Progress: the Flower of Freedom; L.E. Read

P th, A CORRESPONDENT from Pakistan asked: "How can one tell whether a nation is experiencing economic growth?" Really, a nation experi ences nothing; only individuals have experiences. So, if we would measure growth or progress, it must be with respect to the indi vidual human being, nota nation. I here lay myself open to an argument no less contentious than Galileo's when he affirmed that the solar system does not revolve around the earth. He was up against the established faith; I find myself up against Hegel, Comte, and others who have held that only society is real and that the individual is the abstraction. Today these philosophers have fol lowers by the millions - collectiv ists who have no inkling of the s m origin of their ideas - those who favor an intervening political ap paratus, the planned economy, the welfare state. Thus, the argument is between those on the one side who pose society, the nation, the overall economy as the prime unit and, on the other side, the small minority who insist that all meaningful com parisons in progress must be made in terms of the individual.

First, let us ask, how would a bureaucracy, with its numerous interventions in the market place, go about measuring economic progress? The task is greatly hampered by the fact that eco nomic calculation, which is founded on market data automat ically supplied in a system of free competitive pricing, is denied in 4 THE FREEMAN June socialism; it is impossible. 1 Lead ing communist "economists" con cede the point. 2 Yet, the inter ventionists are faced with deci sion-making. And in the absence of economic calculation, they have but one recourse: statistics! "Sta tistics are, in a crucial sense, criti cal to all interventionist and so cialistic acti vities of government. ... Only by statistics can the Federal government make even a fitful attempt to plan, regulate, control, or reform various indus tries - or impose central planning 1 Professor Ludwig von Mises is generally conceded to be the one who intellectually - though not politically demolished socialism. He did this by prov ing that economic calculation is utterly impossible under socialism. Were this not an elusive fact and extremely difficult to grasp, others would have discovered it be fore him. See pp. 131-142 in Socialism by Ludwig von Mises (New Haven: Yale University Press).

2 Aleksy Wakar and Janusz Zielinski, leading professors of the Central Plan ning School of Poland, astonishingly for socialists, say, "The best methods of pro ducing a given output cannot be chosen [by socialist methods of calculation] but are taken from outside the [socialist] system . . . i.e., methods of production used in the past, or so-called 'advanced' methods of production, usually taken from the practice of more advanced countries and used as data for plan-build ing by the [socialist] country under con sideration." (Italics mine). See The Jour nal of the American Economic Associa tion, March 1963. For a clear, brief, simple, and excellent explanation of economic calculation, see "Play Store Economics" by Dean Rus sell. THE FREEMAN, January 1964. and socialization on the entire economic system." 3 When Prices Are Established by Bureaucratic Edict When an economy is controlled by government, prices are not es tablished by competitive forces but by bureaucratic edict. Edicts are written, modified, repealed in accord with bureaucratic judg ments. Thus it is that they are compelled to form judgments from their readings of the statistical data they compile. While the ups and downs in e,mployment, stand ard of living, and many other data are contrived for their use, the usual statistic for measuring economic growth or progress is gross national product (GNP).

The GNP idea is subject to sev eral obvious flaws: • If I divorce my wife and hire her as a cook at $50 a week, the GNP will increase by $2,600 annually. How, pray tell, is there any economic growth or progress in that maneuver? • If the Defense Department spends $50 billion instead of $1 billion on war and its hardware, the GNP will rise by $49 billion. The larger ex penditure mayor may not in3 See "Statistics: Achilles' Heel of Government," by Murray N. Rothbard. THE FREEMAN, June 1961.

1966 PROGRESS - THE FLOWER OF FREEDOM 5 crease our security but, as suredly, it represents no eco nomic progress for you or me. We have a lower, not a higher, freedom of choice by reason of such outlays. To what economic use can a citi zen put a battleship, or a nu clear warhead, or a dead "enemy" ?4 • Were we to spend $40 billion to tear down New York City, the GNP would rise by that amount, the same as if we were to spend $40 billion to build a new city.5 • The dollars we pay farmers not to grow wheat, or peanuts or whatever, boost the GNP just as do the dollars paid farmers for things produced. • GNP - expressed in the mone tary unit - enlarges when ever the medium of exchange is diluted, that is, it gets big ger in an inflationary period. 6 4 This is not to deny that expenditures by government to keep the peace are use ful. Defense against destructive actions is to avoid losses; it is but a means to make progress possible; it is not in itself growth or progress or gain.

5 In Federal urban renewal, for in stance, expenditures for razing the old structures are as much included in GNP as are expenditures for constructing the new. 6 True, The Department of Commerce does publish a figure with a "deflator" (adjustment to a constant dollar) in its monthly Survey of Current Business. But this figure, far from flawless, is Contemplate what Germany's GNP would have been in 1923 when 30 million marks wouldn't buy a loaf of bread. What an inaccurate' device is GNP, the so-called measuring rod of economic progress employed by intervening governments and so heartily endorsed by many econ omists! No Better Guide Available Why, then, is GNP used at all? Probably there is no better statis tical guide available to an inter vening bureaucracy; that is, none more consistent with their gross economy - as distinguished from individualistic - assumptions. Further, they have come to be lieve that spending,· rather than productive effort, is the key to growth or progress. Were this true, then Germany achieved its peak of growth immediately prior to complete economic collapse. Were this true, we could experience enormous progress by the simple expedient of repealing all laws against counterfeiting! The fact is, exploding expenditures no more measure economic growth than does exploding population!

I repeat, GNP is purely an in vention and a device of an inter vening government and/or its innoted almost exclusively by professional economists and statisticians. It is the inflated figure that is "fed to the public."

6 THE FREEMAN June tellectual supporters. In an ideal free market society, with govern ment limited to invoking a com mon justice and keeping the peace, GNP is inconceivable. Try to find a GNP figure in Hong Kong, the nearest approach to a free economy in today's world. There simply is no use for a GNP figure by the voluntary partici pants in· a free market. Market data as related to one's goods or services, yes; but definitely not a generality like GNP related neither to specific markets. nor to individ ual progress. GNP is, of course, subject to manipulation, as explained above. Merely sp.end more, regardless of what for, and up it goes. Thus, the prevailing bureaucracy is en abled to "prove" that it is doing better each year, or better than the' Establishment it succeeded. Now, here is where the mis chief enters: If the majority of the citizenry can be sold on the merit of gov'ernment s'pending and made to believe that GNP is a reliable measuring rod, then w-e can easily be led by the nose into tihe total state - the free market wip,ed out completely.

Again, why is GNP used at all? Bureaucracies that intervene in the market will never use a valid definition of economic growth or progress for the simple reason that the real thing cannot be measured in mathematical or statisti cal terms and, thus, is utterly use less for bureaucratic procedure. No Objective Standards The real thing - individual economic progress - cannot be measured by objective standards. This is to say that the individual's economic progress cannot be reck 0ned by the number of chickens in the pot, by cars in the garage, by cash in the bank or statements of net worth, or by any or all other standard-of-living measure ments. 7 This is not to say that the in dividual can have no idea of his own economic growth; it is only to argue that'growth cannot be judged by any set of objective standards. For instance, I am aware of personal economic growth, which is to say, I can now obtain more of what I want in exchange for what I w'ant to do than was the case thirty years ago. Further, the Pilgrim, or an 18th-century Eng lishman, or my father had no where near the choices of employ7 u. • • true economic growth is theo retically unmeasurable. . . . Concern about economic growth could ... properly be shifted from pondering meaningless percentages to preserving and perfect ing the mechanisms and incentives through which growth is achieved."

United States Steel Corporation Annual Report, 1960.

PROGREgg-TRE FLOWER OF FREEDOM: ment I have, or what could be received in exchange for the fruits thereof. My choices abound com pared to theirs. But please note that what I want to do is forever changing, and that what I w'ant in exchange is in perpetual flux. L1ke a bird on the wing, I don't "stay put," as we say. Even more to the point, I have no carbon copy on this earth; we are all in flux reIative to each other. Perhaps one man's highest as piration is to write and lecture on behalf of freedom. He prefers this to other employments, even though the other jobs available to him p.ay twice or ten times as much. And in exchange he desires above all else a working acquaint ance with the best libertarian minds in the world, along with the economic means - food, trans portation, and the like - for reali zation. To him this is the ultimate in economic progress. Who, pray tell, has any right to set a stand ard for him other than these unusual but, nonetheless, self chosen goals?

But here's another fellow who, above all else, prefers to strum a guitar. And in exchange his heart's desire is "a Loaf of Bread ... a Flask of Wine, a Book of Verse - and Thou." To him this is the ultimate in economic prog ress. Where is the superman who has any logical, moral, or ethical basis for decreeing otherwise? The above gets at the crux of the matter: gain or economic progress is individual and sub jective; gain cannot be objectively measured, that is, neither I nor anyone else can devise a standard that can accurately assess what. is or isn't a gain to you.8 It's diffi cult enough to know one's own choice in such matters. What economic progress is to one individual may very well be regress to another. Examples: There are persons who would pre fer an audience with the Presi dent of the United States to $10, 000, and vice versa; a hoola hoop to $5, and vice versa; a can of imported snails to $2, and vice versa; a Ph.D. or a mink coat to $5,000, and vice versa; a Sammy Davis performance to one by Ro berta Peters, and vice versa; a Jeep to a Cadillac, and vice versa; and so on ad infinitum. Objective standards simply cannot be used to measure subjective judgments.

Measuring and determining the total value of these trillions of complex, ever-changing whims, 8 This is clear to anyone who under stands the marginal utility theory of value, one of the latest (1870) and as suredly one of the most important dis coveries in economic science. See Value and Price by Eugen von Bohm-Bawerk (South Holland, Illinois: Libertarian Press) .

8 THE FREEMAN June fancies, desires - subjectively re corded only in the minds of in dividuals mostly unknown to one another - is not humanly possible. 9 The individual can, if he so elects, generally assess his own economic progress, but he can no more express this growth statis tically or mathematically than he can his intellectual, moral, or spir itual gain. Indeed, in these latter categories, no one makes any at tempt at such measurement. Un like the single dimensions of height, weight, girth, bushels of wheat, population, these other forms of growth, including eco nomic, are multidimensional and - to top it off' - in never-ending flux. And suppose one had an accurate measure of his ovv.n eco nomic growth; what could he pos sibly do with the statistic that he could not do as well without it? A Freeing 0' Choices Far more important than fruit lessly trying to measure individ ual economic growth is under standing what it is that increases the possibilities for progress.

Were we searching for a single 9 This is not to say that the complete satisfaction of personal desires is neces sarily to one's advantage. It is only to argue that it is not my role to decide what someone else's advantage is. Is it to another's advantage that he be cast in my image, have my likes and dislikes im posed on him? Nonsense! phrase to express what has to be understood, we could well settle for a freeing of choices. This, however, is as big as "all out doors." Reflect on the enormity of what's involved: • First, freeing the choices increasing the alternatives and opportunities - for prof itably (subjective) employ ing one's abilities and prop erties. • Second, freeing the choices increasing the alternatives of the desirable (subjective) goods and services that can be obtained in willing ex change for the fruits of said employment. • Third, freeing the capacities of self in 'order to partake of the increasing alternatives.

To what advantage is a pro liferation of opportunities to an oyster, or to a human who can't get off dead center? All three of the above develop ments are founded on exchange--..; production as much as distribu tion. And this is true even of self development, for man grows by ex changing ideas with his contem poraries or drawing on his her itage ; he is incapable of going it alone. Thus, exchange is the key economic term. There are two kinds of ex change, broadly speaking: forced exchange as in state intervention1966 PROGRESS - THE FLOWER OF FREEDOM 9 ism (socialism) and willing ex change as in a free market econ omy. No society ever has had ex clusively one or the other; every society has more or less one or the other. To repeat what is already im plied, economic progress may be judged only by the extent to which an individual becomes capable of taking advantage of an increase in opportunities for productive acti vity and an increase in what he can obtain for his goods or services in willing exchange.

Such progress, let it be em phasized, originates only in will ing as distinguished from forced or coerced exchange. For example, when a robber takes $100 from you, there is no net gain; his gain is canceled out by your loss; this exchange is no more than a coercive swap. Precisely the same holds true when the government forcibly takes the fruits of your labors as a contribution toward any project which does not fall within the princi pled scope of government. 10 Parenthetically, an 10 Bastiat suggested the principled scope in simple terms: "See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen him self cannot do without committing a crime." See The Law by Frederic Bastiat (Foundation for Economic Education, Inc., Irvington-on-Hudson, N. Y.) intervening government, to be con sistent, should tabulate robberies and include the total figure in GNP!

It is clear that there is no gain or progress in forced or coerced exchange. But observe the gain in willing exchange: you, on your own motion - voluntarily - purchase a suit for $100. Both you and the clothier gain in the only way that the term gain makes sense. You want the suit more than the cash; he wants the cash more than the suit. Each of you, on your own terms - nobody else's - gains by the exchange. Were this not true in each case, you would not buy; he would not sell. Individual Economic Progress Let us now ask, why is indi vid ual economic progress so impor tant? What, really, is its deep significance? For, surely, it tran scends sensual pleasures and sat isfactions. Assume I am a Russian whose employment alternatives m.ay be limited to working in the sputiiik--- factory or on a collective farm and where the things that can be obtained in exchange approxiIDJJt~;L_ the contents of Mother Hubbard's cupboard. Or a Chinese who, em ployment-wise, has no choice be yond sloshing around a rice paddy, in exchange for which he gets rice and little else.

10 THE FREEMAN June Next, grant this: 1-the Russian or the Chinese, it matters not possess a potential talent, hidden, latent, untapped. Mine is distinc tively unique, unlike that of any other living being. I don't know what it is myself. I only know that it isn't making sputniks or transplanting rice. If I understand life's purpose, one aim must be to see how close I can come during my earthly days to realizing those creative potentialities uniquely mine. Under the conditions out lined above, I should go to my grave - in this respect unborn! Now, let the alternatives for employment greatly proliferate. They pop into existence every day, one might say. Undeniably, the greater the proliferation the greater is the probability that some one alternative will coin cide with that latent, undiscovered talent uniquely mine. In short, self-realization! Maximizing the Alternatives It is now appropriate to con sider what type of political econ omy is most conducive to a maxi mum of alternatives for the em ployment of abilities and prop erties and of opportunities for profitable exchange. In what socio economic climate is there the greatest freeing of choices?

I believe the first requirement to be a societal agency - government - devoted to keeping the peace, that is, to inhibiting and minimizing all violence, fraud, misrepresentation, predation. Though fully aware of the tend ency of governments to get out of hand - the policeman turned plun derer - I'm nonetheless convinced that society requires an organized agency of defensive force to keep the market free of coercion, to secure to each citizen his life and the fruits of his labor. Private property is the outcome of such security, this institution being a basic foundation for any growth in economic alternatives. Only when life and property are respected is capital formation pos sible, labor and capital being the tools of production. When the societal agency is lim ited to keeping the peace - as suming it does so - there remains no organized force standing against the freeing of creative human energy; a potential always seeking release to some extent in everyone~ When the societal agency keeps the peace, that is, when no one is permitted to lord it over others, there is free entry, free and will ing exchange; in short, the free market.

It is under these conditions never under authoritarian ar rangements - that alternatives proliferate, both as to opportuni1966 PROGRESS - THE FLOWER OF FREEDOM 11 ties' for the employment of one's abilities and properties and as to what one can obtain in willing ex change. ll The flower of freedom! The flower of freedom, I say. But how, many will ask, can this proliferation of alternatives be taking place coincidentally with a rapidly advancing state inter vention into the market? Isn't there a contradiction here? What Goes on Here? While no societal agency has ever been strictly limited in prac tice to keeping the peace,- invok ing a common justice, and secur ing the rights to life and liveli hood, and no market has ever been ideally free, the U.S.A. has afforded the nearest ap.proxima tion to these ideals. This practice of freedom brought an unprece dented outburst of creative activ ity, and through the persons of self-reliant individuals. What's go ing on today can partly be ac11 The alternatives (specializations) brought into existence by government, founded on forced rather than on free exchange - space hardware, and the like - must be excluded from the list that makes for individual economic progress.

When we become dependent on the ex change of our numerous specializations - as is now the case - exchanges must be by CDlnmOn consent if we are to avoid the Russian type of authoritarian state. For more explanation of this point, see Chap ter VI in my Anything That's Peaceful (Foundation for Economic Education, Inc., Irvington-on-Hudson, N. Y.) counted for as a momentum, a mighty thrust from decades when sound principles we-re generally practiced. The traditions, the ways of dealing with each other, the will to improve, the incentives, and numerous other virtues born in that era combined into a fabric too tough for easy destruction. But more than momentum: our impressions of what is happening are greatly colored and distorted because, to a marked extent, they derive from what we read in the press or hear over TV and radio. Public media - our eyes for seeing much of the world around. us=__.

highlight the news. And what's news? Not the commonplace never! But, rather, the exceptional events. A new intervention or con trol (restriction of the market) is always an exception; it is a break with tradition, with our ways of doing things and dealing with each other. So, it is the sub stitution of forced for willing ex change that is taken to be news nowadays. Let's reflect on the common place which mostly we overlook. For instance, the exchange of 30 cents for a. can of beans. We take no more note of this than wedO-~. the important air we hreathe. Yet these commonplace, unnoted ac tions occur daily in billions of unpublicized voluntary exchanges, with a constructive effect that 12 THE FREEMAN June tends to overcome many destruc tive, intervening forces. I repeat, we are keenly conscious of the exceptional destruc tive forces and only dimly aware of the commonplace constructive forces. This, of course, is very dangerous, for we tend to accept these glaring interventions as causes of the proliferation of eco nomic alternatives for the individ ual. This type of mistaken corre lation leads labor union officials to believe that their coercive tac tics raise the wage level,12 or bureaucrats to believe that their price controls curb inflation. The fact is that coercion is an inhibit ing force, never creative. It pre cludes crea ti ve acti vity by the per son doing the coercing as well as by the one being coerced.

Free and willing exchange, on the other hand, can be likened to a world-wide electric grid into which flows the infinitesimal and varied creativities of several bil lion individuals, resulting in a magnificent total available to all. As a bolt of lightning zigs and zags along the line of least resist ance, so has free action found its way through the porosity of governmental restraints. It is the ,12 See Why Wages Rise by Dr. F. A. Harper (Foundation for Economic Edu cation, Inc., Irvington-on-Hudson, N. Y.). free action, not the restraints, that accounts for all that's good in the economic situation. In short, free action is stronger than you think, and the interveners are weaker than they think. However, it is the weakness of the interveners-and ever so many citizens - that can spell our un doing. For when a false economic growth (GNP) can be adopted as a proper goal and when the ,vay to realization is believed to be exploding expenditures, inflation is inevitable.

Specialization of the free mar ket kind is all to the good. But the more specialized we become, the more is each of us dependent on the free, uninhibited exchanges of our specializations. Exchange in specialized societies cannot be achieved by barter; a medium of exchange - money - is required. Inflation, like counterfeiting, de stroys the integrity of the medium and, thus, threatens survival. Of one thing we can be certain: when a high proportion of the time and energy of individuals is devoted to the measurement and expansion of the Gross National Product, their progress as individ uals will be thwarted. Progress is the flower of freedom! ~ ONCE, long ago, the most power ful man in the world was Alex ander the Great. His dominions stretched across the entire civil ized world of his time and pene trated the East as far as India. Bureaucrats and politicians jumped at the slightest. expression of his whims. Cities were planned and built to his sp.ecifications. Even that most nebulous substance, "culture," was defined and elabo rated on the Alexandrian model.