Book Reviews

As Dr. Carson sees it, our pres ent railroad mess is entirely gov ernment-made and can only be compounded by the "cures" that invoke the "public corporation" sort of thing that will mean more government involvement in mass transit, "Amtrak," et cetera. The Federal government took the first really fateful steps in the eighteen eighties with the creation of the Interstate Commerce Commission. Before that there had been rail road subsidies, usually taking the form of gifts of land and govern ment loans secured by first mort gages on railroad property. These resulted in premature building, but the results would not have been disastrous once bankruptcy had squeezed the water out of the more shaky enterprises. Subsidies 1971 THROTTLING THE RAILROADS 567 are bad enough, but in our first flush of railroad building their main deleterious effect was to drain capital from areas that might have given U.S. citizens more satisfactions. Undoubtedly they led to depressions, but the depressions of the nineteenth cen tury cured themselves. Permanent regulation is another matter, as Dr. Carson demonstrates beyond cavil.

Three-Way Intervention By Government The "throttling" of the rail roads by government, as Dr. Car son says, occurred in three main ways. Restrictive regulation took away "crucial managerial author ity," which naturally weakened the power of the railroads to make sound competitive decisions. Sec ondly, after the government had withdrawn from its original pro gram of subsidizing the rails, it turned to giving huge competitive favors to barge lines, the automo bile, and the airplane. Thirdly, the government embarked on a policy of giving monopoly status to the railway unions. The "throttling" continues despite everything, as I know to my own personal cost as I ride the decrepit New Haven line (now part of the bankrupt Penn Central system), to work on tracks that parallel the heavily subsi dized New England Thruway over which the trucks roar in an unend ing stream. The distinguishing thing about Dr. Carson's thinking is his un willingness to accept even the most hallowed cliches. In the eighties and the nineties of the past century there was a tremen dous outcry against such things as charging more for a short haul than for a long haul, or giving preferential rates to large ship pers, or favoring some shipping points over others. These prac tices were condemned as "pref erential'" and the case was seem ingly irrefutably established that "justice" required their abandon ment.

Dr. Carson, however, says that the railroads were entirely justi fied in their supposedly discrim inatory practices. A railroad usu ally has high fixed costs and low variable costs. To recover the fixed costs, it must be able to increase its income by taking advantage of the low variable costs. Other wise it may not be able to remain in business to service the whole community of consumers. Since it costs a railroad less per ton mile to carry things over big distances than over small (most of the fixed costs are in loading and unload ing), it can afford to charge less per-unit and per-distance for the long haul. Any other way of set ting rates must make it difficult 568 THE FREEMAN September for people at a distance to get their goods to market at a low enough cost to compete with those producers who happen to be closer to where the customer lives. Most of the allegedly nefarious practices of the nineteenth cen tury railroad derived from the nature of competition, and the consumer actually benefited from them. The execrated rebate was a competitive cure for the monop olistic "pool." The "rate war," a "horror of competition," was in actuality a way of clearing the market, in no way different from bargain sales in the dry goods business. If something hadn't been allowed for the "long haul,"

growers of grains and vegetables who lived at immense distances from their markets would not have been able to carry their mort gages. When the long and short haul rules went into effect, it actually promoted a nonintegrated national rail system, for there was no incentive to link the long haul western railroads with the short-haul eastern systems. A transcontinental railroad would have had to tie what had been profitable long haul rates to short haul rates in such a way either to incur great losses in the short haul business or to price itself out of long haul traffic. The effect of the Interstate Commerce Commission regulation dampened the ingenuity and the desire of the railroads to find new ways of serving their customers. Made lethargic by the inevitable impact of government interven tion, they were at a double disad vantage when forced to compete with the automobile and the air plane. The trucker had to pay gasoline taxes and user fees, but he did not have to invest in his right of way. The airplane had to load and unload like a railroad train; but the air, unlike the rail road bed, was free.

The unions put the finishing touches on the general railroad debacle. Protected by the govern ment, they have been able to insist on·their featherbedding practices. The railroads have been frustrated in their attempts to substitute automation and the use of labor saving technology in general for the "full crews" that were once needed when steam engines were in use. Dr. Carson tells about the height of absurdity that was reached when the unions insisted that crews of five men be hired to operate a one-man small auto de livery unit running on flanged wheels to carry passengers on a branch line. Dr. Carson's recipe for un throttling the railroads is simple: he would remove the dead hand of the ICC and the state regulatory commissions, he would takeaway 1971 THROTTLINGTHE RAILROADS 569 special privileges from the unions, and he would stop subsidizing competitive modes of transporta tion. Unfortunately, governments don't abandon their interventions easily. A few more years of gov ernment-protected chaos, however, might convince us that our "prag matism" just isn't pragmatic.

How long, 0 Lord, how long? EDITOR'S NOTE: The following "extra" analysis of Dr. Car son's book is in no sense to imply an inadequacy in John Chamberlain's review. Rather, it is to afford the additional point of view of an "insider." Mr. Canfield worked many years in the field of Industrial Traffic Management. He is now manager of the Commodity Code Group of the Uniform Classification Committee in Chicago. • THROTTLING THE RAILROADS by Clarence B. Carson. (Irvington on-Hudson, N.Y., Liberty Fund, for F.E.E., 1971. 143 pages. $4.00 cloth, $2.00 paperback). Reviewed by Joseph M. Canfield HUNDREDS of books have been written on the railroad problem. Dr. Carson's Throttling the Rail roads, consisting of only 143 pages, is refreshing because it clears the air of a number of cliches. This is accomplished by rigidly applying the libertarian "yardstick" of nonintervention to the railroad situation. When this yardstick is used, most railroad students, especially true libertari ans, have to acknowledge that their thinking has been inhibited by interventionist cliches.

In chapter four, Dr. Carson de molished the "right" of the com munity to "common carriage" and its other face, the "common car rier" obligation of the transpor tation company to serve all. Meas ured by the libertarian standard, this right-obligation should be relegated to limbo, along with that spurious "right to a free educa tion." Students in years past .had drilled into them the development of the common law obligation of wharfingers, carters, innkeepers, and ferrymen to serve all. When these "rights" to common service - actually compulsory service originated in medieval times, the free market economy wasn't al lowed to function and compulsion was needed as motivation. To have this concept carried into an in dustrial society shows how hard it is to shake obsolete ideas. The common carrier obligation has lost much of its meaning. It really isn't practical and cannot possibly be enforced. Most rail roads are common carriers only to those who offer 6,000 pounds or more of freight at one time. Le gally, most truck lines are com mon carriers, obligated to serve 570 THE FREEMAN September all the public. Practically, that doesn't mean a thing. For years, I was with one of the largest firms in the country. We were served by some regular truckers. But just try to get service from some com mon carrier we didn't regularly do business with or get someone to haul to a point that wasn't one of our regular destinations. Truck ers would merrily decline their "ccmmon carrier" obligation, and there wasn't a thing the company could do. The truckers were com pletely practical and more realistic than the law.

And, of course, pipelines are common carriers; common to any one who has a tank farm at each end of the line and can offer, say, 50,000 barrels of oil as one ship ment. To use the same legal con cept for a modern "big inch" pipeline as for a medieval boatman whose punt wasn't much longer than the pipeline's diameter, bor ders on the ludicrous. Our trans portation system is shackled with such obsolete thinking. Until I read Dr. Carson's book, I had always defended the rail road land grants. My reasons were, first, that they accelerated the transfer of land from government to private hands. Second, the rail roads in return for the grants, carried government freight at 50 per cent of the commercial rates. The saving, up to the end of the concession in 1940, exceeded by many times the price of the lands so granted. In chapter three, Dr. Carson shows that even in land grants government intervention is inter ference which is upsetting. The upsets spread like ripples in a pond. We rail men have been so impressed by the story of laying ten miles of track in a day during the building of the Union Pacific and Central Pacific, that we forgot our libertarian economics.

The effects of intervention spread somewhat in this order: 1. Railroads built without econom ic justification. 2. Government aid fostered corrupt practices in the railroads. 3. Farms were developed too soon and on poor soil. 4. The Indian problems were ag gravated. 5. The buffalo was almost exter minated. 6. Agricultural prices were de pressed. 7. Pressure for railroad regula tion was accelerated. And the dust bowl of the 1930's may even be a subsidiary effect. But, say objectors, private capi tal would never have any incentive to build into undeveloped areas without government aid. Canadi ans tried to copy our method of sup porting railroad extension. Their experience with the Canadian Pa1971 THROTTLINGTHE RAILROADS 571 cific Railway made them think they could get away with that sort of thing. When the same methods were repeated in the early 1900's, the Grand Trunk and Canadian Northern Railways overbuilt and collapsed. As a result, there has been over 50 years of government spending in an effort to straighten out the mess.

Private capital did go into many areas in Africa, Asia, and South America and build railroads, sometimes aided by some degree of government support. The only broad study of these efforts, made in 1928 by ICC Commissioner Splawn,! makes the point that government action doesn't produce success in the absence of economic justification for building a rail road. The willingness of American firms to pour money /into rail roads, such as the Quebec, North Shore and Labrador in recent years to reach iron ore deposits, confirms the libertarian doctrine that capital will move according to economic necessity. If there are no goods to move, the railroad won't be built. The itch to get something from government, to use government to provide something beyond our means, has always been with us. 1 Walter M. W. Splawn, Government Ownership and Operation of Railroads (New York: Macmillan Co., 1928). Many New England towns, hot beds of "rugged indi vidualism,"

used town funds to build branch railroads. These had no economic justification, but often were built for personal spite or town pride. This misuse of town funds con tributed to the rot that brought about the collapse of the New Haven and the Boston and Maine, even though the day of reckoning was postponed for many years. In my own studies of the trolley lines in the Midwest,2 I found case after case where promoters whipped up enthusiasm for trol ley lines that were completed only by the infusion of village or coun ty funds collected from the tax payers. The trolley cars had hard ly started running before the officials yielded to another wave of enthusiasm and had the tax payers pay for paved roads which destroyed the investment in the trolley lines. (The trolley is a form of transportation which can be a valuable tool, but one which has suffered from intervention more than any other transport medium - to the detriment of the commun ity.) In chapter six, a question we have often raised about railroad 2 Joseph M. Canfield, Electric Rail roads of Northeastern Ohio (1965); West Penn Traction (1968); Badger Traction (1969). All published by Central Electric Railfans Association, Chicago, Illinois 60690.

572 THE FREEMAN September mergers receives a likely answer. Why have there been no end-to end mergers? Dr. Carson suggests that they would be more vulner able to the restriction of the Long and-Short Haul Clause of the In terstate Commerce Act (Fourth Section). This provision, pride of early regulators, is an American aberration which even the Vic torian regulators of British rail ways never invented. Designed to protect one-railroad, intermediate towns (e.g., Tyrone, Pa.), it as sumed that justice required that lineal miles take precedence over market requirements in rate mak ing. End-to-end mergers would produce more situations where this restriction might apply. Actually, it may cost more to serve an intermediate city, espe cially if it must be served by local freights which are operated under present work rules. The recent newspaper ad, showing the avail able work force of Tyrone offering themselves, suggests that even 80 years of protection by the long short clause is of limited value in the face of economic reality.

Utilization of America's com petitive railway network has re sulted in wholesale exceptions to literal enforcement of the long and-short-haul clause. So-called Fourth Section Relief orders granted by the ICC have been nec essary to maintain a semblance of reality in the face of a legislative limitation. These orders must be published in the tariffs where they apply and add complication and expense. The tariffs are difficult to compile, publish, and interpret. And make no mistake, rail and motor truck tariffs, required by the regulatory system, are com plicated. Probably they are the most complicated publications re ceiving day-to~day widespread use. Having spent much of my work ing life interpreting tariffs, I found the mental gymnastics stim ulating, particularly when I spotted the right rate on the first try. But the cost to railroads and shippers of wrong rates runs into millions of d~llars annually.

Foes of deregulation fear that one result would be rates which would vary like stock market prices. Users of transportation want and negotiate for the lowest possible rates. However, most large shippers are now handling shipping doc~ments through data processing systems where the cost of entering needless fluctuations of rates would be prohibitive. In today's picture we could expect negotiated rates without wild fluctuation. Regulation, like all other forms of intervention, has failed to pro vide utopia. The interventionist mentality tries to blame every thing and everybody for the con1971 THROTTLING THE RAILROADS 573 tinuing problems. "Deregulation" proposals have been offered which would put ratemaking under anti trust rules, an economic strait jacket of the first order. A typical freight shipment represents one buyer, the shipper, dealing with many sellers, the various lines which handle the shipment. Col lective ratemaking is the only realistic approach to be used in our national transportation sys tem.

Dr. Carson's book is not a study in depth, but it is a study which adheres to the principles of free dom. All students of railroads and railroad problems should go back to work and review their conclu sions in the light of the principles clearly laid down in Throttling the Railroads. More important, the whole country would gain if these principles could be applied to the present mess. Dr. Carson's mes sage should receive the widest possible circulation. ~ THE THEORY OF EDUCATION IN THE UNITED STATES by Albert J. Nock (New York: Arno Press and the New York Times, 1969) 160 pp., $6.50. Reviewed by Dr. Jacques Barzun, University Professor at Columbia University. ONE IS GLAD tha t he left these luminous pages in their pristine form of lectures (he begs indulgence for doing it), because that form shows him off at his best: full of charm, candid in his pre judices, elegant in diction, a nat ural ironist, and a man in whom thinking is clearly a familiar ex ercise.

I remember picking up the book soon after its appearance in 1932, at a little book shop on Broadway near 115th Street. I am afraid it was a remaindered copy, very cheap, like the novels of E. M. Forster and the two-volume set of Henry James's letters. It was my first acquaintance with Nock and I was delighted with my discovery. I felt elated even after my in credulous irritation at what I found him saying on pp. 76-77. That is the passage where Nock, who throughout his lectures claims a connection with Columbia Uni versity, repeats some libelous non sense about Columbia College, based on Abraham Flexner's then recent study of American and other universities. According to both these unver ifying men, it was possible to ob tain a bachelor of arts degree in Columbia College by offering such subjects as advertising layout, practical poultry-raising, elemen tary stenography, wrestling and self-defense, and half a dozen other s ubvoca tional exertions.

Nock recurs with relish to this list of depravities (including book-re574 THE FREEMAN September viewing) two or three times again in the later lectures. It is enough to make one doubt his common sense - or his familiarity with the educational scene of his own day. As a graduate of Columbia Col lege in 1927, who began teaching there that same year and for many more thereafter, I knew from in side knowledge that Nock's state ment was a fantasy. The require ments for the degree permi tted no such high-jinks as Nock al leged. What is worse, he goes on to say that by "some sort of traffic arrangement with a sister insti tution" the Columbia College un dergraduate "may also count as leading to a degree, courses in . . . cookery, clothing decoration, danc ing for men," and so on through a second half -dozen of domestic or social accomplishments. The fact is that permission to take any courses outside the Columbia Col lege catalogue was extremely diffi cult to obtain. These enumerated frills (presumably froril the Teach ers College Home Economics de partment) would have been dis allowed by the Columbia College dean, sitting with his Committee on Instruction.

The paradox is that if Nock had but known it, Columbia College in his day was the nearest approxi mation to the ideal set forth in his lectures. The curriculum did not require Latin and Greek, to be sure, but it turned its back on the free elective system and imposed strict requirements in history, mathematics, science, English, and modern foreign languages. The "majors" had to be approved so as to prevent a frivolous scattering of effort among elementary courses, and (as I said) there was no straying off the reservation into easy Extension or Teachers Col lege courses. Arguing with friends from Yale, Princeton, and Harvard showed that they lived far more under the loose dispensation that Nock reprobated. Wha t was in fact his connection with Columbia? Research shows that from 1930 to 1932, he taught American History and Politics at St. Stephen's College, then a dis tant affiliate, later independent as Bard College. Reading his book suggests that Nock was there chiefly to bait President Butler, whose pronouncements he studied with the feral eye of a ruthless attorney. Nock, for example, is not above twisting one of Butler's phrases about the "new type of university organization." He makes it stand in a sinister way for the nonintellectual, nonformative sub jects he castigated before. That is not what Butler was referring to, much less advocating. For Butler was a humanist, too, in his way as good a one as Nock.

And Nock, one must also add, 1971 OTHER BOOKS 575 was a little blinded by his just cause into forgetting some truths about the Great Tradition he praised and preached. His medi eval uni versi ties were not as he represented them. Had he stopped to use his wonderful imagination, he could have inferred that the old Faculties of Law and Medicine were nothing but vocational schools - Medicine especially. And even Letters and Theology were largely dedicated to the "prepara tion for life" which he deprecates - making clerics and scribes and pedagogues. The Abelards and Oc cams are always rare and never the average. Universities are good enough when they permit them to thrive and collect disciples. Nock was entirely right, of course, in his main thesis and his prophecy as well. We have been seeing the final degradation of the institution whose misdirected aim he denounced with such deadly ur banity. It would be good to have from him a section XV to add to the fourteen in his neat little book.

It would be on Relevance and So cial Consciousness in the Free Politicalized University. If I had a ouija-board, I'd spend a few eve nings trying to take down the text of it from the authentic source. Albert Jay Nock's book is back in print at $6.50, and may be ordered from The Nockian Society, 30 South Broadway, Irvington-on Hudson, New York 10533. ~ THE DECLINE OF RADICAL ISM: REFLECTIONS ON AMER ICA TODAY, by Daniel Boorstin (New York: Random House), 141 pp., $4.95. Reviewed by Robert M. Thornton THE OLDER RADICALS had some thing to say; sometimes it was something that needed to be said, and occasionally they said it well. Not so the New Barbarians, as Professor Boorstin calls them, who may be found at all levels of so ciety but especially among the ov erschooled. Boorstin refers to "the conform ity of dissent .... Dissent," he writes, "has tended to become the conformity of our most schooled classes. In those circles to say that the prevailing ways of the com munity are not 'evil' requires more courage than to run with the dis senting pack.

"The affirmations of different ness and feeling apart cannot hold a society together. In fact these tend to destroy the institutions which make fertile disagreement possible and fertile institutions de cent. A sniper's bullet is an elo quent expression of dissent, of feeling apart. It does not express disagreement. It is formless, in articulate, unproductive. A society of disagreers is a free and fertile and productive society. A society 576 THE FREEMAN September of dissenters is a chaos leading only to dissention." The fragmentation of society worsens as it passes through the news media. "Since dissent is more dramatic and more newsworthy than agreement, media inevitably multiply and emphasize dissent. It is an easier job to make a news story of men who are fighting one another than it is to describe their peaceful living together." People tend to act in terms of what they believe themselves to be, and the self-image of many is formed for them by what they see and read of vicious actions by a tiny fraction of the populace. Thus do newspapers and television, used in an unprincipled way, contribute to the emergence of the New Barbarians in our midst. "While they are not numerous anywhere - comprising perhaps less than 2 per cent of our two hundred mil lion Americans - they pose a spe cial threat precisely because they are diffuse, wild, and disorganized.

They have no one or two head quarters to be surveyed, no one or two philosophies to be combated. But they are no less rude, wild, and uncivilized than if they had come from the land of the Visi goths or the Vandals. The fact that they come from within - and are somehow a product of - our society makes them terrifying, but it does not make them any the less barbarians." t) HANDSOME BLUE LEATHERLEX FREEMAN BINDERS $2.50 each ORDER FROM: THE FOUNDATION FOR ECONOMIC EDUCATION IRVINGTON-ON-HUDSON, NEW YORK 10533 the Freeman VOL. 21, NO. 10 • OCTOBER 1971 A Letter from Down-Under Stanley Yankus 579 Concerning the importance of self·improvement in the search for freedom. Changing Concepts of Private Property Bertel M. Sparks 583 How far can we dissipate the rights of ownership before we are back to feudalistic restrictions on tenure? Ownership as a Social Function Paul L. Poirot 599 The market allocates property to those who most efficiently serve consumers, so the best a government can do to protect life and property is to keep the market open.