The Great Anomoly; L.E. Read

A modern Dickens might well describe ours as "the best of times . . . the worst of times." Our standard of Iiving soars as oppor tunities for employment multiply· in pace with the quantity and quality of goods and services avail able. Yet, at the same time, we experience on an unprecedented scale the reckless waste of work stoppages, political controls, and other restraints upon freedom. This is the great anomaly, so pronounced on both counts and so hand-in-hand that many persons believe the destructive actions are really causing the creative out burst! This is perfectly illustrated when, on hearing a criticism of the growing governmental inter ventionism, many Americans re ply, "We've never' had it so good." Such mistaken correlation will per sist unless we understand and ex plain why depredation cannot bring about economic well-being. The paradox of increasing pros perity with more extensive inter ventions is not new. In The His tory of England (1839) 1, Lord Macaulay observed: "It has often been found that profuse expendi tures, heavy taxation, absurd commercial restrictions, corrupt tribunals, disastrous wars, sedi tions, persecutions, conflagrations, inundations, have not been able to destroy capital so fast as the ex ertions of private citizens have been able to create it."

Brazilian entrepreneurs have another way of explaining their simultaneous progress and re gress : "We get things done while the politicians sleep." If the notion that regressive measures cause the progress be comes a firm and general convic tion then, assuredly, the regressive forces will overtake, consume, and eventually destroy the progressive 1 See Chapter 3. 77 78 THE FREEMAN February forces. For example, should we be come convinced that a minimum wage law is a means of raising wages and then base all facets of the economy on similar illusions, the American miracle will have ended. So, it is of the utmost im portance that we dissect this an omaly and divest it of its mystery. The explanation is quite simple : exchange has been multiplying more rapidly than restraints on exchange. Consistent with this an swer is the fact that authoritari anism, so far, has lagged behind the release of creative energy; bureaucratic dictation has failed to keep pace with entrepreneurial ingenuity; capital has been formed faster than destroyed; citizens in pursuing their own interests have accomplished much while the polit ical gods have been sleeping.

Changing Patterns of Wealth: Speeializationand Trade A systematic understanding of the importance of specialization and trade (exchange) is of recent origin. Prior to the time of Adam Smith's Wealth of Nations, less than 200 years ago, wealth was concentrated in few hands and was reckoned mostly in inventories: precious metals, jewels, slaves, acres of land, size of manor or castle, and so on. Then, with the advent of specialization which Adam Smith un derstood and explained so admir ably, a new concept of wealth came into being. Instead of idle inven tories possessed by feudal dukes and lords of the manor, wealth in the form of useful goods and serv ices spread to the masses whose skills were needed to activate and operate the tools of industry. So marked has been this change that today's American laborer is wealthier in the variety of things he enj oys than the legendary Midas, Croesus, or any medieval king.

However, a shift from a near self-subsistence economy - forag ing and the like - to a specialized economy presupposes not only the accumulation of savings andcapi tal but also freedom to exchange. Were a people to specialize and not exchange, there would be no wealth; indeed, all would perish. As the absence of exchange results in poverty, so does the prolifera tion of willing exchanges result in increased wealth. That wealth increases through the process of willing exchange is understandable once we apprehend the subjective nature of gain. 2 To illustrate: I produce shoes; you produce sweaters. If I cannot sell my shoes, and if you cannot sell 2 For a more detailed explanation of the subjective theory of value see "Free dom's Theory of Value." THE FREEMAN, October, 1967.

1968 THE GREAT ANOMALY 79 your sweaters, is it likely that either of us would keep on produc ing these things? SO,without ex change, there would. be no further increase in wealth. But, should we willingly exchange, each gains. I value the sweater more than the shoes, and you value the shoes more than the sweater-two in creases in value, as each of us judges value. '\Vere this not the case, there would be no willing ex change between us, no increase in wealth, no further production. Clearly, willing exchange is the key to increased wealth and in creased production. Willing exchanges are incalcu lably more numerous now than in the days of Adam Smith, even than in the days of my grand parents. This is apparent to any observant person. But what most of us overlook is the enormous proliferation of exchanges dur ing the past three or four decades; the increase takes on the nature of an explosion. Try to reckon the number of exchanges you engage in daily; they are so numerous that you are scarcely conscious of them. This is our economic prog ress.

During this period of exploding exchanges, we have also witnessed governmental intervention in the market, restrictions on willing ex changes literally by the thousands. This is our regress. But the regress has not-to date, anyway-kept .pace with the prog ress. In this fact lies· the explana tion of the great anomaly. The Source of Progress It is doubtful if anyone can more than casually account for the explosion in exchanges. Quickened transportation and communication -some of it at the speed of light ning-assuredly plays an impor tant role. Inventiveness, resulting in fantastic technological break throughs, must be included. Per haps questionable motivations have had a hand in the phenomen on; for instance, a raging passion for material affluence, as if this were the highest object of life. While too complex to pursue, some of the restraints-obstacles-have doubtless generated the ingenuity to hurdle them and, thus, have ac counted partially for the progress.

Necessity is, on occasion, the mother of invention. However, my purpose here is only to set forth a fact; I haven't the effrontery to attempt a complete explanation for the exchange explosion. Nor am I bold enough to posit all that lies at the root of our re gress. Why does authoritarianism grow? Why do so many wish to lord it over the rest of us, that is, why do they behave as gods, not as men ? We may never know; we can only reflect as has Lionel Tril80 THE FREEMAN February ling : "We must beware of the dan gers that lie in our most gener ous wishes: Some paradox of our nature leads uS,when once we have made our fellow men the ob jects of our enlightened interest, to go on to make them the objects of our pity, then of our wisdom, ultimately of our coercion."3 But of one thing I feel reasons Quoted in The American Scholar, Autumn, 1965. ably certain: we should bring sharply into question the absurd notion that the regressive forces are the cause of our progress. Fail ure to do this may soon result in the end of progress. There are signs of this! At the very least, let us be aware that such progress as we have achieved is in spite of and not because of the regress.

Thus,we may see through the great anomaly! ~ The Division of Labor IT IS the great multiplication of the productions of all the dif ferent arts, in consequence of the division of labor, which occa sions, in a well-governed society, that universal opulence which extends itself to the lowest ranks of the people. Every workman has a great quantity of his own work to dispose of beyond what he himself has occasion for; and every other workman being exactly in the same situation, he is enabled to exchange a great quantity of his own goods for a great quantity, or, what comes to the same thing, for the price of a great quantity of theirs. He supplies them abundantly with what they have occasion for, and they accommodate him as amply with what he has occasion for, and a general plenty diffuses itself through all the different , ranks of the society. ADAM SMITH, The Wealth of Nations THE THEORY OF Political Escalation WALTER J. WESSELS THE "MAJORITY WILL" or "consen sus" is a smoke screen for many of the false theories and harmful practices of the welfare state. The majority rarely favors any par ticular feature, let alone the wel fare program as a whole. But somewhere in the program indi viduals or small groups may find something appealing to their spe cial interest. And the combination of special interests forms the "ma jority will." But rarely is any group concerned about the over all effect of the entire program, to which all groups might well be opposed. Each sees only the tiny fraction that seems to favor its own interest.