condition

What elevates man above allother animals is the cognition thatpeaceful cooperation under theprinciple of the division of laboris a better method to preserve lifeand to remove felt uneasiness thanindulging in pitiless biologicalcompetition for a share in thescarce means of subsistence pro­vided by nature. Guided by thisinsight, man alone among all livingbeings consciously aims at substi­tuting social cooperation for what

philosophers have called the stateof nature or bellum omnium contraomnes or the law of the jungle.However, in order to preservepeace, it is, as human beings are,indispensable to be ready to repelby violence any aggression, be iton the part of domestic gangstersor on the part of external foes.Thus, peaceful human cooperation,the prerequisite of prosperity andcivilization, cannot exist withouta social apparatus of coercion andcompulsion, i.e., without a govern­ment. The evils of violence, rob­bery, and murder can be preventedonly by an institution that itself,whenever needed, resorts to thevery methods of acting for theprevention of which it is estab­lished. There emerges a distinctionbetween illegal employment of vio­lence and the legitimate recourseto it. In cognizance of this factsome people have called govern­rnent an evil, although admittingthat it is a necessary evil. How­ever, what is required to attain anend sought and considered as bene­ficial is not an evil in the moralconnotation of this term, but ameans, the price to be paid for it.Yet the fact remains that actionsthat are deemed highly objection­able and criminal when perpe­trated by "unauthorized" indi.,.viduals are approved when com­mitted by the "authorities."

Government as such is not only

750 THE FREEMAN December

not an evil, but the most necessaryand beneficial institution, as with­out it no lasting social cooperationand no civilization could be devel­oped and preserved. It is a meansto cope with an inherent imper­fection of many, perhaps of themajority of all people. If all menwere able to realize that the alter­native to peaceful social coopera­tion is the renunciation of all thatdistinguishes Homo sapiens fromthe beasts of prey, and if all hadthe moral strength always to actaccordingly, there would not beany need for the establishment ofa social apparatus of coercion andoppression. Not the state is an evil,but the shortcomings of the hu­man mind and character thatimperatively require the operationof a police power. Government andstate can never be perfect becausethey owe their ra,ison d'etre to theimperfection of man and can at­tain their end, the elimination ofman's innate impulse to violence,only by recourse to violence, thevery thing they are called upon toprevent.

The Fight for Liberty

It is a double-edged makeshiftto entrust an individual or a groupof individuals with the authorityto resort to violence. The entice­ment implied is too tempting fora human being. The men who areto protect the community against

violent aggression easily turn intothe most dangerous aggressors.They transgress their mandate.They misuse their power for theoppression of those whom they\vere expected to defend againstoppression. The main politicalproblem is how to prevent thepolice power from becoming tyran­nical. This is the meaning of allthe struggles for liberty. The es­sential characteristic of Westerncivilization that distinguishes itfrom the arrested and petrifiedcivilizations of the East was andis its concern for freedom fromthe state. The history of the West,from the age of the Greek citystate down to the present-day re­sistance to socialism, is essentiallythe history of the fight for libertyagainst the encroachments of theofficeholders.

A shallow-minded school of so­cial philosophers, the anarchists,chose to ignore the matter by sug­gesting a stateless organizationof mankind. They simply passedover the fact that men are notangels. They were too dull to real­ize that in the short run an in­dividual or a group of individualscan certainly further their owninterests at the expense of theirown and all other peoples' long-runinterests. A sQciety that is not pre­pared to thwart the attacks ofsuch asocial and short-sighted ag­gressors is helpless and at the

1972 A PERFECT SYSTEM OF GOVERNMENT? 751

mercy of its least intelligent andmost brutal members. While Platofounded his utopia on the hopethat a small group of perfectlywise and morally impeccable phi­losophers will be available for thesupreme conduct of affairs, an­archists implied that all men with­out any exception will be endowedwith perfect wisdom and moral im­peccability. They failed to con­ceive that no system of social co­operation can remove the dilemmabetween a man's or a group's in­terests in the short run and thosein the long run.

Man's atavistic propensity tobeat into submission all other peo­ple manifests itself clearly in thepopularity enjoyed by the socialistscheme. Socialism is totalitarian.The autocrat or the board of auto­crats alone is called upon to act.All other men will be deprived ofany discretio:q to choose and to aimat the ends chosen; opponents willbe liquidated. In approving of thisplan, every socialist tacitly impliesthat the dictators, those entrustedwith production management andall government functions, will pre­cisely comply with his own ideasabout what is desirable and whatundesirable. In deifying the state- if he is an orthodox Marxian,he calls it society - and in assign­ing to it unlimited power, he deifieshimself and aims at the violentsuppression of all those with whom

he disagrees. The socialist does notsee any problem in the conduct ofpolitical affairs because he caresonly for his own satisfaction anddoes not take into account the pos­sibility that a socialist governmentwould proceed in a way he doesnot like.

Lost in Details

The "political scientists" arefree from the illusions and self­deception that mar the judgmentof anarchists and socialists. Butbusy with the study of the im­mense historical material, theybecome preoccupied with detail,with the numberless instances ofpetty jealousy, envy, personal am­bition, and covetousness displayedby the actors on the political scene.They ascribe the failure of all poli­tical systems heretofore tried tothe moral and intellectual weak­ness of man. As they see it, thesesystems failed because their satis­factory functioning would haverequired men of moral and intel­lectual qualities only exceptionally

,present in reality. Starting fromthis doctrine, they tried to draftplans for a political order thatcould function automatically, as itwere, and would not be embroiledby the ineptitude and vices of men.The ideal constitution ought tosafeguard a blemishless conductof public affairs in spite of therulers' and the people's corruption

752 THE FREEMAN Decembeor

and inefficiency. Those searchingfor such a legal system did notindulge in the illusions of theutopian authors who assumed thatall men or at least a minority ofsuperior men are blameless andefficient. They gloried in their real­istic approach to the problem. Butthey never raised the question howmen tainted by all the shortcom­ings inherent in the human char­acter could be induced to submitvoluntarily to an order that wouldprevent them from giving vent totheir whims and fancies.

However, the main deficiency ofthis allegedly realistic approachto the problem is not this alone.It is to be seen in the illusion thatgovernment, an institution whoseessential function is the employ­ment of violence, could be oper­ated according to the principles ofmorality that condemn peremp­torily the recource to violence. Gov­ernment is beating into submis­sion,imprisoning, and killing.People may be prone to forget itbecause the law-abiding citizenmeekly submits to the orders ofthe authorities so as to avoid pun­ishment. But the jurists are morerealistic and call a law to whichno sanction is attached an im­perfect law. The authority of man­made law is entirely due to theweapons of the constables whoenforce obedience to its provi­sions. Nothing of what is to be

~aid about the necessity of gov­ernmental action and the benefitsderived from it can remove ormitigate the suffering of thosewho are languishing in prisons.No reform can render perfectlysatisfactory the operation of aninstitution the essential activity ofwhich consists in inflicting pain.

Responsibility for the failure todiscover a perfect system of gov­ernment does not rest with thealleged backwardness of what iscalled political science. If menwere perfect, there would not beany need for government. Withimperfect men no system of gov­ernment could function satisfac­torily.

The· eminence of man consistsin his power to choose ends andto resort to means for the attain­ment of the ends chosen; the ac­tivities of government aim at re­stricting this discretion of the in­dividuals. Every man aims atavoiding what causes him pain;the activities of government ulti­mately consist in the infliction ofpain. All. great achievements ofmankind were· the product of aspontaneous effort on the part ofindividuals; government substi­tutes coercion .for voluntary ac­tion. It is true, government is in­dispensable because men are notfaultless. But designed to copewith some aspects of human im­perfection,·it can never be perfect.

~

A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN

The Essential Paul Elmer More

ALONG toward the end of the Nine­teen Twenties, the philosophy ofhumanism - it was called the NewHumanism then, just to make itfashionable - had a short-lived re­vival in literary New York. TheNew Humanism set its face againstmost of the prevailing 'isms of theday, against humanitarianism, so­cialism, liberalism, anarchism,progressivism or whatever. Natur­ally its enemies vastly outnum­bered its friends, but for a briefperiod the New Humanism had itsmagazine outlets (Seward Collins'sBookman and, to a limited extent,Lincoln Kirstein's Hound andHorn). For one excited year Irv­ing Babbitt, the Harvard don whohad made an arch-devil out ofRousseau, and Paul Elmer More,a legendary figure who had beenliterary editor of The Nation be­fore World War I (what a differ­ent Nation it had been then!),were the subject of thousands of

arguments in Greenwich Village.Babbitt and More were the Oldand New Testaments of the NewHumanist movement, and as wesearched the texts (Babbitt'sRousseau and Romanticism andMore's Shelburne Essays) wefound horrifying things. One ofour group, C. Hartley Grattan, gotup a book, The Critique of Human­ism, to which we all contributedscornful papers. My own was adefense of the modern novelagainst New Humanist critics.

We hated Paul Elmer More witha special passion for his defenseof property. Had he not said that,"looking at the larger good ofsociety, we may say that the dollaris more than the man, and thatthe rights of property are moreimportant than the right to life"?(The italics were More's.) Morehad written the infuriating wordsin 1915 in response to SocialistMorris Hilquit's attack on the

754 THE FREEMAN December

Rockefellers for their alleged hir­ing of "criminals and thugs toshoot the strikers" in the coalfields of Colorado. Rememberingthe recent executions of Sacco andVanzetti, whom we considered vic­tims of the propertied classes ofMassachusetts, we could only con­clude that Paul Elmer More wasa cold-blooded enemy of humanitywho deserved all that he got in ournow-forgotten Critique of Human­ism.

New Wars to Wage in J929

The quarrel over the New H u­manism was at the height whenthe stock market crashed in 1929.But as the depression snowballed,with the bread lines lengthening,literary New York soon turned tomore immediate concerns. Babbittand More were forgotten; thenewer quarrels were over HowardScott's Technocracy, Rexford Tug­well's Brain Trusters and theStalin-Trotsky split in the SovietUnion. The intellectuals of theThirties went off in several soci­ological directions, some of themto work for writers' projects onthe WPA, and the big tempestover the New Humanism blew nomore. Since then the works ofPaul Elmer More have gone out ofprint, and only an occasional Rus­sell Kirk has seen fit to talk aboutMore as though he were a livingauthor.

The republication of a selectionfrom More's writings in The Es­sential Paul Elmer More, editedwith an introduction and notes byByron C. Lambert (ArlingtonHouse, $12.95), is an eye openerafter all these years. Rereadingthat once-hated essay by More indefense of property, I am struckby its subtlety. What seemed, in1929, to be a crass defense of richmen was actually nothing of thekind. More was championing therights of property not particularlybecause he cared for the Rockefell­ers, but because he believed thatthe right to life could not be se­cure if property were not itselfsecure. More had written his essaybefore Lenin had taken over inRussia and rendered life precari­ous for generations to come. Withtremendous foresight More ques­tioned that "community of owner­ship" would "eliminate the greedand injustice of civilized life." Hehad nothing to go on here beyondhis observation that socialistswere "notoriously quarrelsome"among themselves, yet he turnedout to be eminently correct. Look­ing back over the long past,. Morefound "a convincing uniformity inthe way in which wealth and civil­ization have always gone together,and in the fact that that wealthhas accumulated only when privateproperty was secure."

1972 THE ESSENTIAL PAUL ELMER MORE 755

In the Worker's Interest

It was in the interests of theworking men that More defendedthe property relations of the cap­italist order. He had noticed, hesaid, that nearly all that makeslife more significant to men thanit is to beasts is associated withpossessions. This is true "withproperty, all the way from thefood we share with the beasts, tothe most refined products of thehuman imagination." More wasnot sentimental about the workers,but he argued that those who werecareless about ownership wouldnot see to it that "labour shallreceive the recompense it has bar­gained for" and that "the labour­er, as every other man, shall besecure in the possession of whathe has received." As for the oldcanard that the desire for propertyencourages "materialism," Moresaid that the sure way to fosterthe spirit of materialism is tounsettle the material basis of so­cial life. "The mind," he argued,"will be free to enlarge itself inimmaterial interests only whenthat material basis is secure, andwithout a certain degree of suchsecurity a man must be anxiousover material things and prepon­derantly concerned with them."

All this, in 1972, sounds mostreasonable. What More was say­ing as far back as 1915 is that theproperty right is a human right,

and that a man without possess­ions is inevitably at the mercy ofothers, and especially at the mercyof the political bureaucrats whorun the State. In 1929 most of uswere too stupid to see the validityof More's reasoning.

Training for Civilization

In a foreword to ProfessorLambert's selections of "The Es­sential Paul Elmer More," RussellKirk writes that "if some of usare to fight our way to shore, weneed More's chart." The chart ishere, for the Lambert selectionsgive us More in all his catholicity.He was immensely learned inGreek, Latin, Sanskrit and severalmodern languages, yet he hatedthe pedantry that would shun ideasin order to concentrate on suchthings as linguistics and archae­ology. He thought Greek and Latinsupplied a good discipline, but anequally important reason forstudying the classics was to learnsomething about the rise and fallof civilizations. It was "a virilescholarship of ideas" that he wasafter.

More wrote long before we hada "counter-culture," or before themodern theory of "relevance" hadbeen elaborated. But his essay on"Natural Aristocracy" could standfor a good commentary on thecultural and educational trends ofthe Nineteen Sixties. Concentra-

756 THE FREEMAN December

tion on currently topical studies,he said, "results in isolating thestudent from the great inheritanceof the past; the frequent habit ofdragging him through the slumsof sociology, instead of makinghim at home in the society of thenoble dead, debauches his mindwith a flabby, or inflames it witha fanatic, humanitarianism. Hecomes out of college ... a nouveauintellectual, bearing the same re­lation to the man of genuine edu­cation as the nouveau riche to theman of inherited manners."

More, of course, had not heardabout "relevance." But he knewall about cant, and he had theanswer to the Sixties way back in1915.

ENTERPRISE DENIED: Originsof the Decline of American Rail­roads, 1897-1917 by Albro Martin(New York: Columbia UniversityPress, 1971, $10.95, 402 pp.)Reviewed by Joseph M. CanfieldAMERICA grew at a phenomenalrate during the first decade of thetwentieth century, and the rail­roads tried to expand to meet thechallenge. This era producedPennsylvania Station and GrandCentral Terminal in New Yorkand Union Station in Washington,conspicuous evidence of the desireof the railroads for expansion.Railroad buffs can show, fromtheir own photo collections, or

from the pages of a plethora ofpublished railroad histories, dra­matic evidence of the increase insize and power of locomotives inthis period. But rolling stock iseasy to acquire, even when capitalf or fixed way and structures isdifficult to obtain. President Elli­ott of the Northern Pacific Rail­way observed, in 1907, that theroads were "attempting to force athree inch stream through a oneinch nozzle." The congestion ofthe railroads was a harbinger ofthings to come.

The warning sounded by Elliottand other railroad leaders wasn'theeded. Martin declares, and dem­onstrates his point statistically,that the capital needed for expan­sion of the railroad plant was far,far short of what was needed tocope with expanding -traffic. Histable shows that the growth 'capi­tal available in certain years, be­fore World War I, came to aslittle as a fourth of the amountactually required to handle thetraffic being thrust upon the rail­roads.

In those "Golden Years" theprice index rose rapidly. Every­thing that the railroads boughtcost more. Labor demanded-andreceived - substantial -wage in­creases~. But under the regulatoryphilosophy prevailing, the rail­roads were not permitted to raiserates at all.

1972 OTHER BOOKS 757

Railroad regulation was basedon a philosophy, called by Martin"Archaic Progressivism." It hadseveral assumptions, all nowproved to be substantially invalid.One was that the railroads wereovercapitalized. This supposedlymade the shippers pay excessiverates in order to give the securityholders undeserved earnings. Thefallacy was ultimately exploded,as a result of the ICC ordered val­uation of the railroads, but· it isstill believed in many sectors ofthe community and still taught inmany schools.

Another fallacy was the conceptof a "reasonable rate." A freightrate is a price for moving goods,nothing more. Hopefully, it wouldpermit satisfactory recompense tothe carrier, covering the· cost ofservice and a return on invest­ment. At the same time it mustbe at a level that will permit goodsto move. Somehow, the Progress­ives in Congress - and elsewhere- believed in a concept of "reason­ableness" substantially independ­ent of market factors inherent inthe setting of any other price.This undefined and undefinableconcept buttressed the determina­tion of leaders in the "ProgressiveEra" to deny the railroads in­creases in rates.

Three times in the Roosevelt­Taft-Wilson period, the railroadswent to the Interstate Commerce

Commission for general across­the-board increases in freightrates. The chapters in which Mar­tin describes these exercises infutility are entitled, "The FirstDenial," "The Second Denial,""The Third Denial." The philoso­phy of the times, the prevailingpolitical climate, the laws creatingthe Commission and directing itsactivities doubtless left any otherkind of decision outside the realmof probability; the parties in­volved really didn't know how theeconomy worked. They appearedquite unaware of how tinkeringat one point in the economic sys­tem could produce unwanted re­sults in other areas. Even the rail­road officers, expert railroaders,were quite unaware ·of the ideasprevailing outside their own group- and how to contend with them.

"Defeat of the young by the oldand silly." This quotation fromone of Vachel Lindsay's poems ap""pears at the head of the chapter"Third Denial." The quotation isappropriate in view of the suc­ceeding generations which havehad to contend with inadequatetransportation. The men who"'starred" in that era in placingthe regulatory shackles on therailroads may well be described as"old" and/or "silly." Typicallythey were men whose thinking onrailroads had congealed in theconditions of the 1870's, with rem-

758 THE FREEMAN December

edies based on interpretationswhich probably weren't valid eventhen. They were men of advanc­ing years who clung to ideas whichhad lost contact with the realworld they were supposed to belegislating for.

Robert M. LaFollette foughtvaliantly as late as 1917 to pre­vent any rate increase. An in­crease didn't fit in with his ideasof Commission regulation. La­Follette's reputation was based onhis earlier career in Wisconsinwhere his Wisconsin RailroadCommission was considered amodel of the genre. Elsewhere ithas been shown that this Commis­sion came close to depriving Mil­waukee of both power and trans­portation a few years later.

Theodore Roosevelt's blockingof E. H. Harriman's control andrevitalization of the Alton Rail­road served only to provide first­rate publicity for an exceptionalcase of looting a railroad. And itkept the Alton from its full poten­tial in the railroad system untilafter World War II.

William Howard Taft succeededin alienating every shade of opin­ion on the railroad question. Buthe proudly took credit for theParcel Post Law. This forced therailroads to haul packages as mailat much lower rates than they hadreceived for similar packageswhen handled as express - not

very helpful when earnings werealready jeopardized and the roadsthirsting for capital.

Louis D. Brandeis, while sup­posedly protecting the "public,"played maj or roles in all three"Denials." In fact, he made thehearings pretty much his show.He cleverly trapped railroad offi­cials and twisted the effect of theirtestimony, while refutationsdidn't get the publicity his presen­tation received. He was on theSupreme Court when the Adam­son Act (8-hour railroad day)came before that body. He servedneither the railroads nor the pub­lic.

The 8-hour day crisis as it builtup under Wilson demonstrates thesilliness of the time, the age, themovement. Martin describes a dra­matic scene at the White Housewhere Wilson had summonedthirty railroad· presidents:

If the railroads would cooperate hewas willing to do all he could to getthe ICC to grant rate relief, pro­vided that the eight-hour commissionrecommended it. Pointing his fingerat the. railroad presidents, he de­clared, "If a strike comes, the publicwill know where the responsibilityrests. It will not be upon me."

The crisis had been forced uponthe railroads by denying themnormal economic freedom. Placingthe entire onus for a strike on therailroad presidents was not in ac-

1972 OTHER BOOKS 759

cord with the moral principles ofour American tradition. It wasreprehensible to order the rail­roads to increase their costs (byshortening the working day) with­out permitting commensurate rateincreases by grant of the Inter­state Commerce Commission. IfWilson could order the railroadmen, he could instruct the Com­mission. He didn't choose to giveequal treatment.

In the winter following Wilson's"salon," the nation paid dearly forthe maltreatment of its railroads.The incredible congestion at theports, the car shortages, the short­ages of necessities, the skyrocket­ing prices, the approach to civilrights were among the end resultsof following policies which did notallow the railroads to operate in afree market.

~ THE GROWTH OF ECONOMICTHOUGHT by Henry W. Spiegel(Englewood Cliffs, New Jersey:Prentice-Hall, 1971), 816 pp.,$12.95.

~ THE EVOLUTION OF ECO­NOMIC THOUGHT by W. E.Kuhn (2nd ed.; Cincinnati:Southwestern, 1970), 500 pp.,$10.20.

Reviewed by Gary North

THERE ARE a lot of textbooks trac­ing the development of economicthought. Too many of them, in

fact. Sometimes one of these canbecome a true classic, such asJoseph Schumpeter's History ofEconomic Analysis, but most ofthem gather dust on the shelves,for good reason. They are essen­tially reference books and torturesinflicted on undergraduate stu­dents.

The two books under review are,from the point of view of the freemarket position, quite serviceable.Spiegel's is more clearly a refer­ence book, going from school ofthought to school of thought,

. scholar by scholar. His is a sum­mary, a descriptive work, withvery little critical analysis. But hegives a fair presentation of theadvent of marginalism and thecontributions of the AustrianSchool. The book contains a superbannotated bibliography, 130 pageslong. It is a kind of miniature en­cyclopedia, and for quick refer­ence for refresher purposes, Spie­gel's is an ideal guide.

Kuhn's book is more technicaland analytical. In contrast to Spie­gel's brief sketches of the con­tributions of many economists,Kuhn has focused on key membersof various schools of thought, thusenabling him to present more com­plete descriptions of their con­tributions. The first half of thebook is arranged in terms of thevarious economic schools: "FromMenger to Bohm-Bawerk," "From

760 THE FREEMAN December

Marshall to Wicksell," "Keynes,"and so forth. The second half isdevoted to important areas of in­quiry, such as "Monetary andBanking Theory," "InternationalTrade Theory," and "Business Cy­cle Theory." At the end of eachchapter he adds a helpful bio­graphical section, although thesketches are brief.

By avoiding the pitfalls asso­ciated with any single form of or­ganization, whether purely chrono­logical, topical, or biographical,Kuhn has produced a textbookthat deals adequately with bothhistory and issues, people andideas. The careful student cancome away from the book with abetter chance of rememberingsome of the data jammed into thechapters.

So long as the reader under­stands the limitations on textbooks- that they should be used to in­troduce us to the key primarysources and to refresh our memo­ries once we have read the basicoriginal materials - an investmentin either or both books could payoff. Next time, you can look upthat seemingly obscure footnoteand find out why the author· both-

ered to make reference to somelong-dead economist. It will helpus to understand why Keynes saidthat the intellectuals and politi­cians of any era are quite likelyto be mouthing the phrases ofsome "academic scribbler of a fewyears back."

~ AN ECONOMIST'S PROTESTby Milton Friedman (22 Apple­ton Pl., GI en Ridge, N. J.:Thomas Horton & Co., 1972), 219pp., $2.95.

This paperback collection ofProf. Friedman's Newsweek col­umns is a handy. reference guidefor those who want a simplified,quick introduction to the author'scontroversial opinions. Sections on"Nixon Economics," "MonetaryPolicy," "A Volunteer Army," "So­cial Security and Welfare," "Gov­ernment and the Interests," and"Government and Education" pres­ent numerous articles that havebeen plaguing "liberals" over thepast six years. For example, thesection on "Monopoly" containsthree essays, two of which assailthe Post Office, and the third onecriticizes governmental regulationand state ownership in general. ~