Rules by Marekts versus Rule by Men; Y. Brozen

YALE BROZEN Practically every individual has some advantage over all others because be possesses unique information of which beneficial use might be made, but of which use can be made only if the decisions depending on it are left to him or are made with his active cooperation. F.A.HAYEK MARK:f:TS do an unbelievably de tailed and effective job of utilizing information drawn from millions of individuals. They digest the in formation, signal the appropriate action to be taken in utilizing the available economic resources, and moti vate indi vid uals in the most remote corners of the world to take the necessary action. 1 Mar kets are also the most democratic institution operating in the world 1 Friedrich A. Hayek, "The Use of Knowledge in Society," American Eco nomic Review, September, 1945; reprinted in Individualism and Economic Order, (Chicago: University of Chicago Press, 1948) . today. They mInImize tyranny, maximize opportunity, and elimi nate special privilege. 2 And free markets are the most efficient means for accomplishing both of these objectives.

In contrast, the attempts of a f e1V men using the power of the state to order economic affairs have 2 Harold Demsetz, "Minorities in the Market Place," North Carolina Law Re view, February, 1965; Milton Friedman, Capitalism and Freedom (Chicago: Uni versity of Chicago Press, 1962), Chap. VII. Dr. Brozen is Professor of Business Economics, Graduate School of Business, University of Chicago. This article is a condensation of his address to the trustees and guests of the Foun dation for Economic Education, May 15, 1967. 515 516 THE FREEMAN September produced ludicrous spectacles of misallocated resources manifested in forms such as monuments mas querading as steel mills and power dams which frequently do as little for their economies as the great pyramids of Egypt. The attempts of men to rule economic affairs have been accompanied by or re sulted in the most despicable tyrannies in which "terror, sadis tic cruelty, and constant insecurity have been the lot of all save a privileged few."3 Rather than dealing with these propositions at a general level-a task which has already been effec ti vely performed by Mises, Knight, Hayek, Jewkes, Wright, and others in recent years as well as by eminent predecessors-this paper analyzes specific instances of the operation of the invisible hand. These are drawn primarily from American experience, al though it should be kept in mind that other economies provide striking examples, some of which I will mention. Even the Union of Soviet Socialist Republics, once the great enemy of market meth ods, is rediscovering the efficiency of markets as contrasted to the inefficiency of men in guiding economic activity. Determining the appropriate goods to produce 3John Jewkes, Ordeal by Planning (New York: The Macmillan Company, 1948) .

and the appropriate technology to apply in production and motivat ing the efficient production of the most efficacious goods is too com plicated a task for central plan ning. The days of central deter mination of production quotas, of technology, and of pay and profit rates are beginning to fade in Russia because of the cumber someness and the ludicrous ineffi ciency of that system of coordinat ing economic activity. The Russian attempts to moti vate high productivity and output by rewarding output in excess of a quota of X pounds of nails, for example, led to a large output of spikes and roofless houses for want of shingle nails. A shift to a quota of Y number of nails re sulted in a great output of tacks and loose rails for lack of railroad spikes. Also, the fiction produced as accounting records in order to earn bonuses became an open scan dal. Market Coordination to Meet Unpredictable Needs In this country, the extraordi nary capacity of the invisible hand to coordinate economic activity, particularly where the coordina tion must occur in a complex and unpredictable situation, is implic itly recognized in some of our regulatory legislation.' The trans portation of agricultural commodi1967 RULE BY MARKETS VS. RULE BY MEN 517 ties by truck is exempt from regu lation. Only the free market pro~ vides the service required at· the times needed at minimum cost. 4 For this reason, agricultural inter ests insist that their shipments by truck be exempt from regulation.

They learned from their .nine teenth century success in putting railroads under regulation that service is worsened and rates in creased by such controls. 5 The regulated set of enterprises operating in agricultural transpor tation demonstrate by their be havior what enormous losses of produce would occur and what costs would be incurred if all agri cultural commodity haulage were centrally controlled or regulated. Shortages of grain cars and the resultant necessity to store grain in the open with the consequent spoilage are a recurring phenom enon. This is a result of the regu lation of railroads - a phenomenon 4 The contrast between the costs of transportation under regulation and that in a free market is shown to be very marked indeed in an analysis of experi ence under the two sets of conditions by Stewart Joy, "Unregulated Road Haul age: The Australian Experience," Ox ford Economic Papers, July, 1964.

5 George W. Hilton, "Barriers to Com petitive Ratemaking," I. C. C. Practi tioners Journal, June, 1962; Paul W. MacAvoy, The Economic Effects of Reg ulation: The Trunk-Line Railroad Cartels and the Interstate Commerce Commission Before 1900 (Cambridge: The M. I. T. Press, 1965). which would not occur in the ab sence of regulation. It is fortunate that truck move ments of agricultural commodities are exempt from regulation. Otherwise, we would find ourselves in the Brazilian situation where one-third of the crops produced in the interior rot for lack of expedi tious and adequate transporta tion. 6 Expediting the Harvest A crisis in the wheat harvesting season in 1952 illustrates how open markets can meet even very short term emergency situations. The market did a job at that time which could never have been han dled by central planning or by reg ulation as expeditiously or as ef ficiently.

Unusual weather in late May and early June ripened almost all of the 15 million acres of Kansas wheat simultaneously by the mid dle of June. Usually, wheat ripens about the middle of June in south central Kansas. The custom cut ting crews with their combines be gin harvesting there and move toward west and north Kansas in July, finishing in the northern and western areas in August and September. 6 J. K. Dunn, "Grain Storage Needs in Brazil," Brazilian Technical Studies (Washington: Institute of Inter-Ameri can Affairs, 1955), p. 395.

518 THE FREEMAN September With almost all of Kansas ready to be harvested by June 16, in 1952, it appeared that only a few farmers would be able to get their wheat in before losing their crop to hailstorms, fire, wind, and other causes. "At this point, the pull of the price mechanism came into ac tion, as the services of available machines were snapped up at rates of four to five dollars an acre (as compared to the usual three dollars an acre). Across the prairies the long distance telephones were busy; . . . spot radio announce ments of 'combines urgently need ed in Kansas' . . . at generous prices [were sponsored] . "Unsold combines disappeared from dealers' lots all the way to Canada; and from Texas to the Dakotas farmer-operators dropped their farm work, loaded their ma chines, and set out for Kansas. Added to the solid core of some 3,500 full-time professionals . . . came almost 5,000 extra outfits eager to dig their cutter bars into wheat at four and five dollars per acre. They came just in time and in just ample quantity. Almost no machines were to be seen waiting for jobs, yet in almost every field there was at least one big combine knifing its dusty way through the wheat."7 7 C. M. Williams, "Enterprise on the Prairies," Harvard Business Review, March-April, 1953.

The market mobilized equipment and manpower from the far corn ers of the country in an amazingly short time to meet the emergency. It mobilized those pieces of equip ment and that manpower which occasioned the least sacrifice of alternative product. It avoided or dering equipment and manpower into the crisis area which would have entailed unduly large costs and sacrifices. Could any central planning bureau do nearly as well ? Could any set of regulations of price or usage have done anything but reduce the expeditiousness and efficiency with which the job was done? The story of India's attempt to improve agricultural practices il lustrates the point by an opposite experience. In 1959, agricultural agents were sent out by the gov ernment to persuade farmers to adopt new practices to improve their yields. The agents did an outstanding job of persuading farmers to prepare their fields for the use of new seed varieties and for the application of fertilizers.

Unfortunately, the seed did not ar rive on time and the fertilizer was delivered to the wrong places. Fields went unplanted with con siderable damage to peasant in come and the Indian food supply. A complaint made during the late April 1965 floods along the Mississippi in Illinois illustrates 1967 RULE BY MARKETS VS. RULE BY MEN 519 the power of the market to direct activity to meet crisis situations. The city engineer of Rock Island complained that sand bags were being trucked into the area threat ened by flooding and offered at 15¢ per bag. He felt that such prof iteering should not be permitted since the price before the flood threat occurred was 12¢ per bag. One may wonder how he would have felt if no one had anticipated the great demand for sand bags or been motivated to truck them in. How would he have protected the property for which he was re sponsible if no sand bags had been supplied? He had not prepared for the emergency by accumulating an inventory of bags, but the market remedied his lack of foresight.

While impersonal markets suc ceed in coordinating activity even to meet short term, unpredictable emergencies, central planning by men often fails to meet predict able, longer term needs. The In dian situation cited above is one illustration. Another is that de scribed in an April 28, 1965 D.P.!. story from Moscow based on in formation in Pravda. The news paper lamented that several 16 story apartment houses in subur_ ban Moscow were finished, but no body could move in. No elevators! The situation was not unique to Moscow. Pravda said that "in many cities of the cou~try tall buildings are being put up and everywhere there is a shortage of elevators." Market Coordination in Changing Circumstances However, let us turn to the co ordinating and directing power of impersonal markets in a situation which is not a short-term harvest crisis or flood threat. Let us take the somewhat longer period from 1939 to 1946 when the American economy was dominated by the necessity of mobilizing for war and demobilizing on the return of peace. One group of industries was completely dominated by this set of circumstances. The munitions industries (as segregated by the Census of Manufacturers and the Bureau of Internal Revenue) doubled its capital in 1940, again in 1941, and in 1942 quadrupled its capital. In 1939, assets in the munitions industries were $0.6 billion; in 1943, they amounted to $13.4 billion. The subsequent de cline was equally abrupt; within three years the capital of the mu nitions industries had fallen to $2.4 billion.

The magnificent response of the munitions industries to war de mands and their subsequent rapid adjustment to the decline in de mand was a result of the effective ness of the profit incentive. Some may think that the directives of 520 THE FREEMAN September the War Production Board pro duced this result. These people should talk to the men who staffed the War Production Board. The WPB found that the stick could slow production and asset forma tion in some lines of production, but the carrot had to be dangled to obtain increased production. The actual profit record-the incentives which produced this result - is shown in the table below. Average Rate of Return Year All Industries Munitions 1941 8.56% 11.67% 1942 7.30 12.12 1943 7.30 9.65 1944 6.59 6.18 1945 5.43 4.39 1946 8.13 -2.65 Source: G. Stigler, Capital and Rate of Re turn in Manufacturing Industries, (Prince ton University Press for the National Bu reau of Economic Research, 1963), p. 36.

Rates of return in the munitions industries are on midyear assets except 1946. As long as the rate of return in munitions exceeded that in all in dustries, the assets of the muni tions industries increased without detailed direction from the men in Washington. After 1943, when the rate of return in munitions fell be low that in all industries, assets employed in these industries de creased. Following World War II, the American economy shifted from war to peace with relatively greater ease than the European econo mies, despite the lack of direction from governmental authorities. England and other countries which used government boards to redi rect resources, and price controls and rationing to prevent chaotic consumer markets, had much greater difficulties (aside from those caused by war damage). Areas in which governmental con trols in the United States were continued, such as housing, suf fered from the same difficulties common in Europe.

Wartime and Postwar Adjustments Noone told the managers of U.S. enterprises which products they should produce. How, then, did we avoid the calamity of too many firms rushing into some in dustries and not enough into others in the shift from war to peace production? The market mech anism, profit, and other income incentives did for us the job which state planners attempted to do in other countries. Where products were in short supply relative to demand, prices went up, profits were attractive, and capacity was built or shifted to meet needs. Where products were available in relatively more than adequate quantities, prices dropped, profits declined or turned into losses, and labor and other capacity were re leased to alternative uses.

1967 RULE BY MARKETS VS. RULE BY MEN 521 Differences among rates of re turn on capital not only attracted capital from the low-return to the high-return industries; they also attracted labor. High-return in dustries attracting capital bid for labor to operate the additional cap ital equipment. Low-return in dustries, producing goods for which consumers were not willing to pay much, could not afford to meet the bids of the industries producing the preferred goods. The more rapidly expanding manufacturing industries grew by producing goods relatively more attractive to consumers in design and price. By improving design, raising productivity, and cutting price they made themselves prof itable to both their suppliers of capital and to their labor force. The more profitable industries were also high-wage industries. The four highest-return industries paid wages exceeding $5,000 an nually (1957). They were bidding labor as well as capital away from the industries producing less pref erable goods. The four lowest-re turn industries paid wages under $4,000 annually and were losing labor to the high-wage industries.

In a few industries, men rather than markets set wage rates. In these industries, job opportunities were restricted by the overpricing of labor. Coal-mining was a prime example of undue increases in wage rates with a consequent loss of jobs and movement of people out of high productivity work into low productivity occupations, the reverse of the movement which occurs in free markets. In the mid forties, coal wage rates were 18 per cent above factory rates and 380,000 men were employed. By 1960, wage rates had been pushed to 40 per cent above now higher factory rates, job opportunities decreased to 170,000, and we be came concerned about unemploy ment in Appalachia. Regional Adaptation Higher incomes in free markets act as an incentive to owners of resources (labor and capital) to move their resources not only to the industries where they produce the most desirable products, but also to the regions where they will be most productive. As we can see in the accompanying table, per capita income in Southeast United States in 1929 was only 52 per cent of the national average. Evi dently, people in this region were only about half as productive as the average U.S. resident. This was partly because of lack of capi tal for each industrial or other worker, partly because of regional handicaps such as poor markets and transportation, and partly be cause of lower levels of skill. On the other hand, Mideast U.S. per 522 THE FREEMAN September The average u. s. per capita income, in terms of 1966 prices, was $1,370 in 1929 and $2,950 in 1966. Source: Survey of Current Business, April, 1967.

capita income was 138 per cent of the national average. Evidently, there were very productive uses for labor in this area. A Voluntary Response The voluntary movement which has occurred out of the Southeast U.S. and into regions such as the Far VVest may be contrasted with the involuntary movements forced upon people by the men operating the Resettlement Administration in the 1930's. An illustrative story is the experience of a. group of Ozark tenant farmers. Their farms were bought by the Reset tlement Administration. They were told the farms would no long er be rented to them. The Reset tlement Administration was intent on moving people from low pro ductivity areas where they pro duce little income to high produc tivity areas where they could pro duce higher incomes. The Ozark tenant farmers were in effect forced to move from the farms in Southern Missouri which provided them with little income to farms in Northern Missouri which pro vided much better incomes.

VVithin a few years, however, most of the people involved had drifted back to Southern Missouri. VVhen asked why they preferred poverty in the Ozar ks to better living in Northern Missouri, the replies summed up to, "VVe missed the coon hunting and the hills." The voluntary movement which has taken place in response to market incentives has been of self-selected persons. The p~ople 1966 113 115 110 109 91 96 85 77 1929 138 129 125 114 85 81 67 52 Regional Per Capita Personal Income (as Percentage of U. S. Average) Relative Change -18% -11% -12% - 4% + 7% +18% +27% +48% Region Midwest Far West New England Great Lakes Rocky Mountain Plains Southwest Southeast VVorkers migrated from the Southeast to the areas where their labor could be used more produc tively. This movement left fewer workers on the land. The increase in land per farm worker raised productivity. Capital migrated in to Southeast U.S. and made its contribution to increased produc tivity. Proportionately, more in vestment was made in the South east than elsewhere since labor could be bid away from the infe rior alternative uses at lower costs.

As a consequence, per capita in come in the Southeast rose to 77 per cent of the national average by 1966 in spite of a great rise in the national average which oc curred simultaneously.

1967 RULE BY MARKETS VS. RULE BY MEN 523 who chose to move were those to whom higher income was more im portant than "coon hunting and the hills." Those who preferred their current surroundings did not have to move and did not. Yet, they did not lose by staying be hind. Those who moved left be hind capital and land which in creased the resources per man of the stay-at-homes. This increased the income of the stay-at-homes. The voluntary process of reset tlement works better than the cen trally directed, involuntary proc ess. It selects, by self -selection, those people to whom the sacrifices or costs entailed by movement are minimal and to whom the gains are relatively more important. Us ually, those who voluntarily move are those who can make relatively greater net gains. The voluntary response to the incentives of the open market does more to raise average productivity than man aged moves of nonvolunteers ad ministered by a government bureau.

The TVA Experience The events I have described above should warn us to go slowly in enacting special aid and sub sidy measures for low-income areas in the United States, as has already been done to some extent and more of which are being pro posed as part of the Great Society program. If these measures take the form of subsidizing people to stay put, the incentive to transfer resources to superior uses is re moved. As a result, per capita in comes - aside from subsidies in distressed areas will remain low relative to the average for the na tion. This is perhaps best illustrated by analyzing the TVA area ex perience. The area has been and is heavily subsidized. Capital is provided by the Federal govern ment (that is, by the rest of the country) for many projects at a price of 21j2 per cent. All the capi tal for some projects is provided at no cost to the TVA area. Elec tricity is furnished to many buy ers in this area at substantially lower prices than in neighboring areas whose suppliers must bear a heavy tax burden. The power company in Arkansas pays out 24 per cent of its revenues as taxes.

The TVA makes payments in lieu of taxes, but these amount to only 2 per cent of its revenues. That is quite a substantial difference in the tax burden aside from the di rect subsidization of the capital supplied to the TVA. Presumably, in these circum stances, the people of the TVA area should have gained enor mously. An analysis made by the Ken tucky Utilities Bureau in this re524 THE FREEMAN September gard turned up a very surprising result. The Bureau was asked to determine whether it would be wise to invite the· TVA to extend its operations further into Ken tucky. In order to answer the question, it studied the TVA area and eight surrounding areas. It measured the change in various welfare indices such as per capita income, longevity, level of educa tion, freedom from incidence of certain types of disease, and so on. As a result of the study, Kentucky decided not to invite the· TVA to further extend its area of activity.

The surrounding areas had, on the average, done as well as the TVA area. When I heard of the study, I was puzzled about the results. They seemed paradoxical to me or, to put it bluntly, I found them hard to believe. It was only after a number of students had done some further analysis that an ex planation emerged which made the study credible. The data on mi gration made the pieces fall into place. What TVA does is to sub sidize people to stay put who other wise would migrate. Voluntary migration of people out, and of capital in, and a change in the rural-urban balance did for the surrounding areas what the sub sidies did for the TVA area. In essence, what TVA has done and is doing is to subsidize people to stay put in an area of lower productivity than the areas to which they would move. This means that we are keeping people in low productivity jobs instead of letting markets work to move them to higher productivity jobs.

To this extent, average produc tivity in the nation is lower and per capita income is lower than it would be in the absence of the TVA. Also, income per capita in the TVA area is lower than it would be without the TVA. The capital drain from the rest of the nation has kept per capita income from rising as rapidly as it other wise would. This has reacted to cause a less rapid rise in the TVA area than would have occurred in the absence of TVA, the very op posite of the result which our fal lible legislators were presumably attempting to produce. Market Coordination of Research and Technology At this point, I want to turn to a more difficult and less analyzed area, the role of open markets in directing research and develop ment. I will do this by discussing some examples. H In 1950, we had an enormous rise in the demand for benzene. 8 See Y. Brozen, "The Role of Govern ment in Research and Development,"

The Anwrican Behavioral Scientist, De cember, 1962, for a general analysis.

1967 RULE BY MARKETS VS. RULE BY MEN 525 The price had been 14 cents a gal lon. Since it was an ingredient in the making of certain explosives, the outbreak of the Korean War greatly stimulated the demand. Since the price was still free to move, price ceilings not yet hav ing been imposed, the price moved to 50 cents a gallon. The price rise was an expres sion of the great new demand for benzene for certain overwhelm ingly important purposes. It also served as an incentive for people to conserve the use of benzene in less important applications and release it for the more important. The price rise created an addi tional response. It presented an opportunity to obtain a pay-off from the development of new tech nology for producing benzene from a new source. Benzene had been produced primarily as a by product in the extraction of coal chemicals. Because of its by-prod uct status, the elasticity of supply from the then available sources was very low. At the old price of 14 cents, it would not have paid to develop new sources by creating new technology, and there was little need for new sources since the supply was ample. The 50 cent price was a signal that the supply was no longer ample. Also, it was an incentive to develop a new source.

Universal Oil Products responded to the signal. It did some work on the platforming process for handling petroleum hydrocar bons. In three months it developed a process for producing benzene from petroleum. The price of ben zene then dropped to 25 cents. This provided the signal that fur ther research and development was not needed unless it was likely to create a process more efficient than the platforming method. The open market responded to the benzene scarcity. It directed research to do a job to the extent that resources devoted to research could do the task with a smaller resource requirement than putting resources into conserving benzene and substituting other materials. The opposite of open market di rection is exemplified by the reac tion of the Federal Bureau of Mines and of Congress. The Bu reau of Mines said to Congress and the Defense Department, "We will be running out of petroleum soon. How are you going to move military equipment such as planes and tanks which depend on petro leum products ?" The Bureau asked for a $400,000,000 appropriation to work on the hydrogenation of coal and extraction of oil from shale. It almost frightened the Defense Department and Congress into pushing the appropriation through.

526 THE FREEMAN September The oil industry is as much in terested in providing liquid fuels for military equipment as the mil itary establishment is in obtain ing the fuels. To the extent that it would be cheaper to produce the fuels by coal hydrogenation and by extraction of shale oil, the industry would move in that di rection. The industry had main tained a continuous program of research on a small scale to be ready to move when the state of science was appropriate and the scarcity of alternate sources of hydrocarbons made it necessary. The time was not ripe, how ever, and the industry indicated this in congressional testimony. Nevertheless, Congress did appro priate $100,000,000 and the Bu reau of Mines built a pilot plant at Carthage, Missouri, and in creased the scale of work at Rifle, Colorado. Both plants were shut down and have sat idle for a dec ade. We have wasted $100,000, 000.9 There is the difference between the open market response and the controlled market response. 10 Those in the open market were forced to operate on the basis of 9 The Plant near Rifle was re-activated in 1965 with a governmental appropria tion and is being used for research pur poses under contract to six oil companies.

10 For other examples, see Y. Brozen, The Role of TechnolollY in Conserving Strategic 111aterials (multilithed, 1951). economical use of resources since they could not call on taxpayers to pay for their mistakes. The controlled market operated on the basis of scarce headlines instead of the realities of resource avail abilities and economy. Conclusion Central planning by· man has been praised as a superior tech nique for organizing the use. of resources, selecting techniques, and directing production because presumably it employs man's ca pacity to reason and is rational. However, this is an argument for planning as against no planning. The issue thus drawn is false. Free markets are a method of coordinating the decentralized planning of many organizations and individuals. Each plan can be fitted to local circumstances em ploying local knowledge in such a way that the total is coordinated under the constraints imposed by total resources and total needs.

The issue is not plan versus no plan. It is centralized versus de centralized planning; limited· in itiative by a few, or widespread initiative by many. This nation has attempted to maintain widespread initiative and, at the same time, intervene in markets with special programs to benefit politically powerful blocs and presumably worthy persons 1967 RULE BY MARKETS VS. RULE BY MEN 527 who are not receiving "fair shares." Where these interventions have changed the signals, such as wage rates and prices, or forced re allocations of resources among areas or lines of production, such as the subsidizing of certain activ ities like agriculture and certain areas such as the TVA region and Appalachia, the results are fre quently the opposite of those in tended. One example of a result op posite the intent has been de scribed (the TVA instance). In that case, the intended benefi ciaries are worse off than if the intervention had not been under taken. Additional examples which illustrate the same point can be named. The tariff, which is sup posed to protect the levels of liv ing of American workers from the competition of low-paid foreign ers, has simply monopolized low paying jobs for Americans and prevented them from obtaining better-paid jobs which would have been available in the absence of the trade barriers we have im posed. ll The imposition of the minimum wage and its subsequent increases have caused a loss of bet ter-paying jobs by many of the in11 See Y. Brozen, "The NewCompeti tion-International Markets: How Should We Adapt?" Journal of Business, Oc tober, 1960.

tended beneficiaries and forced them into lower-paying jobs or un employment. 12 The subsidies pro vided for agriculture through such devices as the Rural Electrification Administration have depressed rural wage rates and increased poverty while enriching the already well-to-do. 13 The Federally spon sored and subsidized urban renew al programs which some believed would benefit poverty-stricken slum dwellers have instead forced the,m to pay higher rentals, reduced the supply of housing at their de sired rental levels, and destroyed the livelihoods of hundreds of small business people. 14 Free markets have done a mag nificent job of eliminating pov erty,15 of improving the status of 12 Y. Brozen, "Minimum Wage Rates and Household Workers," Journal of Law and Economics, October, 1962; M. Col berg, "Minimum Wage Effects on Flor ida's Economic Development," Journal of Law and Economics, October, 1960.

13 D. G. Johnson, "Output and Income Effects of Reducing the Farm Labor Force," Journal of Farm Economics, November, 1960. 14 The Chicago Housing Authority, Rehousin.q Residents Displaced from Public Housing Clearance Sites in Chi cago, 1957-58; J. Segall, "The Propaga tion of Bulldozers," Journal of Business, October, 1965. 15 A century ago, practically every body in the United States fell below what has come to be called the line between poverty and non-poverty-a $3,000 per year income measured in 1962 dollars. By 1947, the incidence of poverty as 528 THE FREEMAN September Jews, Negroes, the Irish, and other minority groups, and of pro viding opportunities and outlets for the creative use of the ener gies of even the most deviant per sons who are frequently jailed or shot in less open societies. Such markets make it impossible for the few to monopolize power and defined by this standard had fallen from nearly 100 per cent of all families to 32 per cent. By 1964, those falling below the $3,000 standard had diminished to 18 per cent.